I’m planning to purchase my first car and I don’t want to get taken advantage of. What do I need to know?
Buying your first car is an exciting, and sometimes exhausting, process. You definitely want to make sure you do your homework so that you’ll be as prepared as possible. Car dealerships love to feast on the inexperience buyer, so knowledge is definitely power when it comes to car purchases. If you have your finances in order and do your proper homework, you can be a savvy consumer and the dealership will just be happy they get to sell you the car. It takes some legwork and a lot of patience, but in the end it is worth it. Here are some pieces of advice:
- Know your price range
- Get preapproved for a car loan
- Research the cars you are interested in…a lot
- Prepare to negotiate
- Negotiate for the full price of the car, not the monthly payments
- Don’t be afraid to walk out
- Remember that you are the consumer
Know your price range
The first step to buying a car is understanding what you can really afford so that you don’t waste your time shopping for cars out of your price range. There are a lot of auto loan calculators out there to help you get a better idea, but one tool that I like in particular is the Bankrate “How much car can you afford?” tool. It takes your desired terms and income and generates an easy to use guide as to how much car you can afford. It’s easy to want to buy more car than you really should, so make sure to be disciplined in your car search and not make a bad financial decision that you’ll have to live with for the next 5 or 6 years.
A key component to getting a good loan offer is to have good credit. If you don’t have good credit right now it might be a better decision to wait to buy that new car until you can raise your credit score. If you cannot wait, then just try to get the best loan terms that you can.
Get preapproved for a car loan
It is a good idea to get pre-approved for a car loan before going to the dealership. The reason for this is two-fold. One, it solidifies your price range and makes it easier to not buy a car that is too expensive. Two, it gives you better leverage with the dealership since you are already approved for a certain amount. This doesn’t mean that you have to go with the loan you are pre-approved for, and in reality being pre-approved usually means the dealership will try to beat your current loan offer with a better one since they want you to use their financing. It’s a win-win situation for you.
Research the cars you are interested in…a lot
Use websites like Edmunds to thoroughly research the cars you are interested in. You want to know as much as you can about the cars you might buy, including the available options, specifications, features, and of course price. Edmunds has a great “True Market Value” pricing report that shows you the MSRP price, invoice price, and then a price of what others in your region have been paying for the vehicle. Having that information is crucial when it comes time to negotiate the price of your car, by giving you a ballpark of how much wiggle room you will have.
Prepare to negotiate
Negotiating with a car salesman is usually the most intimidating part of buying a new car. A lot of consumers don’t even attempt to negotiate, and that is a real shame. The amount of money you can save is substantial, and since a car is only one part of your monthly financial necessities, every dollar you can save is a plus. The most important thing to make your negotiation go as smooth as possible is to be completely prepared with all the information you could possibly have about your car. Also, make sure that you have a solid plan in mind and you stick to your own plan. Regardless of what the salesman says or tries to distract you with, keep your focus on what you want.
There are some dealerships that offer a “no-haggle” price and do not negotiate. While I can’t speak for all of those places, I have had good experiences with them before. If the price is fair, then you might be able to take advantage of a car-buying process with no need to negotiate.
Negotiate for the full price of the car, not the monthly payments
A common tactic that car salesmen use is negotiating the monthly payment of your car instead of the full car price. The problem with that approach for the consumer is that there are a lot of ways a dealership can lower your monthly payment that are not really beneficial for you. For instance, a common practice is to extend the loan terms to greater than 60 months. While this makes your monthly payments lower, you will be paying longer, and end up paying more for the car overall.
Also, do not negotiate your trade-in at the same time as you negotiate the price of the car. Negotiate the price of the car first, then discuss the trade in. That way the dealership won’t be able to “hide” any additional cost of the new car in the amount they give you for your trade in. Treat them as two separate transactions and aim to get a fair price on both.
Don’t be afraid to walk out
Dealerships thrive on consumers that fall in love with a certain car. Don’t do it. Your greatest advantage in negotiating for a new car is that you don’t have to buy the car. Your car salesman will do all kinds of things to get you to commit to “buying a car today”. Tell them that you will commit if they meet the price and features that you are looking for. You have to be reasonable in your demands and you may have to compromise a few things (depending on how aggressive your plan is), but don’t just take no for an answer. Your car salesman will try all kinds of tactics to try and reel you in, but don’t be fooled by lines like “we can’t go any lower than this sale price”, “this particular sale ends today, so you need to commit today”, or “if we sell you the car at that price, we’d be losing money.” Remember, you don’t have to buy that car today from that dealership and this is a purchase that you have to live with for the next 5 years or so. Make sure you feel good about it.
Remember that you are the consumer
Nowadays the power is in the hand of the consumer. Use any resources you have available to you to get what you are looking for. If there are multiple dealerships in your area that specialize in the type of car you are looking for, make sure to use them against each other to get the best possible deal. Usually the competition is fiercest between dealerships that are direct competitors, and you should be able to use that to your advantage. Lastly, don’t worry about hurting the salesman’s feelings, even if he claims you are. They deal with people every day and have been through negotiations much tougher than yours, so don’t buy it. Know the dealerships will use any tricks they can to get you to give in. Just be as cool as possible, and stand your ground.
At the end of the day, make a smart decision that you can live with. You won’t always get what you want, and may not even end up with the car you originally were looking to buy. But, if you do your homework and stand tough with your plan you’ll be able to get a car that you really love at a price that you can live with. Good luck!
