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Car Buying Basics APRfinder.com 1
Car Buying Basics
Copyright © 2012 APRfinder.com
Notice of Rights
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except in the case of brief quotations included in critical articles or reviews.
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herein. However, the information contained in this guide is provided without warranty, either
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be held liable for any damages caused either directly or indirectly by the instructions contained
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Rather than indicating every occurrence of a trademarked name as such, this guide uses the
names only in an editorial fashion and to the benefit of the trademark owner with no intention of
infringement of the trademark.
Car Buying Basics APRfinder.com 2
Table of Contents
Table of Contents Car Buying Basics ...................................................................................................................................... 1
Notice of Rights ..................................................................................................................................... 1
Notice of Liability .................................................................................................................................. 1
Trademark Notice ................................................................................................................................. 1
Table of Contents .......................................................................................................................................... 2
1) Planning for a New Automobile ............................................................................................................ 4
Where to start? ......................................................................................................................................... 4
Budget ................................................................................................................................................... 4
Credit ..................................................................................................................................................... 4
The Right Car ......................................................................................................................................... 4
2) Do Your Homework before Buying an Automobile .............................................................................. 6
Researching Prior to Heading into an Auto-Dealership ............................................................................ 6
Rebates & incentives ............................................................................................................................. 6
Invoice Price .......................................................................................................................................... 6
Crash test results ................................................................................................................................... 6
Available Options .................................................................................................................................. 6
Competing Prices .................................................................................................................................. 7
3) Buying vs. Leasing an Automobile......................................................................................................... 8
Should I Buy or Lease? .............................................................................................................................. 8
4) Leasing a Car ......................................................................................................................................... 9
Questions to ask when considering leasing a vehicle ............................................................................... 9
5) Buying a Car ........................................................................................................................................ 11
Dealer Tricks ............................................................................................................................................ 11
Common Car Buyer Mistakes .................................................................................................................. 11
6) Buying New vs. Used Cars ................................................................................................................... 13
Should I Buy a New or Used Car? ............................................................................................................ 13
Benefits of new car: ............................................................................................................................ 13
Drawbacks of new car: ........................................................................................................................ 13
Car Buying Basics APRfinder.com 3
Benefits of used car: ........................................................................................................................... 13
Drawbacks of used car: ....................................................................................................................... 13
More New Versus Used Vehicle Considerations:.................................................................................... 14
7) Automobile Financing ......................................................................................................................... 15
Sources of Financing ............................................................................................................................... 15
How Interest Rate is Determined ........................................................................................................... 15
Questions to Ask the Financier ............................................................................................................... 16
8) Types of Automobile Insurance Coverage .......................................................................................... 17
Auto Insurance ........................................................................................................................................ 17
1) Bodily Injury .................................................................................................................................... 17
2) Personal Property Liability .............................................................................................................. 17
3) Personal Injury Protection (PIP) ...................................................................................................... 17
4) Collision ........................................................................................................................................... 17
5) Comprehensive ............................................................................................................................... 17
6) Uninsured Motorist......................................................................................................................... 18
How much coverage should I carry? ....................................................................................................... 18
9) How to Choose an Auto Insurance Company ..................................................................................... 19
1. Licensing .......................................................................................................................................... 19
2. Financial Stability ............................................................................................................................ 19
3. Service ............................................................................................................................................. 19
4. Comfort ........................................................................................................................................... 19
What Determines Price of Policy? .......................................................................................................... 19
10) How to Save Money on Automobile Insurance .............................................................................. 21
Tips for Saving Money ............................................................................................................................. 21
1. Shop Around ................................................................................................................................... 21
2. Choose Higher Deductibles ............................................................................................................. 21
3. Reduce Coverage on Older Cars ...................................................................................................... 21
4. Buy Insurance with Homeowners ................................................................................................... 21
5. Maintain Good Credit Rating .......................................................................................................... 21
6. Other Discounts .............................................................................................................................. 22
Car Buying Basics APRfinder.com 4
1) Planning for a New Automobile
So it’s finally time to start planning for a new car, truck or SUV. While
it’s usually a very exciting time and familiar process for many of us;
when looking into a new vehicle, three seemingly innocent words can
still cause quite the headache:
Where to start?
