more...Tips for buying a new or used car

  • How much car do you really need?
  • Budget early
  • Research insurance costs
  • Color and trim
  • Lease or buy?
  • Choosing a dealer
  • Negotiating
  • Saving money
  • Negotiating psychology
  • Financing and contracts

Negotiating

So, you've decided which cars to look at closely and at which dealers to shop. Now comes the fun part, the wheeling and dealing and negotiating for the best possible price. First, a few words about "one-price dealers." Some dealers, either by their own decision or that of their manufacturer, have adopted a one-price policy. This means that every new car on the lot is marked with a reduced price somewhere between invoice and sticker price. No negotiating is done; as a matter of fact, there might not even be a salesperson present. Everyone pays the same price for that particular car. Supposedly, this approach benefits everyone and saves the pain of haggling. While one-price shopping may help those who are poor negotiators, the prices usually are higher than the price which can be reached by a good negotiator. The best approach would probably be to negotiate first and only try the one-price dealers as a back-up in case wheeling and dealing fails.

It is important to remember that the dealer is in business to make money. He or she not only must have some profit, but must pay employees, utilities, insurance, and other expenses. You should not expect the dealer to sell a car and make no money on the deal. Your aim should be to reach a fair price that allows the dealer a reasonable profit while simultaneously saving yourself a few dollars. But what is a "reasonable profit?" In general, most dealers will sell a typical car at $300-500 dollars over the "invoice price." This is only a rule-of-thumb. You may actually be able to pay less at some dealers, or you may have to pay much more for a popular model that is in short supply. Even at invoice, the dealer still makes some money, usually about three to four percent, known as the "holdback." She or he may also get incentives from the manufacturer for selling a certain number of vehicles in a set time frame. For this reason, you may be able to get a better deal the last few days of the month if the dealer is trying to move a few units to earn an incentive.

Saving money

Don't walk into a dealer and expect to be shown the invoice. If you request it, you may be told to buy your own dealership. But you can, with a little research, come very close to determining the invoice price. Several web sites provide the retail and invoice prices for cars as well as the available options. This information allows you to negotiate up from the invoice, rather than down from the sticker price. Also, basing negotiations on the invoice price eliminates another potentially sticky subject, the "dealer pack." A "dealer pack" usually consists of aftermarket undercoating, fabric protection, and paint sealant. The need for or value of these add-ons is dubious at best, and the pack is drastically overpriced, usually in the range of three hundred to six hundred dollars for what costs the dealer less than one hundred dollars. The "dealer pack" is simply another way to build more profit into a car deal and should probably be ignored altogether in negotiation. Don't let the dealer push you into paying a ridiculous price for something that you don't need and didn't ask for!

Negotiating psychology

Do not walk into a dealer like you own the place, waving your price printout, and demand to buy a car at your price. Doing so will probably just get everybody mad at you and less willing to want to sell you a car. A low key approach is likely to work much better. Make a legitimate offer, one in which the dealer can make some money, and expect a higher counteroffer. If the dealer claims that your pricing information is all wrong, then ask him or her to show you the invoice for proof. During this stage of the process, patience wins. It also helps to remember that you don't have to buy this particular car from this particular dealer, and that you can always walk out if you can't reach an agreement. Do so nicely, because you might be back later for another attempt!

There are few specific pitfalls to watch out for while negotiating. You may get "handed-off" to another salesperson or manager in an effort to wear you down. If this happens, insist on dealing only with the original salesperson or walk out. A common tactic is "low-balling", meaning that the salesperson agrees on a terrific price only to have that price "refused" by the manager. Again, this might be a good time to walk out. If you are trading in another vehicle, don't get confused by creative accounting. Dealers commonly overstate the value of cars accepted in trade. This may be part of an attempt to confuse you into taking a bad deal, or it may be done for other reasons. It's not always wrong, but be careful!

At some point, you may be asked "What kind of payment can you afford?", or something to that effect. Frankly, that's none of the their business. You should be dealing for a firm price on the vehicle, not for a monthly payment. Determine a fair price, have someone figure what the payments will be, then decide on whether or not it meets your budget.

Financing and contracts

Unless you're lucky enough to be paying cash, you will also need to shop for financing. You should do some of this before actually shopping for the car. Check into several online or local financing sources, compare their rates, and perhaps ask for pre-approval. Check into the payment amounts for various loan amounts so that you'll have an idea of what you can afford. Dealerships may also offer financing--sometimes they might even have the best rate. That is rare, but if so, there is no reason to go elsewhere.

Last but certainly not least, you must be careful not to blow your hard-earned deal by allowing the dealer to stick a lot of unnecessary extras on the contract. You probably don't need credit health and like insurance. It's usually smarter to buy a term life insurance policy if your existing policy isn't sufficient. Don't pay for dealer prep! It has already been paid for by the manufacturer. Examine extended warranties carefully. You may not need it, or maybe you can get a better deal later by getting several quotes online. Other than taxes and tags, beware any other charges on the contract. Remember, you'll be financing any of this stuff right along with the price of the car. Never, ever, sign a contract with any blank spaces. Read the contract and other papers carefully, making sure that everything is still as it was agreed on. Make sure that you get a copy of the contract immediately.

You're done: enjoy your new car! Take care of it, keep it clean, and drive safely--driving a different car can take a while to get used to, so take it easy the first week.   ---thanks to ASC Fort Gordon