March 13, 2018

How to Get the Best Deal on a New Car

Read more about Cars

Walking into a car dealer without pricing a car can be the biggest mistake you ever make. The more you know, the better deal you can get on a new car.

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Keep reading to learn the simple tricks you can have up your sleeve before buying the car of your dreams.

Choose Your Car

Walking into a dealership not knowing which car you want is like going into the grocery store without a list. You'll easily get overwhelmed and you may end up buying a car you don't even want.

Before you step foot in a dealership, do your research. Learn all about any cars that peak your interest on the manufacturer's website. Learn about the standard and upgraded features. Create a list of features you need and those you want. There's a difference.

Next, consult with third-party websites. Kelly Blue Book and Edmunds are reputable choices. On these websites, you'll get expert reviews, lists of the pros and cons, and an estimated value for your area. At this point, don't focus on the price. You have not narrowed down the car you want just yet.

Create a list of the cars you think might be a good fit for you. With that list in hand, it's time to head to the dealer.

Take a Test Drive

At this point, you're not heading to the dealer to negotiate a price. Don't even talk pricing yet. You are still in research mode.

There's no way to know for sure if a car suits you until you drive it. Head to your local dealership(s) and drive each car you think may fit your needs. Let the salesperson know you are just in the test-drive/research mode. They may lay off slightly on their sales tactics if they know you are not a serious buyer just yet.

Don't open Pandora's Box and talk money at all during this process. Focus strictly on the car, how it feels, and what you like and don't like. Third-party reviews are great, but until you are in the driver's seat and feeling the car for yourself, you won't know what you like.

After you are done test driving cars, it's time to narrow down your choices. Weigh the pros and cons of each car and how it affects your lifestyle. Once you choose the car you want the most, you'll focus on it for the remainder of the process.

Do Your Research

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Now the real work begins. You know what car you want - it's time to figure out the best price. You'll be back at your computer for this step.

Again, you'll want to use Kelly Blue Book or Edmunds. This time, you should be as specific as possible, down to the color of the car. Each choice has an impact on the value for the area.

Tip: When looking at Kelly Blue Book or Edmunds, use zip codes of any town you'd drive to if you could get a better deal. You never know when a few towns over might save you money on your car purchase.

Once you have an average cost for your area, head to the manufacturer's website again. Look for any incentives they offer. You may see cash back offers or special financing options. Each manufacturer sets their own criteria. Make sure you read the fine print to see how you would qualify.

Did you know: Car manufacturers tend to offer the best incentives at the early and late parts of the year. During the first few months, you'll see incentives on last year's model. So in the first few months of 2017, you'll likely see large incentives on 2016 models.

During the last few months of the year, you'll tend to see more incentives on that year's model. The end of this year will likely bring many incentives on the 2018 models.

Manufacturers offer the incentives in order to clear the lots of the older models to make way for new models.

Your final step is to figure out the supply and demand of the vehicle. How fast are they flying off the dealer's lot? Cars in hot demand mean less room for negotiation. A dealer won't be desperate to get it off their lot. Cars in less demand mean more room for negotiation. The dealer will be eager to make a deal with you. Create a list of the dealers that have your vehicle along with their contact information - you'll need it in the next step.

Armed with this information, it's time to email the dealers.

Email the Dealers

Now you are ready for the first step in the negotiation process. Luckily, you aren't sitting face-to-face with a dealer just yet. You still get the comfort of sitting behind your computer. It's time to draft a very specific email to the dealers on your list.

In this email, you'll ask for a quote on the exact car you want. You should include all specifics you have gathered during your research. This includes the incentives you know that exist, the options and color you desire, and even the options you could live without.

Give the dealer a deadline for when you want to purchase the car by as well. This gets them moving on the quote. Once they know that you are a motivated buyer, they know you can go elsewhere if they don't respond in time.

No matter what you write, make sure you are as specific as possible.

Comparing Quotes

Once you have several quotes, read each one closely. Look for any differences in the quotes. For example, if one dealer provides a quote on a car with all of the features, yet another provides one with fewer features, you cannot compare them. Everything down to the color of the car should be the same.

Once you have your quotes, you have one last piece of information to share with the chosen dealer - your trade-in.

