Getting a new automobile is one of the best emotions in life, I must say.
However, it is also one of the most significant financial transactions most people make.
Get a decent bargain and you’ll save a lot of money throughout the life of the vehicle. Make a terrible transaction, and it will haunt you for years.
It may even interfere with the next automobile you purchase!
You may avoid this consequence by planning your new automobile purchase ahead of time.
And, one of the most important variables in getting a good bargain on a new (or new to you) automobile is how you decide when to buy it.
In this piece, we’ll address these questions and share our best ideas for getting a good price on your next automobile.
When Should You Buy a New Car?
First and foremost, some periods are more advantageous for purchasing a new automobile.
The ideal times to buy a new automobile are on weekdays, during holidays, and around the conclusion of the model year.
However, obtaining the greatest bargain on a new automobile involves considerably more than just the purchase date. When buying a new automobile, keep certain times of year in mind and follow the suggestions below to ensure you obtain the best value possible.
Don’t even consider buying a new car if you’re “upside down” on your current car.
What It Means to be Upside Down
If you’ve never heard the word “upside-down,” you’ve probably never worked in the automotive industry. Everyone who does understands exactly what it is.
It’s a new automobile buyer who owes more on his existing vehicle than it is worth.
For example, “Steve” intends to purchase a new automobile. His current vehicle is worth $10,000, but he owes $13,000 on it. It might be because he doesn’t know how much his automobile is worth but believes it’s at least equivalent to the loan.
It’s also possible that he has no idea.
He goes to a dealership, hoping for the best, and lo and behold, he gets just that. Or at least he receives the response he wants. That’s the dealer informing him that he may get a fresh new automobile.
A vehicle loan shortfall may or may not arise. Regardless, Steve’s current automobile is plainly upside down. Here’s how this will unfold…
After the salesman confidently assures Steve that, yes, he can purchase a brand-new automobile, the procedure proceeds.
It’s almost as if the insufficiency does not exist.
This is because the dealer has the ability to make the shortfall disappear. Or so it appears. Clearly, Steve has no down payment on the new automobile. Not an issue. And if he trades in his existing vehicle, he will have a deficit. There is no difficulty there, either!
Steve wants to buy a $30,000 automobile and expects to get 100% finance. But that is not exactly what will happen.
How Car Dealers “Magically” Remove Loan Deficiencies
Sure, the dealer will provide Steve with 100% finance on the $30,000 vehicle. However, they will add the $3,000 deficit from the previous car to the new loan. When Steve drives off the dealer lot with his $30,000 automobile, he’ll be carrying a $33,000 loan.
Do you see what happened? The dealer just rolled the shortfall from the old loan into the new loan! Steve may be aware of what is going on, or he may not.
All he knows is that he got to drive away in the new automobile of his dreams. In the end, he is still upside down, but this time on his brand-new automobile.
Here’s a crucial takeaway:
Being upside-down in a car is almost a lifestyle. Once you’re upside down in one automobile, it transfers to the next.
Usually, the shortage grows a bit larger each time. In principle, you could live your life upside down in your automobile. The upside-down buyer is always at a disadvantage when negotiating with a vehicle dealer since he relies on the dealer to bail him out.
Moral of the Story:
You can’t afford to buy a new automobile if your present one is upside down, regardless of what the salesperson says.
Know the value of the car you want to buy (and stay inside your budget!)
Every new automobile buyer should be aware of this, especially with the abundance of materials available online.
Kelly Blue Book and Edmunds.com are two of the most reliable sources. Both will offer you with accurate new-car prices in your area.
But it’s especially critical if you’re purchasing used.
After all, used-car prices are determined by highly precise characteristics such as the vehicle’s age and mileage, as well as extras and wear-and-tear. Before you begin bargaining on the automobile, you must first determine its approximate worth.
The objective of this stage is to ensure that you are a knowledgeable buyer. whether you know the vehicle’s estimated worth, you’ll know right away whether a dealer or seller is attempting to overcharge you.
