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10 Tips to Get the Best Deal on Your New Car
By Lance Helgeson, July & August 2004
Whether you’re buying a new or used vehicle, the following tips can help you negotiate smarter with dealers and avoid falling victim to some of the sales tactics that they use to increase their profits:
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Know the value of your trade-in
Go through the classifieds of your local paper or use online resources like
the Kelley Blue Book website or Edmunds.com to help establish a value for the
vehicle you plan to trade in. Dealers handle trade-ins every day, and they
often resell those vehicles in their used vehicle departments. The less they
pay for your vehicle, the more profit they'll make when they re-sell
it.
Know the true market value of your planned
purchase
You should also use online resources like Edmunds.com and the National Auto Dealers Association website to help
establish the invoice price and true market value of any vehicle that you might
purchase.
Shop around
Once you've settled on a particular type of vehicle, visit at least
three dealerships to find the vehicle that has the most features you seek at a
price you can afford. You should leave each store with a firm sense of how much
the dealer will charge for the vehicle you want to buy and how much you'll
get for your trade-in. These figures will help you pick the dealer that seems
willing to offer the best deal—and give you ammunition to negotiate an
even better deal.
Feel free to test drive vehicles, but keep in mind that dealership
salespeople consider anyone who has test-driven a vehicle as a "hot"
prospect and may step up pressure on you to make a purchase that day.
Focus your negotiating efforts on the price of the
vehicle
Do not focus only on the amount of the monthly payment that you want to
make. That's because dealers can adjust loan terms, trade-in amounts and
other factors to make a monthly payment work for you. For instance, in years
past, most vehicle loans lasted for a maximum of five years. Today, however,
dealers and banks are extending loans to six, seven, and even eight-year terms
as a tactic to lower monthly payments and make it seem like you can afford a
vehicle purchase. The danger: Such lengthy loan terms mean that you may end up
making payments longer than you want, and, in the case of used vehicles, the
loan term may exceed the useful life of a vehicle.
Don't let "factory incentives" stand in
the way of negotiating a lower price
Dealers may cite generous incentives advertised by the automaker as a reason
for not being able to lower the price further themselves—a "not
valid with any other coupons" sort of thing. However, manufacturers
account for incentives when they establish suggested retail pricing. The
upshot: You first should negotiate the base vehicle price as low as you can get
it—and then seek to apply any advertised incentives to the deal to get
the price even lower.
Carefully review offers to lower the vehicle sales
price
When a salesperson or manager agrees to knock $1,000 off the asking price of
the vehicle you want to buy, make sure he or she hasn't simultaneously
reduced the value of your trade-in by a similar amount. In that scenario, you
haven't gained anything.
Compare loan terms, interest rates and monthly
payments
Check the deal that the dealership is offering against the figures you
obtained from your bank to determine the best institution to handle your loan.
Typically, a dealer-financed loan will have interest rates about 1 percent, or
more, higher than what a bank offers—a mark-up you pay for the
convenience of one-stop shopping.
Watch out for add-ons
Some dealerships may negotiate the price and, after you've settled on a
figure, tell you that the additional options you want (CD player, floor mats,
etc.) will require raising the vehicle price. When you negotiate, make sure
you're negotiating on a specific vehicle and including such options as part
of the negotiations. Some experts recommend asking for items such as ashtrays
and floor mats for free to avoid a dealer's mark-up on them.
Don't let the dealer's finance and insurance
folks sell you on any "must-haves"
In most dealerships, you negotiate the price of the vehicle and then go to
the store's finance and insurance (F&I) office to work out paperwork
and secure a loan for the vehicle. The F&I managers also will offer you
other products, such as service contracts, credit life insurance, and theft
protection packages, as add-ons to your deal.
Some of the products may make sense for you to purchase, but you should
evaluate them based on whether you need them, can afford them, and understand
the benefits they offer. If an F&I manager positions the product as
necessary for you to buy the vehicle, you should find another dealership to
take your business. State and federal laws mandate that F&I products are
optional purchases, and any other description is regarded as a deceptive sales
practice.
Review your documents carefully
Most vehicle buyers sign the myriad of paperwork they're presented
without taking time to review it all. At a minimum, you should make sure the
figures for the vehicle price, the loan terms, and the cost of any add-on
products are disclosed and described consistently in your retail installment
contract (the loan documents) and the buyer's order (a document that
describes the vehicle and its options).
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