How To Save Money On A New Car And Survive the Car Dealership Sales Pitches And Tactics
Do you know the secrets new car dealers use to get the most money from you?
Even if you have bought a new car before, you might really know next to nothing about the process other than the hassle it can bring. But if you take your time, you can save money and not let the salesperson have total control.
Never Trust a Car Salesperson
Remember that it's a salesperson's job to get you to buy a car and to make money. Some are better than others, able to break down even the toughest customers. Unless you want to be taken in by the pitch, tell them only what they need to know.
Buying a Car Takes at Least a Few Hours
Most people don't realize how very long it actually takes to purchase a new vehicle. Even if you already have the car picked out, the process can still last several hours. This is because the salespeople and managers will try many gimmicks and pitches to get you to pay more, not to mention the drawn-out negotiations and haggling often involved.
Save Time and Money by Doing Your Homework First
It is always wise to try to save time by having at least an idea beforehand about the car you want. Look at the available options online and narrow down your search. Find out how much other people paid for similar vehicles. Check out the standard and optional features for the one you want. Figure out how much you can afford to spend and how much you are willing to spend—which are not always the same amounts—and estimate what your monthly payments would be. And even if your credit isn't as good as you'd like, don't hesitate to try for a low interest rate.
you can go to the car dealership after hours if you're intimidated
If salespeople make you uncomfortable, you can go to the dealership late at night and walk around the lot. You can't test drive or sign the paperwork, but you'll be able to figure out if the dealership's vehicles are really worth your time and money, and you'll be able to think more clearly without the pressure of a salesperson standing beside you.
don't be blind to the value of your trade
When you are haggling with a dealer on a new car, most people are blind when it comes to the trade in value of their current cars. That's a mistake. If you don't know the value of your trade, you'll end up losing money. So appraise the value yourself. While it's not a fool-proof method of getting a value, it will help you have a ballpark idea of what your vehicle is worth before walking into the dealership. If you don't, you'll end up arguing with the dealer over the value of your vehicle.
use only car value estimators to give you an idea of a car's value
Many websites offer free trade-in appraisal tools and all are pretty straightforward and simple to use. You simply enter some basic information, such as your location, the vehicle model, the color, and the condition. The condition is where many people go wrong. You'll have to realize that very few cars are in outstanding condition. In fact, most cars are only in good condition. If you vehicle has any damage, it might be less than good. These appraisal tools offer descriptions of each criteria to help you get an evaluation. If you are unsure, you can always select the lowest and highest values to get a range for your trade.
get a CarMax estimate to back up your value
You should always consider getting a value from a local source, such as CarMax or a local used car dealer. CarMax provides detailed inspection services in addition to a written appraisal that will be good for up to seven days. If you arrive early, you can often be in and out in roughly 30 minutes.
get an estimate for your trade from a local dealer
Believe it or not, a dealership will buy your car from you even if you don't buy one from them. Don't be afraid to try this route. Call a dealership's used-car manager to schedule an appointment to get your car appraised. Try to schedule it for a weekday morning when it;s least busy. Most dealerships have only one person appraising potential trade-ins and weekend afternoons are often the busiest. Don't tell them which vehicle you're looking to buy. Instead, say that you aren't sure yet or that you want to sell outright. While you're there, make it your business to only get an appraisal.
sell your car to another dealer to make negotiation simpler
If the offer you receive is good, you can jump on it and remove the trade in from the new car negotiation process. This can often net you more money than if you traded the vehicle at the same time as your new purchase. But if you owe more than your offer, you must be prepared to pay the difference. If you aren't willing to do that, your best bet is to deal with the trade at the same time you deal for your new vehicle. If the dealership is pressuring you into buying a car, simply tell the used car manager that you're moving to Canada and can't take a car with you. That's usually enough to stop the pressure!
factors that affect the trade in appraisal
Wherever you go, the trade-in price you're offered will vary depending on a variety of factors, including the vehicle's condition, its age, the dealer's current inventory, and the likelihood that the vehicle will sell. Keep in mind that there may also be special promotions for trade-in cars.
get a trade appraisal from a dealer that doesn't sell your brand
Take your trade-in to a dealer that doesn't sell your vehicle's brand so that your vehicle won't have to compete with other models. For instance, if you take your Honda Accord to a Chevrolet dealer, that dealer might offer you more than a Honda dealer. At the Honda dealer, you would be competing with all the other Honda Accords on the lot.
