THE ART OF THE DEAL

Whether you end up leasing or buying, the initial steps in shopping always be the same. First you should decide on the type of vehicle you want or need. While you're in this phase, do more than look eat window stickers and kick tires. Test drive as many vehicles as you might be interested in and, if you have time, drive some that you might not be. Drive cars, trucks, vans and sport-utility vehicles. But do not let a sales- person rope you into discussing any "deals" at this point.

Salespeople are aware that by accepting a test drive, many people feel they owe the salesperson or the dealership something. Don't fall for it. Don't wait for a test drive invitation, ask for it. Use a worksheet like the preceding Auto Shopper's Guide to keep track of your impressions. You should ask questions. But, at this point, it is not in your best interest to let a salesperson know whether or not you have a trade-in or if you have a preference for buying or leasing. Remember: Salespeople make deals, not the cars or trucks they sell. Because they have no control over products, it is always in their best interest to focus your attention on "the deals" as early in the progress as possible.

Only when you have decided on the type vehicle you want and narrowed the field to one or two models, should you begin shopping. Until this point you should be looking and learning. Once you have your short list, you can begin to look for your best deal. The ideal way to do that is to always make the dealer "go first." Keep what you have to offer off the table until you've seen as many of of their cards as you can.

Your first task is to try find out the lowest selling price for the vehicle you want. Make sure all equipment you want is included in the price. Also make sure you're talking about a delivered price. This should include everything that dealer intends to charge you for . In other words, first establish exactly what the thing you're buying is worth. Only after you have done this can you ultimately judge if you're getting a good trade-in allowance (if you have a car to trade) or if leasing can save you money over financing.

Once you think you know what a particular dealer will sell a specific vehicle for, the next step is to determine the net purchase price. This is when you should reveal if you have a trade. Again, whether you are leasing or buying should be of no consequence. In one case, the selling price minus your trade will equal the balance you will need to finance. In the other, it will equal the captialized cost which the lessor will be financing. After you know the net purchase price, you can compare the relative merits of a financing contract versus a lease agreement, or one dealer's deal to another's.

Before you even discuss a lease, you should decide whether or not you will be content driving a vehicle that you will have to give back after a specific period, in a good condition and with no ore than a specific mileage. If you're not com- fortable with any of these things, leasing is probably not for you. Another word of caution: As a rule, the financial penalties are relatively light should you decide to buy your car at the end of your lease. However, should you want to get out of a lease early, the cost can be very high. So make sure you understand the purchase and early termination conditions of a lease before signing.

Because lending laws generally require that you be informed of your interest rate and payments, it's fairly easy to determine your total costs in a con- ventional financing situation. Using the worksheet that follows, you'll see that it's basically a matter of principal plus interest over the length of your loan. The one unknown component in financing is your vehicle's resale value, which should be substracted from your total costs. But this amount will ultimately be determined by the condition of your vehicle and when or if you sell or trade.

Knowing where your money is going in a lease is a little more difficult. This is because the laws and regulations that apply to leasing inb many jurisdictions may not require that interest rates be divulged. But you can easily determine how much interest you're being charged if you know the actual capitalilized cost, which should be the selling price minus your trade-in and /or down payment (capital reduction payment). This is why it's so important to negotiate a selling price upfront, before you discuss financing or leasing.

If you read the fine print in leasing ads, you may find that a particular lease requires a down or capital reduction payment, which does exactly what it says. You may also find other feees or charges listed, like a lease acquisition fee or a disposition fee. These merely go to cover lease administration costs or add to the lessor's profit.

THE BOTTOM LINE

Historically, the way to obtain a vehicle with the lowest out-of-pocket costs has been to pay for it in one lump sum. Most people, however, can't do this and are therefore forced to consider some sort of finance or leasing plan that results in an "affordable" monthly payment.

Leasing will almost always result in a lower monthly payment. But when you add up all the charges, including what it would cost to buy your leased vehicle at the end of your contract, financing should cost less.

If your calculations don't show this, then you may have uncovered one of the many great leasing deals that are available today. Given the narrow variable on prevailing interest rates, the length of your finance or lease term will have the greatest impact on your monthly payments. As far as determining an appropriate length for your contract, the best advice is that the duration of your finance contract or lease agreement should not exceed the length of time you intend to keep the vehicle. If you intend to keep a vehicle for three years, but you can only afford the monthly payments if you finance it for five years, then you should probably consider that you can't really afford to drive that vehicle. Leasing for a shorter term may be the answer. But so might buying a less expensive vehicle.

Car Keys

A glossary of automotive terms you're likely to encounter in searching for a new vehicle.

Active Suspension Computer-controlled suspension system. Replaces conventional shocks and springs with powered actuators that position the vehicle's wheels according to road and load variations. Limited in availability.

