Buying A New Car

Buying a new car should a pleasurable experience, but for many it can be stressful & intimidating.

There is something special about owning a new car, choosing something that you have always wanted & getting that new car feeling, that new car smell (albeit the smell of plastic) & driving a car no one has driven before. That is except for the factory workers, test drivers, transporter drivers, garage mechanics & sometimes the handy man ...
...can be an expensive mistake buying something on impulse that you later find out is totally unsuitable.
First up is to decide what you want in terms of type of vehicle, you wouldn’t believe the amount of people who buy a car only to find it won’t accommodate the entire family or doesn’t fit in their garage.

SIZE OF VEHICLE

It’s no use buying a small four seater town car if you have four children, two dogs & a demanding ... more

Buying a new car should a pleasurable experience, but for many it can be stressful & intimidating.

There is something special about owning a new car, choosing something that you have always wanted & getting that new car feeling, that new car smell (albeit the smell of plastic) & driving a car no one has driven before. That is except for the factory workers, test drivers, transporter drivers, garage mechanics & sometimes the handy man at the garage.

This is not a review on which new car to buy but a review on the likely pit falls when dealing with sales staff at franchised dealers. Having spent many years working at franchised dealers on the after sales side I have seen more than my fair share of questionable tactics played by sales staff in an attempt to sell cars.

DOING YOUR HOME WORK

Unless you are the kind of person who makes decisions on impulse I would highly recommend you do some home work first on what you want to buy. It can be an expensive mistake buying something on impulse that you later find out is totally unsuitable.
First up is to decide what you want in terms of type of vehicle, you wouldn’t believe the amount of people who buy a car only to find it won’t accommodate the entire family or doesn’t fit in their garage.

SIZE OF VEHICLE

It’s no use buying a small four seater town car if you have four children, two dogs & a demanding mother in law to transport around or do you really need a seven seater multi purpose people carrier for you & your boyfriend?

ENGINE SIZE

Once you make the decision on size of vehicle think about engine size, small engines mean small bills, small engines have low Co2 figures which means low road tax values. Any vehicle with a Co2 figure of less than 100g/km is free from road tax. However, an engine of this size would struggle carrying you around if you intend to do a lot of long distance motorway driving. Once you push these little engines they become less economical & having a larger engine can sometimes make more sense.
You can get an energy rating for cars identical to those for washing machines, dish washers & fridges.

Petrol, diesel, LPG, electric or bio-fuel, the choice is bewildering, you pay more for a diesel car than a petrol one & you pay more for the diesel fuel, however diesel cars are more economical. One of the motoring originations reckon a diesel car doesn’t pay itself back until it’s done over 40.000 miles, so it’s worth considering that before you buy. Petrol cars are more economical & cleaner now than ever before but fuel is expensive, why not consider LPG at little over 45p for a litre of the stuff there is a strong argument for it.
Electric cars have their advantages in terms of environmental matters but they range of models available is limited as is the mileage range on a single battery charge. Bio-fuel powered vehicles are limited to certain models & to date it doesn’t appear to be catching on as much as many expected.

MAKE & MODEL

Next decision is to decide on which make or model you want, today there are no bad cars out there, they all come with generous warranties from 2 years up to 7 years on some models. It’s just that some are better than others. My best advice here is to source information from independent resources such as JD Power Surveys & Which magazine that do not rely on advertisers or sponsors to fund their surveys. They will provide you with satisfaction surveys which cover the vehicle’s reliability, ownership, costs, dealer standards & value for money. Some cover just reliability which is usually a good basis to start from.
Web sites like Ciao are also good as its reviews are from real owners who have experienced the good or bad in a particular vehicle. Check out a website called Peach or Lemon, it’s a real eye opener on all new & used vehicles.

Disregard magazine road tests & newspaper reviews, remember these publications rely on advertisers to fund their publications & if one manufacturer spends millions on advertising do you think the same magazine or newspaper will slag off their products?

I remember reading a daily newspaper review on a particular unreliable 4x4, the journalist started his review with “You just have to take one look at this vehicle to realise its tough & reliable”. How can a vehicle look reliable? It may look durable & well finished but it doesn’t mean it won’t fall apart in six months. Comments like this highlight how ‘out of touch’ some motoring journalists really are but I could give you loads of other examples.

PRICE & DEPRECIATION

Compare prices, equipment levels, warranties, safety features & servicing costs, you also need to look at possible residual values. The minute your new vehicle drives out the garage the depreciation time clock starts ticking away. In the first year the car will lose a considerable amount of its value & start slowing down there after. Remember you have paid VAT on the car when new which you will never get back even if you sell it the day after you bought it. You would be surprised how values plummet in particular on big engine cars & some 4x4 models.