Never assume the dealer has your best interests at heart.
After all, he wants to obtain the most money possible for his automobiles. Your goal is to ensure that he doesn’t, at least not in your situation.
If you truly want to be prepared, print out the worth of the automobile you wish to buy. Be prepared to use it as a negotiation tactic.
Few factors compel a vehicle dealer to behave better than acknowledged third-party documentation.
Know the value of the car you want to trade in (Hint: Never accept the first offer).
The same is true for the automobile you’ll be trading in. You won’t know if you’re receiving a fair price if you leave the trade-in to the dealer’s discretion.
You probably won’t; vehicle salespeople know how to spot a weak hand and will take full advantage.
Do not allow this happen to you.
You may avoid the problem by determining the worth of the automobile you wish to trade in. Once again, you may accomplish this by looking up the car’s worth on Kelly Blue Book or Edmunds.com.
At the same time, be mindful that used automobile appraisals, which will be your trade-in, are more subjective.
For example, the car’s condition is a huge grey zone. You may assume your automobile is in fantastic condition, but the dealer may say it is in ordinary or even fair shape.
When visiting valuation websites, be as objective as possible about this. Each asks you to rate the state of your vehicle, but you must be as honest as possible.
Bring the automobile to a mechanic and get an appraisal of its condition: outstanding, good, average, fair, or bad. The difference in each categorization might be thousands of dollars.
If you evaluate the condition correctly, the valuation sites should provide you with a fairly realistic value for your automobile.
Once again, print the results – from both sites if required – and have them ready to show the dealer when the pricing discussions begin.
You may even sift through local Craigslist advertisements to identify comparables if necessary.
Better still, have your down payment before visiting the dealer.
Advantages
Unless you have enough money to put down on the new automobile, you’ll have to sell your present one yourself.
This gives you two advantages:
It will eliminate the down payment hurdle,
Remove the need to rely on the dealer for trade-ins.
#1 makes you a stronger buyer.
#2 places the dealer in a weaker position. It may not be as handy to sell your own vehicle, but it is more significant than it appears.
When you have to rely on the dealer for a trade-in/down payment, you are allowing the dealer to choose how much it will be.
Assume your investigation shows your automobile is worth $10,000. You have a loan of ,000 on it.
If you sell the automobile, you may pay off the loan and walk away with ,000 for a down payment on your next vehicle.
If you trade it in, the dealer may determine it’s only worth ,000. That leaves you with only $1,000 to put down on your next automobile.
The shortfall will be made up by a larger loan, which will have a higher monthly payment.
You owe it to yourself to try and sell your car on your own.
If you’re in a hurry, you can sell it to another dealer as an individual transaction. CarMax buys automobiles this way and pays cash.
You’ve probably seen their advertising on TV recently, with the WBYCEIYDBO phrase – “We’ll buy your car even if you don’t buy ours”.
You won’t earn as much as if you sold it yourself, but it will save you from having to sell your old car and buy a new one from the same dealership.
The dealer has less control, thus you have more.
Get your financing lined up before you go to the dealer.
Why You Should Be Approved First.
Financing is a key profit source for auto dealers, and you may use it to your advantage.
Before you visit a vehicle dealership, seek a loan pre-approval from your bank or credit union.
In fact, browse around at several banks and credit unions to discover where you can get the greatest offer.
There are four reasons to do this:
Having your finance in place before you step in the door provides you a better bargaining position with the dealership.
It takes away another aspect of the sales process from the dealer, diminishing their position.
It stops them from putting you in a high-interest subprime loan, boosting their profit on the transaction.
Finally, it requires the dealer to offer you a better price than your bank or credit union, assuming one is available.
How to Get a Loan for Your New Car.
There are several options for financing your new automobile, ranging from going to your local bank or credit union, as previously indicated, to shopping online.
