Do your research before stepping onto a new or used car dealership. Know the approximate value of your trade-in. Know some details about cars in your price range. Compare different models fuel economy, safety, reliability maintenance and insurance costs. Also, look at used cars because the first 10,000 miles driven on a car depreciate it the most. You could pick-up a certified used car with nice warranty coverage for thousands less than buying new.
Always try to arrange for your own financing before
stepping onto a car lot. Credit unions are a great place to look for
fair rates. Check with banks and other resources to figure out the
best rate and way to finance your car. But, pay attention to the
financing at the dealership because it could still be far better than
anything you could get at your bank. You should take time to compare
rates and choose the one with the best terms and rate.
Do not start negotiations until you have a good idea of
what the vehicles price will be. Below is a light read on how this
might be done.
Try to figure out what price the dealership actually paid
for the car. The dealer invoice price may be printed on the pricing
guides or may be found online. Know that the invoice price is not
always the actual price the dealership paid for the car. Many times
the dealership gets factory-to-dealer incentives, rebates, wholesale
finance reserves and holdbacks to increase profits. These usually come
off the price of the car after you buy it and then drop right into the
dealerships pocket. All of these should be open for negotiation.
Once you figure out about how much the dealership paid for
the car you can start to figure a reasonable starting price to begin
negotiations on the cars price. As a general rule you should always
make your first offer to the dealership low. And as a general rule a
reasonable first offer from the dealership to you would be at 4-8%
above the dealerships cost of the car. So if the dealer’s price is
$30,000 then you can figure maybe seeing an offer that’s 6% of the cars
price or in this case $1,800 above the dealer’s price. So in this
example you would see an offer from the dealership for $31,800. Don’t
forget to include any dealer incentives you find in your final price
figures. Grind them down until you are happy with the price. If you
don’t like what they are willing to sell it for then you can always
just walk away.
Always negotiate each of the parts involved in buying a
car separately. Keep financing, trade-ins, warranty and leases from
being bundled together in one confusing price. They like to sell you on
the monthly payment you can afford rather than telling you about the
actual cost of the purchase. The reality is likely that a crazy high
interest rate, disability insurance, warranty, and a host of other
unwanted products are rolled into the monthly payment amount they try to
sell you on. This “how much can you afford to pay a month” method
leaves the dealer to an advantage as they can charge you more for one
thing and twist the reality of the true cost of the car. When you ask
for a more affordable payment they take out one of the previously added
products and pretend to have done you a favor. Or they will lower the
crazy high interest rate they used to calculate the previous monthly
payment they gave you. This is yet another reason why you need to
negotiate everything separately. And double check none of these added
products are packed into your final price.
Negotiate your cars financing, price, lease, and trade-in
price separately. Remind the salesman that you are looking at other
dealerships and will go with the best price and terms offered. Walk
away if you are not satisfied with the results of the negotiations.
You might even get a better offer for doing so.
Finally when all the negotiations are done you will likely
face some more sales attempts. Dealers will likely try to sell you
fabric protection, rust proofing, paint protections, and even try to
charge you $100 plus dollars to etch your vehicle identification number
( VIN ) in the window. Don’t bother paying for these because in most
cases they are very unnecessary. If you still really want to have
them done you can do them yourself later for a fraction of the price.
Make sure the final paper work does not have any of the
fabric protection, rust proofing etc…..costs cleverly hidden in the
contract. If it does request they reprint a new contract or draw a
line through them before signing. Have the dealer initial the change.
If you still want to work towards a better deal don’t buy
the car after working out the deal. Instead go home and think about
the negotiations and make sure that the car and everything attached to
it are to your liking. In other words, sleep on it. Let them watch the
car sit on the lot for a few more days, it might even sweeten the
deal. Or you might realize that you don’t really need or want that car
anyway.
The key to getting the best deal is to be educated about
your options, price and product. Don’t allow yourself to be pressured
and walk away from the negotiation table to take a breath and gather
your thoughts.
Call around and ask people that have bought cars from dealerships about their experiences.
If you still don’t feel good about going the buying
process alone. Ask a friend you trust with more intestinal fortitude
for this kind of thing to come with you. You can walk away from any
unfavorable deals together.