make sure the trade appraisal is correct
Some appraisers might miss vehicle options or inadvertently select the wrong vehicle condition. Other less honest appraisers will intentionally leave off vehicle options or will give you a lower vehicle condition than you actually have. In any case, don't be afraid to ask exactly how the appraiser got to a particular value. If you doubt the vehicle's condition, ask to see the criteria for the condition think it should be and ask which criteria it specifically did not meet.
don't bring a clean car when you plan to do the trade
Dealership personnel know you are planning to buy a car that same day when you drive up in a detailed car. Many people think that their cars won't make a good first impression if they aren't clean. In reality, the car's value won't be changed by cleaning it. This is not to say that it's okay to bring in a muddy vehicle with lots of fast food bags in the back. But don't worry about getting it detailed beforehand. This will allow you to remain noncommittal regarding whether or not you intend to make a purchase that day. Besides, part of the resale process is getting a full detail and reconditioning of the car, which typically costs the same regardless of how clean it is when you pull up.
to repair or not to repair
If there are repairs that the car absolutely must have in order to run, you should consider the cost to repair and seriously think about having the repairs made. You shouldn't really try to fix dents or buy a brand-new set of tires in an attempt to up your trade-in's value. It rarely works. A dealer is generally able to repair flaws and put on new tires at a significantly lower cost than you can.
overestimating the value of your trade
Sometimes people get sentimentally attached to their vehicles and think they're worth more than they actually are. They find the highest value on appraisal sites and refuse to budge from it. In reality, an appraisal is an average, which means that some people are offered more and some are offered less. It may be a better use of your time and energy negotiating on the price of your new car than fighting over the value of your old one.
Exaggerating competing trade-in offers
Sometimes people will fib about a trade-in offer they've gotten so that the dealer will try to beat the offer. Like making unnecessary repairs, this rarely works. Experienced appraisers either see right through the "offer" or request to see the estimate in writing. If you are going to try to have a dealer match an offer, you'd better make sure this offer exists.
Get a Blank Loan Check Or Get Approved at a Credit Union
If you show up at a dealership with a blank check or confirmed financing, you've taken a lot of power away from the sales team. Apply for a blank check auto loan before you go to the dealership. Once approved, you can take the information with you or wait a few days for the check to arrive in the mail. You should always check with your local credit union before going to a dealership. A credit union will tell you exactly what you can afford and give you an honest idea of the types of auto loan rates you can get, even if you aren't going to get a loan from them!
start with Internet sales first
If you know the exact car you want, e-mail all the dealerships in your area. Internet sales departments know you're shopping around and that they have stiff competition. Tell them the specific options you want. Ask for their "out-the-door price" or "turn-key price," which is the total amount you're expected to pay to start the new car and drive off with no other fees. Some dealerships want to call you to verify you aren't another dealer trying to find out how low you'll go. If that happens, it's fine. Insist on having the price sent to you. Once you get to the dealership, they can change the figures as much as they want to reach that price. But that price must be the same price on the paperwork. If not, don't sign it.
the salesperson is just going to manipulate you
It's true. Even if the people selling you a car are really nice, you are the only thing standing between them and a paycheck. They aren't there just to sell cars; they are there to sell cars at a profit.
the salesperson is always sizing you up
The first thing they'll do is meet you on the lot, typically as you pull in. This is to keep other salespeople away from you and to size you up. They'll look at everything from how you are dressed to what kind of car you drive. If you seem timid, they'll be on you like sharks smelling blood. Meeting and greeting seems simple, but they are trying to get you to form a positive opinion within a minute of meeting you. If they earn this positive opinion, it will be harder for you to stick to your guns.
Setting an interest rate is arbitrary
Car dealers have a significant amount of leeway when assigning you an interest rate. They mark interest rates up in order to make more money, which is why they want to know how much you will accept for a monthly payment. Just tell them you don't know yet. In truth, you don't get approved for auto loan financing at the dealership. The dealership just guesses what a bank might pay for your loan and tries to sell it to the highest bidder. Want to know more about how car dealerships work with regards to setting interest rates? Check out this article about low interest financing.
Use your blank check offer to negotiate better auto loan financing... or lie!
