Terms to Know to Become an Expert Car Buyer

Introduction to Car Buying

Are you looking to buy a car but don’t know where to start? The process can be overwhelming, especially with all the automotive jargon thrown around. Whether it’s your first time buying a car or you're an experienced buyer aiming for the best deal, understanding the key car-buying terms is crucial. This guide will walk you through the essential terms to help you become an expert car buyer, making the process a lot less intimidating.

Car Buying Terms You Must Know

Buying a car is one of the biggest financial commitments many people make, and it’s often complicated by unfamiliar terms and industry lingo. Below, we break down the key terms you’ll encounter during the car-buying journey to empower you with the knowledge you need to make informed decisions and get the best deal possible.

New, Certified Pre-Owned, or Used

One of the first choices to make when purchasing a car is whether to go for a new, certified pre-owned (CPO), or used vehicle. A new car comes straight from the factory, has zero miles, and is covered by a full manufacturer warranty. Certified pre-owned vehicles are used cars that have undergone inspections and carry a limited manufacturer-backed warranty. They offer the best of both worlds—the affordability of a used car combined with some new-car guarantees. Used cars, in contrast, have no manufacturer warranty and may need a bit more caution when buying. CPO and new cars are available at dealerships, while used cars can also be bought through private sales.

Powertrains and Drivetrains

Powertrain and drivetrain are two fundamental terms to understand when comparing vehicles. The powertrain consists of all components that generate power and move the car, such as the engine or electric motor, transmission, and drivetrain. The drivetrain specifically refers to the system delivering power from the transmission to the wheels, and includes front-wheel drive (FWD), rear-wheel drive (RWD), all-wheel drive (AWD), and four-wheel drive (4WD). Your choice of drivetrain can influence your driving experience, especially in various weather conditions or terrains.

Trade-In Value

If you own a vehicle you plan to trade in, understanding its trade-in value is crucial for negotiating a fair price. This value is the estimated worth of your current vehicle as determined by services such as Kelley Blue Book (KBB). Make sure you know this figure before stepping into the dealership, as it can provide leverage during negotiations.

Pre-Approval for Financing

Pre-approval for a car loan is a smart step to take before visiting the dealership. Contact your preferred lender to get a pre-approval letter, which will outline your interest rate, loan term, and maximum loan amount. With a pre-approval letter in hand, you’re better equipped to negotiate and can use it as a reference to evaluate dealership financing options. Even though most dealerships offer in-house financing, comparing options can often save you money.

Manufacturer’s Suggested Retail Price (MSRP)

The Manufacturer's Suggested Retail Price (MSRP) is the recommended price set by the automaker for a vehicle. However, dealerships are not obliged to adhere strictly to this price. The actual sale price can vary, influenced by market demand, promotions, and the negotiation skills of the buyer. It’s important to note that the MSRP doesn’t include additional costs like destination charges—the fee for transporting the vehicle from the factory to the dealership.

Vehicle History Report

A vehicle history report provides detailed information about a used or CPO car’s past, including accident records, previous ownership, and maintenance history. By checking a car’s Vehicle Identification Number (VIN) through services like Carfax or Carsforsale.com, you can avoid unwanted surprises that the seller may not disclose, helping ensure the vehicle you buy is in good condition.

Out-The-Door Price

One of the most important numbers to know when buying a car is the out-the-door price. This is the total price, including the cost of the vehicle itself, dealer fees, taxes, and any other additional costs. Make sure to request this number via email so that you have it in writing, which will help you prepare for the negotiation process and ensure transparency.

Test Drive and Pre-Purchase Inspection (PPI)

The test drive is a critical part of buying a car, especially a used one. It helps you determine how the vehicle feels on the road and if it suits your driving needs. If you’re leaning towards buying a used vehicle, scheduling a Pre-Purchase Inspection (PPI) with a trusted mechanic can give you peace of mind by identifying any potential issues before the purchase.

Key Terms to Know When Negotiating a Vehicle Price

Negotiating the Price

Once you’ve gathered information through research and test drives, it’s time to negotiate. Remember to focus on the final price of the car rather than the monthly payment. Dealerships may try to extend the loan term to make monthly payments appear more manageable, but this can end up costing you more in the long run due to higher interest.

Add-Ons

During negotiations, be ready to face numerous offers for add-ons such as floor mats, mud flaps, extended warranties, and gap insurance. Accessories purchased from a dealership often come at a premium. Consider purchasing these items separately to save money. When it comes to extended warranties and gap insurance, be sure to compare prices from different providers, including your personal insurer, before agreeing to anything at the dealership.

The F & I Office

The F & I (Finance and Insurance) Office is the dealership’s department responsible for arranging financing and selling additional products, such as extended warranties. Expect delays as salespeople may use time spent in the F & I office to add pressure and persuade you to accept their terms. Stay firm in your decision, and if you feel uncomfortable, be prepared to walk away—there are always other vehicles and dealerships.

Final Steps and Enjoying Your New Car

After successfully negotiating the purchase price, it’s time to secure the title. If you financed your car, the lender will hold onto the title until the loan is fully paid. Once the paperwork is complete, it’s time to hit the road and enjoy your new ride! Buying a car may be a complex process, but with thorough research, knowledge of key terms, and a confident approach to negotiations, you can walk away with a great deal and an amazing car.