Dirty Dealer Tricks Revealed
Avoid committing to anything. It does you no favors to do so. They prey on your kindness. Don’t let the dealer put you into the, “I did this for you, now you have to do this” box. Don’t reduce your negotiating power by saying, “yes” to any of the commitment questions they may ask. Some of these statements include:
“If I can get you this price will you buy the car today?”
“If you want the car for this price, you'll have to buy it today.”
“This offer will end today.”
“If I can give you this payment will we have a deal?”
“What’s the most you could afford to pay per month?”
Expect to get a whole bunch of good cop, bad cop type
treatment during the entire buying process. Your sales person will
pretend that he really wants you to get the best price and financing,
but the big bad boss won’t let the deal go through at those rates and
prices. Know what you want and stick to it. Don’t let them play the
fear of loss game on you.
Always negotiate each of the parts involved in buying a
car separately. Keep the cars price, financing, trade-ins, insurance,
leases and warranty from being bundled together into one confusing
price. They like to sell you on the monthly payment you can afford
rather than telling you about the actual cost of the purchase. The
reality is likely that a crazy high interest rate, disability
insurance, warranty, and a host of other unwanted products are rolled
into the monthly payment amount they try to sell you on. This “how
much can you afford to pay a month” method leaves the dealer to an
advantage as they can charge you more for one thing and twist the
reality of the true cost of the car. When you ask for a more
affordable payment they take out one of the previously added products
and pretend to have done you a favor. Or they will lower the crazy
high interest rate they used to calculate the previous monthly payment
they gave you. This is yet another reason why you need to negotiate
everything separately. And double check none of these added products
are packed into your final price.
Don’t fall prey to the “I have to feed my kids” type
statements. They like to say things that make you feel guilty about
making a better deal for yourself.
Watch out for the split the difference trap. You give
them a price that’s $2000 dollars less than the dealer’s offer. The
dealer walks away and checks with the manager if he can agree to your
price. The manager then comes over and asks you to split the
difference. What he’s really doing is asking you for half of the $2000
dollars you could have walked away with back. If you agree to this
split, you are really just agreeing to pay $1000 dollars more than your
offered price.
Then there’s the, “your credit is not good enough”, trap.
Even if you know that you have let’s say a 740 fico score they will
come back and tell you it’s a 620 score. They explain to you that their
financing company has more strict guidelines and your 740 fico doesn’t
matter to them. Then they bust out a big red marker and circle the
620 score to remind you that it’s a bad number that now forces you to
pay for a higher interest rate. Don’t walk, but run away from this
dealership as fast as possible.
Look out for last minute changes to your payments and car
price. Just because you have a verbal agreement with the sales person
doesn’t mean that he’s going to honor it. He may come back and say that
they didn’t figure the sales tax into the deal. Or say you didn’t
qualify for the loan at the rate you liked even though you do.
One of the worst ways they might stick it to you is by
increasing your interest rate days after you bought the car and took it
home. They will come back and blame you for not qualifying for the
lower rate due to bad credit or other lies. Then raise your monthly
payment to include the new costs associated with a higher interest
rate. You want to keep your car and they have now left you feeling
like you couldn’t get a car anywhere else with your credit, so you keep
the car and pay more every month. This is another reason why getting
your own financing is a good idea.
Watch out for the give it and take it away method. Just
when you think everything is going well and the price for the car you
want is sealed. The dealer starts to talk like you can’t afford to
buy that car and introduces you to some terrible featureless look alike
versions of your dream car for the same price. Then after making you
feel like you can’t afford to buy your dream car, he reunites you with
it and raises the price.
Don’t get suckered onto the showroom floor with a
misleading advertisement in the newspaper. They like to advertise a
great car for an unbelievably low price. This gets everyone and their
mother to show up to buy it. You get there and it turns out they only
had the one car and it’s already been sold, but they will gladly point
you in the direction of more expensive alternatives. They got you on
the lot and most times they don’t care much about how that happens.
And if you are thinking that calling ahead to make sure it’s there
helps, you would most likely be wrong. They will probably tell you
that they have that special car and many more at even better prices.
But, when you get there it’s the same old bait and switch story.