Finally, you’ve saved enough money for your dream car and you’re planning to drop by your local dealer this weekend. You are hoping that you’ll get a good deal for your hard-earned money. But before you swim with the sharks, make sure you’re equipped with the right gear--you don’t want to end up as fish food. This isn’t to say that all car dealers are out to get you, but many of them can get too pushy because they’re gunning for the monthly incentive or are struggling to meet the weekly quota. So, many of them use sneaky tactics to make you spend more. Whether you’re buying a used car or a new one, you need to know the four things car dealers won’t tell you.
1. Don’t stick to the sticker price.
When you step inside the showroom, you’ll see a bunch of price tags stuck on the car windshields. Your first instinct is to base your negotiation on the sticker rate, since the salesman said it’s their sale price--any price lower than that means they won’t be able to send their kids to school. You might feel a bit sad, but don’t. The sticker price is what the car manufacturer sets for a car’s retail value, but it’s not the price that the dealer actually paid for the vehicle. What the dealer actually paid for is the invoice price, which is lower than the sticker price. So if you want to get the best deal, set your ideal rate between the sticker and invoice prices.
How do you get the invoice price? You can ask the dealer for their invoice rate, but it’s better to do your own research. Check out http://www.redbook.com.au/ to get the invoice price of a specific car model.
2. Buy at the end of the month/year.
Salespeople have monthly goals and when they meet these goals or even go beyond them, they get bonuses. Some of them do meet their goals, but some don’t. Your job as a buyer is to sniff out salespeople who are desperate to sell a car just to meet the monthly quota. Bonuses are usually based on the total monthly revenue and not on the profit the dealer gets for each car. So if the sales guy is struggling to meet the quota, he or she is more likely to give in to your haggling skills. Buying at the end of the year is also a good idea because car dealers are trying to get rid of their unsold cars to make space for new models. Get the best deal by buying a brand-new or used car at the end of the month or, better yet, at the end of the year.
3. Low monthly payments aren’t good for your budget.
If a dealer is trying to woo you with low monthly payments, don’t take the bait. It’s tempting but it’s not good for you. When you see the low monthly rate, the usual reaction is “Hey, I can afford this car! I just need to pay xxx dollars for this every month”. Before you say yes, look at the big picture, and compute the overall cost of the car. You’ll shell out less money if you choose a deal with higher monthly payments because you get to pay off the car within a shorter time. Remember, the longer the loan term is, the more money you’ll spend on monthly interest rates.
4. The dealer’s 0% financing isn’t for everyone.
You see your dream car parked in the lot, and you notice a sign that says, “0% financing”. Who doesn’t want interest-free repayments, right? Before you say yes and sign the dotted line, however, you should know that this type of dealer financing will only be approved for those with a high credit score. If you think your credit rating needs more improvement, don’t expect to get a zero interest deal. The key to finding manageable interest rates is to shop for a good financing program. Whether it’s from the dealer, a credit union, or a private lending company, the best car loan deal should have interest rates that won’t eat up your savings.
Getting a new or used car is a huge commitment, so you’d better do your homework first before dropping by your local dealer. Salespeople can sniff out buyers who have no clue what they’re getting into. Once they’ve figured you out and you’re unprepared, don’t be surprised if you didn’t get the price you wanted. Shop around and get online quotes. Be familiar with the dealers’ invoice prices, and schedule your visit at the end of the month or year. Armed with enough information, negotiating for your ideal car price won’t seem like swimming inside a shark tank.