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A complete car buying guide


This is a complete car buying guide for anyone who is in dilemma choosing the right car. It is written by our editors together with an experienced car dealer, Suming, who has been in the business for over 25 years, a certified mechanic, Peter Czech, who worked in an automobile service center specializing in Mercedes-Benz, BMW, and some Japanese cars for 15 years, and an insurance agent, Phoenix, who has been selling car insurance for over 10 years. We also did a research on 100 people with a set of questionnaire and tried to work out all the possible questions and answers when one needs to buy a car. These are step by step to buy a car for consumers who are in dilemma choosing the right car.

The first question to ask is, “Do I really need a car?” Sometimes, a person wants to buy a car just because he wants a car, not because he needs it. Apparently, a private transport is an extra cost for people who live in big cities with advanced public transport. However, in many other cases, yes, a private transport is needed. The best car should be chosen when a buying is confirmed. These are the easy step by step to buy a car.

Step 1: How much budget do I have?
Step 2: What kind of cars should I buy?
Step 3: Things to consider when choosing the right car
Step 4: Car Leasing versus Car Buying
Step 5: New Car versus Used Car
Step 5.1: Money for new and used car
Step 6: Buying a new car
Step 6.1: Buy a new car with cash: Smart or Stupid?
Step 7: Buying a used car
Step 7.1: Inspect a used car before buying it
Step 7.2: Questions to ask when buying a used car
Step 8: Selling your car
Step 9: Making the deal
Step 9.1: Vehicle Bill of Sale (Printable)
Step 10: Life after having a car

Chapter 1: How much budget do I have?

One theory is that it may be related to the famous Chinese proverb, “Do not wear a hat that is bigger than your head” (??????,?????????). It literally means living within your means. Always choose a car based on what can be afforded to pay every month. Below is the standard price range for new car prices in theUnited States. Here we give an estimated monthly car payment with zero down payment, zero trade-in value, and zero sales tax over four years loan according to the national average interest rate at 3.46% as of January 2012. It is just a rough estimation because car sales tax is different in every state.

Vehicle price range Monthly car payment
$15,000 to $25,000 $335.07 to $558.46
$25,000 to $35,000 $558.46 to $781.84
$35,000 to $45,000 $781.84 to $1055.22
$45,000 to $55,000 $1055.22 to $1228.60
$55,000 to $85,000 $1228.60 to $1898.75
$85,000 and above $1898.75 and above

Here we suggest four years because a long-term car loan often is not ideal. This is because many consumers start to spend extra money for parts replacement and repair costs after three to four years or after the warranty is over. Our research shows that many people who tied up with long-term loan could not leave themselves from the car because of money problem. When a person buys new a car he may not have any problem with the monthly car payment but debt can be increased when other things come into life, for instance, monthly installment for electronics, furniture, or mortgage loan. Therefore, the annual cost of owning a car must put into consideration including insurance, maintenance, and depreciation. Expensive car will increase annual insurance costs for sure and the amount can sometimes up to few thousand dollars more per year.

Now the price range is clear, but what is the maximum percentage of monthly salary should spend on a car? This is a question without a 100% correct answer that applies to everyone but here are some questions you should answer before you decide the percentage.

1. What is the maximum limit you can tolerate to own a car? For some people who love cars until death, they are willing to devote up to 30% of monthly salary for some exotic cars they really cannot live without. On the other hand, some people will just prefer to dedicate as low as they can for a car which they treat it as a transport. According to Suming, the average consumer pays in between 8 and 12 percent of the monthly income.

2. Do you have any other loan or debt like mortgage loan, housing loan, personal loan, student loan or credit card debt? If the answer is yes, the maximum percentage should base on the net income after deducting all other loans or debt. If the answer is no, go to the next question.

3. Are you planning to buy a new house, new property, or invest in some other thing in the near future? If the answer is yes and you need a new loan for these things, the monthly car payment should not be too high because it may bring problems when acquiring for the new loan.

We suggest the best way to calculate the budget is to think you will walk into a car showroom and buy car wish cash rather than thinking what the affordable range is. In this way, you will never go beyond borders.

An average price for new car in the United States for 2012 is approximately $30,000. If the budget is under $15,000, a used car is seems to be a good choice. See Chapter 3 for more details about used cars. If you have a car and wish to trade-in for a new car, then you will have to find out the used car value at Chapter Four and estimate the budget together with the trade-in value. When the budget range is clear, the procedure to choose the right car will be easier.