How To Buy A New Car

HOW TO SHOP FOR A NEW CAR

Never Go Unprepared
This is rule #1. If you are to be successful in buying a new car at the best price, you must first spend some time researching the vehicles you want to consider buying. That means finding out the latest drive reports, the safety record of the manufacturer, the reliability record, information on crash tests, past recalls, customer satisfaction reports, pricing information, rebate and dealer incentives, etc.

The Internet is a great place to start, as well as your local bookstore/library. The Internet is a wealth of free information, but at times, can be confusing and contradictory. It is not the only source of good information on autos. A few well-spent bucks at a well-stocked magazine rack can buy you lots of information and give you the upper hand when you go car shopping.
Never Go to a Dealership Alone
Going to shop alone can be OK if you have a strong will, but good car sales people will pull every trick they know to get you to buy a car that day. A companion can often keep you from succumbing to these pressures. The pressure to buy can be so strong that it may be hard to resist if you’re alone. A good car sales person will be able to overcome almost any objection you have. If you say your spouse must give their approval, the sales person will ask "..can they be reached by phone?" or "..could they come down now to look at the car?" A pal who is with you can support you and take some of the pressure off.
Never Believe What You See Advertised in the Newspaper
Use newspaper ads as a guide for car prices and dealership promotions, but be sure to read the fine print on the ads that look too good to be true. They are. The $299 per month BMW sounds terrific, but the fine print reveals that it requires a down payment of $12,000 and a balloon payment of $29,000.

One useful thing you can do with ads is pit one dealer against the other. If one advertises that their prices can’t be beat; challenge it. Get a price from one and take it to the other dealer. You’ll eventually get a good price if you are persistent, forceful and have the time to pursue it.
Never Buy the First Time You Look
You will never get the best deal on your first visit to a dealership. You can let the dealer know that his price is not good enough by leaving without buying. Once you’ve done this a time or two, then you can begin to believe that you are getting a good price. You’ve got to work the dealers.
Never Let Your Emotions Take Over
Always take your time and let reason rule. Be sure that you are buying the right car for you and your family and not for your ego. A man who commutes back and forth from his Round Rock townhouse to his downtown office does not need a __ Ton Crew Cab Dually Pickup. His ego might need it; but it’s not a good choice for the use it will get.

Now admittedly, car buying is often an emotional decision, but it can be controlled if you logically decide what you need and can afford before you venture out to your local dealer.
Never Go to Only One Dealer
You will have the best bargaining power if you pit one dealer against the other. Get prices from more than one dealership and let each one know what you are doing. If you are buying a Ford or Chevy this works great. If you’re buying a BMW or Lexus, this will take a lot more effort because you’ll have to go out of town to get other prices.
Never Start Negotiating at the List Price
Don’t let your sales person begin negotiating from the "sticker" price, or MSRP. You are at a distinct disadvantage if you don’t go to the dealer armed with invoice price information on the models that you are interested in. Don’t work from the sticker down; work from the invoice up.
Never Spend More than an Hour in a Dealership
When you go to a dealership to shop for a new car, have an appointment about 1 hour from the time you arrive so that you don’t get caught in the keep-em-here-til-they-buy trap. This trick will often get someone to buy when they might not have otherwise. It’s a stamina game. The longer you stay, the more you let your defenses down, and the more likely you are to say "yes" to buying that day. Think of it as a hostage situation.
Never Buy the First Week of the Month
This is generally a good rule. The real push at all dealerships is at the end of the month. The dealership is trying to meet their goals; the sales manager is trying to meet his sales goals; and each sale person is striving to meet different levels of sales to obtain bonuses. They all are especially motivated at the end of the month to meet their goals to fatten their pocket books.

However, there are often deadlines for bonuses during other times of the month, even in the middle of the month. And the end of the month can often be extended for a few days into the next month, which makes those first couple of days of a new month a very good time to buy a car.
Never Go Buy a Car Without Financing in Hand
Have your financing already in place when you go to shop, or at least tell the sales person that you have your own financing. If you have to, make it up so they won’t concentrate on your credit situation. You’ll then have the upper hand when they tell you that the dealer can easily finance your new car purchase. You will have a "loan" which they will have to match. This puts you in charge, not them.

