New or used? Lease or buy? Gas, electric, or hybrid? Buying a car raises lots of questions. This MasterKit has the answers. Our quizzes, articles and videos will help you get the best car for your money by making sure you ask yourself, and the salesperson, the right questions at the right time.
5 Strategies to Negotiate the Best Deal on a New Car
Buying a new car could be one of the biggest purchases you'll make in years. So brushing up on the best negotiation strategies before you buy is critical to ensure you get the best deal possible.
You've researched the car that meets your criteria, taken a few test drives and narrowed down your pick to the right model. Now it's time to make a deal. If you don't like the idea of negotiating the price with a dealer, arm yourself with these five strategies and you'll be able to buy smart.
1. Shop Around for Financing
Chances are if you're buying a new car, you're going to finance it. Before you walk into the dealership, explore your options from a third party such as your bank or a credit union to see what interest rates they can offer. This will give you something to compare to the financing plan from a dealer. Keep in mind, the dealer is still financing through a bank but usually at a markup (it's how they make money). That means the dealer rates are negotiable — the interest rates at your local bank are set in stone. But if you're late or miss a few payments, your local banker may be more understanding than the financer for the dealership with whom you have no relationship.
Sometimes the dealer can offer enticing rates — as low as 0 percent — via major promotions. That low rate might sound great, but if you have to choose between the dealer interest rate and other dealer incentives like big cash rebates, be sure you know which is better over the term of the loan beforehand. It could be the cash.
Don't primarily look at the cost of the monthly payment. Dealer financing can make it look low by stretching it out over many years, but in the long run you end up paying a lot more because you continue to pay interest on the payments. Keep your eye on the bottom line: the actual total price you'll pay to take the car home.
Also find out what how much it will cost you to own for five years. The salesperson might not have this information available, so it should be part of your initial research. Several automotive websites, including Kelley Blue Book and Edmunds offer tools to help you calculate it. The cost to own includes the depreciation of the vehicle and the cost of fuel, maintenance, and insurance. This information may or may not be useful when you negotiate, but at least you'll know ahead of time that, even if the monthly payment on that pickup truck fits your budget, the fuel bill might not. Take our quiz to see whether a gas, electric or hybrid is right for you.
4. Don't Settle for One Trade-In Price
Chances are you have a car you no longer need now that you're buying a new one. Negotiate the trade-in value of your old car just as much as you negotiate the price of the new one. Start by determining its trade-in value before you walk into the dealership. You can get this info on sites like Edmunds and Kelley Blue Book. You can also get a written appraisal from a dealership like CarMax. Once you're armed with this information, you can work with multiple dealers to see which is willing to give you the most for your trade-in. Just remember that the first offer most dealers give for a trade-in is typically low, so be willing to walk away. And use your leverage as a car buyer, as well. If the sales manager knows you’re serious about buying a car, he's going to want to work out a deal.
5. Push to Reduce Fees and Other Costs
The cost of the car is not the only financial burden you'll have. You'll be responsible for other costs and fees before you drive off the lot. An itemized bill of sale will show exactly what you're paying for, including options packages, taxes, and a variety of fees. Examine these carefully and push back if you have concerns. For instance, a "dealer fee," no matter how mandatory the dealer claims it is, isn't mandatory. A transport fee (on top of the destination fee, which is a legal requirement) makes no sense if you're buying a car already on the lot.
You might also notice the dealer charging you for an option that happens to be on the car but one you don't really need. Floor mats for $500? Tell them to take the mats out and strike the $500. Custom fog lights for $800? No thanks. The dealer might just leave the lights there or discount the option instead of paying for the labor of removing them.
You may also notice smaller fees like a Department of Motor Vehicles fee or a loan processing fee. Unless they add up to huge amount, it's probably not worth your time fighting over.
Pro Tip: You're going to pay the sales tax based on the state where you'll be registering the car, not where you buy it, so there's no advantage to spending time shopping out-of-state.
Perhaps the biggest negotiating tool you have in your arsenal is knowing when to walk away. Don't be too eager to sign the dotted line if you're not comfortable with every term of the contract or you are confused by something that comes up during negotiations. Leave, regroup, and go back to the dealership another day. Walking away will give you all the leverage and when you do go back, you'll be able to make that new car purchase with confidence.