I don’t remember much about my high school civics class, but I do remember the day, during the last week or so of my senior year, when my teacher spent class giving us his “life tips”.
These tips have stuck with me, even when a solid understanding of the political system has not. Here is a list of the car buying tips my teacher gave me, along with some others from my own experience.
1) Time the market
How to: August to October is normally the time when dealerships receive new inventory, and need to make room on the lot. This means you can snag a great price on a brand new car—if you are okay with last year’s model. You can also time your visit to the end of each month, in order to take advantage of sales staff pressured to meet a quota.
2) But if you want a really good deal…never buy new
How to: A brand new car depreciates quickly, but buying a few years old means the rate of depreciation has slowed. You also save money on the purchase price, and will hopefully never owe more than your car is worth.
3) BYOF: Bring your own financing
How to: Stop by your credit union and get pre-approved for the loan. This way you know how much you can spend, what your monthly payment will be, and what your interest rate will be. This gives you purchasing (and negotiating) power. Plus, your credit union is likely to offer you a much lower rate than the dealer.
4) Get educated
How to: You have to do your research ahead of time. Start by blue-booking the car at Kelly Blue Book and Edmunds, to establish a good base line. Then, shop around—check out what prices that car has actually sold for in your area.
5) Shop your trade-in
How to: You need to be educated on more than the car you are buying—do some research about the car you have to trade-in, if applicable, to ensure you are getting a fair price.
6) Sell your old car yourself
How to: This is easier if you don’t have a loan on your current car, but do-able either way. You will nearly always get more selling private party than you will on trade-in.
Behind the scenes at a dealership
This surprisingly fascinating episode of the "This American Life" podcast shows how hard car dealerships work to make deals.
7) Negotiate the vehicle price first
How to: It can be confusing to negotiate the price of the car, your trade in, incentives, and add-ons at the same time.
So a good strategy can be to take one thing at a time. Negotiate the price of the car, get it in writing, then move on to add-ons, and finally, the price they will pay for your trade in.
DO NOT negotiate the monthly payment. (You should take care of that at your credit union anyway before stepping foot on the lot—see No. 3.) Dealers will offer to extend your loan term to get you your magic payment number, but that only means you will pay more in the end.
8) Realize everything is negotiable
How to: Often add-on fees are preprinted on auto contracts (transaction fees, etc…). But don’t be fooled into thinking these are fixed. Everything can be negotiated. You can negotiate to have these fees removed or lowered, or to have them take this fee out of another part of the deal, such as less on purchase price or more for trade in.
9) Shop over the Internet
How to: You can negotiate pricing and financing via computer, and can even ask for the car to be delivered to you, and to sign the paperwork then.
Internet salespeople tend to be compensated more for number of sales, rather than commissions on sales prices, meaning they are more motivated to close deals than to work for the highest price. Internet savings could be as much as $1,000 to $2,000.
Plus, you don’t have to kill a day at the dealership. You can work the deal when and where it’s convenient for you.
10) Pit dealers against each other
How to: Think of this as reverse eBay—the dealers are competing for you. Contact several dealers over the internet, and make it clear you are shopping several dealers and will go with the best price.
You must be very specific about the car you are looking for, so they know you are getting equivalent comparisons.
BONUS 11) Don’t get suckered by the finance and insurance department
How to: This is actually where dealers make a lot of their money. Many times, you feel victorious once you have agreed on the purchase price, but then you get to the finance office and get wooed by warranties and service contracts. Know what you need ahead of time, and stick to the plan.