Why does the dealer so desperately want to finance your car? You guessed it. They make a lot of money when they finance your car. In fact, they usually make more profit on the financing than what they make on the car itself.

You can usually get a better interest rate at your local credit union or local bank. Many manufacturers do have attractive loans that result in lower monthly payments, but often these are balloon payment loans or leases and can be OK if you know what you are getting into.
Never Buy without Driving the Car
Seems like a simple and obvious rule, but you’d be surprised how many people don’t drive the exact car they are buying. They assume that the one they drove is identical except for the color. Not so. Every car is different, so be sure that you carefully inspect the car or truck you are buying because a dealer can pawn off a damaged "new" car if you don’t carefully inspect "your" car.
Never Take a Car Home that You Don’t Intend to Buy
Don’t fall for the old "take-it-home-for-the-night" trick unless it truly is the car you have decided to buy, and you have already negotiated the best price.

Once the sales person has got you driving that new car, your negotiating position has been weakened considerably. You’ll now stop comparing prices, and you’ll lose your strong will to negotiate a hard bargain for fear of losing your new car. The dealer knows that once you are driving that beautiful new car, you have been taken "out of the market."
Never Buy the "Hot" Car When it First Hits the Showroom
Being the first on your block to own the new Volkswagen Beetle may be fun, but it’s not financially smart. You’ll pay way too much and may be buying a car that needs the technological and mechanical "bugs" worked out of it. (No pun intended). The first year of many models can have problems that only get fixed in subsequent years.
Never Be Ignorant of What Your Trade-In is Worth
Dealers have lots of games that they can play with your trade in, so at least be aware of what the Kelley Blue Book or NADA says your car is worth — both the wholesale and retail value. You can find these on the Internet, your local bookstore or ask your local banker.

No matter how nice your old car is, a car dealer will never give you the retail value for your car. The best you can expect to get is a little above wholesale or "loan," and often they will offer you less than that. The reason is that they can go to the dealers auction and buy the same model for wholesale, so why pay you more than that unless the dealer is making a large profit on the car they have sold you.
Never Mention Your Trade-In Until You’ve Negotiated Your New Car
Even if you have every intention of trading in your old car, do not tell your sales person your intentions until you are satisfied with the price you have negotiated on your new car. You are at a disadvantage if you try to negotiate both your trade in and your new car at the same time. It’s too easy for the dealer to obfuscate the real price of both if you negotiate them together.

Some experts recommend that you negotiate the value of your trade in first and then the new car. That’s OK, also. The point is to keep them separate.
Never Take a Dirty Trade-In to Be Appraised
Always have your trade in washed, waxed and detailed. It can mean hundreds and even thousands of dollars to you. A $100 detail job will more than pay for itself, and even a $29 super wash will make a difference. Dealers will tell you that they can see through this, but a shiny, freshly waxed trade in makes a good first impression and a big difference in the amount it will bring. Make the effort.

If you end up selling your trade and not trading it in, this is especially important.
Never Assume That Selling your Old Car Will Bring You More Money
If your old car is not that old and still worth a bit of money, it may be a better idea to trade it in to the dealer. The reason is that the sales tax (6.25% in Texas) can be a substantial amount of money on a new car. When you trade a car in, you are only required to pay the sales tax on the difference between the price of the new car minus the trade in value of your old car. This can be thousands of dollars, which means you would have to sell your old car for more than the tax difference to do better financially…not to mention the hassle of selling your car through the newspaper.

Example: New car price = $29,000. Sales tax is 6.25% or $1,812.50. The dealer offers you $18,500 on your trade in, but you think that you can get $20,000 on the open market. If you trade your old car in the sales tax is reduced to $656.25, or a tax savings of $1,156.25. So you would have to be sure that you could get this much more for your old car if you decide not to trade it in.
Never Buy a Payment
It’s a common mistake that we all make — buying a payment not a total price. First you must understand what the payment represents, and then you can see whether it fits into your budget. It’s natural to concentrate on the monthly payment, but it can mean trouble later if it means you will be upside down in your car for the entire length of the loan.
Never, Never Be Pressured
A successful car sales person will trap you so your only way out is to buy. High pressure means success in the car business, so do everything you can to avoid this situation. Be strong. Don’t give in. Drag a friend along for support. Have an appointment somewhere else. Get an emergency call on your cell phone. Get paged by your spouse or boss. Do whatever it takes to avert the pressure of a sales person.
Never Relax When You’ve Got Your Price
The #1 mistake that you, as a car shopper will make, is to relax once the dealer agrees to your price. When you think you’ve won, the dealer has just begun. He’s now going to try and make up for any money he gave away in the car price game.

