Well, Ben and I bought a new car last week. Just when I thought our big purchases were out of the way after our wedding and buying our new home, Toyota recently informed us that our 2004 Corolla may have an airbag that could shoot shrapnel under certain conditions.
We decided to not wait for what could be two years for Toyota to obtain the right parts to fix the problem (and in the meantime would require one of us to sit in the back rather than riding in the passenger seat). Instead, we decided to upgrade.
I love car buying. I’ve helped several friends buy their vehicles, and purchasing the Corolla with Ben was one of my first personal finance wake up calls when I realized we got screwed on the deal.
I understand, though, why people hate the stress and the hassle of haggling with a salesman. However, here are three reasons why you have the advantage in these negotiations.
1.) You have a ton of leverage: There was a time when car dealers had all of the leverage. The only thing that we really knew about a car was the Manufacturer’s Suggested Retail Price (MSRP). Now with websites like Consumer Reports, True Car, and Edmunds, you can find out the MSRP, the invoice price (what the dealership paid for the car), what others are paying, and the target price you should shoot for. Not only can you get pricing info, you can also shop the target price to different dealers and have them fight over you. Even after our purchase, I still have dealers calling promising to beat the best deal.
2.) A lot of the tricks of the trade have been exposed: A lot of car buying websites have exposed the dealerships’ tricks of the trade. Never again do you have to fall prey to focusing on monthly payments rather than the price of the car, buying pricey add-ons, or having the finance person sell you “the essential” extended warranty. You can find some of my favorite buying guides here, here, and here.
3.) You can get 90% of the transaction done before you even step in a dealership: If you really want to be successful with your purchase, you should do a good amount of research before you buy . You should explore different pricing, financing options (including your FICO score), and the value of your trade. Luckily, you do all of those things before you even step into a dealership. Ben and I went to the dealership with all of the costs in writing, a firm-quote on our trade in, and several financing options in case we didn’t qualify for or want to take the dealerships financing. It still took us three and half hours to take the car home, but the majority of the stress was on their end trying to get money back from us on such great pricing.
Buying a car can be fun, exciting, and very little stress if you approach it in the right way. On Friday, I’ll offer a step-by-step guide to making a successful purchase.