After a house, buying a car will be the biggest outlay you'll make in your life-and it won't appreciate in value. Donal Byrne offers some timely buying tips for the unwary, and some hard-nosed advice for the wary
Buying a new car can be a seductive business. Modern showrooms with clean and modern lines, bright lights carefully focused on shining metal and the very smell and feel of something brand-new can be difficult to ignore at a time when you need to be at your most rational and sensible.
Some of us do see through the aura, but a lot of just don't or we sometimes just choose not to and that is when buying a new car can become a great deal more expensive than you ever thought.
If you don't take very careful steps you can find yourself swimming with the sharks very quickly indeed. How will you feel, having ignored advice, when you discover you are paying several times more for your car finance than if you had simply gone to the credit union before you started the whole procedure?
Lack of preparation and getting carried away are the greatest mistakes that people make when they go to buy a new car. You actually can, to borrow an old cliché, save yourself thousands by being adequately prepared and by employing a little positive mental attitude.
The first thing you need to do is to research your purchase and with the Internet now such a powerful tool you actually don't have to leave the house to do your shopping around. Checking appropriate websites will allow to you see what kind of equipment the car you want should have, what the car should cost and so on. Then a few follow up calls to various dealers will confirm availability, prices and so on.
When you do arrive at the dealer's showroom, bear in mind two things. One is that if you have a car to trade in then the dealer is considering two deals, while you think you are only involved in one. He or she is striking a deal on the trade-in price and on the price of the new car and they are planning to make a profit on both.
A salesperson will always juggle both figures, which explains why dealer X may appear to be offering you such a great trade-in for your six year-old banger when dealer Y seemed decidedly uninterested. Dealer X has simply reduced the amount of discount allowed on the price of the new car. The second thing to bear in mind is that dealer margins on new car sales are approximately between 7 and 10 per cent, with 7.5 per cent to 9 per cent being the average range. Now you can think like a salesman as you work out your deal.
Never, never, go to buy a car unless you have worked out your finance and your budget. Set a limit and bring a partner or friend if you feel you might need that restraining touch on the forearm as you set about signing a finance deal for a coupe sports car when your family were expecting you home with a Toyota Avensis estate.
Having set your budget stick to it and setting the budget entails including all the extras. If you had previously decided you wanted electric windows or mirrors or air conditioning, did you check the price beforehand and will the combined purchase price increase your budget ?
Beware of finance deals and let me repeat that: beware of finance deals. During the 2000 boom year for the motor industry salesmen joked they were making more from finance deals that from selling cars. Many garages are tied in with finance houses and will offer you a deal that could end up costing you a great deal more than ever thought was possible.
You should never accept the first finance offer. Shop around and you may find a great difference in the cost of finance between different garages. Be aware of the fact that salesmen may be paid fees or commission to get you to sign up to a particular finance company.
"We often ask people if they understand APR (annual percentage rate) and many of them did not before they signed up. They would have been far better going to the credit union for a quote and financial advice before they purchased", says Dermot Jewell, chief executive of the Consumers Association of Ireland.
Buyers also need to look into hidden costs. Fiat and Alfa Romeo in Ireland have, for instance, an open-book price policy. There is one inclusive price and that is that.
Other manufacturers don't have that system and one industry source told Motors that delivery charges of up to €500 or €600 were being charged in some cases. Shopping around different dealers is crucial because otherwise you have no data to make comparisons on.
If one dealer is prepared to throw in the electric windows or waive the delivery charges, then you know what you will be saving. Also, shop around with dealers who may be a little distant from you.
Rural dealers don't have the same overheads and may be keener for new business. In one case I advised a woman from South Dublin to travel to a dealer in Wicklow, a three quarters of an hour journey for her, and she saved some €600 on her purchase. She also sings the praises of the dealership for the quality of its service.
CAR BUYER'S CHECKLIST:
BUDGET: Know your budget and stick to it.
EXTRAS: Factor in cost of extras equipment, such as electric mirrors or windows.
COSTS: Check hidden costs, such as delivery charges and bargain heavily on them.
SHOWCARS: Bear in mind that the car you take for a test drive is likely to have all the extras that the standard car does not. There is a big difference between the cost of cloth and leather upholstery.
SUITABLITY: Stick to what is suitable for your needs.
FINANCE: If you have to finance, never accept the first deal offered. Check rates from other sources like the credit union, and always know the APR in the contract. A direct comparison is a real eye-opener for most people. Remember also that there is a cooling-off period allowed after you sign a finance deal.
TIMING: Virtually all new car sales happen between January and July. The attraction of visiting a dealer outside that period is obvious.
SHOP AROUND: Compare several dealers for both trade-in and new prices and consider regional dealers, many of whom offer much better value than city dealers.
BARGAIN: Always bargain and remember the dealer margin of between 7 and 10 per cent profit on a new car. When you make an offer, do not budge on it. If you are refused you will be happier abandoning the deal anyway.
RUN-OUTS: When a new model is coming there is a run-out period for the old one. Thus the current Volvo S40 is packed with extras for the same money and would be worth considering if the Jones' are not your prime consideration.