Getting a good deal on a new car is like winning the lottery. You feel like you somehow escaped the fate of the less fortunate and it can make you smile from ear to ear. Perhaps it’s because you’re a savvy shopper, maybe it’s because you’re a stellar negotiator, or maybe it was just dumb luck that you landed the deal of the day. Either way your wallet, while still a bit lighter, is much healthier than if you had paid full price. What matters is you still have the spending money in your pocket and you got what you wanted. But how do you go about getting a good deal when it comes to one of the most expensive purchases you’ll make in your lifetime—a new (or used) car? How do you know that you’ve found a good deal? When is it “too good to be true?”
Edmunds.com suggests that you determine whether you’re getting a good deal by starting with the purchase price of the vehicle. This applies for both new and used cars. If you compare the price you are being quoted with the price you find at Edmunds True Market Value Calculator or at TrueCar's calculator, you can have a pretty good idea of where your deal falls. These are the average prices that people in your area have paid for similar cars. That means that some people paid more while others paid less.
Autotrader suggests that you should negotiate the price of any car, whether it’s new or used, based on the purchase price. Never, ever, negotiate based on monthly payment size. It can be really difficult to figure out the purchase price based just on the payment since there can be a number of factors that can affect that number. You may be agreeing to put down a large percentage of the purchase price up front to reduce the monthly payment, or you could be looking at an interest rate that isn’t reasonable for your credit. Either way, negotiating the payment isn’t the right way to get a good deal. Stick to the purchase price.
The other way to ensure that you are getting a good deal is to ask the salesperson or seller to name their price first. As a buyer you should never suggest a price first. It gets the salesperson to show their cards and gives you a leg up in the negotiations. It’s also a good idea to sidestep the “what are you looking to spend?” question. Let the salesperson come to you with a price offer and you will have a better idea of where there may be some wiggle room. Once they have named a price, suggest a lower price and continue to negotiate until you can come to some middle ground.
Always counter-offer, even if it’s just $1,000 less. When negotiating on a specific car it makes sense to check out other dealers and see what kind of price they’ll give you for the same car. You can play two dealers against each other to ensure you get the best deal. Just don’t be afraid to walk away from the deal all together if you don’t get the price you want. As long as you have realistic expectations you should be able to land a great deal. Just like in love, there are other cars out there and always other fish in the sea.
As Edmunds points out, it is possible to push too hard on the purchase price. They assert that some dealers may try and find profit in other parts of the deal and do things like set a lower trade-in price or include unneeded extended warranties etc. In the case of private sellers, they may just get tired of dealing with you and decide not to sell you the car. Remember, both parties have the right to walk away at any time.
Once you’ve looked at the purchase price, check out the incentives and rebates that may be available for new cars. Things like customer cash rebates, special financing, dealer cash (a hidden incentive that’s often offered to dealers from manufacturers to move specific models off the floor), and lease specials. You should also check with your employer to see if they have any special deals with a specific manufacturer or dealership. Some large Fortune 500 companies offer their employee discounts when they buy specific models. Check with your HR department to see if your company has any deals for you. The rule of thumb is to negotiate the base price of the car first and then apply incentives and rebates. If you’re negotiating with a private seller, things are a bit simpler, since they wont have incentives or financing for you. The price you negotiate and agree to is the price you will pay. Take that number to your bank and get financing if you decide the deal is good. Want to learn more about your options for financing? Read this. You should also know that you could save a bundle by choosing to finance your new car outside of the dealership. Going to a credit union or big bank can save you thousands in payments over the term of the loan. You can also read this to learn more about the differences between getting financing from a big bank or a credit union.
Next start taking a look at the fine print in your contract. You’ll notice there will be fees associated with the purchase transaction. As Edmunds says, “In a good deal, the dealer only charges three fees; state and local taxes, a reasonable documentation fee and motor vehicle registration fees.” Documentation or “doc fees” vary from state-to-state. Some states regulate these fees while others don’t. States like Florida and Arizona are known to have really high doc fees, some that head up into the mid-hundreds. Some dealers will try and add their own fees like Dealer Prep or Market Adjustment. Be sure to get a handle on these fees up front so that you can take your business elsewhere if they are exorbitant. If you want a good primer check out Edmunds’ piece on what fees you should pay, here.
When buying a used car the doc fees, state and local taxes and motor vehicle registration fees are all determined by the DMV. You’ll need to handle that portion of the transaction at your local Department of Motor Vehicles. Those fees are set by the state so you really wont have to worry about any kind of excess charges there.
Finally, there are other factors to consider when buying a new car. What’s the service department like? Do you like dealing with the salesperson? Are they courteous and knowledgeable? Do you feel like the salesperson will honor the deal you make? If the answer is yes it will make your deal that much sweeter. If not, consider taking your business elsewhere. It’s not worth spending that much time and energy dealing with someone you dislike.
Ensuring you get a great deal on one of the biggest purchases you will make can be a harrowing experience but if you follow the tips above you’ll be sure to walk away with a great new or used car, and some leftover change in your pocket. For all of your car needs, check back on our blog here on Instamotor.
Not your typical used car salesman. Our team is here to provide honest and transparent advice about car buying and selling.