So, you’ve done the research of reading all the specifications and reviews out there to find the exact make and model of your next car, but are dreading the next part — haggling with a dealer.
Buying a car at a dealership can truly be a harrowing experience; here are some tips to make sure you get the best deal possible with minimal heartache, after you’ve decided what sort of car you want.
Finding the car
In this day and age, it almost goes without saying that you should start your hunt for the right car on the internet. Dealerships usually advertise very good prices online because they know that they have to appear cheaper than their competitors’ to get you in the door. Use the advertised price to give you an idea of what you’ll be spending.
You might even start negotiating with multiple dealerships online. This way, you have something in writing when you walk in.
But don’t just stop there, since you’re already on the internet, surf over to Yelp.com to read reviews on the dealership itself. Do they have a reputation for being shady?
And avoid add-ons, if at all possible! Dealerships may tack on accessories to add a layer of confusion and justify charging you more than the advertised price. “Oh, you researched that this car has an MSRP of $30,000?” They might ask. “Sorry, but our dealership policy is to add anti-rust under-coating since we’re in the Northeast — and it costs $1,200.”
This step is particularly important. Even if you know that you absolutely have to have certain upgrades — a better radio or spray-in lining for a truck bed or the aforementioned coating, for example — try to find a car with as few accessories as possible. You can almost always get these for less after you drive away from the dealership — especially when you factor in the aftermarket, third-party installers, or doing it yourself.
Don’t feel rushed at all. Take a good long walk around the car, feel the fabric and the dash, and take a good listen while you’re driving.
I like to go to dealerships when the sun is shining (check the weather) because rain and the dark of night are pretty good when it comes to hiding imperfections.
A frugal tip: The sales representative may turn on the radio while you’re driving. You might just think they’re trying to impress you with the quality of the sound system. Before you start the engine, ask them, politely, to turn it off. Cars can vibrate, hum, whine, and let in road noise. That little bit of noise that you can barely hear over the radio on your test drive may be what drives you crazy down the road.
Keep every nick in the paint, whine from the alternator, and roughness in the interior, in mind for later when you’re going to negotiate price.
Negotiating the price
One big thing to keep in mind: The sales staff do this for a living, all day, every day. Regardless of whether you think they’re good or bad, honest or dishonest — remember that not only do they know more about the car you’re looking at, they’ve seen people in your exact situation a hundred times and know exactly what to say to get you going.
That said, there are some things that can help you be better prepared.
Have your own financing ready, but give the dealership a chance to beat it- Either be ready to pay with cash or get a pre-approval letter from your preferred bank or credit union beforehand. Then, if the dealership wants to discuss financing, you can try to get them to beat the terms you already have available.
Have other options for purchasing available- If, as mentioned before, you searched for other dealerships, you might already know how much you could get the car for elsewhere if negotiations fall through. This gives you a good idea of your “walking away” price — i.e. the price over which you can just walk away and head to another seller.
Negotiate on the price; do not negotiate on payments- Here is a conversation that’s happened millions of times in the history of car dealerships:
Dealer: So how much were you looking to pay per month?
Buyer: Oh, hadn’t thought about that. I guess I could afford $300 per month.
Dealer: Up to…?
Buyer: Oh…hmmm…I guess I could squeeze $350
In that scenario, the buyer will pay $350. Remember that it’s the total price that matters because that’ll be the starting principal of your loan. From there, the terms of your financing will determine how much you pay per month. Or better yet, you’ll pay $0 per month because you saved up enough cash to buy a car you can afford. In fact, that’s an even better idea — if a sales rep asks you how much you’re looking to pay per month, tell them “$0 per month.”
Know what manufacturer offers are available- Do your research as to which nationally available rebates are available. That way, you can negotiate on a price and then get the dealer to knock the rebate off that price. Don’t let them fool you into thinking they’re giving you that nationally advertised $2,000 cash back just out of goodwill.
Keep these in mind too later when you’re searching for car insurance. One option is car insurance by Youi.
There are many more facets to car-buying, of course — for example a huge part that I left out is getting the most for your trade-in — but hopefully this is enough to get you headed in the right direction. Negotiation and behavioral finance more generally are favorite topics of mine, so feel free to reach out if you want to chat more about this.
Remember, they do this every day, but also remember that at the end of the day, you have a common goal — you want to buy a car and they want to sell you a car. With a little preparation before the negotiation, you can still walk out with the best deal possible.