In the market for a new car? Don’t worry, scoring a great deal on a new car doesn’t have to be overwhelming. There are numerous ways to get a great price if you know how to ask for the deals and know where to look for them.
If you haven’t done a ton of research, it’s a little nerve-wracking to visit dealerships and negotiate prices in addition to discussing policies for warranties and insurance.
But it doesn’t have to be that way. There are a number of tactics and resources to help navigate the somewhat pressure-filled undertaking of buying a new car.
There are a lot of moving parts to figure out if you are getting a good deal on a car. You have to consider things like the upfront costs, long-term expenses, and rates. Fortunately, doing your homework beforehand can help you snag the best deal.
Eight ways to get the best deal on a new car
1. Understand the total price you’ll pay
Most of us just think about the monthly payments, and how it will fit into our budget. That’s a major mistake for two reasons:
- It can make the loan term longer and/or boost the interest rate.
- It makes it harder for you to understand exactly what you’re paying for when you’re just going by a monthly fee.
You’ll want to get a monetary breakdown of everything you’re paying for before you sign on the dotted line. Ensuring that you receive the out-the-door price that includes tags, taxes, fees and any other extras will go a long way in helping you understand exactly how much your new car is costing you.
You’ll want to be certain you know the invoice price of the car, not just the manufacturer’s suggested retail price (MSRP). The invoice cost is what the dealership paid the auto manufacturer for the car. This will become key in your price negotiations down the line since you’ll want to negotiate the price of the car down to as close to this number as possible to get the best deal.
2. Know your trade-in value
Knowledge is power. If you are interested in trading in your old car (as opposed to donating it or reselling it), you’ll need to find out how much its worth. Fortunately, the National Automobile Dealers Association has a helpful guide for assessing the value of your old vehicle. Find out exactly the current selling price before you trade your car in at the dealership so you can know whether the dealership you are haggling with is giving you a fair market price for it. You could also read more about the people you might meet at the dealership.
3. Get preapproved
Getting preapproved helps you get a better deal because you know just how much you can afford, and it can help you score a better deal when it comes down to the negotiating table since you won’t necessarily need dealer financing. Getting preapproved means that you get a conditional approval for a loan at a set interest rate, period and for a set amount of money. Obtaining preapproval for a loan has definite pros, including:
- It’s simple and quick. You could also compare custom offers from multiple lenders in just minutes.
- It will save you time at the dealership. When you do some of the virtual paperwork at home, you will probably spend less time with the sales and finance representatives.
- By getting preapproved, you are doing your due diligence by taking control of financing experience of purchasing a car. This shows you are serious about getting the best deal, and you’re taking the necessary first steps toward financing your new car. Also, when you arrive at the dealership, you’ll have a pretty solid idea of the interest rates and terms you can expect for the car you’re buying.
Just as there are positive points to getting preapproved, there are some drawbacks as well. Ronald Montoya, senior consumer advice editor for Edmunds, said there aren’t too many negatives to being preapproved, but consumers should be aware of the following:
- Don’t “sit” on your loan application. Banks can choose to do a hard inquiry or soft inquiry on your credit every time you apply for preapproval. According to Montoya, if you do all the preapprovals within two weeks, the banks know you are shopping for a car, so they won’t ding you every single time you apply for a loan. If you wait for a while, it’s considered a separate occasion and that may reflect badly on your credit. Check with each bank before getting preapproved to see how they pull your credit.
- Be mindful of how much money you’re borrowing. Montoya said it varies by bank, and some banks will approve a specific amount and that gives you the flexibility to change your mind on certain models as long as it’s within that price range. Other banks will want to know exactly which model you’re interested in, and give you a loan for that exact amount, so you’ll need to check with that bank before getting the preapproval.
As a rule, Montoya said it’s a good idea to know what you can afford. If you realize that you didn’t get preapproved for the amount, there may be an issue with your credit that needs to be addressed.
4. Shop around
You need to know what kind of deals are out there and compare as many offers as you can. You may also want to check out dealerships and showrooms outside your local market. Sure, you may spend more time and a little more gas getting to some out-of-the-way places, but it’s worth it to compare offers.
Gathering multiple price quotes can also help you lower the price. By presenting a dealership with competing offers from other dealerships, you may get the sales folks to engage in a kind of bidding war. In doing so, you may walk away with the lowest price by obtaining more than one offer from other showrooms in the area.