His next step is to sell you add-ons that will drive his profit straight up. Sealant packages, alarm systems, window tint, pinstripes and lots of other dealer-installed options are options from which the dealer can make a lot of profit. A $300 alarm cost the dealer $50.

The next trap is the finance office. You may not know it, but when you step into the finance office to sign your "papers.," you are in great danger of having money sucked right out of your pocket and never know it. You think the finance of a new car is straightforward. It’s not. It’s a snake pit. Be careful.
Never Buy Credit Life Insurance From a Dealer
One of the traps that is offered to you in the finance office is a credit life insurance policy that will pay off your car if you were to die. It sounds good, but it’s very expensive and usually has constraints that may not work the way you are led to believe. A much better way to achieve the same result is to take out a regular term life insurance policy. It’s much less expensive and has more flexibility in paying off other debts and expenses, not just your car.
(Almost) Never Buy the Extended Warranty
The extended warranty that all dealers will try to sell you can be useful, but you’ll always pay too much at a dealership. Generally, you will be better off not to buy the extended warranty. Often times, the warranty work you need will not be covered by the policy that you bought; and sometimes, the work will be disallowed if you haven’t done all the scheduled maintenance work.

For those who put a lot of miles on a car, an extended warranty can pay for itself if you’re unlucky. So, if you decide to purchase one, read it carefully and don’t accept the first price that you’re quoted. The price is negotiable, and you can usually get it for less.
Never Buy the Tint, Sealant, or Alarm
The "extras" that sound so necessary for your new car are always over-priced at the new car dealer. Some of them, including the sound deadening and sealant packages, are not only expensive, but also totally unnecessary. In most cases, you can get much better prices and service if you’ll use a local business provider.
Never Sign if You Feel Uncomfortable
Listen to your gut feelings. If you feel uncomfortable in any way, ask for some time to review the documents that you are to sign, or ask friends and family what they think about your impending purchase. Try to find out what it is that is making you feel uneasy.
Never Sign Anything You Haven’t Read
A rule that applies to many things in life applies here also — READ EVERYTHING BEFORE YOU SIGN ANYTHING. Yes, it’s hard to discipline yourself to do this when your new car is waiting outside, but you want to make sure you know what you are getting into. Often in the excitement of getting that shiny new chariot, we suspend rational rules and get ourselves into trouble.
Never Be Ignorant of What Your Finance Terms Are
Many, many car customers sign financial documents for which they do not understand the terms… the interest rate, pre-payment penalties, consequences of non-payment and many other elements.

It is not uncommon for a finance manager to "bump" the interest rate from the one that you were quoted to a higher one and never tell you. There are many tricks that can be played when you get to the finance office.
Never Agree to a Lease Until You Thoroughly Understand It All
Leases can be very complicated, and you should make sure you understand all the ins and outs before you sign up for one. They can be a good deal for the right person, but they often have clauses that can cause you pain at the end of the lease. For instance, if the lease company that actually owns your car is in a state where personal property is taxed, guess who gets the tax bill at the end of each year? Yep, you. Surprise Christmas gift.

Be careful and don’t sign a lease agreement until you’ve read it and understand it. Ask questions of the finance person. They won’t lie to you if you ask the right questions, and there are new laws requiring the dealer to reveal in simpler language the terms of the lease.
Never Sign a Balloon Payment Loan you Don’t Understand
This rule relates directly to the one before. A balloon payment loan is a relatively new instrument that can be very good, but you need to understand the terms of the loan before you enter in to it. Make sure that it fits the needs you have. It can mean lower payments, but it also means that there’s a big amount due at the end of the loan.
Never Be Afraid To Negotiate Anything When You Buy a New Car
Everything is negotiable when you car shop. Don’t accept what the dealer or a sales person tells you. If you have a creative idea about how to solve a problem, propose it and see what happens. The best deals are often the ones with a strange twist that was incorporated to satisfy a customer’s unique needs.