Buying a car is one of the biggest purchases you’re likely to make in your lifetime. For many people, it will be the single most expensive thing they own in their lifetime other than a home. Therefore, it’s surprising that so many people treat choosing and purchasing a car as an impulse decision, and forego the research and negotiation that should pave the way for such a major investment. Don’t be one of the ones caught off-guard – read these five tips to be fully prepared before you sign on the dotted line.
Take Your Time
Dealers and salespeople are going to try to rush you through the process, but don’t let them. Remember, you have every right to take as much time as you need no matter whether you are looking at the vehicles, taking a test drive, or discussing terms like warranties and loan rates. Most car salespeople are going to be working on a commission basis, and that gives them a twofold reason to rush buyers.
First, they want to make the sale with you so that they can quickly move on to catching another potential customer at the door. And second, buyers who feel pressured to move quickly through the car buying process have less time to examine and compare options to make sure they are getting the best deal.
Don’t fall for these tactics – take the time you need, and remember that you’re always free to leave and come back later. You can also tell the salesperson you can see they are a little rushed and ask if there is another salesperson with “more time on their hands” to help you. This will almost always result in them slowing down rather than risk losing you as a customer.
Do Your Research Ahead of Time
Never, ever purchase a car without knowing three things about it: the MSRP (the Manufacturer’s Suggested Retail Price), the cost to insure it each month, and what your loan options are. If you are purchasing a used vehicle, replace MSRP with the Kelley Blue Book price for that car in its current condition. Unfortunately, buyers just cannot rely on salespeople or dealerships for accurate and complete information, and it is vital to a savvy buyer that he or she comes to the dealership armed with independent knowledge about the vehicles.
If you do find yourself at the dealership on a whim, or find that once you’re there you are interested in a different vehicle than you initially were, pull out your smart phone and research then and there at the lot. MSRP and Kelley Blue Book prices are available online. Call your insurance agent and inquire about monthly cost to insure different vehicles you’re interested in. You would be surprised what can affect your insurance rate – even the size of the engine can increase what you pay per month. And the smartest shoppers know their loan options before they even set foot in a dealership – see Tip #3 for more on that.
Know How the Financial Stuff Works
The true cost to own a car cannot be measured in price alone, unless you’re in the rare and lucky position to purchase a car with cash. For most, the excitement of a new vehicle will come with additional cost that goes beyond the sticker price, in the form of loan interest. How much you will pay in interest is largely determined by your credit score, so if you know you’ll be in the market to buy a car several months down the road it makes sense to start paying down credit cards and taking steps to beef up your credit score in advance.
You also do not want to rely on whatever financing terms are offered at the dealership, especially since many of the lenders that work with dealerships are counting on buyers not taking the time to research other rates and therefore won’t necessarily offer the most competitive ones. Instead, go to your bank or credit union in the days leading up to car shopping and ask them to pre-approve you for a car loan. Not only are you more likely to get a better financial deal this way, but as a bonus you’ll have a much more realistic idea of how much car you can comfortably afford and what monthly payments will look like. Knowing this information ahead of time will help you impose self-control during the process of choosing a vehicle.
Watch Out for Hidden Costs
Dealerships are known to add hidden fees, service plans, warranties, and other costs that aren’t disclosed or even discussed with a potential buyer until that buyer is sitting down to sign the paperwork on the car they’ve chosen. There may not be a whole lot that can be done to prevent this from happening, but one way is to ask while browsing the cars exactly what costs other than purchase price are added. When faced with this upfront question, most salespeople will discuss what to expect when you go inside and into a finance manager’s office.
Remember to ask what is truly mandatory and what is not. When in doubt, don’t be afraid to ask a salesperson or finance manager to waive certain fees. The worst they can say is no, but if they feel you’re wavering on the purchase you’ll be surprised what can be scratched off the list of “mandatory” costs.
Buy at the Right Time
Is there a “right time” to purchase a new vehicle? You bet! Most car-buying authorities agree that there are two good times of the year to snag a great deal at the dealerships. The first is a little more than halfway down the year when new models start to come out and last year’s models need to move and make room.
If you walk onto the lot and see this year’s model and next year’s model both on the lot, know that you’re likely to get a much better deal on last year’s model even though both are brand new. The second great time to buy is at the very end of the year in December. Not because of holiday sales – although that certainly won’t hurt – but because dealerships are scrambling to fulfill yearly sales quotas and are more likely to come down in their profit margin in order to make the sale.
Arm yourself with these five tips and be a smarter shopper!