Recently my wife and I decided it was time to trade-up on our 2007 GMC. We started off just like everyone else … going for test drives, haggling with the salesman, etc. But by the end, we had discovered there were a few small things we could do to greatly improve our vehicle-buying experience:
1. Call in Advance
If there’s one thing I can recommend that you do before your next car purchase, its call the dealership ahead of time. Some might be a little shy about discussing numbers over the phone, and that’s fine. But eventually one of them will. That’s exactly how we nearly closed on our latest purchase – all the haggling was done ahead of time over the phone.
Talking to one of the car sales people will not only help you get all the facts, but it will also give you a sense of whether or not this will be the type of dealership that is willing to work with you. I can’t tell you how much time we literally wasted by driving out to a lot and negotiating with various layers of management only to find out that they were stubbornly not willing to come down on the price. By coming to a mutual agreement before we even arrived on location, we were able to save both a boat-load of cash as well as time.
2. Screen-Shot the Online Price
Unfortunately, some places are a little shady when it comes to the actual price of the vehicle.
During our last vehicle search, we encountered one place that had advertised one price the first week and then another much higher one the next. When we confronted them about it, they insisted that the higher price “had always been the price”. Yeah, right … Had we screen-shot the offer on the phone ahead of time, they would have had to legally give it to us at that price.
3. Get Pre-Approved
One of the big mistakes people make when they go out looking for a new car is to rely on the dealership to help finance them. When you do this, you get stuck with whatever rate they offer you … regardless of however great your credit may be. To avoid this, get pre-approved when you’re just-about ready to get serious about making a purchase.
To lower the car price, we applied with our local credit union and got locked into a rate that was hands-down the lowest one around. To be sure, you can check a free site like BankRate to see what they are in your area. In addition to getting a great rate, this also helped minimize the number of times my credit report was pulled. It also proved to the dealership upon arrival that I was serious and prepared to lock in an offer.
4. Go In Knowing Your Asking Price and Top Dollar
As we moved through our vehicle search, I learned that I needed to have two main numbers: The asking price and the top dollar price.
The asking price is what I’d tell the dealership I wanted to pay for the vehicle out-the-door (after all taxes, fees, etc.)
The top dollar price is the price I was willing to let it fluctuate up to – since you know the dealership is going to want to counter-offer.
In our situation, I went in asking for a price of $22,000 but in the back of my mind was willing to go all the way up to $26,000 if need be. When the out-the-door price came in at $25,700, I was sold!
No matter what you do, don’t go over your top dollar price. Stick to your guns and spend the amount you want to spend.
5. Focus On the Bottom-Line Price, Not Monthly Payment
Another tricky maneuver that some auto dealerships like to use is to take your attention off of the “real” bottom-line price and instead put all the focus on getting you a low monthly payment. Don’t fall for this trick. It’s a bit like a magician who makes the audience focus on his left hand while he uses his right one to perform the trick.
A low monthly payment is nice, but not at the expense of adding more interest and years to your loan. Remember that the monthly payment amount can be influenced by any number of variables, none of which are going to help you get the best overall price. To keep things clear, keep your focus on the bottom-line price. Again, it should never exceed your top price!
6. Remember That the Price Is ALWAYS Negotiable
If there’s one thing I’ve learned from my career, it’s that the price of everything is ALWAYS negotiable!
A few of the dealerships I called tried to tell me that there was absolutely no way that they could haggle or come down on the price. (A few even had the nerve to tell me that they ONLY ever advertise their lowest prices, period! That’s a lot of nonsense. )
A few days later I would get a call-back from a manager who wanted to “see what we could do” or find online that they had lowered their price. Again, the list price is always only a starting point. Don’t be afraid to name your own asking price.
7. Get the Maximum Value for Your Trade-In
If you’re planning to make a trade-in for your next vehicle, then you’re going to want to get the most bang for your buck! It can really help keep those payments low and reasonable.
To do this, we did our research ahead of time using a site like Kelley Blue Book. When one of the dealerships we went to tried to low-ball us by telling us our vehicle was only worth $3,000, I had no problem taking out the screen-shots I took of both the Private Party and Trade-In values that showed it was really worth somewhere in-between $7,000 and $5,000. Needless to say, that dealership lost the sale.
8. Ignore a Few Fractions of a Percentage
Again, dealerships love to get you caught up in focusing on the monthly payment instead of the overall bottom-line price. One way they can do this is to claim that they can get you a lower rate.
If the rate they’re talking about is within a half-percent of the rate you were pre-approved for, then don’t sweat it. It’s not worth the fuss. For our loan, I did a little research ahead of time by Googling “auto loan calculator” and playing with the numbers. What I discovered was that every $10,000 at a 3.00% APR for 60 months equals $180 per month.
What is it at 2.75%? Only $179 per month; just 1 dollar less. Even 2.50% worked out to just $178 per month; 2 dollars less.
The bottom-line: A few fractions of a percentage in your loan rate will not make much of a difference in your overall monthly payment amount.
9. Longer Term May Help Your Cash Flow
If a lower monthly payment really is your overall goal, then it’s important to understand ahead of time the trade-off between the monthly amount and overall interest.
For example, using the same Google auto loan calculator, every $10,000 at a 3.00% APR over a period of 60 months equals $177 per month or $648 in total interest. However, changing the loan term to 72 months lowered the payment down to $150 per month ($27 less) and increased the total interest to $779 ($131 more).
10. Be Prepared to Walk Away If Need Be
If you get all the way to the end of the process and things just aren’t going your way, remember that you can always stand-up, politely say “thank you for your time”, and walk away from the table.
We did this to a few places because they were completely un-willing to negotiate on the bottom-line price and meet my top-dollar price. Unfortunately for them, there’s about a million other car dealerships within a stone’s throw, so it was no big loss for us.
Always remember that because you’re the one with the money, you hold all the power. So don’t be afraid to get yourself the best deal possible!
Author bio: DJ Whiteside is the author of “Save BETTER!” as well as several other personal finance ebooks. He is also the blogger behind the sites 1,000 Ways to Save and My Money Design; two great resources where you can pick up all of his tips and tricks for saving more and spending less.