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  • Car Buying Strategies 1

    CHAPTER 14: Car Buying Strategies INTRODUCTION

    Car Buying Strategies is a 60- to 90-minute program suitable for all audiences.

    Purchasing a vehicle is a large investment that can have a significant impact on an individuals short-term and long-term financial circumstances. Because purchasing a car can be a complex process, it is important that buyers understand the specific steps involved in making a wise purchase. This

    chapter is designed to develop knowledge and skills that will enable Marines and their families to conduct adequate research on a new car purchase, to determine how much they can afford to spend on a car, and to negotiate effectively when purchasing one.

    LEARNING OBJECTIVES

    Upon completion of this course, learners should be able to: Determine how much they can afford to spend on a car. Research available vehicles, lenders and sellers. Negotiate the purchase price of a car, financing and trade-in value.

  • 2 Car Buying Strategies

    REFERENCES

    Aol.auto.com. (2010). New Car Warranties: Whats Covered and Whats Not. Retrieved from http://autos.aol.com/article/new-car-warranties.

    CARFAX. (2011). About Us. Retrieved from http://www.carfax.com/about/car_history/hcabout.cfm.

    Edmunds.com. (2010). Understanding Extended Warranties: Finding Coverage Thats Right for You. Retrieved from http://www.edmunds.com/auto-warranty/understanding-extended-warranties.html.

    Edmunds.com. (2009). Prepaid Maintenance Plans: Smart Move? Or a Waste of Money? Retrieved from http://www.edmunds.com/car-buying/prepaid-maintenance-plans.html

    Federal Trade Commission. (1997). FTC Facts for Consumers: Auto Service Contracts. Retrieved from http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut02.shtm.

    Garman, E.T., & Forgue, R.E. (2010). Personal Finance, 10th edition. Boston, MA: Houghton Mifflin Co.

    IntelliChoice. (2011). Certified Pre-Owned: Vehicle Inspection Checklist. Retrieved from http://www.intellichoice.com/preowned/CPOInspection.

    Krueger, H. (November 2010). Buying a Car? Watch for 6 Slippery Sales Strategies. Retrieved from https://www.usaa.com/inet/pages/advice_slippery_sales_pitches_2009.

    Leonard, R. & Reiter, M. (2009). Solve Your Money Troubles: Debt, Credit & Bankruptcy, 12th edition, Berkeley, CA: Nolo.

    Loonin, D. (2010) Guide to Surviving Debt 2010. Boston: National Consumer Law Center.

    Nerad, J.R. (1996). The Complete Idiots Guide to Buying or Leasing a Car. New York, N.Y.: MacMillan Spectrum/Alpha.

    Newman, R. (February 2010). 6 Myths About Car Recalls. Retrieved from http://www.usnews.com/money/blogs/flowchart/2010/02/10/6-myths-about-car-recalls.

    Reed, P. (May 2009). Negotiating 101. Retrieved from http://www.edmunds.com/car-buying/negotiating-101.html.

    Reed, P. (May 2009). Shopping for a Fuel Efficient Car. Retrieved from http://www.edmunds.com/fuel-economy/shopping-for-a-fuel-efficient-car.html.

  • Car Buying Strategies 3

    USAA. (February 2009). Five Steps to Buying the Right Car. Retrieved from https://www.usaa.com/inet/pages/advice_5_steps_buying_right_car.

    United States Code. Servicemembers Civil Relief Act. Washington, D.C.

    U.S. Department of the Navy. Office of the Secretary of the Navy. (2005). SECNAV Instruction 1754.1B: Department of the Navy Family Support Programs. Washington, D.C.

    Visa. Practical Money Skills for Life. (2011). Buying a Car. Retrieved from http://www.practicalmoneyskills.com/personalfinance/lifeevents/car.

  • 4 Car Buying Strategies

    PREPARATION AND PROCEDURES

    Activities with Handouts:

    The Budget Bottom Line: A worksheet exercise in which learners calculate the affordability and total monthly cost of owning an automobile.

    Additional Handouts:

    Buying vs. Leasing

    Car Buying Resources

    Car Buying and Leasing Terminology

    Car Sales Tricks of the Trade

    Determining Car Payments

    Debt-to-Income Ratio

    Installment Sale Contract

    Session Evaluation

    Materials:

    Car Buying Strategies PowerPoint slides

    Pens, pencils and markers

    Chart paper or a whiteboard

  • Car Buying Strategies 5

    Registration:

    Registration ensures that you have an adequate number of materials on hand and that guest speakers are prepared if they have handouts or giveaways for their audience. Program registrants should be contacted by phone or e-mail two to three days before the program to verify participation. Sign-in is advised to track attendance. Target Audience:

    The target audience is Marines and their family members with a basic to intermediate knowledge of personal financial management.