Keep the Trade-in Separate

Your trade-in should be a last resort topic with any dealer. Don't let them know you have one until you have a solid quote in hand. After you choose the dealer you'll buy the car from, you can let them in on your trade-in secret.

Letting the dealer know about your trade-in ahead of time can ruin your negotiation plans. If they offer you a higher price for your trade-in than you thought, you'll feel like you are getting a "great deal." You may pay less attention to the price of the car you purchase. The dealer comes out the winner in the end.

Again, it's important to do your research. Know what your trade-in is worth using Kelly Blue Book and Edmunds. See what others are getting for their car. Make sure you are honest about your car's condition. The trade-in value isn't based on the make, model, and year of the car alone. The condition of the car can increase or decrease its value.

The good thing about a trade-in is that the value will come right off the amount you borrow. This means less interest that you pay in the end.

Find the Right Financing

Once you have the deal you want, you still have more work ahead of you. The best-case scenario is to walk in with a pre-approval. It's as good as cash to the dealer. You don't have to worry about dealer financing or haggling after you have your car's price.

Having a bank's preapproval can also give you an advantage. The dealer may try to beat the rate the bank offered or will work with you on the price. They know you can go to any dealer and get the car you want. They can't lure you in with their new car financing.

The one exception to the rule is if you have great credit. The dealer may approve you for 0% financing. This is like paying cash for the car over an extended period. It doesn't cost you any more money for the loan. However, you should be ready for large monthly payments and a shorter term.

Consider what you can afford and again compare the sales prices. What you want to know is what the car will cost you in the end. This takes into consideration all interest charges you'll pay on the loan.

For comparison purposes, let's look at a 60-month, $25,000 loan:

  • 0% loan = $417/month payment
  • 4% loan = $460/month payment

$43 per month doesn't sound like a big deal. But when you think of paying an extra $43 per month for 60 months, the 4% rate costs you $2,580 more. That's $2,580 you can add to the price of your car.

Tip: Don't focus on monthly payment. Dealers can stretch out your term or lower your interest rate to make the payment lower. But they could also charge you more for the car. Rather than focusing on the monthly payment, look at the bottom line.

Prepare for Final Negotiations

Once you do all of the legwork, it's time for the final negotiation. This is when the deal goes down or you walk out the door. It's important to remove your emotions from this process. You must have in your head that you will walk out the door if the dealer won't give you the deal you know you can get.

With your knowledge in hand, you can tell the dealer you know exactly what is available. You know the going price for the car in your area, demand, your available financing options, and what you want.

If you don't want to do this in person, you can go through the internet department, asking for a final quote on the exact car you want from the dealer's lot. This gives you the chance to bargain with several dealers at once without leaving your home.

We recommend emailing the dealers that are the furthest away from your home first. Get a few quotes in hand, then walk into your local dealer with these quotes. Chances are they will match or beat it. Now you have the lowest price possible and you purchase your car from your local dealer, making future visits convenient for you.

Handling Yourself in the Finance Office

Just when you think the hard part is done, you have one more person to face - the finance manager. If you came with your own financing, you won't spend a lot of time in there. You'll already have the rate and term of your loan negotiated. There are other fees, though. The following fees are non-negotiable:

  • Sales tax
  • Licensing and title
  • Registration
  • Destination fee (manufacturer charged)

Many dealers tack on other fees that you can negotiate, though:

  • Documentation fees
  • Delivery fees (dealer charged)
  • Dealer fees
  • Acquisition fees
  • Advertising fees

If you see any fees outside of the tax, title, registration, or manufacturer's destination fee, negotiate. Find out the average costs for your area and call the dealer out on it. Don't be afraid to walk out of the deal even once you are in the finance office. Including these fees into your loan only increases the cost of the car in the end. If you have your own financing, you may have to pay the fees in cash up front.

The dealer may try to sell you add-ons as well. Again, do your research. Most add-ons can be done after market and on your own when you can pay cash. Even the extended warranty can be added after you already own the car.

The Bottom Line

It is possible to get the best deal on a new car. You just have to do the work. The more research and shopping you do, the better your chances of finding the lowest deal.

More from CreditDonkey:


Financing a New Car


Average Cost of a Car


Average Car Loan Interest Rate

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