From the get-go, trying to navigate the numerous options inherent in attaining a new car can be
tough. Do you buy or lease? Get a new or used car? How do you finance? What about auto
insurance? All together these questions can leave a person with their hands in the air and ready to
quit already. However, with a little background knowledge the decision is one that no person
should be intimidated by.
While you may be hot to pick out the make and model of your new vehicle, it is important to first
get a few things in order:
Budget
A word with little popularity with most shoppers is budget. However, first establishing a budget
for your new car is important out of the gate, and will save you time in the long run. It is
typically stated that less than 15%-20% of take home household income should be spent on
transportation. Keep in mind however, by transportation this does not mean merely the cost of
the car payment. This number includes fuel, maintenance, insurance, as well as other costs which
arise.
Credit
An equally unpopular word in most people’s vocabulary is credit. A person’s credit score comes
into play in more places than one might think. Outside of the financing of the automobile
purchase, a person’s credit score is routinely used to establish rates when it comes to insuring the
vehicle as well. For this reason, it is very important that you are well aware of where your score
stands, clear up any mistakes, and take action to improve your current score. If your credit is not
as high as you thought, it may be worthwhile to wait until you clear it up to continue shopping.
The interest and insurance penalties accruing from a poor score can ad up to thousands during
the life of your vehicle and loan.
The Right Car
While we may all want the newest exotic import car or luxury SUV, the reality is that no car
shopper is the same, and neither is the car for them. To find the best automobile for your
situation, it is important to consider a few issues:
Car Buying Basics APRfinder.com 5
Who will be driving the vehicle?
How many passengers will the vehicle typically transport, and of what age?
What are the primary uses of the vehicle?
Will the car mostly be used in the city, or the country?
How important is cargo space?
Will the vehicle in question fit into the owner’s garage?
How long do you anticipate owning the car?
After you have a firm grasp on these first elementary issues of buying a new auto-mobile, you’ve
then graduated on to the next step in the new car buying experience.
Car Buying Basics APRfinder.com 6
2) Do Your Homework before Buying an
Automobile
Once you have a ballpark idea of your budget, credit, and preferred
style of car, its time to ‘do your homework’ before heading into the
dealership, to ensure you get the best deal. As with any major purchase,
a little prep work at home can save you considerable amounts of money
over the life of the vehicle and loan.
Researching Prior to Heading into an Auto-Dealership
Rebates & incentives
Almost all cars nowadays have some sort of rebate attached to them. There are local and regional
dealer coupons, national auto-maker discounts, and even sometimes governmental rebates. The
best place to find many of these is directly on the manufacturer’s website, however they are often
published other places such as the local dealer’s website as well online car and truck review sites
such Motor Trend and Edmonds.
Invoice Price
Most simply put, the invoice price is the price the dealership buys the cars from the automaker
for. This is different than the Manufacturer’s Suggested Retail Prices (MSRP), or the price they
want it to sell at. It is important to determine the invoice price so you can negotiate a reasonable
fee with the dealer. A good rule of thumb is to set a target price about 2% above the dealer’s cost
($400 on a $20,000 car, for instance).
A few great places to do your research so you can get a general idea of invoice pricing are Kelly
Blue Book (KBB), InvoiceDealers and IntelliChoice.
Crash test results
It’s certainly important to review the safety information of any vehicle you are considering
purchasing. Luckily there are a few government websites providing accurate and up to date data
for most new car makes and models.
Available Options
Vehicle options from what colors you want your new car to be, to what extra features can be
included on particular makes and models can be easily discovered and chosen by viewing them
at each respective automaker’s website.
