Next to buying a house, buying a vehicle is one of the most expensive purchases we make. However, it is also one of the most confusing and bewildering.
It is one of the few times you are going to be pitted against professionals who are specially trained to separate you from as much of your money as they possibly can.
The good news is that if you go into this process prepared with the correct strategy, you have a good chance of coming out of with a good deal. For example - when my son Matt went in to get his last car - a Ford Escape, I went with him and we ended up saving him $3,000. How do I know that? We found an invoice in the glove box from the previous owner. A girl had bought the car 2 months earlier and had to return it because she couldn't make the payments. Her price tag - exactly $3,000 more than we paid.
Here is one big tip that will save you some money - go in at the END of the month. That is when the the window is closing for the big sales prizes and your salesman will be at maximum motivation to make a sale.
Step 1 - Do your research first. This is at least 50% of the job and with all the resources available on the Internet, there is no excuse for not being fully prepared.
First you need to look at your situation and determine what model of car your family needs. Think about what is most important to you. Is it price, seating, style, safety? Usually a combination of all these things.
Some sites you can use to do your research are - Bluebook.com, autotrader.com, consumer reports. Try to focus on "meaty" options like airbags, durability, and reliability rather than "soft" options like color, type of seats (although I do LOVE a seat heater), and fancy trims. I will drive the ugliest color in the world if it's a good deal and a reliable car.
Ideally, before you ever set foot on a dealer lot, you should have the following information in your back pocket:
- The model and features you want (roughly)
- The range of prices for the vehicle - look at both dealers and private parties. You may even do some test drives through the Auto Trader just to see what models may suit you.
- Roughly how many of this model are available in your area - if you want something very specific or unusual, that is going to limit your bargaining power, but if it is a very popular car that every dealer in town carries, you are in the "sweet spot" for bargaining.
Step 2 - Now it is time to figure out how much you can accord to spend. Obviously cash is your BEST option, but few people can pay cash for a car - although I have done it four different times - due to inheritances and other windfalls. Your second-best option is usually a credit union or a bank. Check the papers or the websites to compare rates. Using the dealer's financing is almost always a bad deal - avoid if at all possible unless it is a phenomenal deal.
If you go into a credit union before a purchase, they will be happy to review your credit and circumstances and pre-approve you for whatever amount of credit you can qualify for. Keep in mind that this is a MAXIMUM number, not necessarily a number you can easily afford. Use your common sense, pick a high number and DO NOT budge from it - well, you can go DOWN, but don't go UP from there, even if you think it is the deal of the century on the most wonderful car in the world.
Step 3 - Playing the Game. Realize from the moment you step on a car lot, you are playing a game, even if you don't think you are. It's sort of like a very polite tug-of-war with the dealer trying to get information out of you and trying to drive the transaction in his (her) favor and you trying to turn the tide in your favor. Be pleasant, but resist the temptation to be chatty - you are a CLAM. You are not there to be his buddy, you are there to complete a business transaction. Keep the emotion out of it.
Above all, do not reveal any financial information to them whatsoever. If he asks how much you are looking to spend - say you aren't sure, if he asks to run a credit report - politely decline and mutter something about the dealership next door, if he tries to get you to go talk to the finance guy - again politely decline and mention you will discuss financial arrangements later on.
One cardinal rule of negotiations - the first person who mentions a number usually loses.
Once you have settled on the vehicle you want (and have checked it over thoroughly for any problems - given it a test-drive, etc.) Now the game starts in earnest. He is going to bring you a series of offers that are supposedly approved by his sales manager (actually, they are discussing football scores). You are going to choose a number that is significantly lower than his offer and stick to it like glue. This number is based on your research and it is going to be slightly lower than anyone else is offering this vehicle for.
At appropriate intervals, you can employ your own game strategies - tell him you wish to have you own pow-wow with your husband. One of you needs to look very dubious and shake your head a lot. Go out and take another look at the vehicle, giving the impression that you might change your mind, or mention that you have kids to pick up from school soon. If negotiations seem really stuck - mention that you have been talking to another guy from a rival dealership and you may get a better deal. Remember that every dealership in town carries similar cars and has similar deals.
After about the 3rd round of offers, up your offer slightly to give him a little encouragement. If it seems like he is starting to get within range of a final number (something that seems somewhat fair and affordable based on your research) consider offering him 10% less than that figure. If you are truly stuck and he won't come down at all - go ahead and go home. I guarantee you will get a call from him later that night offering you something that is probably the best deal you are going to get. Sign the deal and enjoy your new car.
Final note - regarding add-on items, be cautious. Undercoatings and stuff like that - you probably don't need and they have a huge mark-up. Warranties are usually a pretty good deal, but you have a week or so to do a little research before you sign on the dotted line for them. I get my electronics warranties from Square Trade and they are about a 40% discount over the retailers. They may offer car warranties or there may be other sites that offer reduced pricing, but be sure they are convenient to use and seem like a legit company.
Photo credit: Image courtesy of Grant Cochrane / FreeDigitalPhotos.net