Thank you to the Credit Union of New Jersey for their presentation on car buying. Purchasing a new or used car can be a hassle, but you can help relieve the stress and secure the best deal by doing some research and willing to negotiate. Follow these tips:
- The most important part of buying/leasing a car is determining how much you can afford. Make sure to create a budget to determine the limit to what you can spend. Secure a pre-approval from your bank or credit union to have an accurate number for what your spending range should be.
- Shop around, either at dealerships or online. By researching the car you wanted, you can pick the features you want, check to see what others in your area have paid for the car, and see what discounts or offers certain dealerships may be giving to help lower the cost of the car, as well as your payments.
- Determining the actual price of the car can be difficult. The MSRP does not include optional equipment, dealer fees such as destination charges, or market adjustments. The total price of the car is the “sticker price” which is usually at the bottom of the window sticker. Additionally, there may be rebates, offers, and dealer incentives that can decrease the cost of the sticker price so make sure to ask about them. Ideally, you want to negotiate to about 2% over the dealer invoice price.
- Negotiation is an art and car salespeople do this many times a week. Be sure to talk about the invoice price rather than the sticker or MSRP. Negotiate the price first before discussing any payments or trade-in values. The salesperson knows what the lowest price is so do not wait around for a manager’s approval; this is a stall tactic to make you think about buying impulsively. As always, shop around to get the best deal because each individual dealership controls the final price of the car, not the manufacturer.
- One way dealerships try to sell you a car is by offering discounts on financing, such as 0%. However, if you take the financing option through the dealership, you usually loose out on other rebates, such as cash back. Financing through your bank or credit union, while it won’t give you 0%, you will still be qualified for the other rebates, which may be greater than the interest you will pay on the loan. Additionally, the dealership may make several hard inquiries on your credit while checking several lenders they work with while your bank or credit union will only make one.
There are many resources out there to help you when buying a car. Consumer Reports has reviews as well as a booklet to purchase that lists the dealer invoice prices for a given year. Cars.com is a great way to shop around for the features you want and see what others have paid in your area. Kelly Blue Book is the gold standard for determine the value of your used car, but they will also provide information on new cars. The Federal Trade Commission has good information on all aspects of the car buying process, especially in terms of leasing a vehicle.