Understand "Auto Speak"
Avoid The "Upside Down" Auto Loan
Dealing With The Dealer
How To Buy A Used Car

Understand "Auto Speak"
To negotiate a great car deal, you must understand the dealer's lingo. Additional dealer profit, or ADP, is like a second sticker. To make more money, dealers try to negotiate down from the ADP. You should negotiate up from dealer invoice.

The holdback is money paid to the dealer by manufacturers. It may be as much as $900 on a $30,000 car. So haggle. Even if you pay less than invoice, you still give the dealer a profit.

Another money-maker is prep charges. The manufacturer already has paid the dealer to prepare the car for sale. Don't you pay, too.
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Avoid The "Upside Down" Auto Loan
The average vehicle owner owes $2,200 more on his or her car than it's worth. Costly incentives are the reason. Suppose you get a low- or no-down-payment loan for five, six or seven years. As soon as your car starts depreciating, you're upside down on your loan. Try to trade in — and you take a big hit.

To avoid the problem, put at least 20 percent down. Also choose the highest monthly payment and shortest financing term you can afford. Another smart move: Never finance a car for longer than you plan to own it.
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Dealing With The Dealer
You — not the dealer — should determine what you pay for your new car. Here's how to be in charge:

• Narrow your choices. Before visiting dealers, decide on one or two models — plus options. Want to test drive? Visit a dealer, but don't talk price.
• Determine cost. To know the dealer's true cost, get invoice price — and any factory-to-dealer cash incentives. We have that information. So does www.edmunds.com.
• Set a target. Plan to pay about three percent more than dealer cost for most cars. Want a hot seller in short supply? Expect to pay more.
• Sell your old car yourself. Typically, you'll get 25 percent more than by trading in. You'll also simplify price negotiations. Or, take your car to the used-car department of a dealer selling the same make.
• Get a preapproved credit union loan. Then tell dealers you'll pay cash. This gives dealers more reason to deal — and less reason to haggle about price. A preapproved loan also limits your temptation to spend more.
• Shop around. Tell dealers what you want and what price you've set. If you find the right price out of town — or on the Internet — ask your local dealer to match it. For better prices, shop at the end of month or model year. Note: Even if you buy elsewhere, you still can get service locally.
• Forget add-ons. Dealers make a lot of money on unnecessary extras like rustproofing and extended warranties. Ignore the press. Don't pay for dealer prep, either. That's a dealer expense.

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How To Buy A Used Car
Follow these four steps, in order, and make your car purchase fun and wise:

1. Save first, buy later — The less you have to borrow, the better off you'll be. Small loans cost you less than big ones. Save regularly at the credit union. You'll prove to yourself — and us — you can afford a car.
2. Research — A good-looking car is easy to find; a reliable one isn't. Learn how to avoid likely lemons. Look for the April annual car-buying issue of Consumer Reports. On the Web, try www.edmunds.com. Make a list of what models and years work best for you. Then ask us what each of the cars should cost.
3. Get ready — You'll need insurance, so check costs. Premiums may change how much car you can afford. Ask your family's agent about discounts for good grades, miles driven, multiple cars, etc. Don't get collision and comprehensive coverage if yearly premiums plus deductibles exceed the car's value. Ask us for a preapproved loan before car shopping. You'll bargain better and know your financial limitations.
4. Shop wisely — Now shop for what you need. If you buy privately, you may pay less but not get a warranty. If you buy from a dealer, look for the "Buyers Guide" sticker on the window. It tells you about the car — and its warranty. Review the service record. Test drive the car. Most important, have it checked by a trustworthy mechanic. Hidden flaws will cost money later.

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