Car Buying Basics APRfinder.com 7
Competing Prices
As with any major purchase, it’s probably a pretty good idea to shop around to see what your top
vehicle picks are priced for elsewhere, locally and outside of your neighborhood. It’s prudent to
search both online and offline if you want to get to ensure you find the best prices and get the
best deals. A little research up front can save you a load of cash in long-run.
A few of the top automobile shopping websites that are great for comparing prices are eBay
Motors, cars.com and AutoTrader.com.
But before we get too ahead of ourselves, let’s take a step back to weigh out all of your options,
and help you determine if it’s better for you to lease or buy at this time.
Car Buying Basics APRfinder.com 8
3) Buying vs. Leasing an Automobile
Alright! It looks like you’re likely getting closer to that exciting vehicle
test drive. Now that you’ve done some initial automobile homework
and established a few ground rules, it’s time to move to the first critical
question on the quest to get your new car:
Should I Buy or Lease?
Many people often begin by pondering the financial comparison of the two, trying to decide
which long term makes the most economic sense. To give you an example, the car buying guide
Edmunds recently did an evaluation of the costs of leasing versus purchasing a car over extended
period of time and came to interesting results.
The sample car used was $20,000 with 3 year financing or a lease at 6 percent interest. Including
monthly payments, down payments, insurance, maintenance, taxes, etc the 5 year total of owning
the car was $32,388 and the cost of leasing the car was $32,140. Now, this may lead some to
believe that leasing is the lower cost option; however, this again was only over 5 years. When
Edmunds extended this study out to 10 years, the cost of owning the car became $43,000 all
inclusive, and leasing over that same 10 years totaled over $64,000 (and the person still would
own nothing).
But before you jump to either conclusion on which is ‘better’ it is important to remember that the
decision is not always a purely financial one. Both options ‘work’ for many people, and
understanding your individual situation is important.
Car Buying Basics APRfinder.com 9
4) Leasing a Car
First, it is important to review what exactly a lease is, and reasons it
may or may not be your best option.
A lease, in basic terms, is paying the difference between the price off
the showroom and the price the dealer thinks they will get for the car
when traded back in at the end of the lease plus the cost of wear on the
vehicle. The price the dealer thinks they will get for the car when traded back in is termed the
‘residual value’ and is typically between 50-60% of the original showroom price on a 36 month
lease.
While the benefits and advantages of having a brand new car every 36 months may seem
appealing, you should review a few of the pros and cons of such a set-up first:
Pros:
Lower down payment
Lower monthly payment
End of lease is easy (no negotiating trade in value, etc)
Cons:
At the end, you own nothing
There is always a payment as long as you drive a car
Early termination can have high charges
Extra mileage charges can be very high
Questions to ask when considering leasing a vehicle
1. Do you drive more than 15k miles a year? Most leases allow for 12-15k miles per year. If you drive over this amount, the overage charges
will make leasing a very expensive option.
2. Do you take good care of your car? Leasing contracts call for cars to be maintained to high standards, excessive wear can prove very
costly.
3. Do you plan on modifying the vehicle? Leases generally do not allow for modifications without substantial payment to the dealership.
4. Do you anticipate any lifestyle changes soon? Will you have kids in the next year or so and need a larger car? Or will you be moving to a new
area where you will need a Sport Utility Vehicle (SUV)? Breaking a lease is very costly, so you
Car Buying Basics APRfinder.com 10
must consider that you will need to stick it out with the car for the term of the lease, unless
you’re okay with paying a ton of over costs.
Specific questions to ask regarding an auto lease agreement
What is the amount due on sign-up?
How long is the lease?
What happens at the end of the lease?
What is the mileage allotment, and what are charges for overages?
What is the residual value?
What happens if I must end the lease early?
Can the leasing period be extended?
Few people find the whole leasing process ‘straightforward’ and knowing a few of the common
traps that dealers use to pad profits can greatly benefit the potential customer.
