After driving the same family car for the last 7 years, my wife and I decided it was time to get a new car that provided better fuel efficiency and some of the nice to have modern features. Not having bought a car for quite some time meant that I had to extensively research the market for the car we wanted, figure out price ranges and to sharpen my negotiation skills for getting the best deal I could. After a few months of passive and active searching, test drives and negotiating my wife and I finally found the car we wanted and got a great deal based on equivalent comparisons (saved over 20%!). Here are some of my real life tips that can hopefully be beneficial to you when looking for your next car. Some may be unconventional, but they all work!
1. Buy from a big (giant) dealership. They have the inventory and they make their money with volume. Small dealerships depend on higher profit per car – which doesn’t help you. This is especially the case with new cars.
2. Buy from inventory. If it is sitting on their lot, they want to sell it. After all, they are paying fees (interest) to the manufacturer until the car gets sold.
3. Buy at the end of the month. The dealerships turn in their “numbers” at the end of the month. All their bonuses, kickbacks, etc., are based on their monthly sales numbers. Therefore, dealerships are willing to sell a few extra cars – at big discounts – at the end of the month, because of the potential volume bonuses.
4. Buy on a rainy day. Since you are the only person in the dealership (nobody likes to go shopping when it is pouring rain), they will be eager to do a deal.
5. Don’t trade-in your car. It makes negotiating that much more difficult. Sell your used car to a private party or sell it to Carmax. You will get – more or less – the same amount for it. Dealerships make more money from used cars than new cars. Why? Because they low ball you on the trade-in price, put a couple hundred into making the car look new, then sell it for a $2,000 to $3,000 profit.
6. Be careful with the Finance Guy/Gal (F&I). His/her primary job is to “up-sell”. In other words, to get you to buy all the extras: warranties, insurance, accessories, add-ons, etc. Plus dealerships get kickbacks from banks for sending financing business their way. Therefore, get you own financing from your bank or a credit union. The only exception to this rule is the subsidized financing (0% for 5 years, etc.) that is sometimes offered. But you better have exceptional credit to get this kind of financing in today’s market.
7. Don’t negotiate the monthly payment. There are too many variables to consider when negotiating the monthly payment: length of loan, sales price, interest rate, etc. Negotiate on one number only – the final sales price. You should be able to get anywhere from 10% to 15% off the sticker price – more if the model you are looking at, nobody else wants (like a Hummer H2 when gas is $4 plus per gallon).
8. Try not to get frustrated and impatient – the saving will be worth the time spent. If you want the “best” price, it may take several hours. Dealerships are not in the business to lose money, so they will try every trick in the book to squeeze a profit from the deal. Unfortunately, even if you go to the dealership and say, “I want to buy that 2008 Acura MDX, base, Silver…I will give you $36,000”; a salesman will not be allowed to approve the deal. It will need to go through several “layers” of management until the deal can be finalized. But if you do your research and stick to your “guns”, you will get the deal, especially if you have used the Internet and various car sites (like kbb.com and edmunds.com) to find out a realistic market price. Once you find the “invoice price” on the Internet, take off an additional 3%. We all know that dealerships get kickbacks, often called holdbacks. Holdbacks and other incentives make the true cost to the dealership lower than the invoice price.
9. Do not “engage” the salesman when asked about the price. Here is what is going to happen. In order to “throw you off your game”, the salesman will question your offer: “Where did you get that price”….”I can’t do that price, I will loose money”….”Nobody in town is going to sell you that car for that price”…”What is a thousand dollars more to get this beautiful car today”. These tactics are distractions to make you question (doubt) yourself. Remember, you did the research. Use an excuse if necessary, it takes the heat off of you. For example: “My wife will not let me spend more than $36,000 on this Acura MDX. If you can’t do the deal, she wants me to buy the Toyota Highlander”.
10. Remember, it’s just a car. If the dealership will not do the deal, just walk away. No harm, no foul. But, trust me, the big dealerships will do the deal on all but their most desirable vehicles. Don’t walk into a dealership expecting to get the limited edition Porsche at a discount. You will know the leverage you have over the dealership by the number of cars on the lot. If there are 50 Acura MDXs sitting on the lot, you have the power…they need to get rid of them.
With high gas prices and a weak economy it is a buyers markets today. So make sure you do your homework and negotiate for the best deal possible, because there are real savings to be had. Feel free to leave a comment if you have any more useful car buying tips.