5. Flex your negotiation skills
Montoya said it’s always a good idea to negotiate because the first price you get is not necessarily the best price you can get. He suggested that people do away with any outdated notions about negotiating as being a kind of haggling – going back and forth on price. He suggests getting a number of different prices from different dealerships on a vehicle so you have a number of options: if you don’t want to negotiate, you can just take the lowest one. Or, if you like one that costs a bit more, but you are a fan of the service at that particular dealership, you can ask the salesperson if they can beat the price you received earlier. You can let the staff know you want to do business with them because of their location, or because they had the vehicle in a color you really want.
“This way,” Montoya explained, “you have a reason for why you’re negotiating. Even if you’ve just checked the price online and seen what the market value is. That’s something you can point at, as opposed to just saying, ‘Can you knock off $3,000 off this car?'”
Knowing that there are multiple prices floating around makes your case much stronger and can snag you a better deal.
Here are a few tips for being a pro negotiator:
- Don’t get emotional
Remember negotiation is about business, not feelings. Don’t get swayed by emotions when you’re negotiating the car of your dreams. You should always be ready to pursue another dealership at the drop of a hat in order to get the best deal.
- Do the math
If you’re asked, “How much can you afford to pay per month?” be extra careful.
That’s the advice of Sonia Steinway, president of Outside Financial, LLC. “That’s usually one of the first questions dealers ask prospective car buyers, and it should be a red flag,” she said. “The dealer knows that few car buyers like to do the math. As long as the dealership can extend the loan length to adjust the monthly payment, the customer doesn’t think about the total purchase price. The borrower pays more in the long-term, but doesn’t feel the pain each month,” Steinway said.
- Think twice about bundled features
Before you set out on your car-finding mission, Montoya advises buyers to make a quick list of must-have options. Then, figure out which trim levels and options are going to include what you want. “If, for example, you want navigation, and it’s bundled in a technology package that costs like $2500, then you have to really debate how much you need that navigation,” he explained.
Montoya suggests that you take your must-have list with you as a reference point while you shop. “It’s important to know the basic features that you want to have,” he said.
- Don’t shop while drowsy
Car dealers know that most consumers hit the cognitive overload point after a long day of perusing the showrooms. Sonia Steinway said that’s one of the reasons they wait to present financing options until after you’ve already spent a few hours test driving and haggling over price.
“You’re tired, hungry, and overwhelmed, and that’s when psychological research suggests you are the most vulnerable to being taken advantage of,” she said. Just like you shouldn’t go to the grocery store when you’re hungry, never shop for a car when you are feeling exhausted.
6. Have a Plan B
You may have tunnel vision when it comes to your dream car, but there are comparable models that may net you significant savings. You owe it to yourself to consider those vehicles and see if one might suit you better than the car you had your heart set on. Be sure to check out the comparison tools provided by NADA and J.D. Power for help comparing different makes and models.
7. Rebate? Great!
Automakers and dealers continually offer rebates and incentives. It’s always a good idea to ask about current specials, sales events and inventory blowouts. You could walk away with a great car, and a great deal.
8. Warranties, insurance and other things to consider
Extended warranties are another thing to consider. Montoya said there is really no simple answer to whether buyers should opt for an extended warranty. It’s very much a personal choice.
“Some people do want that piece of mind that an extended warranty gives them,” he said. “Others,” he continued, “question the price of it.” He advises asking questions about warranties and other extras before you sit down in the dealership’s sales office, where it becomes a pressure-filled push to seal the deal that day. Call ahead to ask about the warranty. You have no obligation to buy the warranty, nor are you obligated to buy it at the time of sale.
“In fact, you have until the manufacturer’s original factory warranty expires, so that gives you some time to kind of spend some time in the car, see if it gives you any issues, and see if you want to move forward with that warranty,” he said.
Montoya also advises folks to consider insurance “very early on” once you’ve decided on a couple of vehicles. He said it can help you decide between two cars if one make/model has a higher insurance cost than the other. This particularly comes into play if vehicles have advanced safety features that include sensors like adaptive cruise control and blind spot monitoring. Those features add up to higher insurance costs because they are expensive to replace in the event of an accident.
The bottom line
Taking the new car plunge isn’t easy. Before moving forward on a purchase, you’ll need to do quite a bit of analysis and be extremely patient. Fortunately, today’s auto dealers know that buyers have extensive information at their fingertips and will work with them to make a deal. It’s important to do your homework, ask the right questions, be realistic about what you can afford and keep your emotions in check. By taking these steps, you can snag the keys to the car of your dreams, knowing you got a great deal.