5 Golden Rules to Buying a New Car
Whether you’re a first-time car buyer or your current ride has racked up too many miles, you may be thinking it’s time to purchase a new vehicle. But the car buying process can be intimidating no matter how many times you’ve been through it, and it can be easy to overlook some aspects you should be considering. Here are five rules to help you save money before driving off the lot.
1. Begin negotiations with the invoice price.
The cost of the car you’re considering is called the manufacturer’s suggested retail price (MSRP) – also known as the sticker price; however, the price you want to know is the invoice price, which is what the dealer pays the manufacturer for the car. Begin negotiations with the invoice price in hand, which you can find online, and try to get as close to that number as possible before any discounts or rebates are applied.
2. Have a working knowledge of discounts and rebates.
Students, first-time car buyers, active/retired military and credit union members are just a few groups that may qualify for certain rebates or discounts. The most common are cash rebates from the car manufacturer, which is money that you get back after the purchase. While salesmen may share some discounts with you, they are not obligated to tell you everything that you may qualify for. Third-party sources, such as Edmunds.com and Kelley Blue Book, are good places to start researching purchase incentives.
3. Be prepared to negotiate three times.
You may go into a car purchase with the idea that you’ll only have to negotiate the sales price. However, to get the best possible deal, you’ll want to negotiate three times throughout the process.
- Negotiate the sales price first.
- Then, come to agreeable terms on the value of your trade-in; it is a good idea to get price quotes for a trade-in from multiple dealers. If none of these offers are desirable, you can choose to sell your vehicle on your own. However, you should be prepared to negotiate with a potential buyer when selling on your own.
- Finally, talk financing, which includes the monthly payment, terms of the loan and interest rate. Remember, if you still owe money on your trade-in, the amount that you owe will likely be included in the new car’s financing. To keep things clear, write down what is said and compare those numbers to the sales contract.
4. Ask around for great car dealers.
Consumers candidly share their car dealership experiences through online reviews on websites, like Yelp, DealerRater, and Cars.com. Topics such as how reasonable the car pricing is and test drive experiences are common in customer reviews. You can also consult your circle of friends and find out who was happy with their last car purchase.
5. Shop for the best financing.
While you can finance your new car through the dealership, that’s just one option among many. Talk with your credit union about their car loans, which can have an APR that’s one to two percent lower, on average, than financing from conventional banks. Ask lots of questions about any promotional dealership ads offering low interest rates. Only about 10 percent of car buyers qualify for the zero-percent and low-interest-rate offers.
Additionally, be sure to ask your lender about an extended warranty, which is long term coverage that will apply if the manufacture’s bumper-to-bumper warranty has expired. Many lenders offer this option in addition to your loan, and a typical extended warranty costs between $30 and $60 per month. Even if you’re confident you’re purchasing a reliable car, having that extra coverage will provide peace of mind before you sign on the dotted line.
By following these five golden rules, you will increase the odds of not only driving away enjoying that new car smell but also feeling confident that you negotiated the smartest deal possible.
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