Major Purchases
For most people, buying a car or a boat is a major investment requiring thought, research, planning and finances. With the multitude of make, model and option choices available today, this major purchase is enough to make your head spin. And that's before you've even waded through the wide array of financing arrangements. To be sure you make the smartest choices, you'll need to do some homework. Here are some steps and helpful tips to guide you through the process of this major purchase.
Buying a Car
Evaluate your needs and preferences to determine your current car style. If you know the answers to these questions, you may help yourself determine which car fits you best.
What are the primary and secondary uses of the car? This may help you determine the best size, gas mileage, and durability for your needs.
Who will be in the car most of the time? This will determine how much interior space you need.
How often will the car be used? The more time you spend in your car, the more important comfort is likely to be. Considering frequency of use can also help determine engine needs.
New or used, buy or lease, you need to know all the costs involved in getting your next car. Even if a car is a great deal and the financing options are unbeatable, you may find that making those monthly payments puts an impossible strain on your budget.
If you're not sure how much you can afford, talk to a financial advisor or get pre-approval on a car loan from a bank. Professional advice in the area of financing will let you know ahead of time how much you can really afford.
Once you set your price range, stick to it. If you're buying new, don't be tempted by unnecessary extras that will run up the price of the car, and be cautious about purchasing extended warranties. If you can't afford everything you want in a car, prioritize the features on your list. Don't forget that owning a car costs more than the monthly payments. Gas, maintenance, taxes and insurance should all be figured into the cost of car ownership.
Download the Cost Estimation Worksheet to help you estimate the cost of buying and owning a car.
The difference between the dealer's invoice (estimates are available from automotive magazines, websites, and auto pricing services) and the price listed on the sticker is your bargaining range. The more information you have on exactly what the dealer pays for the standard package and for each option, the stronger your negotiating position. It also helps to know whether the manufacturer is offering any cash rebate offers or factory-to-dealer incentives (which give the dealer more latitude in pricing).
The popularity and availability of a particular car will also factor in to how willing a dealer is to negotiate. And keep in mind that when you shop may make a difference in the final price you pay. The end of the model year (September and October) favors consumers because that's when dealers are reducing inventory to make room for next year's models. Late December, when more folks are worried about holiday shopping than car shopping, is another good time.
When you lease a car, you make monthly payments in exchange for using the vehicle for a set period of time. Generally, at the end of the contract period, which is usually two or three years, you can simply turn in the car and walk away. Since you don't own it, you get no trade-in or resale value. If you need to end the lease early, you may face steep charges. Likewise, you may be charged for excessive mileage or excessive wear and tear. Most leases include an option to buy at the end of the lease for a predetermined price. Generally, however, you may pay more than if you purchased the car in the first place.
On the positive side, a down payment may not be required, and monthly lease payments are generally lower than monthly payments when you purchase a car. Be sure you understand the terms of the contract and review it carefully before you sign it.
Buying used is very similar to buying new: You need to assess your needs, estimate what you can spend and do your homework.
You have one additional variable to consider when buying a used car: wear and tear. If the car hasn't been in an accident, has been well-maintained and runs well, you may have yourself a first-class car at a discount price.
However, assessing a used car is better left to the professionals. If you think you've found a good one, have your mechanic check it out before you buy. A qualified mechanic can tell if the car is in good condition and worth the price, or if it's all just a good wax job. To figure out the going price for a used car model, consult one of the used car price guides available, such as the Kelley Blue Book Used Car Price Manual (commonly called the "Blue Book"), which lists estimated values for used cars based on what car dealers are paying for various makes and models. Keep in mind that price guides aren't the final word on a car's fair value and that factors such as mileage can change a car's value considerably.
Buying a Boat
Evaluate your needs and preferences by asking yourself these questions:
Who will use the boat? Just you and your family, or do you want to have room to accommodate friends?
How will you use the boat? Do you plan to take day trips, weekend trips, or week-long excursions? Will you use the boat for fishing, water skiing, or just cruising?
When will you use the boat? The occasional weekend trip, or almost every day? Year-round, or just the summer months?
Where will you use the boat? In a lake, river, or on the ocean?
How much do you have to spend? Lots, or just a little cash? Don't forget maintenance, insurance, registration costs, and instruction and safety course fees.
What kind of boat will fit your needs? Do you see yourself making waves in a motorboat or maneuvering in a sailboat?
Know what to look for when buying a boat and become familiar with terminology, styles, and prices.
Buy a book or two on the subject and talk to friends who own boats.
Read boating periodicals.
Attend a boat show.
Sign up for a class. Your local Power Squadron or Coast Guard Auxiliary can provide instructional classes on basic boating skills and information. Call 1-800-336-2628 for course locations in your area.
When you are ready to purchase your boat, keep in mind:
New or Used: A new boat will be ready for immediate use, but may come with a hefty price tag. Used boats can be a bargain, but, like used cars, may require immediate maintenance or repair. Yet, buying a used boat that has been researched and inspected can result in a great deal.
