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Shopping for your next car

Shopping for your next vehicle

Where to Begin

One of the most important things you can do while shopping for your vehicle is to stay organized and have a plan. This will save you time, and help you to be well prepared and confident throughout your quest.

To help in your search, take some time to narrow down what is important to you so that you can focus your efforts on a few particular aspects of the vehicle. We have found that many consumers spend far too much time on their vehicle search because they never spent a little bit of time trying to determine what they really wanted out of a vehicle. Take a look at the pre-shopping checklist we have provided to begin to narrow your choices.

Pre-Shopping Checklist

Decide which kind of vehicle you want vs. need.

  • Which features are most important?
  • Do you prefer a car, truck, or SUV?
  • How efficient must the vehicle be with respect to gas mileage?
  • Do you prefer an automatic or manual transmission?
  • Are you interested in 4-wheel drive or all-wheel drive?
  • Do you want/need anti-lock brakes?
  • Is engine size important to you (i.e. 1.8, 2.0)?
  • How much horsepower do you want/need (i.e. 80, 180, 360)?
  • How many cylinders do you want/need (i.e. 4, 6, 12)?
  • Do you require cargo-carrying capacity?
  • Will you need to tow anything with the vehicle?
  • How often?
  • Will the vehicle fit easily into your garage or parking space?
  • Have you considered the impact that the vehicle will have your insurance premium?
  • Will the vehicle be able to accommodate your needs as they change over the course of the next few years?
  • Is there a nearby maintenance shop for this type of vehicle?
  • Have you check with Consumer Reports or any other sources of vehicle reviews?
  • Have you considered the annual cost of maintenance for this vehicle?
  • How important is trunk space?

Determine how much you can afford.

Review the differences between leasing and buying to decide which option best meets your needs. (See the section entitled “Lease versus Loan” for help on making this decision)

Look at similar vehicles in the same category to compare features.

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What Price Can I Afford?

The affordability of your vehicle has a lot to do with your other existing monthly expenses. A general rule of thumb is that your car payment should not represent more than 20% of your income. This does not include insurance, so the overall number would be slightly higher.

Part of the problem in determining what vehicle you can afford is not knowing what the final price of a vehicle will be when you get into a lease. There are many factors to consider, but a good baseline is to use $125 per month in payment for every $10,000 in MSRP cost. Again, these will vary greatly, so this is just a real general rule.

For a quick calculation on actual lease rates, go to the internet and perform a search for real-time rate calculator. Most calculators use the actual ALG values that the dealers use across many popular lenders. Your payment ranges will vary based on the criteria that you input, especially your selling price and term. Affordability should also consider the cost of insurance as well. (See the section entitled “Shopping for your Insurance” for more information about researching insurance companies.)

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Where Can I Go to Find a Vehicle?

Traditional car dealerships are always a good option. Dealerships are great if you want to touch, feel, and test-drive the vehicles. In addition, the Internet has become an incredible resource for finding a new or used vehicle. Millions of vehicles are instantly available and thousands of pages of content are written about almost any model you could imagine.

Before you walk on the lot, though, it would make sense to start narrowing down your choices through some smart research online. There are three steps to consider when shopping for your vehicle:

Step 1: Learning about your vehicle
Step 2: Finding the true market price of a vehicle
Step 3: Locating the Vehicle

Learning about your vehicle

While we could list an endless directory of web sites that highlight particular vehicles, the most popular sites often cover the most important issues. While learning about your vehicle, be sure to not only read reviews, but also visit chat rooms and forums of actual customer experiences.

Reviewers are not necessarily owners, so they might now be able to experience the same ownership issues that an actual owner would.

Step 2: Finding the True market Price of a Vehicle

You may have heard of the terms "blue book price", "dealer wholesale", or "trade-in value". All of these are different terms for determining what a vehicle is worth. Vehicle prices are probably one of the most contested values of any commodity, as everyone feels they could potentially pay less than advertised. In most cases, it is probably true!