  • 6 Car Buying Strategies

    KEY TERMS

    Annual percentage rate (APR): A measure of the cost of credit, expressed as a yearly rate. It must be disclosed before you become obligated on a loan and shown on your account statements.

    Armed Forces Disciplinary Control Board (AFDCB): Established at installations to advise on and make recommendations to commanders about matters and conditions that may affect the health, safety, morals, welfare, morale and discipline of the service members.

    Customer incentives: Benefits such as cash-back rebates, low-interest financing offers or other perks that are offered directly to buyers from manufactures.

    Dealer holdback: A percentage of the MSRP or invoice price of a new vehicle; which can vary according to the manufacturer, which is repaid to the dealer by the manufacturer usually quarterly. It is generally between 1- 3 percent of the MSRP. Generally the luxury models have lower or no dealer holdbacks. The dealer holdback is essentially designed to supplement the dealer's cash flow and profits which indirectly reduces variable sales expenses, such as sales commissions. This, in effect, artificially elevates the dealerships cost to the customer.

    Dealer incentives: Factory-to-dealer incentives that reduce the dealer's true cost to buy the vehicle from the factory. Typically a manufacturer will offer these incentives on a regional basis to generate sales on specific models. These incentives can be tied into sales targets and can touch off competition among dealers to move slower-selling stock. Once a sales target is reached, each subsequent sale could result in a higher factory-to-dealer rebate. If you negotiate, you may be able to get the dealer to pass on some of this incentive to you. Remember, it costs dealers to keep vehicle inventory in stock. An incentive does not have to be attached to a particular model. If a vehicle has been on a lot for a couple of months, dealers are more likely to be flexible on pricing.

    Manufacturers Suggested Retail Price (MSRP): The base price of a vehicle at the time of introduction, including standard equipment only. The price does not include taxes, transportation and destination fees.

    MIOT (Maintenance, Insurance, Operating Expenses and Taxes): The total cost of owning and operating an automobile.

  • Car Buying Strategies 7

    National Automobile Dealers Association (NADA): Provides to dealers and consumers new and used car prices, specifications, pictures, reviews and other information to help in buying and selling vehicles. NADA also provides industry trends, education and training, and career information.

    National Independent Automobile Dealers Association: The not-for-profit organization representing the independent motor vehicle industry to promote, educate and advance the independent motor vehicle dealer. They provide to the consumer information which will promote a better understanding of the independent motor vehicle dealers place in the economy.

    Non Commissioned Officers Association (NCOA): The NCOA was established in 1960 to enhance and maintain the quality of life for non-commissioned and petty officers in all branches of the armed forces, National Guard and Reserves. The NCOA offers its members benefits and services designed especially for enlisted service members and their families.

    United Services Automobile Association (USAA): A Fortune 500 financial services company offering banking, investing, and insurance to people and families that serve, or served, in the U.S. military.

  • 8 Car Buying Strategies

    QUALITY ASSURANCE PROCEDURES

    To assure accurate and current information as well as a quality presentation:

    Headquarters (HQ) and installation PFMs will review the curriculum annually or when there have been consequential changes to content regarding laws, regulations or military programs that could have a significant impact on Marines and their families. HQ will then update the curriculum.

    Distribute session evaluations to participants at the end of each workshop. Results should be tabulated and retained to measure the effectiveness of information provided at the session, in the program content, and of the delivery of the presentation.

  • Car Buying Strategies 9

    CONTENT OUTLINE (75 MINUTES TOTAL)

    1. Welcome and Introduction (5 minutes) a. Overview: Topics

    2. Preparation and Research (35 minutes) a. Know What You Can Afford b. Do Your Homework c. Determine Your Car Payment d. The Budget Bottom Line e. Choosing Your Car f. New Car Considerations g. Used Car Considerations h. Warranties i. Depreciation j. Insurance k. Performance and Reliability l. Fuel Economy m. Choosing a Dealership n. Buying from a Private Seller o. Other Buying Options p. Determining a Fair Price q. Car Pricing Terminology r. Leasing s. Leasing Terminology t. Car Sales Tricks of the Trade

    3. Negotiate the Purchase Price (5 minutes) a. Negotiation Strat