Common auto leasing ‘traps’:
Over mileage Often dealers will advertise exceptionally low rates, however with a very low mileage allowance
and high overage charges.
Early-termination Dealers often claim they can end your current lease early and ‘roll-over’ into your new lease.
This is very expensive.
Residual value Dealers can sometimes vastly understate residual value, causing your price of the lease to
increase.
Down payments A low monthly payment is often advertised; however, the size-able down-payment is visibly
absent from such advertising.
“Savings” The dealer will show the difference in monthly payments between leasing and buying. However,
you must remember, at the end of the lease you do not ‘own’ anything, so keep that in mind.
Fees Document fees, disposition fees, purchase option fees, license fees.
Car Buying Basics APRfinder.com 11
5) Buying a Car
Buying a car is usually easier to understand than leasing for most
people. You choose a car, finance the car, make payments, and
eventually own the car outright. However, during the process of buying
the car, there are tricks that the dealer normally uses, as well as
common mistakes which can cost the consumer thousands.
Dealer Tricks
1. Using your credit against you. Sometimes the dealer will say you ‘don’t qualify’ for certain financing or rebates due to your
credit. Knowing your credit ahead of time can give you information to question the dealer’s
findings.
2. Buying a car as 1 transaction. While it may seem that buying a car is one transaction in reality it is 3: the purchase of the new
car, the value of the trade-in, and the financing. Negotiate all 3 separately for the best deal each
time.
3. Payment games. The dealer will often ‘bring down’ your monthly payment while at the same time adding to the
length of the loan. A lower monthly payment is not always the best deal, so keep this in mind
while in negotiations.
4. ‘Financing fell through’. After getting the deal seemingly wrapped up, the dealer often returns to regretfully inform you
that the ‘financing fell through’. No way. The dealer knows within seconds if the financing is
approved and this is simply a move to sign you up for more expensive financing.
5. Balloon Payments. Sometimes part of the ‘payment games’ dealers will offer is a significantly reduced down
payment, and monthly payments with a ‘balloon’ at the end. This loan payment will go up
leaving the buyer unprepared for the new large payment amount. Be careful entering into one of
these deal structures, and be prepared for a much larger payment a few years into the auto loan.
Common Car Buyer Mistakes
1. Buying the wrong car. As discussed earlier, not all buyers are in the market for the same car. If you know you are going
to be transporting around children all day, don’t leave the lot in a sports car with no back seat. A
sedan, Sport Utility Vehicle (SUV), truck or Van will probably be a better fit for you.
Car Buying Basics APRfinder.com 12
2. Emotional in the showroom. Often the stress and excitement of car shopping can leave buyers extremely emotional when the
time to sign on the dotted line takes place. Don’t make rush decisions. Try to sleep on your
options and go back to the dealership when you’re convinced you’ve picked the right one.
3. Choosing dealer by location. Although it may be easiest to drive to the closest dealership, not all dealers are alike, and should
not be treated as such. Check with numerous dealers for the best price, as well as the better
business bureau to verify their standings.
4. Talking about trade in too early. Remember that the new car purchase is really 3 separate transactions, and discussing trade-in
value prior to hammering down the deal on the new car can cost you money.
5. Not over till it’s over. Even when the deal is seemingly ‘done’ there are always fees that seem to magically appear prior
to walking out the door. Be prepared, and don’t get overly excited about the new car until you
know the complete package.
Car Buying Basics APRfinder.com 13
6) Buying New vs. Used Cars
Now that you have a better understanding whether buying or leasing is
the best option for you, it is now time to tackle the second major
question in any car buying experience:
Should I Buy a New or Used Car?
Here too, the answer depends on your individual needs, budget, and desires. Three or four years
old cars are usually less than half the price of an average new car, which may seem attractive.
However, there are risks involved with buying a used car that usually aren’t relevant with new
cars. How did the previous owner treat the vehicle? Will it require major repairs soon?