When finding the true market price of a vehicle, you can now leverage some popular Web sites to get a good reference point. Here are some of our favorites:

Kelley's Blue Book
Kelley's Blue Book (KBB) is a great resource because it is viewed by so many people and is widely accepted as a general benchmark for a vehicle's value. KBB's values of vehicles tend to run a little bit higher than you will find elsewhere, yet they are very conservative. As a general rule of thumb, you certainly do not want to pay any more than what your vehicle is listed for at Kelley's.

Edmunds has launched a more practical pricing guide by introducing their TMV - True Market Value of a vehicle. Their data is more reflective of what a vehicle is really selling for in the open market versus some dated statistics that are used in most general Blue Book sites. You will want to make sure you compare your vehicle to both Kelley's and Edmunds.

Blue Book Prices are derived from broad statistics across many dealers, auctions and third party information sources. Thus, the "book price" is just a guideline, not an absolute value. You should only use "Book Pricing" to understand what ballpark you are in, not as a final determination of priceor what you should pay. In most cases these values are about 6-12 months old, so changes in market value may not be reflected accurately.

eBay Motors
The popular auction site is also a great way to research used vehicle pricing. But, it helps to know how eBay works. Understand that the prices that you may see for vehicles that are available may reflect the "current bid", not necessarily the final price. Therefore it is helpful to see what vehicles have already sold for by searching through recently closed listings. eBay represents one of the largest real-time marketplaces for used vehicle sales. Typically if a vehicle has recently increased or decreased in value you will see this reflected in the price on current vehicles.

Unlike Blue Book Pricing, eBay pricing only applies to the specific seller at that moment in time. You may see a vehicle that sells for $1,000 below what you have seen the value elsewhere, but it may have been a distressed sale or otherwise unusually low. What's important about eBay pricing is that it is current and actual.
Another way to determine what vehicles are currently leasing for is to search through a lease marketplace like Swapalease has thousands of vehicles listed that identify the exact payment, residual and mileage allowances for each vehicle, as well as the leasing company who offered these terms. This is the most accurate collection of what prices are being paid by actual consumers for actual vehicles at the time of lease.

What you do not know about each vehicle is whether or not the lessee put money down on their vehicle to reduce their monthly payment, had a trade-in that inflated their payment or had special circumstances surrounding their lease. So once again this is only a benchmark. You can ask these questions of the sellers directly using the Web site for more information.

Manufacturer's Sites
Each manufacturer will have an extensive collection of information on its most recent models as well as special financing programs that it may be running. One of the fastest ways for a manufacturer to sell more cars is to offer special financing programs to make them more attractive. Taking advantage of a great financing program could be very advantageous, so it is highly recommended to visit a manufacturer's site to determine if special financing is available.

Locating the Vehicle?

Once you have found the vehicle you want and have a general idea of what price you want to pay, your last step is to locate the vehicle itself. There are many places to find a vehicle, but generally speaking you will likely purchase it from either a dealer or an individual. Because there are so many sites that offer the same thing - new and used vehicle listings - we will focus on the largest directories that offer the most selection.

General Vehicle Classifieds, New and Used

Lease Assumptions

Vehicle Auctions

Luxury and Exotic Vehicles

Manufacturer References
Most manufacturers will have their own directory of affiliated dealers who often link to existing inventory. This is particularly helpful when considering a new car because inventory is so fresh.

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Putting your Decision to the Test(drive)

Now that you’ve narrowed down your decision to a few select models (or just one if you’re lucky) it’s time to do a physical test drive. No matter how great a car sounds in an editor’s review, or a customer’s claim, or in a fancy brochure, there really is no better way to tell whether a car is for you than to test drive it yourself.

What to look for in the test drive

Obviously you’re not a mechanic, but you certainly know whether you like the basic functionality of a vehicle. You can tell the difference between the ride in a pickup truck and that of a smooth luxury exotic. Most consumers get nervous that they are not qualified to make a good decision on a vehicle. But there are two types of considerations – mechanical, and personal (not to mention financial!).

