by Jim Thompson |
Last Updated: January 11, 2021 Being a for-profit business, dealerships do everything they can to maximize those profits. Sometimes this can be accomplished by not disclosing most of the numbers (interest rates, real values, hidden fees, etc.) involved in a sale and by charging consumers whatever they can persuade them to pay. Financing a car includes many variables, such as trade-in value, interest rate, financing conditions, and multiple fees. It used to be that after a sale was concluded, often consumers had no understanding of what they would spend for the car over the life of the loan.
Secure Your Own Financing
To protect yourself from overpaying for a car, secure financing before visiting the dealership. Many dealerships offer in-house financing, but they often include many extra fees in the terms of the agreement, inflating your final cost. To avoid these charges, it is advised that you line up financing for your vehicle ahead of time through your own lending company, bank, or credit union.
Can You Afford the Car You Want?
First, consider your monthly budget. What car payment would fit can you reasonably afford? How much can you put down on the car? When buying new, the life of the loan can be extended as much as 72 months. Alternately, used car loans are only offered with terms of 24 to 36 months.
After adding the down payment to the total amount of the loan, you will have a good idea of the price range in which you should be shopping. Next, research interest rates for identical-term loans at the various lending institutions to secure the best deal.
Lastly, using an internet payment calculator, input the estimated price of the vehicle you can afford and the best interest rate you have researched, and adjust the numbers until you reach the monthly payment you previously determined.
By visiting the lender first, you can obtain pre-arranged financing. Pre-arranged financing will give you an edge at the dealership, giving you the ability to:
- Simplify negotiations
- Save money by not relying on financing from the dealer.
- Stick to your budgeted amount more easily.
- Getting an Honest Price
Fortunately, changes have come to the car purchasing arena to help consumers gauge the true value of cars. Websites like Edmunds.com now publish the invoice prices of cars, trucks, and SUVs, and are successfully reaching a large population of the car-buying public. Today, smart shoppers can investigate and explore the sticker prices of cars they are considering purchasing and, by adding a 2% or 3% profit margin, make a dealer a firm and reasonable offer.
To serve their better-educated consumers more efficiently, many dealerships have now created “internet departments.” By taking advantage of online offerings, the consumer can avoid the showroom sales pitch by connecting with dedicated internet salespeople and can request a bottom-line quote for the vehicle in which they are interested. If the potential customer is dissatisfied with the price quote, they can easily proceed to a different dealership – and nobody’s time was wasted.
You may still find the traditional salesperson using varying psychological methods to attract potential buyers into the showroom, quickening them toward a commitment to purchase the vehicle, and then sell it at the highest possible price. In contrast to the on-the-lot salesperson, the internet department concentrates on volume sales rather than attempting to achieve a huge profit from the sale of an individual vehicle. Buying through the internet sales department might yield a price quote near the rock-bottom selling price.
Consider Buying Used
A wise shopper can shop savvy by purchasing a used car. Typically, a car’s value takes a sharp decline during the first year – as much as 20% or 30%, so you can get more car for less money when you opt for a used vehicle. If that used car is still under factory warranty, that can also counterbalance any hesitation you might otherwise feel.
The advantage of utilizing the internet for the best deal is not limited to new vehicles, but also for used cars. Similar to Edmunds.com, respected sites like Kelly Blue Book and the National Automobile Dealers Association allow users to input the year, make, model, mileage, features, options, location, and condition of any used car you may be researching. The results will instantly inform you as to the car’s resale value. This information can be used to negotiate with the seller if you think the price they’re asking is too high.
When buying used, it is important to know its maintenance history to protect yourself from buying someone else’s headache. An excellent method to accomplish this is to order a vehicle history report. With a vehicle history report, potential buyers can glean valuable information such as number of owners, service record, any history of accidents or damage and discover whether it has been declared salvage, stolen, or used as a fleet vehicle. This type of information will allow you to make the best car-buying decision that you can make.