How to buy a car? Make your car purchase a headache-free experience

If you have planned to buy a vehicle or it is time to change the one you currently have, carefully analyze the options because it is not so easy to make a decision of this type and the disbursement is not just anything.

Take into account the multiple options offered in the automotive market, not only in terms of brands but also in terms of the possibility of buying a new or used car, as well as the corresponding payment methods.

Carefully analyze each of the following topics, so that you can consider your situation and avoid "marrying" yourself to a specific brand or purchase scheme. Before deciding, analyze the advantages and disadvantages of buying a new or used vehicle and make an informed choice.

Review your budget and analyze what car you need

Before buying, the first element you should review is your budget, so you will have a clear idea of how much money you have available. This will allow you to know precisely what amount you will allocate to buy your vehicle, without putting your pocket in check. In this way, you will comply with your financial responsibilities, because if you make a hasty decision it can bring you bad times.

Next, analyze a second element: the characteristics that the car must have, among them, determine the size and number of people to be transported; the cargo space you require; the use you will make of it; the safety measures it must have; the distance of the trips, as well as the fuel efficiency it must have.

Also consider how much the vehicle of your preference is stolen, since if the car you are interested in is among the most stolen, it will surely affect your peace of mind and your pocket, since you will pay a higher amount for the insurance.

Compare different vehicle brands. Avoid getting stuck with one of them beforehand. Choose the vehicle that suits your needs, has an attractive price, and is in line with your budget.

New car

This vehicle is one that you can purchase directly from the car dealership and therefore, has not had another owner.

If you have decided to buy a new vehicle, consider in addition to the price, the cost of tenure (if applicable), license plates, the New Car Tax (ISAN), insurance, verification (for those states of the Republic where this is mandatory), commissions, agency fees that are often charged at the car dealerships and maintenance costs.

Remember that buying a car is not an investment, since it does not increase in value over time, but on the contrary, it depreciates from the moment it leaves the agency where you purchased it and you drive it for the first time. According to data from Consumers Report magazine, although there are variations according to makes and models, a new car loses approximately 45% of its value during the first three years and an additional 25% in the following three years.

Advantages of buying a new vehicle

Warranty. When purchased at the dealership, it will have a valid warranty that will allow you to deal with any major damage that may occur.

Maintenance. Most new cars do not require this service until the first 10,000 or 15,000 km (depending on the brand).

Technological advances. It will have the most recent technological advances in terms of safety and fuel consumption, among others.

Disadvantages of buying a new vehicle

Price and related costs. You will have to pay a higher price for the acquisition of the car, along with higher costs for damage insurance, tenure (according to the applicable scheme), and related taxes (ISAN).

Depreciation. You will have to absorb the higher impact of depreciation, so if you decide to sell it, you will have to do so at a lower price than you originally acquired it.

Warranty. If you do not follow the manufacturer's recommendations regarding the care of the car, it is likely that the car will no longer be covered by the warranty, so if any major damage occurs, you will have to pay for it with your own resources.

Maintenance. In order to keep the warranty, you will have to take the car to the dealer for maintenance services, which will imply a relatively higher cost.

Equipment. Acquiring an equipped vehicle will mean paying a higher price.

In the case of new cars, the Mexican Official Standard NOM-160-SCFI-2003 establishes the regulatory elements that suppliers must comply with within the commercialization of new vehicles within the Mexican Republic, specifically the following.

Name, denomination, corporate name, and Federal Taxpayers Registry both yours and the supplier.

Specific characteristics of the new vehicle brand, sub-brand, version or type, model, year, color, among others.

Specifications of optional equipment and additional accessories.

Place and date of delivery of the vehicle, price, form of payment, mechanisms, and procedure in case of rescission.

The advertising they use must be truthful and verifiable.

They must provide you with an invoice, receipt, or voucher stating the specific marketing data of the new vehicle.

Inform you, before formalizing the sale of the new vehicle, if it is not offered with a warranty. In case of not having a warranty, you should be informed of the consequences and implications of not granting it and that you will be the one who will assume the costs.

Provide you with attention mechanisms such as telephone number, fax, e-mail, or any other accessible means to raise doubts, clarifications, claims, and obtain orientation services.