First focus on the personal aspects of the vehicle:

  • Are you comfortable?
  • Can you see out of the windows with ease?
  • Is the drive easy or do you feel you are overcompensating for a poorly designed interior?
  • The "right" car has a lot more to do with fitting into your day-to-day routines than scoring high on some editor's scorecard. If you’re driving long distances, does the car have cruise control, cup holders and comfortable seats?
  • If you live in an area that is covered in snow in the winters does the vehicle have adequate tires and traction control for these conditions? More than anything, is the vehicle safe?

The mechanics of your car

If the car is new, chances are it does not need to be inspected by a mechanic. Most flaws will be covered under warranty. But if the vehicle is used, any number of problems can exist that could really come back to bite you later on.

For less than a couple hundred dollars you can have a professional inspection service do a thorough inspection of the vehicle you would like to purchase. They will do a road test, an engine test, and a thorough check up on the cosmetics and functional areas of the vehicle. At, we request that each of our buyers perform this type of test to ensure there is a qualified third party opinion of the vehicle prior to purchase. Even a good mechanic cannot guarantee the condition of your vehicle long-term, but pointing out some glaring issues could save you a great deal of money down the road.

At Swapalease, we recommend a provider like DataScan Field Services ( although other providers may perform the same task as well. If your dealer provides an inspection report you may be a little skeptical because you are effectively taking the word of the person selling you the vehicle which will likely be a bit biased!

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Getting the best price on your vehicle

Just because you test drove the vehicle of your dreams at your local dealer, that does not mean you need to buy it at that dealer. In most cases, for a new car you can find the same year, make, model and trim-level from any dealer around the country, perhaps even at a lower cost!

Once again we are going to go to the Internet to help find this vehicle. There are a number of sites on-line that will allow you to put multiple dealers in competition for the sale of the same car, which means a lower price for you and more options. Sometimes the vehicle will be located in another city, state or even an opposite end of the country.

Not to worry. In most cases a vehicle can be shipped anywhere in the country, right to your doorstep. There is of course a charge that may be assessed, anywhere between $500 to $1,000, but could be well worth the price if the deal is right. Most vehicle inventories are listed on-line through different Web sites. You can browse the selection of these inventories as one major listing versus individual dealer listings.

Some popular sources for finding a vehicle on-line include:

Regardless of where you find your vehicle, you will want to make sure you get multiple quotes on the same vehicle to be certain you have a competitive price.

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Dealer Tricks to Avoid

If you do decide to go through a dealer directly (or when you choose the one who has the right vehicle) there are some common dealer tricks that you should absolutely avoid. Let’s take a look at some of the more popular ones.

Sales price, Trade-in, and Financing

The sales price of the car you want to purchase, trade-in value of your existing vehicle, and financing terms you select are three completely different transactions.

Be sure to negotiate sales price, trade-in value, and your financing separately.

A popular dealer trick is to use one of these tactics to improperly represent the others. For example, say you have a trade-in that the dealer claims is worth far less than you think it is. He may say that in order to take your trade-in, he must adjust the sale price of your vehicle by adding $2,000 onto the final selling price.

This is a dealer’s way of not only convincing you that you should trade your car in at a lower price, but that you should not even think about negotiating the sale price of your vehicle. Not so! You need to negotiate each of these items separately, as if the other two never existed. Any of these transactions can be done without this particular dealer, so you need to make him aware of this.

We recommend you start with the sale price of the car. This is where the dealer has the most amount of leverage and you can negotiate from there.

Dealer Holdback

You may have heard that there are incentives provided to dealers by manufacturers to sell more cars. This is true, though not in every case. If a car is selling well already, chances are the manufacturer does not have to provide additional incentives in order for more units to move.

If this is part of the dealer’s total compensation for this vehicle, though, you should be aware of it. There are many places that mention what current holdbacks may be. We recommend doing a general search in your favorite search engine under the search phrase “dealer holdback Toyota Camry” (or whatever car you are interested in) and scan through some of your results. Dealers can earn hundreds if not thousands of dollars in holdback when the timing is right.

MSRP versus the Actual Selling Price

Earlier we noted sites on the Internet where you can go to find your vehicle. These same sites will also give you market rates for what vehicles are currently selling for. You will want to get a good sense for how far below MSRP (Manufacturer’s Suggested Retail Price) customers are currently paying.

