Having a new – or new-to-you used – car to drive is an invigorating experience. For most people, though, the process of actually buying the vehicle ranks right up there with going to the dentist or doing taxes. Fortunately, by following some simple rules, you can make the car-buying process go much smoother.
As you’ll see on the following pages, the best car-buying experience starts with preparation. Knowing what you want to buy by using resources like our new car rankings, knowing how to finance your purchase, and knowing how to avoid common traps will protect both your wallet and your sanity as you negotiate your purchase at the dealership.
Before you even think about talking with a salesperson, read the following pages for tips on how to negotiate and what can be negotiated, when to buy, and how to get a great deal on financing.
1) Knowledge Is Power
Never before have consumers had as much information about car prices, their features, and financing as they do today. You can learn about every phase of the buying process – including your trade-in, financing, car deals, car insurance, and the negotiation process – by using online resources.
Our new car rankings and used car rankings will show you the pros and cons of nearly every car, truck, SUV, and minivan on the market. You can use our comparison tool to see how they stack up against one another. You can see the best deals carmakers are offering on our new car deals, subsidized lease incentives, and used car deals pages
Buying a car without knowing what fits into your budget is a horrible idea. Using online resources, such as CreditKarma.com, to learn your credit score will help you determine how much you should be paying for financing.
If you are looking at a used car, vehicle history reporting companies like Carfax.com will show you if your dream car has a checkered past.
2) There’s More Than One Dealer
One of the worst things a buyer can do is to only shop at one car dealership. By shopping at multiple dealerships, including those some distance from your home, you’re more likely to get a good deal – especially if the salesperson knows you’re shopping at more than one dealer.
By chatting with a dealership’s online sales department, you don’t even have to travel to individual locations. Be sure to look at dealers where the car you are considering might not be too popular. For example, if you’re shopping for a hybrid or electric car, check out a rural dealer. On the flip side, if you want a full-size truck, check with urban dealerships.
Even if you have emotionally locked onto a model that you’ve only found at one location, it’s a good idea to seek the same model from other dealers. They frequently trade vehicles with one another, so you may get offers from multiple dealerships on the same exact car.
3) Don’t Focus on the Payment
Salespeople will do almost anything to keep you focused on the monthly payment. It’s easy to make you think you got a deal when you’re only looking at one number. Instead, you need to look at the price of the car and the total cost of purchasing it, including financing.
To find the total cost of the car, use the calculator on your phone or computer and multiply the monthly payment by the number of months in the car loan. Then add anything you are paying at the time of purchase, included add-ons, taxes, and fees. The total is the actual cost of the vehicle.
You’re simply not getting a good deal if you have to extend your loan out to six, seven, or even eight years to fit the payment into your monthly budget. Every month that the length of your car loan exceeds the vehicle’s warranty puts you at risk for having to pay both your car payment and for costly repairs in the same month.
4) Know the Deals
Car manufacturers frequently advertise new and used car deals to keep up the sales pace of vehicles that aren’t selling quickly enough or are due for replacement. Our car deals, special lease incentives, and used car deals pages are a great place to see all the deals at once.
Car deals take several forms. Cash back offers really aren't stacks of money that the salesperson hands back to you as you walk out the door. They are discounts on the price that you pay for the car. Financing deals lower the interest rate you pay on your financing to a number below market rates. The best are zero-percent offers, which reduce your interest payments to nothing. In some cases, you'll find a combination of both low-interest and cash back offered.
Lease deals lower the monthly payment, the amount due at signing, or both. Used car deals are typically only offered on certified pre-owned cars, and reduce the interest rate below market rates.
Note that most car deals are only offered to consumers with top-notch credit scores. Some deals are only available to specific groups, such as veterans, AAA members, or AARP members.
5) Think About Financing Early
Smart buyers never get near a car dealership without having a pre-approved financing offer from a bank, credit union, or other lender in their back pocket. Without a pre-approved offer, the dealership's finance officer will have no incentive to try to find you a better deal on financing.
Before you agree to any financing deal, make sure you know all of its terms – not only the interest rate, but also the length of the loan, if it has prepayment penalties, and any fees that are charged by the lender.
Starting your search for financing early can also help you find out if you have any dings on your credit that will get in the way of your car purchase. Customers without nearly perfect credit will probably not qualify for the best car financing deals.
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Even if it means selling it yourself or shopping it around to several dealers, you typically don’t want to include your trade-in vehicle in the negotiation. Letting the dealer weave a trade-in value into the car purchase transaction is a recipe for wallet-damaging confusion.
It is way too easy for a dealer finance officer to show you a great price on a new car if they can low-ball the amount they're willing to give you for your old car. Conversely, if they give you a lot for your trade, you’ll likely see a higher price on the car you’re buying.
By separating the two transactions, customers can work to get the best price on each component.