Must display the prices and characteristics of the new vehicles (at least brand and model), the technical specifications of the vehicles, and a legend stating that the vehicle complies with all legal and commercial specifications.

The adhesion contract provided to you must be registered with Profeco and contain the following:

The warranty must be delivered to the consumer in writing with the stamp and signature of the supplier. It must specify validity, coverage, terms, and conditions.

Used car

This is a car that was purchased new by one person, who later sells it to another person, who then registers it in his or her name. If you choose this option, analyze the advantages and disadvantages. Here are some of the most relevant ones.

Advantages of buying a used vehicle

Price and related costs. Its acquisition is more economical, not only because the price is lower, but also because the related costs such as insurance and ownership (depending on the applicable scheme) are also lower.

Depreciation. The impact of depreciation will have been absorbed by the person who acquired it new, so if at some point you decide to sell it, the difference with respect to what you paid will not be so radical.

Maintenance. Once the warranty has expired, you will not be forced to take it to the dealer to maintain it, which will allow you to access maintenance services with another provider and find a better price.

Disadvantages of buying a used vehicle

Maintenance. It is possible that due to the years of operation it may present mechanical, electrical, etc. problems, which you will have to cover since it is very likely that the warranty is no longer in force.

Vehicle history. You do not know if it suffered a collision or any major repair since it cannot be seen with the naked eye, but that could affect its operation. In addition, you will not know the conditions of use or maintenance that the owner(s) gave it.

Technological advances. Because the car was manufactured before, it will not have the advances in terms of safety and fuel consumption, among others. The differences are greater the older the vehicle is.

If, after considering the above, you decide to buy a used vehicle, take into account that you can purchase it not only from a private individual but also from used car lots or from the semi-new car sections of car dealerships.

The Mexican Official Standard NOM-122-SCFI-2010 establishes the regulatory elements that suppliers must comply with within the commercialization and/or provision of consignment services of used vehicles within the Mexican Republic so that you have sufficient information to make the decision that best suits your interests, specifically the following.

They must post inside the establishments, in full view of the consumer, the hours of operation, prices and characteristics of the used vehicles (make and model), payment methods, technical specifications of the vehicles; as well as the costs for the provision of the consignment service, and the warranty, in case it is offered.

They must also display a legend indicating that the supplier has the necessary licenses, permits, notices, or authorizations to carry out its activities and that the used vehicle complies with all legal and commercial specifications to be marketed.

They must provide consignment service attention mechanisms such as telephone number, fax, e-mail, or any other accessible means to raise doubts, clarifications claims, or obtain guidance services.

Ensure the infrastructure and technical capacity in equipment and labor to provide warranty services for used vehicles, when offered.

The supplier is obliged to provide you with an invoice, receipt, or voucher stating the specific details of the commercialization and proving the ownership of the used vehicle.

The adhesion contracts must be registered before Federal Consumer Protection Agency (Procuraduría Federal del Consumidor) and must contain the supplier's data and also the following.

Specific characteristics of the used vehicle: vehicle identification number, brand, sub-brand, version or type, model, year, color, number of kilometers traveled, number of registration certificates in the Public Vehicle Registry, number of license plates, among others.

Specify the general conditions in which the used vehicle is in, in aspects: Physical-mechanical and safety devices.

Establish the date, place, and time for the delivery of the used vehicle.

Specify if the used vehicle is offered with a warranty and mechanisms to make it valid.

The documentation of the used vehicle that is delivered to you and that accredits its ownership, its legal stay in the country, and the payments of the taxes, rights, and uses of the used vehicle (tenure, vehicle verification, fines, surcharges, etc.), and in its case, the user's manual.

Contain the total price of the used vehicle, with the available payment options (cash or credit) as well as the date and place where the corresponding payments must be made.

Before buying, research the value of the vehicle of your choice, so you will know if what the seller is asking for it is reasonable. Remember that the condition of the car, mileage, and age are some of the factors that impact the price.

Also, find out the history of the vehicle, that is to say, the use it was given, the maintenance it was subjected to and if possible, try to find out if it suffered any major blows due to an accident, among others. Regarding this last element, regardless of whether a mechanic checks the vehicle's engine operation in-depth, inspect the following.

That it is not out of alignment.

