How To Buy New Cars

With new car price tags rising, many people are investigating options such as leasing as a way to drive their dream cars without busting their budgets. Marcus lawless, a financial services advisor for consumers car club, says, "leasing is growing, since you get more cars for less money." he adds that another factor in the surge is that leasing is now safer for the consumer than in the past -- thanks to new federal laws that keep the consumer from "getting ripped off" by vague contracts.


While it's true that leasing is an increasingly popular alternative to buying a new car (almost a third of new vehicles leave the lot under lease), experts say there are a few things to consider before deciding to lease or not to lease.


There are many different factors to mull over when deciding whether to lease a car or buy a new car. The processes of each are very different, with car leasing potentially being the more confusing of the two due to its vast terminology.


Leasing offers the opportunity to acquire a vehicle worth more than you could afford to purchase outright. But because vehicles suffer their greatest depreciation hit the first two years, leasing is destined to be more expensive than purchasing in the long run.


Our table presents the costs of buying versus leasing, showing not only the long-term differences, but the benefits of negotiating the lease, discovering dealer holdback and incentives will arm you with powerful ammunition for haggling a more favorable price for either method.


When you buy a car, you pay for the entire value of the car. But when you lease, you pay only a portion of the car's value. The portion you pay is based on how much the vehicle depreciates, or loses value, while you have it. Depreciation is calculated by taking the value of the car when it's new minus its value at the end of the lease. In addition, expect to pay a lease rate -- similar to an interest rate -- on that amount. Leasing a car works like renting an apartment. you put down a refundable deposit and your first month's "rent" and sign a contract (lease) that guarantees you the right to use the car for a specified time. This time period, known as the lease term, is usually between two and four years. Similar to an apartment, you pay your monthly rent to the owner of the property -- in this case, the car leasing company.


Whether leasing or buying, getting the best deal is the bottom line, so you must do your homework. Experts say that if you're buying a car, you shouldn't pay more than 5 percent above invoice price. Before you step into a showroom, look on the Internet or check out consumer car guides to find out the invoice price because the dealer most likely won't give it to you. Get pre-approved for a car loan through a bank or credit union. At home, determine what you can reasonably afford to spend on monthly payments. When you get to the dealership, negotiate and settle on a price before you talk financing. Experts say that for every $1,000 you knock off the selling price, you save $30 on your monthly payment.


If you decide to lease, understand the influence the vehicle's residual value -- the car's value at the end of the lease -- has on your monthly payment. In general, the greater this value, the lower your monthly payments.


However, this can have a backlash effect if you want to purchase the vehicle at lease end. Also don't stop at just one dealer. If researching, haggling and comparison shopping all make you faint-hearted, there many services that do the legwork for you, usually for a small fee.


Finally-, read the fire print and understand what you read. If necessary, insist on a breakdown of the charges. If you don't like the terms of a contract, don't sign it. And remember that whether you lease or buy, it pays to be knowledgeable. Otherwise, you might get taken for a ride.


New and used cars compete with each other, of course, and when relatively inexpensive new cars collide with a steady stream of high-quality used cars in the marketplace, the result is a cycle of falling prices. And that was the case even in the good years. Throw in the threatening recession and the economic kidney punch of September's terrorist attacks--when shoppers largely disappeared from auto showrooms--and you can fully understand why dealers have been going to extraordinary lengths to lure people back. The average interest rate on new-vehicle loans has plunged by nearly half since the terrorist attacks, which is sure to clip used-car prices even further. Already, you can buy a 1998 Lexus ES300 for less than the average base price of a new Camry SE ($21,140). And that's just the start, says J.D. Power's Chris Denovie: "Expect to see prices go down before the end of the year."


Thinking used. Buying almost any late-model used car in good condition is, to a certain extent, a smart move because autos lose a disproportionate percentage of their market value in their first couple of years on the road. Buy a high-quality two- or three-year-old car and you simply get a lot of driving at relatively little cost.


That said, the smartest used-car buyers use some additional strategy, seeking out models that are reliable but for certain reasons have lost an unusually large portion of their market value in their first years on the road. Typically, these will be vehicles that either have fallen out of fashion or are due for a redesign--or both, as is the case with sport utility vehicles based on truck designs. "Crossover," or car-based, SUVs such as the Acura MDX, the Buick Rendezvous and the Honda CR-V are gaining popularity; meanwhile, buyers are turning away from bigger models whose look has been around for a while, such as the Ford Explorer, which kept the same basic design from 1991 to 2001. As a result, truck like SUVs are posting the largest price declines of all used vehicles, making them great deals. For instance, in 1998 a four-year-old 1994 Grand Cherokee Laredo was worth $16,150. Today, a 1997 Laredo is worth less ($15,900), even though it cost $2,000 more than the 1994 when both were new.


Referral services like Cars.com, Invoice Dealers, Cars Direct , Yahoo! Autos, Auto web, Autos.com, Edmunds.com and Car.com provide a discount selling price through a network of 5000+ dealers, no tricks, no gimmicks. Member dealers get referrals from free online request forms that car buyers submit, so they give a better price. These services can get you a lower price when they hook you up with a non-commissioned fleet or internet manager.


When you visit these sites to fill out the request for your free quotes, remember to enter your full email address properly! If your email address is CarBuyer@aol.com, don't just enter "Car Buyer", you must add the full email address. They need to be able to email your dealer contact information to you.


Quotes are different for each free car buying service, so get a consensus. Hard to get cars might not have a large discount. Spend a few minutes now getting your quotes, save a few thousand dollars later. Your ability to negotiate the best price with the dealer depends on your quotes from these sources. Put free car buying quotes in "The Folder" that you bring to the dealer.