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New Car Buying Basics
When should I buy a new car? What car dealership scams can I avoid? Where should I get my new car loan? Trade-in my used car? Helpful tips for buying a new car here!
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Car Dealers are in Business to Make Money
Many people think that the car dealers are required to give them a sweet deal on a car because they walked onto the lot - they are not charities. What people don't realize is that car dealers need to eat, too. They have bills to pay just like you and me.
Therefore, car dealers need to make money or they're not going to be in business long. Period.
Knowing this, you must also realize that most car dealers are not trying to rip you off. If they were, they would quickly garner the reputation of an underhanded dealership and would go out of business.
There are, however, car dealers who will not let reputation or the potential to lose a customer base interfere with making the almighty buck. They will prey on those who are ignorant to the car buying process, and have little or no knowledge of the car they are interested in buying. So the best way to avoid being taken is to do your research, get the facts, and be prepared. This will also help you get a good deal on a car.
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The key things you'll want to research is the vehicle's invoice cost (which is what the dealer paid for the car), the Manufacturer's Suggested Retail Price (MSRP), and the values of all the extras and perks. Make sure you know the invoice price, the holdback, and that you examine the contract.
In the negotiations, you'll want to work your way up from the car invoice price. A car dealer intends to make about three or four percent above the invoice price, which is a lot less than the sticker price and even the MSRP. For example, a fully loaded 2002 Ford Explorer, one of America's top selling vehicles, has an invoice price at roughly $31,000 and an MSRP of about $34,000. If the dealer gets four percent over invoice, it brings the price to $32,240, still cheaper than MSRP. And the sticker price can be $3,000 or $4,000 over invoice.
Even if the dealer sells you a car at invoice, there is still a profit. The car dealer gets a dealer holdback from the manufacturer. A dealer holdback is a set percentage of the MSRP of a new vehicle that the dealer collects from the manufacturer. It is designed to guarantee a margin of profit for the dealer on the sale of a vehicle. This doesn't mean that you will get a car at invoice, but knowing this information will help if a dealer starts to gripe about not making any profit on a sale. The shiftier dealer will put the holdback on the invoice, but don't get duped.
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There are definitely good times to buy a new car! Sales folk often work on quotas - so remember the more they sell the better off they are! September and October are the usual times that new car models arrive, however new models are starting to be released year-round. Saturday mornings are good because a dealership is trying to create some momentum going into the weekend. Also, when the end of the month is coming up, car dealers will want to boost sales figures for monthly reports, so good deals may be found then as well.
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Be cautious of the add-ons the dealer will tell you that you need. This is where you can save some money! Add-ons are usually designed for a dealer to make a few extra bucks. For example, Scotchgarding your interior could cost you $100 to $500 at a dealership, when you can purchase a can at a grocery store for about $10. Applying an undercoating to a vehicle can be done by the dealership. They will pay some minimum-wage worker to spray about four cans of undercoating onto your undercarriage. Each can costs about $5 and the job takes less than an hour, and the dealership will be more than happy to provide this service and charge you around $200.
Car Dealers will also try to sell you an extended auto warranty. The manufacturer usually provides a warranty with the vehicle, which usually run for 36 months and 36,000 miles. Beware of the dealer trying to sell you a warranty you already have.
Antitheft devices - alarms, LoJack®, etc. - can provide you with some peace of mind. But don't be fooled if the dealer tells you that, in order to get financed, you must have some sort of antitheft device. Double-check this with your insurance provider or financial institution.
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Hopefully in dealing for the new car, you were able to get the sale price as close to invoice as possible. Therefore, the dealer will want to pay as little as possible for your trade-in vehicle. Still when it comes to trading in a vehicle, avoid bringing up the topic until the negotiating is done. This is to protect you from getting ripped off on the car trade-in. And by waiting until the new car price is set, you will get the best deal possible. The car dealer will inspect your trade-in vehicle meticulously for any necessary repair or replacement. It would help you to know what your trade-in vehicle is worth to avoid getting too low-balled - check the Blue Book Value. And make sure you have the dealer explain the reason for everything. For example, have the dealer tell you why it'll cost $250 to replace a door handle.
Also, consider selling your trade yourself.
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IMPORTANT - Know what your credit rating is before you hit the lot. Find out your qualifications and your interest rate. And it's usually best to negotiate for percentage rather than monthly payments. You want a low overall cost, not a low monthly payment. Try to get your car financing plan for 36 or 48 months. When you hit the 60-month plateau, dealers may try to throw in a few added perks that'll only cost you "a few more dollars a month." The dealer could try to convince you to get the $800 fender flares that will cost $15 a month on a 60-month plan.
Remember that financing at the dealer is not your ONLY option, you can use your credit union, personal bank, or numerous online options.
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One thing to always remember: you have the final say. It is your cash. Bear in mind that most dealers are not scandalous. They are however, trying to make a living, and they are not going to give away all of their profits to sell you a car. If you go into the car buying process with a little car research and a relaxed demeanor, there's no reason why you can't leave with a great new car at a reasonable price. However, nothing will ensure getting a bad deal more than walking onto the lot, acting rude to a car dealer and expecting that dealer to sell you a car for less than what the car dealership paid for it. Remember, the dealer wants to sell you a car and you want to buy one. Try to make it as painless as possible. And if you don't like what's going on at the dealership, you can always walk away - try another dealer.
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