As I said in my previous post, you should be excited about how the tides have turned in your favor when it comes to buying a car. Today I want to offer some practical steps to take in order to get the best deal possible.
You should understand a couple of fundamental things when it comes to successful car negotiations:
- Information is Key: The more information that you have about the key parts of the sale, the better off you’ll be. Before buyers were at a disadvantage because dealers had most the knowledge when it came to pricing and financing of the vehicle. The playing field has evened now that we the have access to those figures.
- You Should Always Be Willing to Walk Away: Your biggest source of leverage is your ability to walk away. In the end, these dealerships want to sell you a car. So much so, that they may take a hit on the price of a vehicle in order to meet monthly, quarterly, or annual quotas. Use that desire to your advantage.
- Give Yourself Options: This key piggybacks off of being able to walk away. If you have several options as far as where you can get the vehicle and how you will pay for it, the greater your ability to walk away from a deal that goes sour during negotiations.
Now we can apply these fundamental elements to the car buying process. I suggest splitting the process into three separate transactions: 1) negotiating the price of the car, 2) determining the value of your trade in, and 3) financing the transaction.
The Price of the Car
The car itself will likely be the most research-intensive part of your purchase. You have to find the car that fits you best. And you should get as detailed as possible, down to the type of floor mats that you want. You can use websites like Consumer Reports, True Car, and Edmunds to find out the different models, packages and accessories, as well as the target price for each. You can also compare and contrast the results from the different sites.
Once you find the target price, you can shop it around to different dealers without leaving the comfort of your couch. Just like with the different details about your car, your pricing should be just as detailed. In your email exchanges with the delearship, you should have them list the base price, sales tax, and any related fees (document, plate transfer, DMV fee, etc.) associated with your specific purchase. You can then share the quotes that you get between dealerships to see who is willing to go the lowest.
Ben and I went to the dealer knowing exactly what we would pay, in writing, from one of the dealer’s sales manager. We would have walked out and gone to another dealership, if things had changed significantly when we got there.
Your research should also entail going to dealerships to test drive the vehicle. The test drive should not be the same day that you go to buy the car. Take a day to see different vehicles in person, feel them out, and make sure that you’ve found the one that you want. You should make it clear to the salesperson from the get-go that you’re not interested in buying that day, but you will be soon.
The Value of Your Trade In
Not only will the research sites help you price the exact vehicle that you want, they can help you find the value of your current car. Admittedly, these values might span a wide range. The online sites valued our Corolla anywhere from $1,987 to $4,300. We also got an in person quote from CarMax who will buy your car, even if you’re not buying one of theirs. Again, information and options. Even with the wide range, we knew going in that anything under $2000 was out of the question. If the dealership came in low, we would sell it elsewhere.
Lastly, you need to find the best financing that you can. This starts with knowing your FICO score and getting a sense of what type of financing you qualify for. You can go online to a broker sites like Eloan to get different quotes. We also went to our bank and the Teacher’s Credit Union. Don’t worry about dinging your credit while you’re rate shopping; if you get an auto loan within 30 days of the inquiries, the credit checks won’t affect your FICO score in that time period.
If you know what will pay for the car (step 1), you can have a check ready when you go to make the sale. Ben and I still rate shopped knowing that the dealer was offering 0% financing and that we would we qualify for it. I wanted to the ability tell the finance person at the dealership that we would just pay with a bank check.
Additionally, when you’re in the financing office, skip all of the upgrades like the extended warranty or gap insurance. You can get most of the add-ons outside of the dealership, for much cheaper if you really want them.
One last piece of advice: a lot of time the car salesperson will try to conflate the different parts of the transaction in order to get more money out of you. For example, she may give you $500 more than you expected on your trade in, but take you for more $1000 more than you thought on the vehicle. Don’t let this happen. Go into the deal knowing the bottom line figures you have for each aspect. Coming prepared will help you walk away with the car you love at a great price.