Some value for money products can also lose much of their values in three years but you need to take in account you will pay less for them in the first place so they can is some cases be better value for money. Working out future depreciation levels is not easy as even the motor trade struggle to get it right.

LOCATION OF FRANCHSIED DEALERS

It’s no use travelling a 100 miles round trip to buy your selected car if you have to travel that same distance each time it needs repairs or servicing, try & chose a dealer close to home. If you live in a big city you may find more than one dealer selling the same make, this is good for negotiating a deal as you can deal one against the other.

PLC v FAMILY BUSINESS

You will have little say in who runs your local franchised dealer but a small family owned business will probably look after you better when things go wrong than a large PLC. The larger dealer will probably give you a better deal with more choice as they often ‘buy in bulk’ & I have seen examples of big dealers selling cars at a price cheaper than small business can buy the same product.
Big PLCs have a bigger turnaround of staff compared to small family businesses which can often be frustrating for the customer.

THE SALES STAFF

No matter if they are male of female sales staff I feel are a breed of their own, no matter if they sell cars, fridges, computers or ladies underwear. They are constantly chasing a sale & some would sell their grandmother to make money.
However, they can’t all be tarred with the same brush, I have worked with many professional sales people, male & female who are excellent & look after their customers very well after the cars are sold. Look after a customer & they will come back for the next sale, the best sales staff know this. They are often trained by the manufacturer to a high standard.

But for every good professional sales person you can bet your last pound coin that there are many bad ones following close behind. Loyalty is not a word that enters their vocabulary & I have seen some shocking examples of bad sales people over the years.
They are guilty of false information given to customers, incorrect procedures carried out, false finance figures given out, promises made that can never be delivered & many other shocking examples most of which wouldn’t be allowed in today’s market place.

It is important to know how sales staff operate to fully understand how this will affect your deal. Most are only paid a small basic wage & have to rely on bonuses / commission to make up their wages. It’s probably why they can sometimes come over as pushy. They are paid a bonus / commission on every thing they sell, not just cars. So when you walk in a showroom expecting the sales person to make a little bit of commission on your car, think again, he or she will make money on at least the following:

1, The sale of the car.
2, The finance package.
3, Payment protection.
4, G.A.P.
5, Extended warranties.
6, Paintwork protection.
7, Service plans.
8, Accessories.

Let’s look at these eight items in a bit more detail.

1, THE SALE OF THE CAR

Contrary to popular belief not all dealers sell new cars for huge profits, many of the volume manufacturers sell some of their cars with little basic profit for their dealer network. They prefer to pay their network a bonus at the end of the year if they achieve a target on sales, the bonus can run into six figures but the dealers have to jump quite a few hoops to achieve their rewards.

Small cars make small profits & large ones make large profits but I do know some dealers selling volume makes making as little as £25.00 profit on a basic new car without their bonus. I know one franchised dealer who lost £200 on each basic entry level model they sold as he failed to ‘sell up’ to a more expensive profitable model as advised by the manufacturer.

Some however, do have a lot of profit (dealing money) to play with when negotiating a sale but at the end of the day they can only play about with so much. If they have £1000 profit on a deal they may decide to offer you £500 off the new car or an extra £500 on the trade in & keep the remainder to themselves. You won’t get both, that is commercial suicide but you can be assured that the sales staff will do alright out of the deal.

2, THE FINANCE PACKAGE

The one single issue that will determine what you eventually buy is how much money you have to spend or how much you are willing to borrow.
Rule one, always allow for needing extra money for unforeseen expenditure. Once you have decided how much you want to spend on a car, set yourself a limit and stick to it.
A personal loan from your bank maybe the answer, before the recession they were easy to arrange and often didn’t require a deposit. The downside is that the rates are usually more competitive when you are borrowing a higher amount. You often pay a higher rate when you borrow a smaller amount.

Hire purchase is another option, it’s easy to get but you don’t own the car until the payments are completed. Other drawbacks are usually higher interest rates and penalties for an early settlement.
Remember unsecured loans can be a little more expensive, but if you default on payments you won't lose your property. Secured loans are usually secured against your property and can be cheaper, but you need to be absolutely certain you'll keep up payments or you could end up homeless.

Personal contract purchase (PCP) or contract hire is only available for new cars and if available can be quite competitive but read the terms & conditions of the plan first before committing.