That the joints of the doors and fenders are even and straight, as well as those of the hood and trunk.

That there are no undulations in the bodywork, which could mean that it has been repaired.

That the color of the paint is uniform and that it does not feel rough to the touch.

That inside the trunk, behind the wheels, and under the hood, there is no hidden damage to the bodywork.

That there are no welds on the chassis.

That there are no signs of oil or fuel leaks or loose cables.

That the interior, upholstery, and dashboard are in good condition. Seats fit easily and do not smell musty.

Finally, try to drive it, so you can confirm if the engine starts easily, there are no strange noises, speed changes are easily made and it brakes properly and on time.

In relation to the papers that the current owner must give you, there is the original invoice (the last one in case it has been re-invoiced), the registration card, the tenure payments, and the verifications.

Check that the engine and serial numbers match on all these documents. Do not forget to check if the license plates currently on the car match those registered on the registration card. You may consult the Public Vehicle Registry, which provides information at a national level in order to provide public and legal security to the acts carried out with vehicles circulating in national territory, by means of vehicle identification and control, in addition to providing the citizens with legal certainty regarding the ownership of a vehicle.

Check if the tenure payments are covered (you can go to the Treasury of your state) and that the verification is not overdue.

Finally, make a responsive letter of purchase or sale, in which you must register the date of the transaction, the data of the vehicle (engine number, serial number, model, make, color), your signature, and that of the person who sold it to you, as well as a copy of their official identifications (voter's credential, passport, ID card). With this letter, you will be exempted from any responsibility in case the car you purchased has a theft report.

And now the question of how to buy a car?

Once you have considered your budget, the characteristics of the car, and whether you will buy it new or used, it is time to decide how you will buy it. In this regard, the options are many and varied, so you should analyze your personal situation to see which one suits you best.  These are the most frequent financing schemes so that you can compare and choose the one that best suits your budget.

Cash (cash or debit card)

It is the simultaneous exchange of money for your car, once the payment is made you can take it with you. The most important advantage of paying this way is that you will not be acquiring any debt and you will not pay any interest. You will be able to sell it at any time, and you choose the insurance company.

If you choose this payment option, it is important that you stick to your savings plan and avoid decapitalizing yourself. For security reasons, you may prefer to use your debit card to make the payment. Before doing so, confirm with the seller what the conditions of use are, as sometimes you may be charged commissions depending on the amount you are going to use.

Car loan

It is the financing granted by a bank, a car dealership, or a Specialized Corporation (SOFOLES), for the purchase of a car, whether new or used. Acquiring an auto loan means that you will pay for the car gradually with a certain annual interest rate.

To access this type of credit you must pay a down payment (the minimum percentage is 20% of the total value of the vehicle) and the rest is paid in monthly payments, which are determined by the amount of the down payment you have paid, the term you choose (terms can range from 6 to 60 months), the type of damage insurance (annual or multi-year) and the life insurance.

Furthermore, at the beginning you will have to pay the cost of the commissions for the opening of the credit, the registration of the license plates, the tenure (if applicable), the verification (in case you are in a state of the Republic where it is mandatory to do it), and the ISAN in case it is a new car.

For this type of credit, you are often asked to fill out an application form and submit a copy of your official identification, proof of address, and income. Personnel from the institution where you applied for the loan will conduct an investigation of your financial situation and will inform you whether or not they will grant you the loan.

One of the disadvantages of this type of credit is that you will acquire debt and for this, you will pay interest and in some cases, you will also pay a commission for the opening of the credit, which ranges between 1.5% and 2% of the amount to be financed.

Generally, the institution that will grant you the loan, determines the company with which you will contract the damage insurance with broad coverage (and in some cases, they also establish the contracting of life insurance and unemployment insurance). Thus, even if there is a cheaper option, you will not be able to contract it or change it while you are still in debt.

When the debt is in force, the invoice will be in the name of the institution that granted you the credit, so you cannot sell the vehicle until you finish paying it. Even if at some point you lose your ability to pay, the car can be repossessed.

If you decide to buy on credit, do not forget the following.

Analyze the down payment amount. Take into account that to the amount announced by the institutions you have to add several payments such as license plates and tenure, which will increase the initial payment.

Compare and evaluate the credit term and the amount you will have to pay monthly.

