Friday, December 9, 2016

Your Car Insurance Costs May Surprise You - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

If you think your perfect (no accidents and no tickets) driving record is getting you the lowest possible car insurance rates: think again.

There’s no question that you’ll be penalized by your insurance company for a bad driving record but you may be surprised about what else is impacting your premiums. You probably know that the type of car you’re driving has a bearing. For example, cars with a higher than average probability of being stolen will cost you more (even if they are not luxury cars). The size of the engine, whether it has 2 doors or 4, and if it has all-wheel-drive can affect your rates for better or worse.

An important issue in recent years is the vehicle’s safety rating, especially if the IIHS (Insurance Institute for Highway Safety) has rated it less than a Top Safety Pick. Lowering insurance premiums on the safest cars is one way the insurance industry can influence car makers to improve the safety of the cars they produce.

For the insurance industry, safer cars means fewer claims. But insurance companies keep trying to find new ways to identify risky customers and therefore charge them extra. A customer of mine recently moved from a small town near Toronto to a Toronto suburb and because the crime statistics for the Toronto suburb are much higher than the small town, his insurance premiums doubled! So, besides choosing the right car, you need to be choosing the right neighbourhood!

Thursday, December 8, 2016

Car Reviews: Who Should You Believe? - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice.

As I have said in other posts, there are hundreds of opinions on every new and used car by so-called experts and hobbyist reviewers and even the top Car Review organizations will differ on how they rate a particular vehicle. Their rating may or may not give adequate weight to the issues and concerns you have about which vehicle should be on your short list.
My own experience selling cars over a decade has convinced me that car buyers fall into three major categories:
  1. Car Enthusiasts. They are the car buyers who read the most reviews and hunt for reviews that agree with their pre-determined conclusion about brands and models that they already prefer. They already have their favourite car magazines and car reviewers that they follow and believe.
  2. Utilitarians. Those who are less concerned about styling and driving dynamics but want to make a relatively rational decision based on specifications, features, technology, and safety. They consider a car to be closer to an appliance and a status symbol or show piece. They want to know about performance, comfort, ability to do what the buyer needs done.
  3. Budget Shoppers are mainly looking for economical transportation so cost of acquisition and cost of ownership are their key criteria. The experience of past owners such as Consumer Reports conducts are of most interest to these folks.
Car & Driver Magazine is focussed on performance and driving dynamics.
Consumer Reports is concerned with reliability, safety, fuel economy and cost of ownership. Consumer Reports has the advantage of not accepting any automotive advertising nor do they accept pre-production cars from manufacturers. They actually buy their own test vehicles so they are are not influenced by advertisers which guarantees an unbiased report.

Some other rating companies to comment on = Edmunds, Kelley Blue Book?, CR, Car&Driver, APA (Canada), Ralph Nadir?,,, etc. TrueCar, Edmunds,,,

Final point, the rating organization that aligns with you will be concerned with the issues that concern you. If performance and driving dynamics are most important, Car&Driver may resonate with you while CR may be more valuable if safety and reliability are your hot buttons.

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Wednesday, December 7, 2016

“Over-Shopping” Can Be Hazardous - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

As your car buying project progresses, have you quickly zeroed in on two or three vehicles that that really appeal to you and fit your needs or have you been keeping the list long enough to include a wide range of possibilities? This could cause problems once you finally select a car to buy.

I have seen lots of people shopping for a new car traveling from dealer to dealer (and/or doing the same work online) while considering several makes/models before working out a final deal at a dealership.  If you continue to keep several vehicles and dealerships in play before landing on a vehicle at a dealership, you run the risk of “over shopping”. The danger in "over shopping" is that when you finally decide on a vehicle, you may have assumed something in the deal that was part of a discussion at another dealership.  Or, you test drove a GT model and ended up settling for a GS model which is missing a couple features important to you.  

Because I have seen this happen, I recommend being particularly focussed when reviewing the final purchase agreement. Before signing and before making the final commitment, make sure that everything you believe you are agreeing to is printed on the agreement. Just because the salesperson said he would try to get tinted windows included in the deal doesn’t they will be there when you pick up the car (unless those tinted windows are written into the agreement).

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Tuesday, December 6, 2016

Used Car Shopping: What to Expect - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Let’s take a look at the Used Car Shopping landscape and consider the perils. So where should you be looking for a used car?  You really have the following choices:
  1. Buy from a Private Seller. Getting on Kijiji may appear to be the lowest cost way to get your next car but it is a bit of an illusion. And, it’s also the least safe way to buy. You are essentially buying an “as is” vehicle with no recourse if it turns out to be a clunker.
  2. Buy from a Small Independent Car Lot. This is little better than buying privately since these small lots normally have the cars that franchise dealers and large used car superstores have turned down. You may get lucky and if you’re not lucky, you better be handy.
  3. Buy at a Used Car Superstore. Used car lots with more than 100 cars have the critical mass to offer financing and warranty protection similar to what you can get at a new car dealer’s used car lot. Some of these large operations are owned by new car dealerships but all are competing with new car dealerships for shoppers who want a good deal but also want to avoid the risk of buying a problem.
  4. Buy at a New Car Dealership. What does a dealer offer you? First, a dealer has access to many more quality used cars including trade-ins, vehicles coming off lease, and fleet or rental units.   Dealers normally get first crack at the best quality used cars coming off leases. They will have the vehicle thoroughly inspected and refurbish it both mechanically and cosmetically. If the vehicle is their franchise brand, they have access to warranties and financing subsidized by the manufacturer on the best units in inventory.
But can you get the best deal at a dealer? Is it cheaper buying privately?  In the final analysis, it might even be more expensive to buy privately.  A dealer's cost to repair a transmission or replace an air conditioning compressor will be well below what the average person will pay. This allows a dealer to refurbish a vehicle, make a profit and still be competitive with a private seller. When you compare a private sale with a dealer or used car superstore sale ... look at price and quality!