You can organise your own finance via your bank or get finance from the dealer via a subsidised deal with the manufacturer through a leading bank. I have seen banks reject a customer’s request for finance to get the approval via the manufacturer & the same high street bank!!!

In the 21st century paying cash doesn’t offer much in discounts, garages and dealers prefer selling finance as they earn commission from it.

Watch out for the hidden administration fees which are usually never mentioned until you are about to sign the documents. By this time you are so excited about your deal that you sign without thinking. Don’t accept any administration fees, explain that unless they drop these fees you will go elsewhere, it usually works!

How can I avoid being ripped off as regards monthly payments? Forget the APR figure the sales staff may give you, APR helps to compare loans not calculate monthly payments. You will need a calculator to work out the following:

Multiply the flat rate of interest by the number of years the loan is likely to run.
Multiply this figure by the amount borrowed.
Divide by 100 to get the total interest payable.
Add this figure to the original loan amount, which gives you the total amount.
Finally, divide the total by the number of months the loan is likely to run; this will give you the monthly amount.

If you are asked by a sales person what you want to pay each month, some will very quickly work out a monthly figure to suit them, not you. Beware of anyone quoting you over two years and then trying to reduce the monthly quote but over a longer period of time. You may end up paying more over the entire period of the loan although the monthly figure is actually lower.

What if I get my application rejected from one particular finance company?
Many lenders look for 100% guarantees before they lend money and people are often declined finance. Don’t give up, find out why you have your application refused and speak to other finance lenders. Don’t be tempted to buy a car from companies who specialise in lending money for people who have trouble getting finance in the first place. They will take you on but at a heavy price, their rates are often much higher than other companies because you are considered a higher risk.
If you are ‘black listed’ and can’t get finance, don’t be tempted to get a loan of money from loan sharks. They will lend you money without many questions being asked but you will pay astronomical rates of interest and should you default on your payments they often use violet tactics to recover their losses.

Remember don’t over stretch yourself; this is a car you’re buying, a depreciating object, not an appreciating asset or investment.

3, PAYMENT PROTECTION

Watch for the ‘add on’s’, things like payment protection insurance, should you lose your job how would you keep the payments going? This can add about 12% to your monthly payments so it becomes very expensive. Remember the garage or bank will make healthily commission from this at your expense. Don’t waste your money, should you lose your job or fall ill, the law is on your side. Contact your local Citizen Advice Bureau who will advise on how to keep the creditors off your back legally, until you are back to work.

4, G.A.P.

GAP is short for guaranteed asset protection, this covers the outstanding part of your loan should your vehicle be written off in an accident & is worth considering. Imagine buying a £10.000 motor car with total payments of £12.000, if your car is written off in an accident two years down the line the insurance company will stump up for the vehicles value. Lets say that value is only £6500, you have a nice cheque for the car but what about the loan that you are still paying for which is more that the value of your cheque?
GAP protection ensures that the remainder of your loan is paid up & that you are not out of pocket. GAP is not cheap & it does have its limits but it does give piece of mind & creates a bonus for the sales staff if they sell one.

5, EXTENDED WARRANTIES

Despite many manufacturers issuing a free 3/5/6/7 year warranty with their products many manufacturers approve of extending the warranties via an underwriter for another 3/4/5 years. They can be expensive & sometimes limited in their benefits but some sales staff will try & sell you them at the point of sale.
Best advice is not to bother if you intend to sell the car after three years, these warranties are sometimes not worth the money & contrary to what a sales person tell you, you can purchase them at any time. There is also a bonus to the sales staff if they sell an extended warranty.
Have a look at my old review on Ciao about car warranties before you sign up.

6, PAINTWORK PROTECTION

Using a branded name paintwork protection is becoming very popular, in layman’s terms it is special treatment applied to the paintwork for around £300-£400. It means for about three years you do not need to polish or wash your car. Yes dirt will collect on your car body but as soon as it rains the dirt just washes off & the car keeps its lovely shine. It really does work but there is something appealing about washing & polishing your pride & joy on a summer Sunday morning. Oh & by the way the sales staff get commission out of selling these packages.

7, SERVICE PLANS

A service plans allows you to pay monthly payments towards your servicing costs for two or three years. You need to calculate the total cost against the same garages costs for individual servicing but its usually cheaper or they provide some freebees such as wiper blades, bulbs or brake pads. Some also cover any price rises over the years & yes the sales staff make commission on these plans.

