When that time comes along when you need to replace your car, you want to save as much money as you possibly can. After all, buying a car may be the biggest purchase you ever make (other than your house that is) and that means you’re spending thousands of your hard earned dollars. Yet sadly, like no other purchase does so dramatically, the minute you drive away it decreases in value.
When shopping for a car you can always haggle over prices and you may be able to save a few hundred dollars. You can shop around and compare the prices too in order to save. But how else can you save big money on your next car purchase?
Think about Certified Previously Owned (CPO)
Most of us shop for a car with a specific model and make in mind before we even set foot out the door. If you're looking for a specific model, why not consider a lightly driven completely reconditioned and warrantied used version of it?
CPO’s are now offered almost everywhere the big name dealers operate and they are head and shoulders above the traditional “as is” used car. The “like new” CPO’s can save you thousands off the price of a brand new car. They also will come with extras that many brand new cars come with such as satellite radio free trials and lifetime oil changes.
Almost every well know brand including Ford, Chevy, Hyundai, Lexus, Audi, and Honda have great selections that will absolutely save you money over a new car.
Make the Most Out of Your Old Car's Value
Should you trade in your old car for the new one you seek? Should you sell it privately on the retail market or sell it outright to a new or used car dealer and then buy your replacement vehicle? These are the tough decisions you face and each has some advantages and disadvantages.
Trading in your old car when you deal for the new one is simple and easy. But you have to be careful here because while you're agreeing on a price, it may be actually costing you money on the other end. Car dealers are in business to make money, and they will always try to lowball a trade because they will be looking to move that car out and sell it for a profit.
If you do want to trade it in, make sure that you negotiate the price on your purchase before you discuss the trade. You can say that you are going to keep that car or you have a friend that’s buying it to avoid that discussion and be sure you’re getting the best price on your purchase. After it’s all agreed to, you can ask about the trade in value.
If you're not happy with that process, consider taking your car to another dealer and look to sell it outright. See if that offer is better than the one you heard previously before you do anything final. One last thing is that if you sell privately to another dealer, you have to collect sales taxes and pay those to your state when you complete the transaction. You will then be paying a higher price when purchasing a car because you won’t be using your car as a trade to reduce the price and that will cost you more in your sales taxes on that transaction.
If that doesn’t appeal to you, try selling it yourself to a private party. This usually produces the best price, but it comes with your time and effort and perhaps some cost in making it more appealing like cleaning it up or putting in some repairs. Whatever works out best for you, consider that time is also money in this process.
Buy from Dealer Inventory
You’re excited to be getting that new car and of course in your head you are thinking about loading every creature comfort into that baby. Wrong!! Do you really need all that stuff which by the way can cost you up to 50% more than a mid-level version of the same car without all the trimmings? Why buy the trim that won’t hold up in the long term value when you can get the model you want at a much better price without those unnecessary wants?
Buying from stock will save you thousands of dollars in a number of ways. First, the dealer is highly motivated to move his inventory off his lot which he has already paid for. He will negotiate much more from that weakness. Looking at the inventory gives you real wiggle room.
Secondly, you don’t want to buy something you really love, but get stuck with a ton of extras that are costing you tons of money. If you heading to a large selection you will find the colors and features you need and want amongst the lot. Or, if not, ask the dealer to see if another of the car dealers around your area has the car you want with the features you want. Dealers do that kind of thing upon request for each other all the time and it can work for you, so just ask!
Beware the Mysterious F&I Office
The finance and insurance office is quicksand along the pathway to your new car for sure. First, know for certain that this office is a huge profit maker for the dealer, huge! Be an informed customer and know your credit situation before you go in to talk to anyone. If possible, and you can do it, arrange you own credit at better rates than the dealer advertises and get approval before you go shopping. Most pre-approvals last for several weeks to allow you to find the car you want.
If and when you go in to speak with the finance department, listen and take notes, read every document including the fine print, and ask all the right questions. If there are rebates offered on any vehicles, take some time to do the math. Sometimes the finance rates and the rebates can change the deal around entirely so do the math before you sign to make sure you’ll get the best overall deal, not just the lowest monthly payments (if you're financing). By the way, your credit rating plays a big role in the rate you will be charged, so rebates and low financing may not be offered to you if your rating is not at the required level.
Finally, don't bite at their offers of insurance or extended warranties. Compare auto insurance quotes yourself and extended warranties are rarely worth it.
Remember, buying a car is still very much like horse-trading and you can’t ever feel like there is a bottom price. Everything is negotiable. You will often see preprinted forms with the dealer prep fees on them when you are making a deal. Keep in mind that’s just a number they have printed on there for you to assume it’s not a negotiated feature like the price itself. Wrong!! It can be altered, reduced, eliminated and even if they don’t want to change the number itself, it can be deducted from the cost of the car. If they won't make any concessions there, consider walking away to another dealer. It can save you hundreds on that line alone.
Try also for fee oil changes and perhaps throwing in an extra accessory or 3. It never hurts to ask and if a few dollars of freebies on a huge purchase shuts them down, maybe you should consider going elsewhere. I have personally been halfway out the door when the salesman followed me outside and agreed to what I wanted. It can work.
Try Shopping on the Internet
You will probably want to go in for a test drive and that’s what you should do. But after that, you can do everything else online including negotiating the deal and financing. The online sales person is usually not on any commissions and is paid a salary and bonus based on volume. That makes him highly flexible and motivated to sell the car, way more so that a total commission guy whose pay is based on each sale individually. The internet guys, however, have usually proven themselves tough negotiators so just be tough yourself and you can win. Extra bonus here is that you don’t get dragged into the F&I department nor do you have to sit around while the salesman checks with the manager on your offer. Shop several internet dealers and play them against each other. Making them compete and haggle with you is a bit of role reversal, but that’s what they will do to get a sale.
A Few Last Tips
The best time of the year to buy has proven to be August to December for new cars. That’s when the new models roll out and dealer inventory must be moved. That doesn’t always work out for you the consumer, but you can use another approach as well for good timing. Try the end of the month because that's when the showroom sales people have the most pressure to meet their sales quotas and are most motivated. You can also try to negotiate if weather is a factor. Things like snow or rain will slow foot traffic and make the sales staff anxious to make a sale. By educating yourself with these ideas you have a real leg up. You should also check web sites like TrueCar, Edmunds, Kelley Blue Book, and NADA Guides for info on prices and what others have paid in your area for their car. Just compare apples to apples in all cases.
If you follow these tips to save money on your next car purchase, you'll have a huge advantage. Just remember, don’t ever go in with a set monthly payment on your mind and make that the criteria for you to buy. A salesman can make the numbers come out to any payment they like by extending payment terms (i.e. more interest payments) and making it appear very affordable. Stick to a price in your head when you negotiate, not a payment number.
What have you done to maximize you best deal when car shopping and what do you think works best?
Image courtesy of tOrange.us via CC 4.0 (with changes)