Here is a list of sites we recommend visiting to get a good sense for what cars are actually selling for:

Each of these sites should provide relatively accurate information about actual selling prices. The pricing the list is based on selling prices of actual vehicles (in most cases) so vehicles that are brand new may not be completely reflected on these sites.

Poor value of your trade-in

A very profitable segment of the dealer businesses in used car trade-ins. The reason for this is because dealers often can negotiate very low purchase prices for trade-in vehicles because customers feel like they are compromised in the negotiation process.

The value of your trade-in should be no different than if you sold the car outright to a private individual.

In order to find the “right” price for your vehicle trade-in, consider comparable sale prices at a retail level using car classifieds and market indices like Edmunds and Kelley Blue Book. Remember that the dealer cannot pay retail value in most cases because he has to make some profit on the sale of your car. So expecting to get “full retail” for your vehicle is not realistic either. Your goal is to try to get as close to retail as possible. A general rule of thumb here is $1,000 less than retail should provide enough margin for the dealer to make money on the vehicle and enough room for you to still make most of your money on the vehicle.

Vehicle Financing

The financing of your vehicle is absolutely separate from the rest of the vehicle sale. More information about how to find the right financing and work with a dealer can be found in the section entitled "Shopping for your Lease."

Vehicle Add-Ons

In addition to selling you your vehicle, the dealer will also make money on additional “add-on” services such as extended warranties, GAP insurance, and various aftermarket add-on products and services.

Auto Insurance

Buying your auto insurance at the dealership is like doing your grocery shopping at a gas station convenience store. Sure, you’re there, but you’re likely going to pay for more for the convenience of shopping in one place than you are if you shop elsewhere for the same price.

There really is not a great advantage in being able to get your insurance through a dealer, so do your homework on your own time, preferably before you purchase your car so you can get a good sense for what the cost will be.

For more information on finding great insurance rates, see the section entitled “Shopping for your Insurance".

GAP Insurance

GAP insurance is a basic insurance product that helps protect customers from the personal liability that would occur if your vehicle was damaged (or destroyed completely) and the insurance company would cover less than the actual value of the vehicle.

For example, if you were to get into an accident and your car was considered “totaled” (unable to drive or function) the insurance company may cover you for $25,000 of the total damage of the vehicle. However, if you paid $27,000 for the vehicle, you would have $2,000 of cost that would not be recouped. If you financed the vehicle, the finance company would expect you to pay the difference personally. The $2,000 difference is considered the “gap” in coverage, hence the name. To avoid this type of loss, dealers will offer you GAP coverage. In reality, the dealer is only reselling the policy that is provided from any auto insurance provider, which means they are making money in the process. If you desire this type of coverage, ask your insurance agent for pricing when you write your auto insurance policy.

Extended Warranties

Dealers make a fortune off of extended warranties. Obviously the only reason you would ever need an extended warranty is if the existing warranty ran out before your financing term did. If you have a 4 year warranty on your vehicle, and a 48-month (4 years) lease, there is no reason to purchase any additional coverage.

You’re also speculating that the condition of your vehicle will warrant the additional coverage. If you are purchasing new, how can you be sure that your vehicle will need additional coverage in 4 years? You really can’t, nor can the dealer. But it is a way for the dealer to ask you to buy additional “coverage” that you may never use.

Once again, you do not need to purchase this type of warranty directly from a dealer, nor do you need to purchase anything at that very moment. Extended warranties are available from many 3rd party sources at any point in the life of the vehicle and can be shopped competitively. The value of warranties can vary quite greatly and the coverage provided can be managed to meet your budget. We have found a number of on-line companies that can service your warranty needs on-line:

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Finalizing your deal

So there you are – your sale price is competitively negotiated, your trade-in was settled at the right price, and you have aggressively sought out the best financing source for your lease. Now it’s time to sign on the dotted line!

Our best advice at this point is to remember to double-check every document and take your time at the closing table. Far too many consumers have gotten taken at the end of the process, when they forget to pay attention to the details. This is a big decision and it should be a positive experience. Take your time and enjoy it!

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