Buying a new car is an exciting experience. Buying one, on the other hand, is difficult, time-consuming, overwhelming, and fraught with financial risk.
Do Your Shopping at Home
Never start your shopping experience in a dealership showroom. In fact, visiting a dealer is one of the process’s final steps. Begin by narrowing down your options based on your needs, wants, and budget — at home, not at the dealership. Determine the exact make, model, and trim package you desire. If you walk into a dealership blind and declare that you’re just “looking around,” the salesperson gains complete control and will gladly “help” you find the car that’s right for you to buy — but really the one that’s right for them to sell.
Do Your Homework
Make sure you gather as much information about the car you’re interested in before walking into a dealership. This includes the resale value, average cost of ownership, and most frequently paid price. That is not the list price. Instead, use a tool like Edmunds’ True Market Value (TMV) finder, which will show you what people in your area actually pay for the car you want.
Know More About Incentives
Many dealers, including Ford, Toyota, and Honda, offer incentives to both consumers and dealerships. It is your responsibility to learn about those incentives on your own. It is also your responsibility to ensure that the dealer includes the rebates and other incentives in the final price of the vehicle.
Bring Your Research With You
When you learn about your car’s true market value, cost of ownership, manufacturer rebates, and so on, print it all out, place it in a folder, and bring it with you to the dealership. To begin with, it’s useful to be able to refer to your materials while looking at the car — everything tends to blur together when you’re researching so many vehicles. Also, if there are any discrepancies, you should be able to refer the dealer to what you’ve learned. Finally, it shows the salesperson that you’ve done your homework, know your stuff, and are unlikely to be oversold.
Don’t Let the Salesperson Take the Wheel
In an attempt to steer you away from the vehicle you’ve chosen, a salesperson may begin with “if you like that, you’ll love this.” According to Car and Driver, this is rarely done because they truly believe they’ve found a better fit for your needs and budget. Most of the time, they’re attempting to unload a vehicle that they need to get rid of and believe they can sell that day.
Bring Someone With You
You do yourself a favour by not walking into a dealership by yourself. It’s not uncommon for two salespeople to work with you at the same time, and while they may not be ganging up on you on purpose, it may feel that way. Even if you’re dealing with a lone sales rep, having a second set of eyes on the car and paperwork, a second brain crunching the numbers, and a second opinion on the entire process is always a good idea.
Avoid the Weekends
According to a survey, the best time to shop for cars is on a weekday early in the week. The weekend is the worst time. Weekends are busier, which means that the process takes longer, the service isn’t as good, you get less personalised attention, and, most importantly, the prices are higher.
Buying a car is an exciting experience, and you may be tempted to accept the first deal that appears to be a steal. It could be, but contrary to what the dealer claims, it will still be there in a few days. Look around. The car you want is most likely being sold by several dealers in your area. Visit as many as you can — at least three — compare offers, and inform them that you’re doing so to incite a bidding war for your company.
If you’re looking at multiple dealers, we recommend emailing all of them and attempting to negotiate a price online. This is obviously faster and easier than physically visiting multiple dealerships, but the real benefit is that it allows you to compare the same vehicle side by side right on your laptop.
Go In With a Long-Haul Mindset
Make a day of it — between the test drive, negotiations, trade-in, paperwork, financing discussions, and everything else, you could easily spend four hours or more at the dealership. Don’t plan anything else for that day, and eat something before you leave.
Let the Dealer Know You’re Serious
While you shouldn’t fawn over a car, you also shouldn’t overplay your hand and make the dealer think you’re just a window shopper. Don’t make the dealer chase you or play hard to get. CNBC suggests informing them right away that you’ve chosen your car, that you’re ready to buy if the deal is fair, and that if you’re satisfied, you’ll tell your friends and social media networks about your experience.
One of the most effective ways to get the best deal is to arrive at the dealership with preapproved financing. When you get preapproved, you’re not at the mercy of the dealership’s financing department, which is where they make the majority of their money. You can always apply for financing to see if they can beat your lender’s offer, but even if they can’t, you’ll be able to drive away knowing you got the best deal possible.
Consider a Credit Union
Credit unions, unlike banks and other traditional lenders, are member-owned nonprofits. Because they are not beholden to quarterly profit-obsessed shareholders, they are frequently able and willing to offer better loan rates to their members. They are sometimes able to work with members whose credit may prevent them from obtaining a traditional loan.
Ask To See the Loan Offer
If you decide that dealer financing is the best option for you, always request a copy of the loan agreement. Most dealers work with third-party partner lenders, sometimes dozens of them. Many of those outside banks allow the dealer to charge a higher financing rate in exchange for bringing them a new customer and doing all of the work — and they have no legal obligation to tell you if you’re getting the rate that the lender offered.
Don’t Reveal How You Plan To Pay
A dealer will almost certainly ask if you intend to finance the vehicle through the dealership. Say you haven’t decided yet and will discuss financing after you’ve agreed on the price of the car. If the dealer knows you have a preapproval, the salesperson may increase the price of the car to compensate for the fact that they will not be making money on financing. If they know you intend to finance with them, they may reduce the vehicle price because they know they can jack up the loan rate.