Air Bags Driver-only or driver-passenger passive restraints are now standard in well over half of all new cars sold. Deployed in severe frontal impacts. Acclaimed for saving lives in otherwise fatal accidents.

All-Wheel Drive aka Four-Wheel Drive. Certainly not new, but a feature that has grown in popularity with the proliferation of trucks and sport-utilities. Improves contol under adverse road situations by allowing power to be sent to all four wheels. Full-time systems like Quadra-Trac are full automatic and provide continuous power to both axles as needed. Availability in cars is still limited.

All-Wheel Steering aka Four-Wheel Steering. Improves maneuvernality by steering reer wheels as well as fronts. Very limited availability, but may yet catch on.

Anti-Lock Brake System (ABS) System that helps keep either two or all four wheels from locking up and skidding in hard braking situations through automatic pulsating action. Available on most vehicles though you may have to spend uo to $900 for it. Certainly worth having.

Auto-Lock Hubs A must for all-wheel drivers who'd rather not jump out and manually lock front hubs at -20 [degrees] below.

Bumper-to-Bumper Coverage or Basic Warrantly Normally refers to that part of a new car's warranty that covers everything but tires, wipers and normal wear and tear. These days the basic warranty from most companies is good for three years or 36,000 miles.

Cab Forward Chrysler's "revolutionary new auto architecture" LH platform cars introduced last year. Refers specifically to the rake of the windshield--moving its base far forward to expand interior room and aid aerodynamics.

Coil Springs Resilient spirals of metal that can expand or contract without losing shape--used extensively in car suspensions and gaining in trucks. A more car-like feel than old-time leaf springs commonly found in truck or sport-utility suspensions.

CSI J.D. Power's Customer Satisfaction Index that rates manufacturers based on buyers surveys. Last year's most satisfied customers were Lexus owners.

Dealer Preparation A fee usually listed with MSRP. Also an extra fee added by some dealers. Not worth paying twice.

Disc Brakes Superior to drum brakes in reducing brake fade and distance required to stop a vehicle. Consist of discs that rotate with the vehicle's wheel, straddled by calipers that pinch the disc surface.

DOHC Dual or Double Overhead Camshafts. Two Camshafts per cylinder head--one operates the intake valves, the other the exhaust valves. Usually superior (in efficiency and performance) to SOHC or pushrod/cam in block designs.

Extended Warranty Offered by a variety of sources to extend coverage beyond the limits of the manufacturer's basic warranty. Worth considering, but always consider the source.

Electronic Fuel Injection (EFI) Fuel delivery is electronically controlled according to electronically monitored operating conditions. Better fuel economy and lower emissions than traditional carburation. Early throttle-body-type EFI has been cirtually replaced by Multi-point EFI which usually consists of at least one fuel injector per cylinder.

Free Maintenance Contract An indication of just how tough times are in the car business. Offered by certain manufacturers on harder-to-sell vehicles. Covers all routine scheduled maintenance usually for one or two years.

Guzzler Tax Penalty fee applied to vehicles that exceed federal minimum fuel economy requirements. Listed with MSRP. Non negotiable.

Horsepower The more the better, though using more power uses more fuel.

Joint Venture Ex: Sold by Food, designed by Mazda, built in Korea .

Lemon Laws New car buyer protection laws enacted in all but two states. Qualifiers differ, but you probably have a case after four unsuccessful repairs for the same problem.

Luxury Tax Another federal assessment. 10% on the part of a vehicle's cost over $30,000.

Market Adjustment Profit-boosting surcharge added to the MSRP by some dealers to take advantage of high demand for that vehicle in that market.

No Dicker Sticker aka One Price Selling, No-Haggle Pricing. Removes price negotiation from the purchase process so that what you see on the sticker is what you pay. Reduces confusion, but you should still haggle over the value of your trade.

Passive Restraint System Supplemental restraints--pre-fastened belts or airbasgs--required by law on all cars (extends to trucks/sport-utilities/vans in model year 1996).

Powertrain Warranty Usually longer than the manufacturer's basic warranty. Generally covers the vehicle's engine and transmission. What's included varies so be sure to read the fine print.

Shift On-the-Fly Ability to shift into all-wheel-drive mode with vehicle moving. Eliminates having to stop to engage or disengage 4WD when traveling through a variety of conditions.

Traction Control Rotten weather/road feature. Wheel spin is automatically controlled by reducing engine power or by applying brake(s) when one of the driven wheels begins to lose traction. Offered by an increasing number of car makers as optional equipment.

Turbocharger An exhaust-driven supercharger that increases power by forcing more fuel/air into the cylinders. Modern turbos are great improvements over originals that earned an evil reputation for high maintenance.

Value Pricing Practice by car companies or dealers of setting a low, fixed price on a well-equipped vehicle, reducing both dealer and maufacturer profit margins. Good deal for consumers.

Zero Emissions Vehicle (ZEV) aka Electric Car.