Buying a new or pre-owned car, truck or SUV should be fun and exciting, yet few people have this experience. After hours of back-and-forth negotiation with the sales person, you are exhausted. You finally agree to the deal because you are tired of hearing the sales person say, “I have to ask my manager,” before he picks up the papers and heads to the sales office to talk to his manager. Notice how I said “he picks up the papers and heads to the sales office?” This is a common tactic used by dealers preventing the consumer from analyzing the numbers. Dealers don’t want you to think logically and analyze the numbers, they want you to respond emotionally, because if you “love the car and can’t live without it,” you will pay more!
The key to getting through the car-buying process is to prepare yourself before getting to the dealer. This will prevent you from being “sold,” by the dealer (which happens to most people whether they know it or not). Most people are “sold” because they don’t know or understand the “market” for the particular car they are buying. In addition, most people only spend a few days researching before making a decision. With today’s busy schedules, careers, kids, homework, family, outside commitments, etc., it makes sense that few people have time to prepare for their car-buying purchase. Throw a lease into the mix and most people are clueless and have no idea what they are doing because they don’t understand how a lease works (this is a whole other topic we will discuss another time).
Consumer buying patterns show most people only visit 1.6 dealerships before making their car-buying decision. Think about this . . . ONLY 1.6 dealerships! Buying a car is the second largest purchase you’ll ever make next to buying a house. Doesn’t it seem necessary to spend more time shopping multiple dealerships for the best deal? The statistic shows the average consumer visits the first dealer and will most likely buy even if they are unhappy with the deal, final price, sales person, or any number of other reasons. This is because most people spend four hours or more at the dealership haggling and going through the process and they don’t want to do it again.
For the person who is a glutton for punishment and don’t buy at the first dealer, they most certainly will buy from the second dealer. They couldn’t imagine going through the process a third time. In the end, the dealer wins and you lose. Don’t let this happen to you. Consider the following steps the next time you buy a car:
#1: Read reviews from experts. There are a number of trusted publications reviewing vehicles for consumers. Research vehicles with options that are important to you. Only pay for extra options that are important to you. Paying $2000 for a navigation package that you won’t use is a waste of money. This cost can add $40 or more per month. Skip the navigation package and save your money. Some manufacturers “package” options together requiring you to buy certain options in order to get others. Be careful in this situation. Make sure you will actually use the main option you are buying.
#2: Research your trade in. Arm yourself with information. Kelly Blue Book (kbb.com) is a good source to utilize. This will give you an idea of your vehicle’s value. Check out various other website to see what a vehicle similar to yours is selling for. It may be a good idea to have a few dealerships including CarMax appraise your vehicle. CarMax is a good source because they will appraise your vehicle without requiring you to buy one of their vehicles.
Trade ins can be tricky because there are many factors involved. In summary, despite what Kelly Blue Book or any other online publication says your car is worth, the “market” is the true deciding factor. Example: if you want $10,000 for your trade in and you found online publications to state your car is worth this, yet the dealer can buy your same car at an auction for $6000, it is very unlikely the dealer will pay you $10,000. An automotive expert such as Open Road Auto Concierge will guide you through this process to negotiate your vehicle’s true “market” value.
#3: Know your budget. Negotiate the top price. Don’t get sucked into the dealer’s game of negotiating the payment! There are too many ways dealers can maximize their profit by manipulating the numbers to get to a certain payment. If you focus your negotiation on the payment, you will lose!
#4: Research finance options. Once you’ve narrowed your vehicle selection it is important to research loan or lease options. Knowing what is available and what you can qualify for is key to your negotiation with the dealer. Without doing your homework prior to going to the dealership, you won’t be able to compare loan terms. Your local credit union is a good place to start researching loan terms.
#5: Know how much it really costs to own your chosen vehicle. It is important to factor more than the payment. Consider insurance costs, fuel type, maintenance costs, along with service intervals too. A vehicle requiring premium fuel or requiring frequent service intervals can quickly eat up the lower payment savings. Consider all factors before making your final decision. Dealers get paid from their captive lending institutions, so if they can match your credit union’s rates, they will.
#6: Be prepared to negotiate. Unless you have money to burn, prepare to invest as much time as needed to negotiate your best deal. Don’t be afraid to stand up for yourself and certainly don’t be afraid to walk away if you’re not getting a good deal. This is a business transaction, so don’t make the negotiation personal, and certainly don’t make an emotional decision. If the dealer won’t give you a good deal you may need to leave because another just might. Negotiate every aspect of your deal separately (purchase price, interest rate, trade in, etc.).
#7: Take a thorough test drive. A quick drive around the block doesn’t provide enough information to get to know the car. Test driving the vehicle under the conditions you will actually drive it is important. If you will mostly drive around town, do that on the test drive. Get behind the wheel and really feel the car. Get to know how it feels to park the car at the grocery store. How does it brake? Accelerate? Can you parallel park the car? Listen for road noise on the freeway or wherever you will mostly drive the car. This is a big purchase, so take your time on the test drive. Don’t be afraid to ask the dealer to borrow the car overnight. Get as much time behind the wheel as possible before buying.
#8: Thoroughly read the contract. Before you agree to or sign anything, read it. This is binding and you are required to follow the terms. Understand it and ask questions if you don’t. Make sure to review the price, fees, taxes, etc. along with all other terms to make sure they match the deal you agreed to. Be prepared to be offered additional add-on products (extended warranty, GAP, Lease Wear and Tear, Road Hazard coverage, Paint & Fabric Protection, etc.). These items can be expensive, so make sure to negotiate if you find value in any of the products.
#9: Enjoy your new car. Buying a car is commonly very stressful. You can minimize the stress by being prepared. Don’t be intimidated. Do your homework, stand tall, and be confident. If going through the car-buying process is not for you, check out our car-buying services at www.OpenRoadAC.com.