One of the best methods to ensure that you obtain the best interest rates and loan available is to utilize a site like LendingTree to compare all of your alternatives.
Why Should You Avoid Dealer Financing?
At the same time, resist the allure of low-interest dealer financing. The advertised rates are “teaser” pricing, offered exclusively to the most eligible consumers.
If you are discovered to be anything less, the interest rate may be far greater than the advertised rate. Finally, dealerships usually provide an option between a very cheap loan rate and a cash back offer.
If you currently have a low-interest loan from your bank or credit union, you can cash out and reduce the price of the automobile. You can calculate the figures, but it is typically in your benefit to accept cash.
Speaking of financing, if you have credit problems, get them fixed!
What Credit Score Do You Need to Purchase a New Car?
If you’re asking for a vehicle loan from a bank or credit union, they want strong credit.
To qualify for a vehicle loan, you will need a FICO score of at least 650.
The difficulty arises when you are unable to qualify for regular bank or credit union automobile financing. If you can’t, the vehicle dealership will most likely arrange a subprime loan.
Car sellers adore these loans. As previously said, they make a lot of money on them. They are only too eager to relocate you into one.
If you are unable to obtain a bank loan, this is most likely where you will end yourself.
Subprime vehicle loans are significantly more costly than bank and credit union loans.
How To Check Your Credit Score
The first step in establishing if you’ll be able to finance your new automobile purchase and improve your credit score is to check it! There are various alternatives for obtaining and boosting your credit score.
How a Bad Credit Score Can Affect a Car Loan
Real-Life Case Study: I know a young man named Ed who found himself in need of a new automobile right away. He had smashed his last automobile and wanted to get it replaced.
But he had a credit score of about 500. No bank or credit union would offer him a loan. However, the dealer was only too eager to offer financing. It was a $10,500, 72-month loan at 22.99%!
The monthly payment was around $265. Not only that, but he was slammed with a slew of add-ons, including a prepaid maintenance plan and gap insurance, both of which he was informed were required.
It’s how the auto industry works when you’re playing with a poor hand. Ed’s credit score improved by more than 100 points after 18 months. He was able to refinance the debt with his credit union.
At that moment, the amount was reduced to around $9,000. He took out a 36-month loan for 3.99%, which was 19 points lower than the initial subprime loan!
The monthly payment remained about $265.
However, he reduced the loan term by 18 months.
In doing so, he saved over $4,800 over the course of the loan (18 months x $265). This actual anecdote demonstrates why it is critical to clear up your credit before purchasing a car.
Also, if you can’t do it ahead of time, do it as soon as possible after purchasing the vehicle. Subprime vehicle loans not only offer absurdly high interest rates, but they also tie you in for longer than the car is expected to endure.
Did I mention the 72-month loan was for a secondhand car?
Include all costs! (Not Just The Sticker)
Add-Ons That Affect Cost
When purchasing a new automobile, do not focus solely on the buying price.
That is never the true price.
When you acquire a car, you will incur a number of additional expenses, which will decide the ultimate price.
Add-on charges may include:
State sales tax – If your state imposes a sales tax on motor vehicle purchases, it might have a significant influence on the car’s ultimate price. For example, if you live in a state with a 7% sales tax and buy a car for $30,000, the sales tax will increase the total price by $2,100. Some states levy additional county and municipal sales taxes.
Simply explained, document fees are additional expenses added by the dealer to the final purchase price. They can have a variety of names. Some states regulate these fees, while others do not. Where they are enforced, they can add several hundred dollars to the total purchase price.
All states impose DMV fees. They can be registration or title transfer fees, which vary by state. For example, Illinois costs between $101 and $114 for registration, plus $95 for the title price.
Let’s take a brief look at how these fees impact the ultimate purchasing price:
New automobile purchasing price: $30,000
State sales tax (6%): $1,800.
Documentation fees: $500.
DMV costs are $300.
The final sale price is $32,600.