Ask for the percentage of the moratorium interest rate in case you are late with your monthly payments.

Ask for an amortization table, specifying how much you will have to pay monthly.

Request a copy of the contract to review before signing it and do not forget to keep a copy duly signed by the parties.

Identify the payment days to avoid additional late charges. When you do not pay on the stipulated dates, interest is automatically capitalized and may cause late interest.

Ask about the term within which claims or disagreements related to the movements of your credit will proceed.

Keep in mind that while you are paying for the vehicle, it gradually loses its value. Expert Phil Reed, from Edmunds.com, says that "the best investment is to pay for a car for three years (36 months) and keep it for seven".

To give you an idea of the money you will spend when buying a new car on credit, you can use the Auto Credit Simulator of the National Commission for the Defense of Financial Services Users (Condusef), which shows you different information options, for example, What car can you buy with your income? Which car will you pay the least at the end of the credit? Etc.

Auto-financing

It is a marketing system that consists of the integration of groups of consumers who periodically contribute a certain amount of money to be administered by a third party for a certain period of time, in order to acquire, in this case, automobiles.

The amount of the monthly payments to be made by the consumers who form part of the group will depend on the model of the automobile that each one has chosen, and their contributions will be administered through a bank trust.

With the money collected each month, a certain number of automobiles will be acquired, which will be delivered to the members of the group through three mechanisms, in which only those members of the group who are up to date with their payments will be able to participate.

Drawings: These are held monthly, and all members of the group participate in them regardless of their seniority or the number of payments they have made.

Auctions: These are held when some of the members of the group make monthly payments in advance. The vehicle is delivered to the one who offers the highest number of monthly payments.

Punctual payment or seniority: The car is obtained after having remained in the system for a certain period of time by that member who made his monthly payments punctually and who was not the winner in a drawing or in an auction.

These sales procedures are established in an adhesion contract duly registered before the Federal Consumer Protection Agency (Profeco) in accordance with the provisions of Article 63 of the Federal Consumer Protection Law. Regardless of which of these three ways you obtain the vehicle, each time it is awarded to any of the members of the group, the latter must finish paying for it according to the term chosen from the beginning, by means of frozen payments.

Sometimes, after the award, it is necessary to prove income, present a guarantor with property and pay the administrative expenses derived from the process to obtain the license plates and the tenure. This marketing system is currently offered by auto-financing companies and car dealerships.

It is important to mention that the monthly payments do not include the price of the car insurance or any other costs. One of the most important advantages is that the monthly payments are relatively low and initially you do not have to pay a large amount of money (unlike when taking out an auto loan in which you have to pay the down payment), except for the registration fee when there is one.

However, one of the disadvantages is that the possession of the car will depend on luck in the case of the lottery or disbursing a large amount of money to ensure its acquisition through the auction. Finally, you should know that auto-financing is also regulated by the Mexican Official Norm NOM-143-SCFI-2000. Before resorting to auto-financing, consider several aspects.

Ask the provider for a document describing the most relevant characteristics and specifications of the self-financing system offered, so that you can analyze it carefully and ask any questions you may have. The provider should answer and clarify them before you decide to enter into a contract and make a commitment.

Consider the maximum amount you have available to make a down payment along with your monthly payment capacity.

Request a quote from several agencies and auto financing companies so you can compare and choose the one that suits you best.

Check that the company or agency you wish to contract with has registered its adhesion contract with Profeco. It is important that you read it carefully before signing it.

Recommendations

Identify your needs. Before buying the car, analyze what you will use it for, otherwise, you are likely to buy one that does not fully meet your needs.

Be patient. The best buyer is not the one who spends less, but the one who spends better. For this you need to take time to plan and compare, so you will make a smart and responsible purchase.

Shop around at least three different car dealerships or brands. Often, they all have lines of cars that meet similar needs, and there may be significant price differences between them.

Consider your financial situation. Be aware of how much you have and how much you can spend.

Compare several options so you can choose the one that best fits your budget. Payments that appear to be small are not always so because of the interest that sometimes accompanies them.

If you are going to buy a new car, it may be worthwhile to wait for the offers that the agencies usually make at the end of the year. This way you will be able to acquire a car with practically all the innovations at a lower price.

Sources: Profeco