10 Tips for Buying a Car That Will Sharpen Your Negotiation Skills and Get You the Best Price
Driving off the lot in a new car can be an exhilarating experience. But going through the process of buying a car is more on par with a root canal or a day spent at the DMV. Because many of us aren’t automotive experts, we expose ourselves to common tricks that get us forking over huge amounts of cash for a subpar vehicle. Negotiation serves as another uncomfortable experience, resulting in many people agreeing to a higher price than they should. Here are ten tips for buying a car that will help you enter the dealership confident and unlock your inner Herb Cohen.
Set a budget
The price range for automobiles veers wildly, even among similar models. Before you even begin your search, figure out what you can afford. Set a price ceiling that you cannot, under any circumstances, exceed. Remember that the vehicle isn’t your only expense. Factor in how much you’ll pay for taxes, dealership costs, delivery fees or any other hidden costs. You’ll also want to consider the cost of insuring the car. While that Camaro looks nice, your insurance costs dwarf what you would pay for a more practical car.
Compare dealerships using online tools
Since the birth of the internet, car shopping has become much easier. Before you commit to buying a car, research as many dealers as you can. This includes Craigslist and dealers in other cities and states. Even dealers located down the street from each other can feature widely different pricing. AutoSMART, Vantage West’s online car shopping tool, provides easy comparison shopping. After finding a match, you can also get pre-approved for a loan through Vantage West.
Bring along a knowledgeable friend
This one might seem obvious, but we often place too much confidence in our ability to withstand the Jedi mind tricks of the modern car dealer. As a failsafe, gather a friend (or two) who knows more than you about cars. You can count on them to ask questions that you might overlook and cover your blind spots. Even if you don’t any car expert friends, you should still bring along a buddy. Having a neutral party on hand ensures that you won’t fall in love with that impractical Mustang you can’t afford.
Take the test drive seriously
You should never commit to buying a car without first trying it out. Sure, the dealer’s website might claim that the car is brand new, but you won’t know until you’ve seen it for yourself. Maybe the car’s handling isn’t what you expected or your knees hug the steering wheel. Whatever the problem might be, you don’t want to find out after you’ve bought the car.
Be ready to walk away
Nothing sinks your car-buying mission quicker than falling head over heels for a car. The dealer sees that glint in your eye and he knows he’s got you. If you’re smitten, then the dealer is less likely to budge during negotiations. Put yourself in his shoes. If you’re already committed to buying a car, why would he go any lower?
That’s why you always need to be ready to walk away if the negotiations aren’t going your way. Threatening to walk away proves especially effective when having to pay extra fees. In the final sales phase, you’ll find yourself in the Finance Office. This is where you’ll hear about all kinds of charges unmentioned up until that point. Keep in mind that the dealer doesn’t want to blow that sale. If you threaten to walk over a $200 processing fee, then they’ll usually waive the charge. But be serious and be strong. It’s hard to walk away, but there are plenty of fish in the sea.
Never pay the sticker price
Each vehicle comes with a Manufacturer’s Suggested Retail Price, or MSRP. Dealerships use the MSRP to set their own prices. But pay close attention to the word suggested. This figure doesn’t signify how much the vehicle costs, but rather what the manufacturer suggests it should sell for. That means there’s lots of wiggle room to negotiate a lower price. Some recommend negotiating at least $4,000 under the MSRP. But there’s a better solution…
Dealerships buy or lease vehicles from the manufacturer. Each of these transactions comes with an invoice, stating exactly how much the dealer paid. You can access this price by using Edmunds’ True Market Value tool or other similar online tools. You’ll notice a huge difference between the listed price and what dealers pay. When it comes time to negotiate, try offering $400 or $500 above the invoice price and see what happens. Remember, you can always say no and walk away.
Get your own financing (or negotiate the dealer’s)
Many of us become exhausted by the time it comes to figure out how to finance your car. Normally, the dealer or finance officer spits out a number and you accept. But you can try and negotiate a lower rate. A common misunderstanding is that the dealership can’t negotiate a lower Annual Percentage Rate on your loan, which isn’t true. Even better, get pre-approved for a loan through a credit union, such as Vantage West since you’re likely to get better rates than any dealer.
Avoid buying extras from the dealership
Dealerships love selling you extras like paint protection, GAP insurance and extended warranties. After all, the upcharge is insane and you’ve already committed to buying a car. Rather than fall for the trap, investigate whether you need these extras. Next, find out if you can purchase them through a 3rd party. For example, you can purchase GAP insurance through Vantage West for less than a dealer would charge.
Use a quote ladder
During the final battle of negotiations, your research serves as your best weapon, especially when you use a quote ladder. First, gather all your pricing quotes. Now bring the lowest quote to the dealer who gave you the highest quoted price. Then ask them to beat it. Sometimes they will and sometimes they won’t. If they don’t, then just move onto the next dealer. If they do beat the price, take that quote to your next highest quote, then ask them to beat it. If used correctly, you drive the price down until you get it where you want it.
Buying a car can be a bit like poker in that it requires a tremendous amount of strategy and a unshakable poker face. Remember that you are spending the money so you’re in charge of what happens. Never hesitate to walk away if you feel overly pressured or if you’re getting a raw deal. By going into the process with confidence and a solid plan, you can outmaneuver even the craftiest dealer. Then all you have to do is drive off into the sunset knowing that you negotiated like a champ.