Expert’s guide to buying a car

Some time last year I doled out nuggets of advice about the selection of a car when the need to get a new set of wheels arises. This time, we shall take a step back: before you visit any local dealer/private seller, you first have to have the browns (yes, browns, greens is American, you know) in your hand before you can get the gleam in your eye.

Kenyans love a good deal and will haggle, cajole, beseech, debate and finagle their way into a buying price way below the sticker price.

But should this always be the case? Can’t some more money be saved by other means besides arguing with a dealer about his asking price? I believe this is possible, and so I will proceed to put you in class again; not a Power Mechanics class as has been the habit, but a Business Economics class.

Read on.

Before forking out your hard-earned cash on some lump of rubber, glass and metal, sit and have a good think (preferably after reading this). Most people tie themselves down wondering how much a dealer will allow in the case of a trade-in, or how many factory options you will get for a given amount.

This myopic view where one focuses on a single aspect of the transaction will be detrimental to your wallet, so here follows a list of ten steps to take to maximise on the net saving you will achieve after the car has left the lot and is sitting in your garage (and I use that term loosely).

1 Reverse your priorities: Not all of us can afford the initial outlay that is necessary to get a decent motor vehicle at a go. Admit it, most of you out there find a car you like and then try to fit the payments around it, grossly overstretching your budgets.

This is not applicable exclusively to hire purchase of the vehicle, it could also be a loan. Decide (soberly, objectively and realistically) how much you can set aside as monthly payments (in the case of hire purchase, also consider the down payment), and make a resolution not to exceed that figure. Keep in mind that the longer it takes to repay the loan, the more the interest will be.

2 Choose a financier, and a plan: You could choose to pay numerous small installments over a longer period of time, thus spending more in the long run but maintaining a higher level of disposable income.

Alternatively, you could choose to suffer first and get it over and done with as quickly as possible, spending less money overall. Your personal views should help you here. Do you believe in raw numbers or percentages? For example, Sh10,000 is a lot of money in cash, but when expressed as 0.67% of 2 million, it seems to rapidly lose importance).

Scrutinise the various repayment plans available to you to see how much you will pay above the sticker price, both in raw figures and in percentage.

Some banks and even dealers offer financial plans, but it is up to them to market themselves. I will not go into that. But do your research and find yourself the deal that offers you the most value and one that you are most comfortable with.

3 Trade in: This is where most people get played. Do not go up to a dealer and tell him you want to trade in your car. You will be under-quoted, and quite badly.

Instead, tell him you are selling the car outright, and want to know how much it can fetch. Try this with two or three other dealers, and the highest offer you get should now be considered the trade-in value of your car. Work from there.

Don’t get me wrong, this is not the same as the valuation of your car. Motor vehicle valuation, such as that done by the AA, gives you the value of your car according to its physical and mechanical condition with respect to the value when new, and factoring in things like inflation.

While accurate in its own way, this valuation does not take into consideration other aspects such as market characteristics and dynamics such as reputation, supply and demand.

That is why you might have a late ’80s Peugeot in pristine condition, whose real value is maybe Sh250,000-plus, but the only offers you get are in five figures. People are scared of Peugeot cars from that era, so nobody wants to invest too much in one.

4 Sum it up: Compute your available cash. If you have a loan of Sh1.5 million and the trade-in value of your car (if you have one) is Sh630,000, it means you have a grand total of Sh2.13 million to cover all the costs of acquiring a new, inorganic member of the family. This should include delivery costs (especially for DIY imports), all forms of taxation and the first year’s insurance. Now you can go shopping.

5 Refer to “How to buy a used car”: Follow all the steps I outlined in that (subsequently) much-plagiarised article — I’m not bragging, it happened). In the case of a new car, keep depreciation in mind, using cars of the same make/model that are 4–7 years old as reference points.

Compare with competing models and make an educated decision. Remember to visit franchises or reputable dealers to avoid grief later.

6 Cheapest is not always best: There are many factors that go into determining a car’s sticker price, one of which is PDI (Pre-Delivery Inspection). It has not yet been made a pre-requisite for car sales entities, but maybe the Government (or Kenya Bureau of Standards) should get on this. It costs some money to have a mechanic look the car over just before delivery, but it will ensure that your tyres do not fall off several yards from the forecourt.

Unless under warranty, once the vehicle is off the lot, it is no longer the dealer’s problem. Ask if the PDI charge is part of the asking price, and insist on being there as it is done. If the dealer seems less than welcome to the idea, put him under a cloud.

For the cost of the car, find out if a warranty is included, and what that warranty covers. Ask about the cost of the car without the warranty. Judge for yourself which way to go: some warranties cover unlikely things (like paint jobs), and so can be done without, while others cover more usual stuff but hike up the cost, more so if those complications are avoidable. Suspension warranties fall under this category.

After-sales services are to be scrutinised too. If your car is being repaired at the same outlet you got it from, are they ready and willing to loan you another car for that period, thus ensuring that you are never without a vehicle?

7 Research: Find out from the manufacturer’s brochure how much the car you want cost the dealer. This will give you an idea of how far you can negotiate without disrespecting the dealer or his business.

For example, let us say a car goes for USD 2,000 CIF (Cost, Insurance and Freight). It will cost a further 55% (roughly) of CIF as customs duty, pushing the price to USD 3,300, add 16% VAT and it goes to USD 3,828. Consider registration fees too (if the car is registered), and meet the fellow halfway. Do not, for Christ’s sake, offer to pay exactly what it cost him to get the car, that is an insult. Also, compare what prices various dealers are asking for the same car.

8 Pull a Denzel Washington: I do not mean that you become a Hollywood heart-throb; that we will leave to God, Fate and Darwin’s Laws. What I mean is, become an actor. This is the most important ploy of the good buyer. When you return to your showroom of choice, appear undecided, or even a bit bothered (but not disgusted. Never show disgust). If you appear as eager as a puppy, you have just given the seller incentive to dig in and not flinch.

9 Back to the trade-in: Now ask the dealer for an appraisal of your car: not the trade-in value but an actual cash figure. If it does not match the figure you got in No 3 above, let him know and see if he will come up. If he won’t, take your business elsewhere. If you reach an agreement, write the figure down somewhere to prevent misunderstandings later.

10 Read all the print: Go over, carefully, all the numbers printed in the buyer’s agreement, detailing basic cost, discounts if any, taxes and any other extras. For a part-exchange (trade-in) it will also show the agreed allowance on your old car. Also, be careful to read and understand all the conditions set out in the agreement.

Counter-signing by senior personnel or a reliable witness is also important. Now you can go ahead and pay (deposit or whole amount, depending on payment plans).

Is it worth the effort? The answer is an emphatic yes. You will be surprised at the thousands you will be able to save over and above what you were haggling over. You will also understand exactly what you are doing, eliminating guesswork and conjecture. And if you apply the other steps I had outlined earlier, you will also be very happy with your purchase, and even happier with what you have managed to retain in the bank.
There are other ways of saving even more money, but these are borderline-illegal, so I will not discuss them. At least not now.

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