So with your blank check offer in hand, you can tell the dealership finance team that you'll take their financing if they can beat the rate you've already gotten. If you feel comfortable, just pretend that you already have financing and lie through your teeth. After all, they do! See what the going rate is for the type of loan you want and start from there. To make money, they'll beat any rate you get.
don't get distracted by monthly payments
You're looking for the lowest interest rate and lowest price possible, not a specific payment amount. That's not to say you should completely ignore the total monthly payment, particularly if you can't afford it, but don't play their game. If you start getting distracted by monthly payments and add-ons, you might miss something important.
the test drive tactic
When you take a test drive, don't let the salesperson hurry you along. It's a tactic to get you excited and in a rush to sign the paperwork or to have other unrealistic expectations. It's also a tactic to get you to notice and fall in love with specific features about the car, especially if they know your current car doesn't have them or if it's important to you. If you brought someone with you, this is a great time for that person to step in to give you an honest opinion and to keep your head level.
negotiating a price if you didn't get an offer from Internet sales
When it comes time to negotiate, there are several things to keep in mind if you didn't get a final price from the Internet Sales Department. So-called "doc fees," fees dealers charge for filling out paperwork are really to offset any losses they experience in negotiations. This fee is usually included already in the price of the car by the manufacturer. You probably won't get them to budge on it, but if it's more than $100 you should keep negotiating until it falls.
they won't give you the best price upfront... ever
If you got the best price upfront, you might take it to another dealer and try to get a better price. You might also not trust the price you are given and try to get something even lower. Just understand that the dealer won't give you the best price right off the bat. Some dealerships do offer competitive pricing upfront, so recognize when you are at this kind of dealership. Some dealerships also have no haggle prices, which can give you an idea of how low you might be able to go at other dealerships.
extra features help the dealer make more money and typically aren't worth it
To help pad their losses, the dealer will try to get you to buy extras in a last-ditch effort to get you to shell out more money. They will offer you everything from extended warranties (which you probably shouldn't take) to rust proofing (unnecessary as every car already has it) to interior protector (which is useless in carpet form and unnecessary in seats, which come protected from the manufacturer). VIN etching is also unnecessary since it won't actually prevent your car from being stolen, it won't get it back after a theft, and it won't give you any insurance discounts. You should decline all extras as it's just a way for you to spend more money.
it's time for the managers to get involved
You've negotiated an offer that you think is good, and the salesperson has left the room to ask the manager "for approval" on something. But is that really what's happening? It is more likely that the salesperson is letting the manager know how much you're willing to shell out and how difficult a customer you'll be. Salespeople know what they are and are not allowed to do, so there is no reason to go speak to the manager unless there's a question or you have a very firm price in mind and won't budge. But the managers are really just the most experienced salespersons.
it's time for you to do your trade
Hopefully you have not mentioned the car you are trading in before this point. Dealers don't like for trade-ins to be brought in at this time because it makes it harder for them to hide fees and charges in the "trade-off figures" after you have been given a solid price for your car. Bringing it up now will give you more leverage, since you will then simply have to compare the final figures and make the best choice.
remember the total price you already negotiated
Even if you brought up the trade-in before, make sure to keep in mind the "out-of-door" price, the total price of the vehicle, plus all taxes, tags, rebates, and fees, plus and/or minus your trade-in. It is extremely important that you remember this number now because your next stop is the finance manager.
Haggling with the Finance Manager
The finance manager is the dealership's big gun that it brings out in the last stage of the process to make sure that you pay as much as they can possibly convince you to pay. If you rejected extra options, charges, and fees earlier, the finance manager is going to bring them back up, providing different scenarios for you to think over and running all kinds of figures. If you aren't careful, rebates will disappear, fees will hop on, a transferred tag will become a new tag, and the value of your trade-in will fall. Finance managers expect you to be so eager to get out of there after all those long hours that you will just sign the paperwork and be done with it all. After all, who reads the fine print?
read the paperwork to make sure your salesperson didn't sneak in any unwanted add-ons or change any prices
Yes, carefully reading through all the paperwork before signing is a huge hassle, but you owe it to yourself to make sure one last time that you don't get taken in and have to shell out much more than you want (or can). Not everyone is honest and money talks. Your salesperson gets a kick back for each add-on sold to you. So even if you decline these add-ons, it's possible that an extended warranty, maintenance package, etc could 'accidentally' make it back onto the contract just before you sign. So make sure no one is trying to sneak anything in or trying to play magician with the prices. Bottom line: the total price you negotiated minus the amount you're getting for your trade-in should equal the final price on the paperwork.