8, ACCESSORIES

What is the difference between options & accessories? Options are fitted at the factory & involve items that couldn’t be fitted easily later on, these include items such as automatic transmission, air conditioning, glass roofs, metallic paint & so on.
Accessories are after market items such as carpet mats, mud flaps, dog guards & telephone hands free kits. Watch out for hefty prices for items you can buy at Halfords & remember the sales staff make bonuses on these items.

WHEN TO BUY

Avoid buying a new car when the registration numbers change, even during a recession sales are reasonably buoyant at these times & sales staff are not so hungry for sales. However during late December & early January you could almost name your price, also during May, June & early July.

At the end of each quarter (March, June, September & December) a dealer maybe close to reaching targets & desperate for that missing sale(s) so it can be a good time to make enquires.

If a model has been replaced by a new model the old ones may still be available & there is often cracking deals on the old models. Some car makers dress them up as limited edition models just to get rid of them & these can represent good value for money but are not usually worth more in the future.

BE PREPARED

Before you make any enquiry & after you have done your homework allow for four golden rules:

1, Set yourself a budget & stick to it no matter how persuasive the sales staff become.

2, Never ask a sales person for advice, they will always put themselves first.

3, Know exactly what you want, if you walk into a showroom & tell sales staff that you are looking for a new car but not sure what you want they will take advantage of it. They will locate a slow selling beige coloured oddity they have tried to sell for months & tell you how much a bargain it is. That is until a few years later when you discover how difficult it is to dispose of.

4, Take someone with you as a witness to the conversation should a problem arise later on.

WALKING INTO THE SHOWROOM

Remember sales staff are experts when it comes to judging characters, they just sense if you are wasting their time or not. They will ask you what your looking for & what you have to spend. Focus on the cars you want to see & ask them to leave you alone while you look around. If your buying a family car take the family with you & see if they all fit in, don’t forget the dogs!

If you have a hobby such as golf, surfing or playing drums will your gear fit in? Ask for a road test preferably without the sales staff present, drive to the roads you are familiar with & give yourself enough time to get accustomed to the car as it will always feel strange compared to your old one. Take as long as you need to drive the car, a blast around the block is not enough.

It surprises me the amount of people who never road test a vehicles & then complain later after buying that they can’t get a comfortable driving position or can’t see out when reversing.

DOING THE DEAL

Don’t be hurried, don’t sign for anything unless you are 100% happy, ask as many questions as you want & take notes. You’ll be asked to leave a small deposit which the dealer is not obliged to return especially if they have ordered a vehicle to your requirements that you cancel later on. Don’t pay for dealer’s number plates with their logo on them, they will charge about double the real cost & why should you pay for their advertising? You can source number plates form Halfords at a fraction of the cost.

Choose you options carefully, a used car with some options is worth no more then some without, a built in sat nav will not increase the value of your new car 2-3 years down the line despite paying around £1000 for it when new, the same applies to leather seats or even alloy wheels. However some options will help resale values such as air conditioning.

Colours are important, a nice blue, black, red or even white will be safe enough but colours such as orange, lime green & pink won’t, many go out of fashion as quick as they came in. You will have to pay extra for metallic paint despite costing no more at the factory to apply.

Look for something for nothing, try & prise a free set of mats or mud flaps from the sales staff & get that assurance in writing.

THE HANDOVER

When the big day comes & your new car is ready to collect your dealer will go through the handover stage with you. This is important & is a legal back up should things go wrong.
I remember hearing about a lady who purchased her new car & drove straight on to a motorway, she decided to adjust her seat whilst driving & whilst she was fumbling for the seat lever the car drove across the carriageway & caused an accident. Despite casing the accident she successfully sued the garage because they didn’t show her how to adjust the seat!

The handover procedures covers all the important things such as how to operate the switches, heating, open the bonnet, location of spare tyre etc. You have to sign the form to prove they have explained everything to you & that they cannot be sued later on for something trivial them missed out.

Check our car over carefully for any defects no matter how small they may be & highlight them right away before driving off. If you are not happy don’t take the vehicle away until the defect is rectified.

IS THERE AN ALTERNATIVE TO ALL THIS?

Should the lottery come up tomorrow I would disregard all of the above & do what the ‘other half’ now do when buying a car. I spoke to a sales manger that runs a dealership for a very famous luxury make of car of which one model costs a mere £250.000. His last 25 enquires have required him to take the car to the customer’s home or business (sometimes a 300 mile round trip), spending a half day demonstrating the vehicle to him & obviously a road test.
He tells me that if someone was to come into his showroom to see his range of new cars, he just knows he or she can’t afford it. Apparently rich people don’t visit garages to buy, collect or service their cars.

No worries about the cost of number plates then!

Happy motoring!
 

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