Getting A Good Deal

While the average transaction price of new and used cars soars, you don't need to overpay for your purchase.

Use these tips to avoid common sales tactics and get a good deal on a new car.

Narrowing the Selection

When buying a new or used car, there are many options to choose from. To narrow the selection and get the best deal possible, there are a few things you'll need to figure out before you begin researching specific models.

Here's what you'll need to consider:

  • Can you pay cash?
    • Paying with cash keeps you from paying interest, which can bump up your negotiated sale price by a few thousand dollars once you're finished paying off the vehicle.
    • Cash offers almost always result in a lower purchase price.
  • How much can you get pre-approved for?
    • If you can't afford cash, getting pre-approved for a loan will help you determine how much your monthly payments will be and which models you can afford.
    • Knowing the interest rate from your lender before you head to the dealership will allow you to compare it to what the dealer is offering.
  • Are you going over budget?
    • Most financial advisors recommend you not exceed monthly payments that are a certain percentage over your take-home pay.
    • Just because you want a new car doesn't mean you can afford one—a certified pre-owned vehicle or other used car may be your best option financially.
  • How long can you wait?
    • If you're buying a new car, waiting until certain times of the year can get you a better deal.
    • Dealers will usually lower their prices:
      • At the end of the month, when salesmen are looking to move inventory to meet quotas.
      • At the end of the year, when year-end quotas and new inventory means discounted prices on last year's models.
      • During the winter, which generally means lower demand.

Do Your Research

Once you know what you can afford, do your research to find out which dealerships offer the best prices.

Below are a few tips to help you get the most bang for your buck:

  • Be flexible.
    • Leaving your options open instead of settling on one particular make and model will help you find the cars with the best overall value.
    • Make a list of cars you're interested in within your budgeted range, then look for the best deal.
  • Look at sales figures.
    • If certain models aren't moving quickly from showroom floors, dealers will usually offer huge discounts to buyers in order to move inventory.
  • Find the manufacturer's suggested retail price (MSRP) and the actual dealer cost.
    • You won't likely be able to negotiate a deal under the dealer cost, since that would require the dealership take a loss.
      • The price you should consider negotiating to should fall somewhere in the middle of the MSRP and dealer cost.
      • The dealer cost may not necessarily be the invoice price you are shown.
  • Search online for the best incentives and rebates.
    • Dealerships may offer incentives and rebates that will lower the overall cost of the vehicle.
    • In addition, check with the manufacturer for other rebates the dealership may not offer.

Negotiate the Deal

No matter what you're told by the salesman, everything is up for negotiation when buying a new car.

Use these tips to get the upper hand and negotiate the best deal possible:

  • Begin your bargaining over the Internet.
    • You'll still need to go to the dealership in person to test drive the vehicles you're considering, but negotiating online may get you the best deal because:
      • Internet salesmen are often salaried, and only receive bonuses for volume of sales.
      • You avoid the financing and insurance office, which is where add-ons are usually pushed.
      • You can negotiate without feeling the pressure of sitting in front of a sales desk for hours.
      • It's easier to say no if you aren't getting the price you want.
  • Make dealers fight for your business.
    • Starting a bidding war between dealers will usually yield you the lowest price possible.
    • Let the salesman know you're talking to other dealers, and whoever gives you the best deal will get your business.
    • Contact a handful of dealers via Internet for their lowest prices if you plan to head in to a dealership to negotiate.
  • Haggle the purchase price first, then your trade-in.
    • Salesman will often lump the trade-in and purchase price of the new vehicle together, when in reality these are separate transactions.
    • Focus on one negotiation at a time, and don't be afraid to walk away if you don't get what you want for either transaction.
  • Say no to extras.
    • Additional warranties, extra features you may not want, and advertising costs are just a few of the extras dealerships will try to include in your purchase to bump up the sale price.
    • Stand your ground and say no to any extras you don't want or need.
      • Better yet, see if you can negotiate extra features to be added on to the vehicle at no additional cost.
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