As you can see, the add-on fees raise the total cost of the vehicle by $2,600, or nearly 9%. That’s only a ballpark. In certain states, it may be lower, while in others it may be significantly greater.
Do Not Forget About Insurance.
Do not forget to include auto insurance in your estimates. Insurance, like vehicle finance, should be carefully considered.
Get insurance quotes here and choose the finest vehicle insurance alternatives for you.
The cost of owning a car varies depending on the vehicle.
While we’re on the issue of pricing, consider the continuing costs of owning a vehicle.
The Automobile Association of America (AAA) estimates the yearly cost at $8,469, or $706 each month. That’s only an average.
It varies from $6,354 a year for a small sedan to $10,054 for a pickup truck. These figures consist of the following expenses:
Depreciation (the amount your automobile loses in value each year you possess it)
Maintenance and Repair
Fuel
Tires
Car Insurance
Everything but auto insurance will be roughly the same across the country. Car insurance varies greatly by state.
For example, while the national average for vehicle insurance is $1,682 per year, it varies from $864 in Maine to $2,394 in Michigan. These are only averages.
Premiums might also vary greatly depending on the kind and price of the car you’re buying. That is why it is essential to obtain a car insurance estimate from your insurance provider before purchasing a new vehicle.
Trading in a compact automobile for a pickup truck might result in an annual insurance rise of more than $1,000.
You’ll need to know this before making the transaction.
Timing is Everything: When to Buy a Car
Now that you’re ready to acquire a decent bargain by the statistics, let’s talk about when you should buy.
This is really crucial.
Certain seasons of year, or even days of the week, are more likely to result in a better offer.
Here are some of the finest times to purchase a car:
The End of the Model Year.
The fiscal year for car manufacturers concludes on August 31. That’s when they change the model years.
By August, they want to have last year’s merchandise off the lots. To move the autos fast, they frequently offer discounts.
After all, they need space for new models. You can generally get nice prices right into October, when they’re attempting to clear out the remainder of the older models.
Holidays
Dealers frequently have big deals around holidays, notably Memorial Day, Labor Day, and Independence Day. Black Friday is another major event.
It has two advantages: one, it falls on the Thanksgiving holiday weekend, and second, vehicle sellers compete with Christmas shoppers for sales.
However, the largest holiday benefit may occur between Christmas and New Year’s.
At this time of year, Christmas parties and travel take precedence over automobile purchases. At the same time, dealers are apprehensive about hitting their year-end sales targets. Dealer bonuses may also be contingent upon hitting particular sales targets.
This is a period of dealer desperation, which gives you a significant edge as a buyer. But what if you need one sooner than the holiday season?
When should you go?
Weekdays
People who work throughout the week are more likely to shop for automobiles on weekends. Dealers are typically more eager to make deals on weekdays.
Mondays and Tuesdays are especially excellent since they are quiet.
This takes us to the second point: you can really save.
When You Do Not Need A Car
If you buy because you need an automobile, you may be desperate. However, if you buy when you don’t need one, you’ll be in a better negotiation position.
You’ll be thinking in terms of dollars and cents (does that make sense?) rather than simply meeting an urgent need.
Leave Your Emotions At Home.
This one can be difficult to pull off. After all, purchasing a new automobile is mostly an emotional decision.
We’ve all heard the expression “you are what you drive,” and it influences our car-buying decisions.
It’s akin to buying a house in that you’re not simply purchasing a product, but also something that identifies you and your lifestyle.
You must distance yourself from that. After all, buying a car is primarily a commercial transaction. If your emotions are in charge (i.e., I HAVE TO HAVE THIS CAR), your business sense is not. This raises the likelihood of making a poor transaction several times over.
After the excitement of a new automobile wears off, the reality of the car loan sets in. Only then will you know whether you made a decent bargain. The time to do so is when you buy the automobile.
And that is why you must leave your emotions at home.
Car sellers understand how to manipulate emotions; in fact, they rely on it. (Nice pun, right?! I’ll see myself out.)
