The economy isn’t the best of shape and people are losing their jobs, so now’s the time to put off that new car purchase, right? Well, not necessarily. While it may seem silly to part with your little hard-earned cash right now, economic downturns mean that now is one of the best times in years to get a great deal on a new car—if you are in the position to afford one (i.e., if you have some cash to spare on a monthly basis, hold a job and a have some credit and/or a cosigner).
When committing to such a large purchase as a new car, common sense says you should shop around. Common sense is right. Don’t be afraid to invest time in your search – car shopping can take as little as two days to two months, depending on your knowledge of what you want, your luck in finding the right deal, and of course how good your basic negotiating skills are.
Before we continue: Don’t be afraid to invest some time in finding a person with good credit to cosign for you. A parent or relative is a good place to start, and if not available, family friends and neighbors are also good prospects. Younger people are normally charged a very high interest rate because their repayment ability is harder to measure due to simply having less credit history, and having a strong cosigner at this point can save you a lot on the financing cost of the car—more than you could get as the best negotiator in the world—so don’t be afraid to ask around and use little persuasion, but be nice about it.
Now if you plan on buying at a dealer, be prepared to play the dealership game. Remember, the object of the game (for you) is to get the lowest price possible. For them, it’s literally the other way around!
1. Don’t be submissive, be assertive! Your first order of business (and this applies to all negotiations) is to never sit across the desk from someone you’re doing business with. Instead, grab your chair and pull up right alongside them. Sitting on the “visitor” end of a desk inherently implies that the salesperson is the boss and you’re a guest in their office and are there to accept what is offered to you. Needless to say, this is not what you want. Plus, if you sit next to the salesperson, you can see what they’re writing as they’re writing it, and negotiate in real-time, which is very effective. You can also induce a team mentality of sorts with this “trick”. Believe us, as soon as you pull up your chair, the salesperson’s tone and communication style will change immediately. But remember, you are the one holding the greater power in a car-buying negotiation, so act like it. Don’t be afraid to dictate your own terms and have the salesperson or dealership comply (within reason).
2. Be prepared to pay the four-square game. When you sit down to negotiate, the salesperson will use the typical “four-square” worksheet on which to work out the terms of the deal. In the four boxes of the sheet, the salesperson will pencil in the purchase price, down payment, monthly payments, and trade-in value. He/she will fill in the sheet as you talk, working it based off your input—if you’re concerned with getting a fair deal on your trade-in, the salesperson might give you a good price for that and then hike your new-car purchase price up. Take it slow, focus on one item at a time, and be sure you are comfortable with each individual aspect of your purchase. Be especially wary of square 4 – which are your monthly payments based on the three other squares. The salesperson will try to get you to focus on this figure since it is what most buyers care about and can be changed the easiest without as much of an effect on the dealer’s profit or the salesperson’s commission.
3. Pit dealerships against each other. This one is simple, but can prove beneficial. If you play the four-square game at a few dealers and come up with varying numbers, you will get a better idea of how much various options cost and how financing terms can affect your total cost. You can show these numbers to the different dealers to level them out and essentially have them bidding against each other for your business. They will usually throw in a few extras or knock off some costs in order to get you to buy a car from them and not the guys over in the other city.
4. Mind the invoice price. That’s what dealers pay for the car. The sticker price, on the other hand, is what they want to sell it to you for. You have room to negotiate here, and the difference is usually between $1,500 to $4,000. If you start at the invoice price (which you can find for any car here), and negotiate up, you’re in a lot better shape than if you start at sticker price and try to go down. Many people feel uncomfortable challenging the authority of the numbers written on the official-looking window sticker (sticker price), and this is exactly what the dealer wants. People tend to believe things that are written down. Remember to just treat car buying as a game and prices as negotiable figures. It’s what the salespeople do all day, and you can save yourself a few grand if you’re persistent in finding a good deal.
5. Watch what you say. A salesperson may ask how much you are willing to pay each month, and you throw out a number—say, $500 a month. He asks how much more you could afford—just getting a feel for you. You tack on another 50 bucks. In your mind, you were just theorizing, but to the savvy salesperson, you just committed to a $550 minimum monthly payment. Instead, when they ask how much you can pay each month, say you won’t discuss monthly payments and only want to talk purchase price. It’s much better to decide on monthly payments after you’ve settled on a fair price. Avoid paying for certain extras. While titling fees and a few other closing costs are inevitable extras associated with buying a new car, most fees or extra-cost items offered by your salesperson or finance manager are either inflated or altogether unnecessary. Negotiate them down, or outright refuse to pay them. Basically, if it’s anything after you’ve already negotiated the car’s price, you don’t need it and you shouldn’t pay for it. The most common offenders are paint protection and fabric guard, essentially wax and Scotch Guard that will set you back hundreds of bucks.
6. Avoid getting eavesdropped on. If you take a friend or loved-one with you to the dealership, avoid discussions about the deal that could undermine your negotiating efforts. All is not safe when the salesperson leaves the cubicle, though. Many buyers drop their guard and feel comfortable discussing the aspects of the deal they wouldn’t mention in front of the salesman, but often enough times, salespeople subtly turn on the intercom on their office phone that’s connected with the sales manager’s office they’re eavesdropping on your conversation and getting information to use against you.
7. If you plan on trading-in your car, the answer most of the time is don’t! Many people could sell their used car themselves for a lot more money than what the dealer gives them; they just don’t want to take the time and hassle associated with it. A dealership will usually not give what you think is fair value because they can flip it for at least $2000 to $5000 more. If you do a trade-in, however, you should at least know how much it’s worth – it’s always a good idea to bring in an online estimate of your car’s value from kbb.com or the like. You can also go one better by taking your car to Carmax — for free, they’ll give you an offer to buy your car that you can use to negotiate with another dealer.
Visit www.automotive.com‘s New Car section to learn about and research all the new cars on the market and find out how much money you should and shouldn’t pay for a particular model.