Each year, approximately 7.5 million vehicles are sold in the United States with an average price of about $30,000. Driving off the lot with a new car may be a great experience, but it also can be a daunting task. Nobody wants to pay more than they should. Here are some tips to help you get the car you want without the stress!
1) Determine your budget and how much you want to spend. This should include how much is available for a down payment, how much must be financed, fuel economy and the cost of insurance. You can go online to see auto loan calculators to figure out monthly payments.
2) Do your homework. Determine what type of car you want to buy, including size, purpose of the vehicle, safety features and personal preferences. After you have selected a car, research the difference between the invoice price (the price the dealer paid) and the Manufacturer Suggested Retail Price (MSRP is the sticker price). You can go to Edmunds.com, kbb.com or Consumer Reports Car Price Reports to get these numbers. This knowledge can make a difference when negotiating a price since it puts you in control of the buying process.
3) Negotiate the price. After you know what the dealer paid for the car, research the incentives they receive for selling the car since that will give you more room to bargain for a lower price. The dealer will want to start negotiating based on the MSRP you should use the invoice price as your starting point. According to Consumer Reports, a reasonable target price is 1 to 5 percent over the dealer cost. Don’t pay for extras you don’t need, since the dealer will try to sell you warranty programs, financing options, and extra services and products.
4) Prearrange your financing. Before you go to the dealer, get a prequalification loan from your bank. Make sure to shop around for the best interest rates. With an approval, you’ll be able to shop around like a cash buyer and keep financing out of the negotiations.
5) Get a fair trade-in value. Do the same research you did for the new car to make sure you get a fair price for your old car. More often than not, selling your old car to a private buyer may get you more money, so keep it out of the negotiations.
6) Don’t let emotions get in the way. Be prepared to walk away if you don’t get what you want. Bottom line is that they want to make the sale and they need you more than you need them. Take your time and resist any attempts to make any pressured decisions. Inspect and test drive the vehicle. Stay focused on what you want. After you have come to a fair price, close the deal and enjoy your car!
It may also make sense to purchase a used car. New cars lose approximately 40 percent of their value within three years, so buying a used car can get you the most car for the least amount of money. Make sure you check the condition of the car to avoid expensive repairs later. A good option is to buy certified preowned vehicles that have the manufacturer’s warranty with the used-car price.