Are you shopping around for a new car? Perhaps even your first car? Buying a car from the dealership will really test your negotiation skills and considering we’re talking about a big financial buy here, it’s important for the sake of your wallet to get it right. Car dealerships famously have a lot of tricks up their sleeves in order to get you to pay more than you need, but even if they didn’t, you’ve got a lot of things you can do to make the process easier and more affordable.
For all the tips and tricks, read our guide to buying a car.
Get Pre-approved Before You Go In
Getting pre-approved for an auto loan has a lot of benefits. Do not enter the dealer’s lot without one. It will reveal any problems with your credit, so you don’t walk into a dealership, fall in love with a car like it’s a puppy in the pound, and then realize that you can’t, in fact, take it home. In the meantime, you can work on your credit score so that you can go back and get that puppy. Build a credit history, make regular payments on time, keep your credit usage low and you’ll be able to build that credit score into something that a lender can feel secure with. If you’re in between cars, you can always get temporary car insurance to keep you going until you have your new ride.
For another thing, it will also cause you to really think about what you can afford before you go in. It will be something you want to consider so you know not to stray over to the Mercs and Jags when you only have the wallet for a Ford Polo.
Know What You Want Going In
The internet is a wondrous place, where you can window car shop without a dealer breathing down your neck. Every experience with a dealership feels the same: you came in “just for a look” and you somehow left an hour later with a set of keys. Can you afford that set of keys? Did you even want that particular set of keys? You don’t know, and the dealership doesn’t care.
It will make a lot of things easier if you go in knowing exactly what you want. Think about the make, model, age and any capabilities or practicalities that are important to you, like if you need a big trunk or space for child car seats.
This means that if you are going in for a particular model, say a Honda Civic, and the salesman is wandering you over to the more expensive Honda E’s, you’ll be able to direct him back to the Civics and let him know you’re not about to be swayed.
If You Don’t Have A Model In Mind, Keep It Simple
Of course, you don’t have to have an exact make and model in mind, but you might as well give your dealership a starting point. Are you looking for a city car, a truck, a family wagon, or a sports car? Hit your salesman with one thing at a time to keep it simple. You don’t want to give away too much, since you’re looking to negotiate.
The first thing would be the kind of car you are looking for, and then the age. People have different opinions on what makes value for money when it comes to a car and how old it is – more on that later – so give your dealer an idea of how old you want your car to be and how much of a budget you have and they should be able to pick out a few models for you to try, like a personal shopper.
But when you’re getting shown about, don’t get too excited. Don’t tell your dealer if you’re looking to trade in another car or get a loan through the dealership. Holding onto this will help you when it comes down to the deal and you’ve got a good price and they have no means of jacking up the interest rate or low-balling you on your trade-in. Once you’ve got the price nailed down, you can talk about how you’re going to pay it.
Skip The Add-Ons
Once negotiations are over, you’re likely to be presented with a range of add-ons. You’ll get to practice your shaking head for a while as they are all brought out like game show prizes.
Extended warranties, tire protection plans, paint protection plans, gap insurance, etc. None of it is really worth your time – or your money. It’s usually greatly overpriced because dealerships are relying on the fact that you don’t really know what it is or what it’s worth. It can often be marked up 300%, and you wouldn’t know. This is especially true on longer loans, where the addition to your monthly bill could be stretched small enough that it almost seems reasonable.
If it was worth your time, it’s likely it would be available elsewhere. If there’s something you’d like in particular, like paint protection on your new Ferrari, shop around for it online.
Consider A Used Car
There is a financial rule that some budgeting expert has surely pointed out to you: your car total shouldn’t take up more than 20% of your salary. This includes expenses, insurance, gas, and repairs, so it’s more likely that the payments on the car itself should only be around 10-15%.
A good way to avoid getting a car that’s out of your budget, but not downgrading, is to get a used car. The reliability of used cars is very good nowadays since over the past couple of decades cars have been built to last longer. People are buying cars with 100,000 miles on them and going on to add another 100,000 miles with few issues.
A general rule of thumb is to stick to cars that are three years old. Coming off that first three-year lease, it’s practically new, but not. At the end of your own three-year lease, you’re then likely to see faults in the car and an uptake in repairs.