How to get the best car deal for your needs
By Kyle Busch • Bankrate.com

Before making a purchase, especially a large one, most buyers ponder an equation that goes something like: What is it going to cost me, and will that equal what I'm going to get?

Consider that equation when buying an automobile. Naturally, you want to get the most vehicle for the money you spend. Here are several tips that will help you to get more for your money.

First and foremost, consider eliminating some of the steep depreciation cost incurred during the first three years of vehicle ownership by purchasing a 2- to 3-year-old used vehicle.

The price of transportation can be further reduced by paying cash. However, if you need to finance your next vehicle purchase, consider doing the following to keep its cost closer to the "as if you were paying cash" figure:

• Take the time to carefully identify your current and future transportation needs, and pick an appropriate vehicle. Transportation represents different things to different people. For some drivers, it represents status in society. Other drivers place greater emphasis on reliably getting from point A to points B and C. The more closely you match your driving needs with the vehicle you buy, the more driving pleasure you will experience and the more likely you are to want to hold onto the vehicle. If you can't fully identify your transportation needs or the vehicle that can best satisfy them, consult the April issue of Consumer Reports at a public library. The publication groups vehicles into categories, provides frequency-of-repair information for many vehicles, and gives vehicle price information.
  
  
• Identify how much you can afford to spend per month on transportation. A rule of thumb suggests that the cost to rent an apartment per month should not be greater than 25 percent of your monthly net pay. The cost of an auto loan should not exceed 10 to 12 percent of your monthly net pay. In some instances, that could mean leasing a vehicle rather than taking out a loan.
  
  
• The vehicle down payment should be the largest possible, and the amount of money borrowed the lowest possible. In addition, borrowing for the shortest period (i.e., a 24-month loan rather than a 48-month loan) will reduce the overall cost of the loan.
  
  
• Identify the various loan sources such as banks, savings and loans, credit unions and national lenders. You can get information on loan costs and auto loan rates on this site. In regard to national financing vs. local financing, it can be useful to determine what the cost of a loan would be from the national sources, but to accept a loan from a local source if the loan cost is comparable or nearly comparable between the two. Compare the APR (annual percentage rate) that each of the sources will charge for the loan. The cost of a loan is negotiable. Therefore, be certain to inform each source what the others have to offer. In addition to the loan's APR, remember to also compare the other costs associated with a loan, such as loan insurance and loan processing costs.
  
  
• Be certain to read and understand any fine print contained in the loan contract. Insist that the loan contract gives you the option of making payments early and that the payments will be applied on the loan principle with no penalty or extra cost if you pay off the loan early.
  
  
• Do not settle for a vehicle that does not entirely meet your transportation needs because of low dealer or manufacturer incentive financing. Sometimes dealers or manufacturers offer extremely low APR financing on vehicles that the dealer is having a hard time selling. That's why it helps to have initially identified the correct vehicle before encountering the sales pitches and other influences of buying a vehicle.

Kyle Busch is the author of Drive the Best for the Price: How to Buy a Used Automobile, Sport-Utility Vehicle, or Minivan and Save Money, which is also available in e-book editions from 1stBooks Library. In 1991, Busch purchased a used 1986 vehicle with 82,000 miles for $2,600. He has driven the vehicle for more than nine years and the odometer has now logged more than 292,000 miles.

-- Posted: June 29, 2001