Here are some of the pros and cons of buying a new versus used vehicle.
Benefits of new car:
Manufacturers warranty
Latest safety, comfort, convenience features
No ‘surprises’ from previous use
Drawbacks of new car:
Higher cost
Higher auto insurance
Fast depreciation (lose 20-40% when you drive off the lot)
Benefits of used car:
Lower cost
Lower insurance
Less depreciation
Can buy more ‘car’ for your money (better bang for buck)
Drawbacks of used car:
Higher maintenance and repair
Lack of new car warranty
Less recent safety/comfort amenities
Beyond the above considerations and mere price point difference, there are other issues one
should keep in mind when deciding between a new or used vehicle.
Car Buying Basics APRfinder.com 14
More New Versus Used Vehicle Considerations:
Residual Value It is important in either scenario to determine how the car will hold its value over the long term.
Not all cars depreciate at the same rate and when you are ready to sell in 5 years if two $20,000
cars are then worth $10,000 and $7,000, then the second was $3,000 ‘more expensive’.
“Nearly New” There are often cars that dealerships used for ‘demo’ cars or short term transportation. These cars
have never had an official ‘owner’ although they may have a few thousand miles on the
odometer. The benefit to these cars is they are often marked down significantly by the dealership
and are still covered by factory warranty.
Trade-Ins When you go to purchase a new car, often you will have your previous car to ‘trade-in’. Usually
it is both the easiest and the best deal to trade in at the same place you’re purchasing your new
vehicle at. However, it is important to negotiate these as two separate deals, as opposed to
allowing the dealer to lump them into one. First negotiate the price of the new car irrespective of
your trade in, then attack the price for the trade-in.
Time of Year There is always a wide variety of incentives, rebates, and price-cuts associated with both new
and used cars. It is often prudent to take into account the time of year when purchasing a car.
Typically, the best times to purchase a car are towards the end of December, or between July and
October. During the first time frame the dealers are competing for Christmas shoppers, and the
second the dealers are making room for the new models.
Vehicle History Reports When buying a used car, it is always imperative to purchase a vehicle history report. The most
common is a CarFax report, which can provide number of previous owners, the odometer
readings at checkups, as well as major crash incidents.
Extended Warranty? The dealer at most sales locations will heavily pressure potential buyers into purchasing an
extended warranty. These warranties are typically come in two types: one from the manufacturer,
and others from independent companies. While the independent companies may be less
expensive, you need to be careful to review what exactly is covered under each.
While many sources are against the option of extended warranties as they often cost much more
than they are ‘worth, there are times when extended warranties can provide a peace of mind. If
you are one who despises surprise expenses, or rarely tuck away extra cash for times of
emergencies, an extended warranty may be a good option to consider. On the other hand, if you
budget for some repairs and can handle the shock if such an expense arises, it usually makes
more sense to forgo the warranty.
Car Buying Basics APRfinder.com 15
7) Automobile Financing
With the dream car, truck or SUV in mind, its time to figure out how to
pay for the thing!
Since most buyers will need financing to secure their new or used
vehicle, considerable time should be invested to make sure that the
financing is appropriate for the individual borrower.
There are many options when pursuing auto financing, and each can offer unique benefits, as
well as individual drawbacks.
Sources of Financing
Dealership
Pros: Convenient, fast
Cons: High pressure, usually not best rate
Bank or Credit Union
Pros: Competitive rates, personal service
Cons: Not as convenient as dealership
Online Institution
Pros: Competitive, quick, easy
Cons: No personal service
Home Equity Loan
Pros: Can provide tax benefits, competitive rates
Cons: Tying your car to home in case of default
How Interest Rate is Determined
Wherever you choose to secure financing, an interest rate will be established. Knowing what
factors influence this rate can help you lock in the best rate for your situation.