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Monday, December 5, 2016

Don’t Buy a Used Car Without a Vehicle History Report - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Depending on the state or province where you live, car dealers selling used cars will be required to disclose any police reports or damage claims on the vehicle you’re considering. A few organizations collect this information to assist consumers and dealers. In Canada, it’s CarProof and in the US it’s CarFax. If you have the V.I.N. (that’s the serial number), you can buy these reports directly or simply ask the dealer to provide a complete CarProof/CarFax report on the vehicle being considered.

These firms use data provided by the insurance industry and law enforcement as well as car manufacturers and government licensing bodies to assemble a comprehensive history of the used car you want to buy. You will be able to see when the vehicle went on the road, where it was licensed, the number of owners, if it was reported stolen, damage claims made, and the size of the claims.

It is helpful to know where the vehicle was purchased as some states and provinces are very strict (and some very lax) on their reporting requirements. You want to be buying a vehicle that comes from a jurisdiction with very high reporting standards. Here in Ontario, Canada, we have among the strictest reporting standards in North America so cars from Ontario will normally command a higher price than those from neighbouring Quebec where the standards are more relaxed.

These reports do not tell everything but can be an important screening tool. If the dealer cannot or will not produce a full Vehicle History Report, you would be wise to move on to another dealer. This should be your minimum information requirement.

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Friday, December 2, 2016

Beware the “Second Sale” - Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Once you agree to buy the car, the second part of the process begins. This is where the dealership has an opportunity to make a profit on the sale (which your skilled research and negotiating made difficult to achieve during the “first sale”).

In most jurisdictions, the dealer cannot charge more than the MSRP for the vehicle. If you negotiated a deal well below MSRP, the dealer can only recover the lost profit by selling additional products and services which is done in the Business Office or Financial Service Office.

You will get the opportunity to “protect” your new purchase with additional warranties, rust proofing, and various insurances. Some of these are worth getting (particularly additional factory warranty) but it is often over-priced. But the presentation is usually so effectively done that it can be hard to resist.

The reason that it is so difficult for most car buyers to resist the F&I sales pitch is because once you agree to buy the car out on the sales floor, you have mentally taken ownership of the vehicle. It’s now your car and your instinct is to protect it (which is why rust protection is often one of the first add-ons to be pitched).

It is also true that the “second sale” is easier than the first. When we agree to buy something, it does not quench the buying thirst like a glass of water satisfies you. When you make a purchase, your brain is excited and ready to buy something else. Dealerships know this and construct the sales process to accommodate this fact of human psychology. That’s why I have found that the happiest customers leaving the dealership are not those who have negotiated the best deal, they are the ones who spent the most in the FandI office. By the same token, I have also observed that those who have hammered out a great deal during a prolonged negotiation are the least happy customers because they have a feeling they could have gotten an even better deal.

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Thursday, December 1, 2016

How's Your Credit? Car Buying Tips and Advice

Video Series - Car Buying Tips and Advice

Ever since the financial crisis, banks have become incredibly cautious.  At the dealership, I see people failing to get approved who were easily approved a couple of years ago.  The credit approval pendulum has clearly moved to the far other side.  Unfortunately, many people who believe their credit is in good shape are frequently surprised (and somewhat embarrassed) to discover that under the new standards, they cannot take advantage of those low finance rates to buy their new car.

Here are some warning signs that your credit score is in the danger zone:
  • Do you pay all of your bills on time?  Paying late, or having your account sent to a collection agency will torpedo your credit score and any chance of financing a car.
  • Have you run some of your balances up to your credit limit?  Keeping your account balances below 75% of your available credit may also help your score.
  • Have you acquired new credit cards recently or have you applied at different financial institutions for a loan as a way to shop for the best rate?  Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can actually repay. A flurry of inquiries will prompt most lenders to ask you why.
I recently had a customer apply for a bank loan so she could shop for a used car and buy it for cash.  When she found a car and realized that the dealership could get her a much better rate, she decided to finance the car through the dealership (who has access to better rates through selected banks).  Well, the bank that the dealership was using, declined the customer because she had "already applied for another loan" which put her score over the limit.  We eventually got her approved after some discussions with the bank.

As the above example illustrates, seemingly innocent financial behaviours can often put you in a difficult position when it's time to finance a new or used car.  

To get information on your credit score, it's worth the small fee to discover how you rate and whether there are errors in the data that need to be corrected.  The key rating agencies in Canada and the US will provide you with a free report. To get your data, contact Equifax Canada Inc.

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