Shopping for a new or used car doesn’t have to be the kind of nerve-jangling roll of the dice that it historically has been. For one thing, we have some very helpful tools so you can figure out exactly what you want – and what you should pay – before you even leave home. Showing up to the dealer with a good idea of what the landscape looks like will give you a huge confidence boost. Here are a few things to do before reading the rest of this article.
1. Use Car Finder to figure out a few cars, trucks, or SUVs that might be right for you.
2. Compare the vehicles you’re interested side-by-side with our Car Compare tool.
3. Check out our New and Used car listings to find a couple of likely candidates near you.
But once you’ve found what you’re looking for, you still have go down to the dealer to negotiate. With that in mind, we spoke to both an AAA car-buying expert and an auto dealer to find out what NOT to say once you’re in a dealership showroom. And, of course, what you should say!
Don’t work backward from a monthly payment
“Under no circumstances should you start talking about monthly payments,” says John Nielson, Director of Auto Repair and Buying for AAA. “You should just focus on negotiating the purchase price. Once you start talking about monthly payments, everything gets confusing, because suddenly you don’t know if that’s the payment for 24 months, or 36 months, or how much of that would include interest charges if you’re financing the purchase through the dealer.”
Nielson’s advice on this matter is supported by a sales representative at a Virginia car dealership, who agreed to speak to us on the condition of anonymity. “After all, I don’t want to shoot myself in the foot,” he says. So we’ll call him Bill.
“Dealers will absolutely try to get you to negotiate monthly payments instead of purchase price, because we make more money if we do it that way,” says Bill. “We’ll say something like, ‘I can get you into this car for $300 a month,’ but we won’t say how many months that’s for. If we can get you to commit to a longer payment structure and we’re doing the financing, we’re making more money off you in interest payments.”
Mention your trade-in later, or sell it beforehand
Fundamentally, says Bill, “dealerships like to move money around. So it probably also is not in the buyer’s best interest to mention right up front that he or she has a car they want to trade in. Because once we know that, we know you’re looking to get as much money as you can out of the trade-in.”
Bill explains how getting more currency for your trade in can be a smokescreen that won’t save you money in the end. “We’ll assess the value of the car, and if it’s worth, say, $15,000, we’ll tell you we’ll give you that amount,” he says. “But once we do that, we’ll be pretty hard to budge on the sale price of the car. So in that instance, you’ll probably end up paying full MSRP for your new car.”
Bill informs us, “These days, with CarMax being so prevalent, consumers might want to consider not trading their car in at all, and just selling it via CarMax. You will almost always get a better price for it if you sell it than what a dealer will give you in trade-in value.”
Never forget that the new car’s price is the focus
Nielson of AAA has similar advice on this front, although he comes at it from a slightly different perspective. “It’s OK to mention that you might want to trade your car in, because you don’t want to get caught telling them something that isn’t true. But just tell the sales rep, ‘We’ll talk about that later, let’s just focus on the price of the new car for now’,” says Nielson.
“Anytime you add the trade-in value for your existing car into the negotiation of the price for the new car, the numbers start moving back and forth, and you could end up being confused about how much you’re really paying for the new car,” warns Nielson. “The number one way consumers can go wrong in this scenario is to lose sight of the purchase price of the vehicle, which is the number you are in best position to negotiate.”
Nielson laughs, “You probably also shouldn’t tell them that you recently had a car repossessed, or that you have bad credit. That kind of information probably won’t work in your favor.”
Keep the dealer interested
And while it may be unwise to tell a dealer you’re desperate for a car – information that can bring out the shark in any sales rep – there’s nothing wrong with telling the car dealer that you’re definitely looking to a buy a car in the next few days. “Face it, dealers are trying to make a living,” says Nielson. “So if they think you’re just out kicking tires and are six months away from making a purchase, they might think you’re wasting their time, so you won’t get as much attention from them.”
But back to the financing question: Bill reveals, “One tactic dealers sometimes take is getting the buyer lost in the numbers, by asking them, ‘Where do you want to be? What’s your budget?’ And then once we know that, we start talking about financing through us, which is a way we make a lot of money on the back end of the deal.”
Learn about incentives before you go
That’s why Nielson advises prospective car buyers, “Do your homework, find out what incentives are out there, and use a payment calculator you can find online so you’re educated on how much car you can get into for the price you want to pay.”
Also, it’s best to get preapproved for a car loan before you even walk into the Thunderdome – er, the dealer showroom. Bill says, “That way, if we know up front you’re pre-approved to get your financing elsewhere, we’re not going to try and hit you with a high interest rate. That’s what a lot of dealers will try to do without even knowing what your credit rating is.”
Cash is NOT king
One issue to factor in is whether or not you intend to pay cash. (If only all of us should be so lucky to have that kind of coin lying around.) If you do intend to pay cash, Bill tells us that’s something you may not want to say right up front.
“When dealers are negotiating the purchase price, they anticipate making money on the back end, via financing,” Bill explains. “So if you tell them up front you’re paying cash, the dealer knows he has no opportunity to make money off you from financing. So, he might not be as moveable on purchase price if he already knows he isn’t going to make any money off you from financing.”
It’s ok to change your mind about dealer financing
This likely holds true if you’ve been preapproved for financing. It’s best not to reveal your hand on the outset that you don’t plan to use dealer financing before you negotiate the vehicle price. It’s not necessarily bad form for the buyer to tell the car dealer up front that he’s strongly considering financing the car through the dealer – and then, later, saying, “I changed my mind,” after negotiating the purchase price.
“The buyer CAN get a better deal if he does that,” concedes Bill, “because all along, in that scenario, the dealer is maybe knocking something off of the top of the purchase price thinking he’s going to get some interest out of you on the financing.”
Finally, confirms Bill, “It’s OK to say you’ve been to other dealers, because cross-shopping between two dealers is always a good idea. From the dealer standpoint, customer service is what separates one dealership from another dealer who sells the same brand. Some customers are willing to pay more money if they were treated right during the purchase process, because that’s a pretty good indicator that you’ll also be treated right later on, when you come back to have your car serviced or repaired.”
Source : AutoBlog