Buying a car for many is an essential investment, but it is not one that should be made uninformed. One survey published that over 26% of new car buyers felt they overpaid for their vehicle. That leaves 74% that either received an amazing deal or did not realize they were being taken advantage of. Car dealers will seek your weakness in their selling opportunities. However, the following steps will help you understand the art of car buying and negotiations.
Do Your Research
When Osric’s car broke down last summer, we needed to make a decision. We were planning to fix his car, but my car was in the shop and we needed his car to get around. Of course, when it would overheat causing the belts to melt and snap. We knew at that point that it was going to cost more than just the estimated costs of getting the water pump and coolant leak fixed. So, it was time to think about purchasing a new car. We had to make this decision quickly as it was getting to be pretty rough commuting in one car. Especially, since we worked in two different cities and had a daycare stop in between.
For us some of the things that we considered were the car price, size, year, make, mileage and gas mileage. We established those priorities but you may want to consider the questions below when you do your car research. It is also recommended that you check the Carfax report and be aware of the history of the car you are interested in.
- What is the style of car would you like?
- Sedan, SUV, Compact, Truck, etc.
- What is your price range (pick it and stick with it)?
- What age and mileage of the car are you comfortable with?
- Some financial institutions will not finance cars older than 5-10 years or cars with high mileage. This is important if you are looking to make monthly payments versus cash upfront.
- Gas mileage expectations?
- Can you afford to fill up the desired car if gas rose by $1.00 or more per gallon.
- Does the car come with a warranty?
Take a Test Drive
We found an SUV that we really liked, but because of the time pressure we did not have as much time as I would have liked to do background research on the car before arriving on the lot. We were offered a test drive and it gave us an opportunity to get to know the dealer and experience riding in the car. The car had a nice interior and the drive was smooth. However, during the commute I asked several questions about the car and the dealer had was kindly admitted that he did not know much about the car. Keep in mind that the car had been sitting on his lot for about two weeks. At that point, I knew his interests and my interests did not align. I wanted the most valuable option and he wanted the quickest sale.
Do not go car shopping alone
When buying a house, you may elect to have a contractor complete an inspection before accepting the mortgage loan. Likewise, it will be in your best interests to bring someone with you when you are buying car. If you are not an expert in the mechanics and condition of cars, it is inevitable that you will overlook something. Bring someone with you, preferably someone who knows a good bit about cars to be your second set of eyes when you are looking shopping.
Know Your Worth
This is SO important. Many people will accept what they think is a great deal because they do not know their worth. They feel like because their credit is less than perfect, they should settle for whatever is offered by the lender. Keep reading as you will learn that this is a weakness for both the buyer and seller. Dealers are not equipped with the education to understand your financial picture or your worth. They are taught to sell cars no matter the cost to the buyer. The next time you go to the dealership, I guarantee you they will ask you the following question, “What would you like your monthly payments to be?” This is dangerous question and do not answer until you know your worth.
Visit a Credit Union
I suggest going to a credit union and getting a preapproval before you step foot on any car lot. Typically, you will have to open a savings or checking account to reserve a loan. They will likely require a deposit to open the account (amount will vary based on credit union but ranges between $5-$25).
This will help you with negotiations. If your credit union offers you a 6% interest rate with your less than perfect credit, then there is no reason for the dealership to offer you a 25% interest rate. However, if you answer that question above and only state that you want a $200 payment without inquiring about the interest rate, you may very well be offered the higher rate. This could result in an overcharge of $1000+. Remember that question is dangerous and should be answered in two parts (desired payment and interest).
- Not always but more times than not they will beat your credit union because their goal is to sell even if it means they may reduce their anticipated profit significantly. This is how their focus on selling works in your favor. It is a win-win for everyone. You will know your numbers and where they need to be and they are happy as long as you take their car home.
Take at least 24 hours to think about it
Cars can be hefty investments. Be sure take some time to make sure you want what you are getting. Cars without warranties are be returned. We have had our SUV for a couple of months now and we love it. However, after bringing it home we noticed some cosmetic conditions that we did not notice when we bought the car. They were not a big enough deal to be sour over the purchase but we are glad that we did not just buy the car without putting in the time needed to make a good, investment.
If this helped you and you successfully negotiated your auto deal, share your story below and what tactics you used.