They can exploit your emotions to persuade you to spend more for the automobile than you should, to accept unnecessary extras, or even to lock you into an upside-down loan.
None of this can happen if you treat the acquisition as a commercial transaction.
You may have to leave something on the table, but you’ll feel much better about yourself a few months later.
Create Competition – Inform the dealer that you’re working with other dealers (even if you’re not).
Never go to a dealership and say you need to buy a car right now, from this dealer.
If you do, you are putting yourself at risk of having your pocket taken. Instead, let the dealer know you’re shopping.
Add a name or two for extra effect.
The goal is to make sure the dealer understands he is competing with other dealers for your business. They will appreciate you more and offer you a better bargain.
Go Easy on the Options and Add-Ons.
Dealers may easily increase the price of a vehicle with choices and add-ons.
Take cautious with this. You don’t want to over-improve a home, and you don’t want to overwhelm a car with alternatives.
Not only will they boost the price, but the car’s resale value may not rise by the same amount. Today, most automobiles come with option packages that include the majority of what you need.
It may be appropriate to add a few more as preferences, but don’t overdo it. Also, be aware that certain settings and add-ons provide little value or are unnecessary.
Credit life insurance, extended warranties (in addition to those supplied by the manufacturer), unique automobile colors or editions, and other treatments such as undercoating, rust protection, sealants, and fabric protection treatments are some examples.
All may quickly increase the cost of an automobile while offering very little value.
Bring Help.
Some people are born negotiators, but it’s reasonable to assume the majority aren’t.
If you aren’t, bring along a negotiator.
This is completely appropriate. You may invite anybody you want to a car purchase. You may also want to bring someone who is familiar with autos, especially if you are not.
The primary objective is to ensure that you do not enter the dealership alone. After all, the salesman you’re working with will not be alone.
She will have the backing of her sales manager, finance manager, other salespeople, and anybody else she requires to complete the transaction. If you have a more passive disposition, you will feel outnumbered and overwhelmed.
Bringing one or more of your own personnel levels the playing field. You can bring a strong negotiator or a vehicle specialist as an advisor, but don’t be hesitant to invite others simply because.
The idea is, the salesperson has a team; you must have your own.
At the very least, they’ll provide moral support.
But more importantly, they will be there during the heated bargaining period. They may even be there to prevent you from making a terrible transaction.
If the automobile buying/negotiating process has the potential to make you weak in the knees, this is a stage you should not skip.
There is true safety in numbers, even when purchasing an automobile.
Never, ever, be afraid to bug out.
This could be the most crucial car-buying technique of all.
Never feel compelled to complete the automobile purchase (some individuals do).
If you do not like the bargain being given, or if you are uncomfortable for any reason, simply stand up and go.
Never let a vehicle salesperson bully you into making a bargain, or make you believe you’ll never obtain a car if you don’t buy this one.
There are over 18,000 vehicle dealerships in the United States, thus you do not need this dealership or this salesman. They are aware of this, but by standing up or threatening to leave, you are indicating that you are also aware of it.
Some dealerships and salesmen are skilled at making you believe you need them more than they need you. However, the precise reverse is considerably more accurate.
This is why it is ideal to shop when you do not require a vehicle. You may tell them you’re here to gather information and won’t be buying a car today.
You may now take the decision home and sleep on it, eliminating buyer’s regret.
Maybe you won’t be able to employ all of these tactics while buying your next automobile. No issue; utilizing just a few may make a significant difference.
When you buy a new automobile, you want to obtain the greatest car possible for the money you spend.
That should always be the end objective.
Unfortunately, when you buy a car from a dealership, you and the dealer become natural adversaries. You want to get the best automobile for the lowest price, but the salesman wants you to spend the most.
Your goal is to ensure that does not happen, which is why you must be prepared ahead of time.
Choose the perfect time to buy a car, do your homework, and get a killer price.
You’ll be glad you spent the time, not the money.