If you do decide to trade your car in as part of your new or used car transaction, be sure to look up its value before you head for the dealer. While the resources that dealers use to determine used car prices often show lower values than mainstream outlets, the amount that is offered can be a point of negotiation.
Selling a car yourself has its own pitfalls, though a private-party sale usually will bring you the highest price you’re likely to get.
7) Remember It Is a Business Transaction
Car buying can be an emotional roller-coaster. First, you probably have some emotional attachment to the vehicle you're considering. Second, you're dreading the stressful negotiation process. It’s best to remember that it is simply a business transaction and any emotions will get in the way of a good deal.
You’re trying to get a great price and the dealer is trying to maximize their profit. There’s nothing wrong with either position as long as both sides are polite, professional, and follow legal requirements. While some customers might think that being super tough and rude will make the salesperson quiver in their shoes and give you a great deal, the actual result will likely be different. It’s much easier to stick it to someone who’s being a jerk than it is to a pleasant, knowledgeable customer.
A car salesperson is typically a trained negotiator who handles hundreds of deals per year and is skilled at moving you at increments into the deal that they want. The typical car shopper only gets a chance to haggle over the price of a couple of cars per decade, so the playing field isn't level from the start. Information, resilience, and a willingness to walk away are a car buyer's best tools.
Politeness and professionalism should be the name of the game in all phases of the car buying process, including the test drive. Remember that the test drive is a time to get familiar with the car, not a chance to demonstrate your driving prowess. Showing off on the test drive can get you thrown out of a dealer, and any groundwork you laid toward getting a deal will have been wasted.
8) Timing Is Everything
Like most businesses, car dealers and salespeople have sales goals with bonuses and commissions based on hitting specific sales numbers. If you buy a car toward the end of the period that their incentives are based on, you might get a great deal as they try to hit their goals.
That means the end of the month, quarter, or year, in most cases. This strategy only works if the dealer or salespeople haven’t already hit their goals, however.
The old tactic of showing up just before closing time getting you a great deal because they’ll offer you anything so they can close is pretty much an urban legend. A motivated salesperson may be willing to haggle all night, while someone else will just tell you that it’s closing time and usher you to the door. They probably won’t lose money to get you out, though.
9) Negotiate the Price First
As a buyer, your primary goal is to negotiate the lowest price you can on the vehicle. Though the salesperson will likely want to mix your trade-in and financing into the equation, your focus is always the price you will pay for the car.
The dealer is expecting a certain amount of profit, so your opening offer should not be too insulting. The final price will be somewhere between the dealer cost and the manufacturer window sticker (not the addendum sticker next to the real one). Any counter-offers should remain in that range. Make sure the price you get includes any applicable car deals and rebates.
It’s also good to know what you can and cannot negotiate. You likely won’t be able to negotiate the destination charge or license and title fees, but advertising fees, documentation fees, and other miscellaneous costs are open for negotiation. You shouldn't pay for anything that's added to the car at the dealer if you didn't want or agree to it. That includes window etching or nitrogen in the tires.
10) Avoid Costly Extras
When you have set a price and are nearing the end of your car-buying odyssey, you'll be ushered into the dealership financing office. You probably think the negotiation is over, but that's far from the truth. Many dealers make the majority of their profit in the finance office. It is where you will likely be pressed to buy expensive add-ons. Take a look at our article on things never to buy at the dealership to learn more about what you should buy there, skip altogether, or purchase outside of the dealer.
Before you consider an extended warranty or service contract, be sure to read our article on the pros and cons of extended warranties.
11) Read the Paperwork
Before you sign anything, read all of the documents thoroughly to ensure that it is the deal you agreed too, and that no additional fees or add-ons have been snuck in after your negotiation. Sometimes it’s good to have friend or family member along to double-check the docs with you.
It’s in the financing office where the details of your financing are negotiated and spelled out in documents for you to sign. It is critical that you never leave a dealer without your financing being approved and the final papers signed. If there are errors or blank spaces on the documents, politely decline to sign them until they are completed to your satisfaction.
One of the longest-running dealer tricks is called yo-yo financing. A dealer makes you believe that your financing has been approved and you can drive the car home. A week or so later, you’ll get a call from the dealership saying that there was a problem with the financing and you need to come back to sign new documents. The deal you’ll find when you return to the dealer won’t have the same favorable terms as you were told were approved, but by then you’re attached to the car and won’t walk away as you should do. They leverage your attachment to force you into a bad deal.
12) Be Prepared to Walk Away
The best way to get a great deal on a new or used car is to walk away from a bad one. It is your greatest negotiation tool, though too few consumers have the will to use it for fear of embarrassment, intimidation, or the loss of time they’ve invested.
When you politely get up and leave, be sure to leave your number behind. Sometimes they’ll magically be able to find a bit more room to negotiate, especially if it is near the end of the month or you’re very close to a deal.