Cars! Cars! Cars!

Late Tuesday afternoon, around 60 seniors gathered to hear Scott Jaeger, a 1989 Rose graduate and General Manager at Thompson Honda in Terre Haute, share his knowledge about the general process of buying a car. Jaeger was invited by Alumni Affairs as part of the Countdown to Commencement Series.

“You’re going to spend a lot of time in this car, and it’s going to serve you for several years,” advised Jaeger, who encouraged students to consider the use of their car even five years from now.

Jaeger began by highlighting some of the important considerations in car purchasing.

One basic considerations is the utility of the car; will it need to haul anything or be driven in rough terrain or weather?

Another is size: will the car be used for a single driver? Or will it have to be used for spouse or family hauling?

All cars use fuel of some kind; consider the cost of fuel, and whether it is worth driving a large truck when a small car will be sufficient.

A major consideration will be whether a new car is purchased, which will have a warranty, be more reliable, and have that “new car smell,” or whether a used one will do just fine.

Jaeger also brought up several other considerations that may not be as obvious. Insurance on the car will be needed; this will be much more expensive for some models than others. Some states, including Indiana, have an Excise Tax, which is charged annually and is based on the cost of the vehicle. Finally, all cars depreciate the moment they are driven off the lot - some much more so than others - so Jaeger recommends considering this if the car will be traded in or sold in the next few years.

Feeling relaxed and comfortable with the process is important during the search for a car. “If you’re not having fun, you’re probably in the wrong place,” commented Jaeger, citing problems such as not trusting the salesman or dealership as major causes of feelings of uneasiness. He encouraged students to find a sales person who they are comfortable with and who treats all customers fairly, regardless of age.

When discussing cars with any dealer, there are a few things to watch out for. Any dealer claiming he or she can get a discount on certain models that other dealers cannot get is lying - by federal law, all dealers pay the same price to the manufacturer.

When shopping for used cars, the official legal history could be altered; such as removing indications on the title of hurricane or flood damage, or underrepresenting the number of miles it has been driven: “Any reputable dealer should provide a Car Facts for you” explained Jaeger. The Car Facts help you determine if evidence of major damage has been illegitimately purged from an official record.

Used cars sometimes are marked as ‘certified.’ Jaeger suggested determining who certified it, and what the certification does. If certified by the manufacturer, this can generally mean an extended warranty. However, if someone other than the manufacturer certified it, it may not mean anything other than a pretty picture in the window.

Once an acceptable car has been selected, it is time to begin negotiations. Jaeger indicated that there are three distinct phases to negotiation, and they should be done in this order for maximum benefit: price negotiation, trade-in negotiation, and financing.

For price negotiations, one chief thing to keep in mind is supply and demand: when gas prices went above $3 per gallon last year, a Toyota Prius went for the value posted on the car door, no less. However, this was a great time to buy a Ford Explorer.

Recently, though, this has become untrue because gas prices have receded to between two and three dollars per gallon range. When a dealer is making any offers on a car, such as a non-standard warranty or other options for a discount or for free, make sure it is in writing on the bill. “If anyone tells you anything, write it down,” Jaeger urged.

According to Jaeger, when trading in a car, the dealer will almost definitely pay less than could be made if sold by the owner. That being said, Jaeger pointed out, selling a car by owner takes longer and is a tedious process.

When the dealer sets a price, “Remember that profit is not a dirty word,” said Jaeger, who pointed out that the company does need to make some money to stay in business and pay its employees. It is still a good idea to look up the true market value of a car; however, keep in mind that it is just an indicator, and cannot take into account, such as a general appraisal.

He also suggested that some students, especially some of the women, may feel uncomfortable with a large strange man wanting to come up and test drive the car. Each car has three prices - the price the dealer asks, the price the car has on the wholesale markets, and the price at which the owner could sell it.

Come time to pay, Jaeger listed five options: pay cash, finance it with the dealer, get a simple interest loan, lease it, or get a balloon note, which Jaeger notes is probably not very wise.

A lease is generally computed by the company determining how much the car will depreciate after X years, dividing that value by the appropriate number of months, and adding interest. At the end of a lease, the car can be bought, traded in to a dealer who will pay off the lease, or give it back. What is done at this point is dependent on the current market value of the car; Jaeger again pointed out how gas prices can affect the demand for a car. Leasing varies from state to state.

Most manufacturers will generally have a college-grad financing option. Simply have decent credit (no credit is ok) a diploma, and an offer. A dealer financing package will generally have the option to get cash up front or get a percentage reduction on financing. It is fairly simple to run these numbers, but Jaeger suggested that if it is close, take the up-front cash in case something happens to the car.

When it comes down to signing the final contract, the filled out contract can be taken home, says Jaeger, who encourages that students do it to be aware of all of the fine details. He suggested that students make a special note of prepayment penalties and late fees on payments, and generally try to avoid these. “If somebody’s pressuring you, you’re probably in the wrong place,” Jaeger advised.