Time To Buy a New Car
Here's one way to get a slice of all that bailout money that's being thrown around by the government: buy a car. U.S. automakers are desperately trying to stimulate demand, and there are remarkable rebates on some models says Bob Sullivan, of MSNBC’s The Red Tape Chronicles. To list a few: Chevy Trailblazer and Dodge Magnum, $3,000; Ford F-350, $3,500 ; Hyundai Veracruz and Nissan Titan $4,000. But that's nothing, says Edmunds.com Consumer Advice Editor Philip Reed. A friend of his recently bought a Chrysler Town & Country minivan for $12,000 off MSRP, after all rebates, dealer incentives, and downright price slashing occurred.
“You can get outstanding deals,” Reed says. “If you need a car, and you are secure in your job and have the money, then yes, this is a great time to buy a car.”
Of course, you might notice something in common about all those cars just mentioned: none of them would be mistaken for a Toyota Prius at the gas pump. In other words, huge rebates are available on cars few people want.
There are reasons to be anxious about buying a new car. What  if the manufacturer disappears? It’s very unlikely for an automaker to go under so completely that it wouldn’t be able to honor warranties. It’s more likely that individual brands – like Saturn - will be shut down, with warrantee coverage sliding to other brands. Parts supplies shouldn’t be a problem either, given the similarity of engineering among cars, and the availability of aftermarket parts. But consumers who cherish the convenience of having repair work done by a nearby dealer should think twice before pulling the trigger. There are no guarantees that dealership will be in business three years from now.
Still, the deals are so aggressive, anyone who’s considering a car purchase should really test the new-car market. Before we get to the down-and-dirty details you need to protect yourself from the shark-infested waters of showroom, here’s a few basics on how to save money.
How to buy new
Sadly, getting a price quote is only the beginning of the car buying process. You might not find that much variance in price, once you show the dealer you are a savvy buyer whose done Internet research. Dealers will recognize you and lure with a low price, then hope to cash in on your purchase by larding up your deal with extras and hidden fees.
"If you get seven quotes, you'll likely have five that cluster in the middle, one that's very high, and one that's very low," Reed said. Now you will have a good idea of the real market value of the car you seek. The low price might seem tempting, but it should raise alarm bells. But even if you go with an average-priced dealer, there are many traps on the way from e-mail quote to your driveway. Here’s how to survive the experience and get a good deal:
1.) Purify the negotiation
The most universal tip for saving money buying a car is to show up at the dealership with your own money -- buy the car with cash, or with a pre-arranged loan from your bank. The dealer will hate you, because they make money on those loans, but you don't care. A car purchase is already an incredibly complex transaction, and something you do only every five years or so; don't muck it up with another complex transaction like a loan. Paying "cash” will make your negotiations simple. You only haggle over the price of the car. From the moment you arrive until the moment you sign the contract, make sure all your focus is on the price of the car and not on any side deals, like loan interest rates or extended warranty discounts.
When you settle on a price, make sure it's the "out-the-door" price. Dealers know smart buyers are arriving with Internet printouts that claim to reveal "invoice" prices, and force them to offer rock-bottom sales prices. To counter, they tack on fees for marketing and other intangibles, or they over-charge for license and tags. Some of these fees are legitimate; just make sure you know what they are when you are negotiating and keep the conversation about your out-the-door price.
If you plan on trading in your vehicle, don't bring that up until you've established the price. Remember, you want to keep the conversation simple. If you combine trade-in value, financing, and price all in one conversation, you will give the dealer too many weapons for baiting and switching -- what the dealer giveth in trade-in they'll taketh in interest rate, for example. If you can, sell your trade-in privately. You'll always get a higher price, and Craigslist makes it easy.
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This tip leads into another hard-and-fast rule for price negotiating: Never talk about monthly payments. Always talk about the total price. Dealers win when you talk about monthly payments – burying hidden costs in those payments is their most common trick. Many consumers who think they’re paying $369 a month for four years end up happily leaving the dealership paying $349 for five years, only to have an embarrassing conversation at a cocktail party six months later. This is the chief reason to show up with your own money or loan. When the sales rep says, “What can you afford per month,” you say, “What’s the total price of the car” and move on.
Finally, if you hear anything you don't like, you can employ the most important bargaining tool you have: walk out. Some people believe that if you haven't walked out of a dealership at least once, you haven't really bargained for your car. Keep in mind that if you're buying a new car, there will always be another one just like it somewhere else. And despite what the salesman says, the price you're getting is never only “good for today.”
2. Give yourself time
This seems obvious, but it’s not. Dealers brag about how fast they’ll get you into a new car. You might be busy running back and forth to soccer practice. But buying a car is the second-biggest financial decision most people make, and it deserves sober reflection. Take at least a full weekend to shop and *not* buy. One helpful trick: Find out if a local dealership is closed on Sundays, or another day of the week, and walk the lot on that day so you can survey cars without being hassled.
3. Avoid extras
This sounds like point No. 1, but it’s the most common error car buyers make, so it deserves separate mention. Reed’s friend, who saved $12,000 on a Chrysler car, gave part of that savings back by buying a $2,000 extended warranty from the dealer. “The car’s power train already had a lifetime warranty,” he noted. It’s easy to get sucked into warranties. Sales reps just pack consumer loans with them. You might hear, “Oh, it’s only $15 extra a month.” Some dealers even hint – or lie – that they are required by banks. They’re not, and they can be purchased separately. Extended warranty sales abuse has been so extreme that several states, such as Washington, have passed separate consumer laws that give buyers “regret” rights. Extended warranties bought at time of sale can be voided for seven days after purchase. Other extras, like undercoating protection, are usually unnecessary and can turn a good deal bad very quickly.
4. Take the cash
Zero-interest loans sound like a deal that’s too good to pass up. Often, you should. When offered the choice of rebate or low-interest financing, you should almost always take the cash. For starters, it gets you out of the car dealer’s financing office, which helps you avoid the booby traps there. And generally, the math works in favor of applying the rebate to your down payment and using your bank loan instead. Bankrate.com offers a calculator to help you decide. But generally, take the zero-interest deal only when you are borrowing a lot (more than $20,000) and the rebate is small.
5. Its OK to ask about dealer financing…at the end.
When you get through all the steps of negotiating, and have the final out the door price, it’s worth asking the dealer if it can beat the financing deal you already have from your bank. Often, the dealer can offer a better rate. But before you even ask the question, make sure you know exactly what your payments and terms would be with your bank loan. Using that comparison is the best way to make sure you aren’t missing some hidden cost that’s shoved into your dealer loan
6. Take a friend
When the time comes for doing the deal, another pair of eyes really  helps. It’s impossible for a mere mortal to follow everything that’s going on when you are sitting in those dealership back-rooms surrounded by the sales posse. Generally, at that point, the buyer is worn down and just wants to go home. It’s very helpful to bring a dispassionate friend who can ask extra questions on your behalf and act as your own posse.
7.) Price isn’t everything.
Finally, you don’t always have to go with the absolute lowest price. Many shoppers get hung up on those last few pennies as a point of negotiating pride. That’s silly, and can hurt in the long run. I’d happily pay $100 more to buy a car from a dealer I trusted, and who didn’t make me miserable during the purchase process. There’s a high likelihood that you will end up back at the dealership at some point in the first two years – to get a small repair, or to ask a question. At that point, you’ll be glad you purchased from a good dealership. |