The first and most important factor is going to be your credit score. As with all loans, the lender
is going to want to know what type of risk you are as a borrower, and what your previous money
management and spending habits were like. The worse your score, the higher interest rate you
are going to pay.
Second, the term of the loan influences the rate. Normally, the shorter term the loan is the better
rate the lender will offer. The risk is therefore lower as the lender can assume to be paid back
faster.
Car Buying Basics APRfinder.com 16
While these factors are typically used in most lending scenarios, often the dealership will play by
a different set of rules specific to various incentives that may be offered by the manufacturer.
Financing at a dealership is a large profit generator, and you must be prepared to negotiate
proposed terms. This includes the interest rate, down payment, rebates, term of loan and monthly
payments.
Questions to Ask the Financier
What is the percentage % rate I’m really paying?
Possible penalties in the loan?
What is the price I am paying for the vehicle?
Total amount being financed?
Total financing charges?
Total number # of payments?
Deal contingent on financing from a 3rd party?
Credit insurance?
Exploring all options and weighing the benefits of each is an important step to securing your new
car. The right financing can not only save you money, but headache in the long run.
Car Buying Basics APRfinder.com 17
8) Types of Automobile Insurance
Coverage
At this point you’re either shopping around or have your new vehicle
picked out and the financing in place. Before you drive off the lot, it’s
important to make sure to take care of one last piece of the puzzle:
Auto Insurance
Auto insurance is generally stated as protection against financial loss in case of an accident. This
protection includes property, liability, and medical coverage.
This protection can further be broken down into 6 different main parts:
1) Bodily Injury
This coverage is to cover injuries that you, the driver, cause to someone else. This insurance is
required by all states, although the minimum requirement by the state is generally not
recommended in case of a large accident.
2) Personal Property Liability
This coverage pays for damages you, the driver, cause to someone else personal property.
Typically, this is damage to the other drivers car, however may include fences, light-poles, or
other structures damaged in an accident.
3) Personal Injury Protection (PIP)
This coverage pays for the medical attention for the driver and passengers of the driver’s car.
This can include medical payments, lost wages, as well as potentially funeral and other costs.
4) Collision
This coverage pays for damages to the driver’s car resulting from an accident. This coverage is
an area that can be removed in older cars if one deems that the costs of maintaining insurance is
no longer worth it, as the car may no longer be worth repairing.
5) Comprehensive
This coverage pays for damages caused by things outside of a normal collision with another
driver. These may include theft, fire, natural disasters, or impact with animals. This is another
area of coverage that may be removed with older cars to reduce insurance payments.
Car Buying Basics APRfinder.com 18
6) Uninsured Motorist
This coverage pays for damages caused by a motorist without insurance, or in a hit-and-run
situation.
How much coverage should I carry?
This is a common question among people first looking into automobile insurance. The answer to
this question will vary from person to person, however all states require a minimum amount of
liability insurance for all drivers. This minimum, as stated above is not generally recommended,
as most accidents cause larger damage, and being on the hook for the balance after a large
accident can leave many bankrupt.
The rule of thumb is normally 100/300/50, or $100,000 individual coverage, $300,000 all
passengers coverage, and $50,000 property damage coverage.
Car Buying Basics APRfinder.com 19
9) How to Choose an Auto Insurance
Company
With the endless choices for car insurance these days, one of the main
battles can be choosing the right company for your needs. Although
price often weighs heavily into the decision, it is important to explore a
few other areas prior to signing up too:
1. Licensing
Insurance companies are not licensed to operate in all states automatically. It is important to
purchase insurance only through companies licensed in your state. To check, visit your State
Insurance Department for a list.
2. Financial Stability
When you need your insurance company, you want them to be around and have the resources to
fulfill their end of the deal. For this reason, it is important to check the financial stability of the
company in question. The 4 main rating agencies, Fitch, Moody’s, Standard & Poor’s, and AM
Best should all be a good place to start.
