The process of purchasing a car involves many decisions, procedures and paperwork that can be quite challenging. Sometimes it is hard to know whether the value, price and risks are in balance, and how to weigh your needs and means. Following is a set of resources that may help you navigate through the process.
Considering the Costs
Purchasing and maintaining a car or truck in the United States is surprisingly expensive. On average, Americans spend $9,122 USD per year on car payments, maintenance, insurance, fees and taxes according to the American Association of Automobiles. Thus, before purchasing a vehicle, it is wise to consider costs of car ownership that are not immediately evident in the price of your initial purchase. While most costs are foreseeable, be aware of the risk of unforeseeable costs as well, such as unexpected repairs, especially when buying a used car.
This risk can somewhat be mitigated by conducting a careful vehicle history check, buying a “certified” car from a dealership or through warranty options. Consider that while you may benefit from better deals and easier negotiation in price when purchasing from a private owner or smaller dealerships, these sellers often do not offer warranties and abort any responsibilities for future problems with the car. In these cases, conducting a mechanical inspection before committing to buy becomes essential.
Cost Factors
- Taxes: A five to eight percent sales tax will be added to the sale price of your vehicle. This applies to new and used vehicles. This tax must be paid within the first 30 days of ownership and is usually added at the time of registration. In addition, the County and State charges an annual property tax assessment based on the value of your car; this tax varies. Estimates for those who live in St. Louis County vary between $50-300.
- Registration: The State of Missouri charges a one-time fee upon purchase and an annual licensing fee. The title and licensing fees usually run $50-100 each year.
- Insurance: Insurance is mandatory and costs vary widely depending on the level of coverage (An expensive car may prompt you to add additional coverage.) You should expect to pay $500-1000 each year. Make sure you do your research. Discounts are available for students and “good drivers,” so consider getting quotes from several insurance providers.
- Maintenance and Repairs: All cars require general maintenance such as oil changes and brake repairs. Costs depend largely on the make, model and condition of your car and the number of miles you drive, but it is a good idea to be prepared to spend $250-500 per year on maintenance and possible repairs.
- Fuel and Parking: The amount you will spend depends largely on the number of miles you drive. Parking is also a consideration. Parking on campus requires the purchase of a permit, and some apartment complexes charge for parking as well.
- Depreciation and Opportunity Costs: The value of the car will decline with age. Do not expect to sell your car for the same price you paid for it. The value will go down.
Evaluating Your Options/Making a Smart Purchase
Before making any decisions or commitments, it helps to become informed about your car options. Research a variety of car databases to see what is available, get profiles and reviews of vehicles, and get a feel for their market price in your area. While some of the listed sites only contain classified ads, others also have helpful tips on car values and ratings, insurance, financing, etc.
Once you find a selection of cars that interests you, you need to pin down which offer gives you the greatest benefit at the lowest cost. First, you may want to consider the factors that influence the price of a car, such its model, make, year, trim level, condition, mileage and special features (such as air conditioning, four-wheel drive, power door locks, etc.).
You should then find out if the price is fair and does not override the current market value by comparing the same model with its particular set of features among different market outlets.
You can research a car’s current national and regional average value, also termed as “blue book value,” on http://www.nadaguides.com, http://www.edmunds.com and http://www.kbb.com.
For used cars, be sure to distinguish between retail value, trade-in value and private party value. The private party value is usually lower than the retail value.
When planning to purchase a used car from a private owner or small dealership where the various resources (classified ads from local newspapers as well the internet), to compare and contrast similar offers under similar circumstances (condition of car, type of seller, etc.) to find out if a car’s price is reasonable. Knowing the market value and variations in prices within your region will give you a feel for when it is appropriate to negotiate price.
Reducing Consumer Risks
You want to assure that your purchase is low-risk and free of fraud, especially when buying from an independent dealership or a private owner. Following are a few tips:
- Get the car’s Vehicle Identification Number (VIN) to conduct a VIN and vehicle history check. The VIN is a unique serial number assigned by the automotive industry to each vehicle and is visible on the driver’s side of the dashboard.
- Become familiar with the vehicle’s history. A vehicle history report is the quickest and easiest way to research the history of a car. It gathers all of a vehicle’s insurance and DMV records into one place. At a glance, you can tell if there are major accidents, odometer problems, flood damage issues, etc. Using the VIN, you may retrieve reports for one or multiple vehicles from $15 to $35 through AutoCheck or CarFax.