Buy from a dealer, broker or individual: In addition to individuals selling their own boats, and dealers selling new and used boats, you'll find brokers who sell mostly high-end boats and receive a commission when they find a buyer. Typically, brokers work for the seller, but they can save you hours of time and multiple trips to look at boats that don't meet your expectations.
Resale value: Although selling your boat may be far from your mind, resale value is something to keep in mind. To get your money's worth from your investment, you should plan to keep a boat at least three years. When you do sell, brand and model will be important and may have an impact on your sale price.
Inspect before buying: Carefully inspect any boat you're considering. If you're spending thousands of dollars on a boat, new or used, you may want to have the boat professionally inspected by a surveyor. If you're borrowing money, your bank or insurance company may require a surveyor to appraise your boat. To find a surveyor, ask around at boating shops, boat yards, and marinas, check the Internet or call the National Association of Marine Surveyors at 1-800-822-6267 or www.nams-cms.org or the Society of Accredited Marine Surveyors at 1-800-344-9077 or www.marinesurvey.org. Surveyors charge a fee based on the value of the boat, and you'd have to pay the fee, regardless of whether you bought the boat. If possible, accompany the surveyor to the inspection. If the surveyor discovers problems with the boat, you can walk away from the deal or use the information to negotiate a lower price. For used boats, you'll also want to know the boat's repair history, so get a copy of the maintenance log or service records.
Calculating Costs: Ultimately, your budget will dictate how much boat you can afford. Be certain the monthly payments are within your comfort range. If you plan to finance the purchase, you'll likely be expected by your lender to make a down payment of at least 20 percent. Beyond the monthly payments, however, owning a boat incurs other costs you'll want to factor into your financial picture.Use this worksheet to calculate how much your boat is likely to cost over the course of a year.
Item Annual Cost Monthly payments (x12) $ Registration $ Equipment $ Insurance $ Triler Registration $ Dock Fees $ Maintanance / repairs $ Taxes $ Fuel $ Winter storage, if needed $ TOTAL $
Your new boat is likely to represent a significant investment on your part, and you'll want to be sure it's adequately insured against loss or damage. Basic insurance coverage includes physical damage to your boat, bodily injury and property damage liability, and medical payments. You may also want to consider optional coverage for such things as personal effects, emergency service, and trailers. See your particular policy for terms and conditions.
Generally, yearly coverage could run several hundred dollars. Factors that affect the premium you pay may include the type of boat (sail or power), the cost of the boat, the operator's driving record, and whether the boat is operated on inland or in coastal waters. Shop around to get estimates from several insurers, and make sure you're comparing fees for equivalent coverage.
For More Information
New Car & Truck Buying Guide
An AAA-published book featuring shopping tips and in-depth reviews and ratings of more than 160 new vehicles. Available at bookstores and through many local AAA clubs.
Car Buyer's and Leaser's Negotiating Bible, Third Edition
by William Bragg
Publisher: Random House Reference
Car and Driver magazine, a Hachette Filipacchi New Media publication
Boating magazine, a Hachette Filipacchi New Media publication
Motor Boating magazine, a Bonnier Corporation publication
The quarterly Consumer Information Center Catalog lists more than 200 helpful federal publications. For your free copy call 719-948-4000 or visit www.pueblo.gsa.gov
Edmunds
www.edmunds.com
This site provides pricing, unbiased car reviews, ratings, and expert advice to help you get a fair deal.
Popular Mechanics
www.popularmechanics.com
At this website you can research new cars and read exclusive reports from people who've already paid the price for the car you're thinking about buying.
IntelliChoice.com
www.intellichoice.com
This site has essential automotive information and tools for vehicle buyers, sellers and owners. Before you buy a car check out the information here on: savings, buying advice, safety, pre-purchase questions, test drives, rebates and price negotiation.
MetLife Auto Insurance
www.metlife.com/individual/insurance/auto-insurance/index.html
MetLife Auto & Home can provide you with a comprehensive auto insurance policy. Auto and Home Insurance offered by Metropolitan Property and Casualty Ins. Co. and affiliates, Warwick, RI. You can also protect your boat from bow to stern, with a boat insurance policy MetLife Auto & Home® at
www.metlife.com/individual/insurance/boat-insurance/index.html
Yacht World
www.yachtworld.com
This site is the resource for boat enthusiasts. You can find everything from boats for sale to boat show calendars.
U.S. Coast Guard Navigation Center
www.navcen.uscg.gov
This website offers information on everything from boating safety to more technical information on Differential GPS Systems.
U.S. Coast Guard Auxillary
http://nws.cgaux.org/index.html
U.S. Coast Guard Auxiliary is the civilian arm of the United States Coast Guard. It has a very useful site with a plethora of boating safety information.