Keep Trade-In Negotiations Separate
Just as financing and purchase negotiations should be kept separate, so should trade-in and purchase discussions. If you’re trading in an old car, first and foremost, negotiate the price of that deal separately, and get the trade-in value in writing. If you allow the dealer to bundle the negotiations, the salesperson can seesaw the discussion, offering what appears to be a great deal on the trade-in only to compensate by raising the price of the car you’re buying.
Don’t Overestimate Your Trade-In Value
Many websites, such as Kelley Blue Book (KBB.com), provide free appraisal tools that will tell you how much your vehicle is worth at the time of sale or trade-in. When it comes time to enter those values into the tool, a common mistake is to overstate the car’s condition — sometimes because of a sentimental attachment to the car that only applies to you and never to the dealer. According to KBB, the majority of cars, 54%, are in “good” condition, one category above “fair.” Fewer than one-quarter are rated “very good,” and only 3% are rated “excellent.”
Don’t Negotiate Based on MSRP
Salespeople are trained to negotiate lower prices based on the vehicle’s MSRP, which is what they want for the vehicle. Instead, base your negotiations on the car’s invoice price, which is what the dealer paid for it. In most cases, 2% above the invoice price is a good deal for both parties.
Don’t Negotiate Based on Monthly Payments
Another common tactic is for a dealer to inquire about your monthly budget. Do not fall into this trap. A dealer can sell you almost any car they want once they know your budget. They can fit a much more expensive car into your monthly budget by extending the loan terms. The issue is that you not only end up with a more expensive car, but you also end up paying far more money in interest payments — if they do the financing, they win twice. According to AutoTrader, a $24,000 car can be purchased for $400 per month for 60 months (five years). For 72 months (six years), it’s $28,800, and for 84 months (seven years), you can get a $33,600 car for the same $400 monthly payment. Make a budget based on what you can afford over a 60-month period.
Never Turn Over Your License or Keys
Although it is less common these days, some dealers still use tactics to keep prospective buyers in the showroom until a deal is reached. During a test drive, one of them is to request your licence and/or keys as security. If you return and decide not to buy, your collateral may be in a manager’s office, a secure room, or somewhere else that keeps you in the showroom while the dealer makes a final pitch. However, with the rise of online reviews, these tactics have mostly been eliminated.
Never Agree To an Early Credit Check
If you want to finance a car, you’ll have to submit to a credit check. However, according to Car and Driver, some dealers will try to get you to agree to a credit check early on in the process, possibly because they need to “screen” potential buyers. Not only does this have no benefit for you, but so-called hard pulls can actually harm your credit.
Say No to Fees
Some fees, such as those associated with destination charges, tax, title, and registration, are required and cannot be waived. According to Consumer Reports, many dealers try to sneak extra fees into the final bill — and you should challenge each one. Fees for dealer preparation, vehicle procurement, and vehicle preparation, for example, should be included in the mandatory destination charge. Arguments can also be made about advertising fees, loan payment fees, market adjustment fees, and documentation fees.
Negotiate the Final Price Only
One effective way to avoid fees is to negotiate only the final price, also known as the out-the-door price or drive-away price. Tell the dealer right away that you’re only interested in negotiating the final price, and that all charges and fees must be included.
Don’t Be Afraid To Ask For a Salesperson Swap
Buying a car can be a very personal and intimate experience, and it’s OK to ask for a pinch hitter if your salesperson makes you uneasy or if you feel pressured. Edmunds refers to this as “test driving your salesperson.” Simply request to speak with a sales manager or a different representative, and your request will almost certainly be granted without hesitation.
Don’t Forget the Details
It’s easy to overlook minor but crucial details. This includes questions about new-vehicle rebates, warranty limits, add-ons that may be built into the price of the car, in-dealer service plans, financing offers, and any contract caveats.
Avoid Unnecessary Add-Ons
Your dealer will almost always try to upsell you with add-ons and options, some of which may make perfect sense — perhaps you want alloy wheels or a better sound system. Don’t, however, pay for extras you don’t need or could get elsewhere for a lower price. Window tinting, fabric and rust protection, VIN etching, upgraded floor mats, wheel locks, and door-edge guards are all out.
Stick To Your Guns
Part of the battle is knowing what you want, what you don’t want, and how much you’re willing to pay and under what conditions. The other part of the battle is sticking to those parameters, refusing to be swayed, and saying “no thank you” and walking away if negotiations have become hopelessly stalled.
Finally, don’t confuse firmness with unreasonableness. Refrain from playing hardball. Car salespeople, like dealerships in general, get a bad rap, but the vast majority are hardworking, honest brokers who rely on their reputations and work hard to build customer loyalty. They, like all businesses, must keep the lights on, pay the rent, make payroll, and, yes, make a profit. They are unable to sell their vehicles at wholesale or invoice prices, and they are unable to give the store away to unreasonable buyers. If you are reasonable and fair, they are more likely to be as well.