Car buying tips
by Mark Hoerrner
Most Americans approach a car dealership the same way they would a live rattlesnake and that's with great caution and distrust. They do so with good reason. Cars are expensive. And the dealers have very well-trained people negotiating for them. So how do you succeed against such an adversary? Here are several tips to help you get the most from your car-buying dollars:
- Change your mindset. You have the power. Many customers enter a dealership already on the losing side mentally. Dealerships are built to intimidate. It is vital to remember that you, not the dealer, are in control. No force says that you have to buy that day at that dealership. Nothing says you have to buy a new car or one with all the available accessories. Walk in knowing what you want and be determined to get the best deal. If you don't get it, walk away. If you can say no, the dealer has no power over you. If you walk, they lose the sale and they know that. You have all the power. You have all the power. Repeat this often.
- Know what your trade is worth. Do some research. Visit the Kelley Blue Book, www.kbb.com, to get the current standard value on your trade vehicle. It wouldn't hurt to get the standard value for the car you intend to buy, either. Remember, this is not necessarily the trade value you want to accept as you always want to strive for more. Use this as your starting point.
- Get financing before you hit the dealership. I tried to buy a two-year-old Saturn with 35,000 miles on it a few years ago. My credit was not perfect but not bad. The dealership offered a double-digit interest rate and told me my credit score was worse than it was. I was embarrassed and passed on the deal. I called our credit union, and in 30 minutes, I garnered a loan with interest rate that was 12 percent lower than the dealer's offer. I also learned my true credit score. I could have avoided the whole charade by going to the credit union first.
- If you finance through the dealership, understand dealer financing. Dealers rarely indicate how much they can pay on a trade-in and will also manipulate a number of variables to give you the sense that you are getting "a really great deal." You might even hear the phrase "I'm losing money on this deal." That will never be true. A dealer might break even, but it's highly unlikely. It's the old "I lose 10 cents on every widget, but I make up for it in volume" fallacy.
- Be wary of the approximate payoff period (3-6 years) and approximate interest rates thrown around by the salesperson. If you tell him/her you can afford $350 a month, expect an approximate payment of $400. When you come back the next day to sign the papers, the deal may change. The interest rate and payment go up slightly. The math doesn't work there. Back out of the deal, which is the one thing the Finance Manager doesn't expect you to do. Don't deal with a dealer who can't deal straight with you. Every charge, every line of the paperwork should be the same from your initial approval to the final signature. Taxes and tag fees will apply beyond your negotiated deal, but otherwise, hold them to the original deal.
- The car price is never really the car price. The dealer is almost always willing to do better, either on the trade or the price. I found my used car on the Internet for $13,999. The dealership immediately applied a discount of $2,000 for an "Internet special" but also added in a nebulous $650 "dealer fee." This fee is often a straight markup used to defray the dealer's cost on expenses. It's pure profit. So now, we're at $12, 649. I rejected the deal until they eliminated the dealer fee, upped the trade-in by $2,000 and generally knocked another $1,000 off the price. This took several trips by the salesperson to the sales manager and the sales manager coming back to personally negotiate the deal, which is a common practice. Through negotiation, I saved $5,000. You can, too.
Take the Next Step
- Visit Edmunds.com to get informed about car prices.
- Don't be afraid to negotiate your deal. Remember "You have all the power".
- Reduce the cost of your gasoline with a 'gas card'. You can compare them here.
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Also In This Week's Issue
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- Factors for retirees when buying a car
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- Can I save money leasing a car, then buying it?
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