3. Service
The service side of any insurance company is an important consideration when shopping for
coverage. Talking with current customers, as well as reading reviews can help gauge the
character of the firms in question. In addition, the state insurance department should have records
of complaints against companies in comparison to their policies.
4. Comfort
You should feel a layer of comfort with the agent or company you ultimately decide to insure
with. Ensure that the agent will be easy to reach, and you are comfortable communicating with
them.
What Determines Price of Policy?
Driving record Simply put, the better your vehicle driving record, the lower your insurance premium.
Miles driven per year Driving more means more opportunities for accidents. For this reason, the less you drive per
year, the lower your premium.
Car Buying Basics APRfinder.com 20
Your location Insurance companies look at trends around where you live to determine the risk of the area. This
includes the number of accidents, thefts, lawsuits, as well as costs of medical coverage, among
others.
Your age The younger the driver, historically the more likely they are to get in accidents. Drivers under the
age of 25 typically have higher premiums.
Your vehicle The likelihood of theft, cost of car, overall safety, and other factors also play into the cost of
insuring the vehicle.
Marital status Married people tend to get in less accidents, and therefore enjoy lower rates than singles.
Credit score Often misunderstood by motorists, a person’s credit score is one of the main inputs an insurance
company uses to set an insurance rate. At a basic level, a company views a person with poor
credit is viewed as higher risk, and as such, priced higher. Information such as payment history,
bankruptcies, outstanding debt, and length of credit history are all used as tools for determining
an auto insurance policy.
Car Buying Basics APRfinder.com 21
10) How to Save Money on Automobile
Insurance
Everybody loves saving money. Especially when it comes to things we
have to have. If you drive an automobile, then you have to have car
insurance too. Many people don’t realize they could be saving a lot of
money compared to what they are currently paying for auto insurance.
I’m going to show you how.
Tips for Saving Money
1. Shop Around
As with anything, price varies from insurer to insurer, even for similar policies. Many companies
can provide quotes quickly over the phone or online, so it is easier than ever to get various
quotes in a matter of hours. Price alone shouldn’t be the determining factor when choosing an
insurer, ask around and read up on the different insurers. Insurance is bought for a piece of mind,
and if the time comes when it is necessary to use it, you want an agent and agencies that will
assist you in that stressful time.
2. Choose Higher Deductibles
A deductible is an amount that the policyholder pays when they get into a wreck or need to the
insurance company to cover some other expenses. This is in addition to their regular premium. If
you request higher deductibles, you will be responsible for more of the payment in the event of
an accident, however, the insurance company will compensate for you taking on greater risk by
offering a lower cost insurance premium. For example, choosing a $500 deductible over a $200
deductible can reduce coverage costs 15-30%.
3. Reduce Coverage on Older Cars
As stated before, collision and comprehensive insurance can often be dropped on older cars. A
rule of thumb is that if the car is worth less than 10 times the deductible, having this coverage is
not cost beneficial.
4. Buy Insurance with Homeowners
Many insurers will give package discounts if you carry both policies with them. Also, many will
offer discounts for having multiple vehicles covered with them. Although they may offer
discounts, it is still important to shop around, as greater savings may be found elsewhere.
5. Maintain Good Credit Rating
Car Buying Basics APRfinder.com 22
As you now know, your credit rating is often a major factor in the rate the insurance company
ultimately charges. Maintain good credit, and you will have lower rates.
6. Other Discounts
Beyond the above tips, insurers offer a wide variety of discounts for many different things. These
other discounts vary greatly from insurer to insurer, so one is best served by asking about the
below when shopping around:
Good student discounts
Installing car alarms
Defensive driving courses
Drivers ed courses
Long-time customer
No accidents in past 3 years
No moving violations in past 3 years
Armed with your new knowledge, you should be best prepared to lock in the best vehicle
insurance policy for your situation.
If you found this e-book helpful, please take a moment to link to it here, and
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Wishing you the very best!
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