- Conduct a mechanical/electric inspection of the vehicle before committing to buy. Check the vehicle’s lights, gauges, seatbelts and tire pressure. Check the oil level and look for leaks under the hood and car. Ask for a test drive (including on the highway) to test out the car’s acceleration and strength of its brakes, smooth functioning of clutch and gears, and to listen for strange sounds. Also, have a reliable mechanic who is not associated with the seller inspect the vehicle for potential suspension, steering, electrical and engine hazards, and any other defects. The mechanic may also be able to tell you if the price asked for by the seller is reasonable.
Paperwork (specific to Missouri)
- Certificate of Title: When making your purchase, be sure to obtain the Certificate of Title to the vehicle from the previous owner/dealership. The title is an official document issued by the state that serves as proof of ownership of the vehicle. Without the title you cannot register the vehicle. Be on the lookout for scams; make sure that the VIN on the vehicle is identical with the one listed on the title. Also, be cautious if you notice that the title and the vehicle’s license plate are from different states, or if the name on the title does not match the name of the seller (ask for ID to verify). When you purchase a vehicle, get the owner to sign the back side of the title (unless you are the first buyer). Note: If you purchase a new vehicle from a new-car dealership, you will receive a Manufacturer’s Statement of Origin (MSO) instead.
- Lien Waiver: If you purchase a vehicle with a lien on it, be sure to receive a lien waiver issued by the lien holder. Lien holders (i.e., creditors, such as a bank or a credit union) are listed on the vehicle’s title. Liens are on vehicles that were purchased with a loan and give the lien holder a legal right to claim the vehicle until the loan is paid off. A lien waiver can be a notarized Lien Release form (MO-4809) to be obtained from the Missouri Department of Revenue or a notarized statement on letterhead by the lien holder stating that the lien is released. If the owner still owes a loan, recommend that you will complete the purchase with the respective lien holder.
- Inspection Report: Unless the vehicle is exempt, ask the seller to provide you with the latest Vehicle Safety and Emissions Inspection Report. According to Missouri law, a seller is required to subject the vehicle to a safety inspection, and, if the seller resides in St. Louis city and a few selected counties, the emissions inspection upon selling the car. The report should not be older than 60 days. Check the Missouri Department of Revenue for exemptions.
- Bill of Sale: Obtain a signed bill of sale from the seller. A bill of sale serves as evidence that the transaction between the buyer and the seller has taken place. It also verifies that you have paid for and are entitled to ownership of the vehicle. A bill of sale should list vehicle information (make, model, VIN), the buyer’s and seller’s name, address and signature, and shall be presented upon registration. You can download a Bill of Sale Form 1957 (PDF) from the Missouri Department of Revenue website. A bill of sale is not necessary if you have the certificate of title with the appropriate signatures.
Helpful Websites
Missouri Department of Revenue: Official Missouri state website with requirements to obtaining a vehicle
DMV – The Unofficial Guide to the DMV: Comprehensive resource on car ownership and driving; allows you to modify information based on state
Kelley Blue Book (KBB): Extensive database to establish car market values and get car reviews
Relevant Terminology
Model Year: the period of time during which the vehicle was manufactured (counted as intervals from October through August of the following year)
Make: the manufacturer of a vehicle (e.g., Ford, Lincoln, Buick, Pontiac, Nissan, Honda, Lexus, Toyota, and Audi)
Model: an additional component to a vehicle’s name that is indicative of its size and “purpose” [e.g., Grand Marquis (full-size), Neon (subcompact), Savanna (van) and Corvette (sports car)]
Odometer: records and displays the number of miles a vehicle has been driven since it was manufactured
Vehicle Identification Number (VIN): a unique 17 digit alpha-numeric identifier assigned to any vehicle, usually visible under the driver’s side windshield
“As-Is”: when a vehicles is sold “as-is,” the buyer must accept to take full responsibility for any unforeseen repairs that may occur
Certified Car: A certified preowned car has passed a strict inspection by the original manufacturer and is backed by an extended warranty.
“No Haggle”: “no haggle” pricing means that you pay the price listed on the vehicle. This is a way for sellers to indicate that they do not negotiate.
Please keep in mind that while the Office for International Students and Scholars cannot give you specific advice on cars, we do have two guides – Making an Intelligent Car Purchase and Guide to Maintenance and Repair – available free of charge in our office. Ask for your copy at the front desk.