Inspect the Contract
Buying a new set of wheels is a big event. Rushing to complete the deal may be tempting, but it also invites a dealer to take advantage of you. Make sure you understand every charge you're being assessed.
Before you sign anything, read the entire contract. Be certain you understand exactly what you're buying. The salesperson will likely pressure you to sign on the spot, to get a legally binding contract that sets the terms of your purchase. Worse, you may be in a hurry because you're eager to drive off in your new car. Once you sign that document, it's difficult, if not impossible, to get it changed. A little time spent reading now can save you a sizable amount of money later.
If in doubt, take the contract home. Go over it at your own pace, and contact the dealer if you have any questions. If a dealer doesn't want you to take the contract home, get a written purchase agreement that spells out all the details. Once you're satisfied with that agreement, it can be written into a contract. If a dealer won't provide either, it's probably best to walk away from the deal.
Here's what a contract should spell out:
- Sale price: The amount you've agreed to pay for the car and optional equipment, plus any dealer-installed accessories.
- Down payment: How much you have to pay immediately, either in cash or combined with a trade-in and/or rebate.
- Trade-in value: The amount of money you're getting for your old car or truck, to be applied to the new-vehicle purchase.
- Destination charge: Sometimes called freight, this is the cost of shipping the car to the dealer. Every vehicle has a specific, non-negotiable destination charge.
- Sales tax: Check with your state or local government to determine how tax is assessed in your area. Most states levy sales tax on the full purchase price of the new vehicle. In some states, sales tax is calculated on the net price after trade-in value has been deducted.
- Total cost: Be sure the all-important "bottom line" is filled in, so you know your total price including options, accessories, destination charge, dealer prep, and taxes. If a dealer leaves this portion of the contract blank, you can end up paying more than you had expected.
- Loans: Federal regulations require lenders to disclose all charges. Be sure you know how much you're borrowing, the interest rate, your monthly payment, the length of the loan (in months), and the total amount you will pay over the life of the loan.
Don't be swayed by low monthly payments if they result in paying a higher total price than is warranted. Too many shoppers think of little beyond the monthly payment, and are easy prey for salespeople who adjust figures to fit that requirement, but which wind up with a far greater total price paid by the end of the contract term.
For more information on car buying and selling, check out the links in the next section.