Question of the Week
A Reference Guide for Car Buyers
Happy Friday, all!
Last week, we talked about the opportunities this market environment offers to home buyers. But what about cars? This week, clients have asked about and even finalized purchases of new vehicles. It’s a good time to consider it. Slow sales and a back-up in inventory have made this a buyer’s market for cars.
Here’s a quick reference guide to give you all the information you need to buy a vehicle in one place.
Before you head to the showroom—or start clicking on one of those handy new car buying apps—make sure you understand a couple of fundamental things about 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 the internet, buyers were often at a disadvantage. Dealers knew far more about vehicle pricing and financing than most consumers. The playing field has evened now that we 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, dealerships want to sell you a car. They want it so badly 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. The more options you identify for buying the vehicle and paying for it, the more flexibility you’ll have 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:
- negotiating the price of the car,
- determining the value of your trade in, and
- financing the transaction.
The Price of the Car
Finding the right car will likely be the most research-intensive part of your purchase. You have to zero in on the car that fits you best. And you should get as detailed as possible, right down to the type of floor mats that you prefer. You can use websites like Consumer Reports, True Car and Edmunds to research 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. Don’t forget to check out new, no-hassle dealers like CarMax and Costco. You may pay a little more for the price of the call, but you may have less hassle and worry since you take everything as is.
Once you find your 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 dealership, 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.
You should also visit dealerships to test drive the vehicle. Just don’t do it on 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. So again, get information and options and take the best deal possible.
Lastly, you need to find the best financing that you can. Right now, many dealers are offering 0% financing, which I highly recommend taking advantage of, even if you have the cash to pay for the car in full.
Getting good rates 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. 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 the vehicle would cost. 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.
Quote of the Week
“When you know better, you do better” – Maya Angelou
Task of the Week
If you’re in the market for a new car, and need additional information, check out these additional posts: