Don't be Swayed by Attractive Auto Deals

Physician's Money Digest, September 2005, Volume 12, Issue 13

Money

According to a recent articlein , the averagediscount on a newcar or truck is $5000.For sport utility vehicles(SUVs), the combination of rebates, financingoffers, and incentives tops outat $9000, according to Edmunds.com.

So, this is a great time to get a deal ona new car or truck, right? Yes, but onlyif you understand how to make therebate game and no-interest loans workfor you. A good car becomes an evenbetter one with a rebate. However, amediocre car doesn't become great justbecause you pay less. The following iswhat every physician needs to know toget the best value for your money:

•Remember resale value. Moreoften than not, you will own your autofor several years. As such, you musttake into account not just the price youpay for, the vehicle, but its resale valuewhen it's time to trade it in.

Money

offers a side-by-side comparisonof the Acura TL and theLincoln LS V-8. The Acura, with abase sticker price of $33,220, will bedifficult to negotiate much lower. TheLincoln, on the other hand, lists for$40,095, but features about $6000 inrebates and incentives.

Does that make the Lincoln the betterbuy? Not really. As the article pointsout, the Acura will retain 57% of itsprice after 3 years and 48% after 5years. The Lincoln, however, will dropto 42% and 25%, respectively. Takinginto account the Acura's superior performance,which car is the better buy?

In other words, a mediocre car thatis masquerading as a bargain shouldn'tsway you. Think value and make sureany incentives outweigh the vehicle'sflaws. You can check out a vehicle'sdepreciation ratings through theAutomotive Lease Guide available atwww.edmunds.com.

•Consider model lifespan andcost. Car manufacturers introduce afull redesign of a particular modelevery 6 years. During this time, agingmodels often require even greater discountsin order to keep up with newercompetitors. The arrival of the redesignedmodel can boost those discountseven higher.

Money

As an example, lists the 2004Honda Odyssey as an oldie, but agoodie. A redesigned model went onsale this past September, and with itcame significant discounts on theremaining 2004 models. Still considereda leader in its class, the 2004Odyssey is a very smart buy.

In contrast, the article points to the2004 Jeep Grand Cherokee, which hasfallen far behind the midsize SUV leaders.An upgraded 2005 model wasscheduled for introduction in October.As a result, the 2004 model's value hasbeen rapidly depreciating.

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•Drive, compare, and then buy.Once you've narrowed your list ofpotential vehicles based on quality,value, and life cycle, it's time for a test drive.When you do so, suggestsemphasizing to the salesperson thatyou're only interested in driving andcomparing, not buying.

Once you're ready to buy, keep inmind that just because the car has anadvertised rebate doesn't mean thedealer won't go lower in price. Severalautomakers—including GM, Ford, andChrysler—have boosted retail pricesfive times during 2004, oftentimesmaking the postdiscount price look betterthan it really is.

Money

If you're fortunate enough to receivea generous rebate, suggests thatyou quickly pocket the cash. Using thatmoney to step up to a fancier model oradd unnecessary options will only drivethe price of the car back up, thus negatingthe rebate.