Is your old clunker on its last legs? Do you have a son or daughter who's been begging for a first set of wheels? Or maybe you've been eyeing a new sedan but aren't quite sure if you can afford it. No matter what the circumstances are, you can start planning now for that next car, so that when the day comes, you'll feel confident and prepared. Developing a negotiating strategy for purchasing a new or used vehicle doesn't necessarily mean waging war with car dealers. The idea of haggling over a price may make your stomach churn, but this isn't your only option. With online resources and a little ingenuity, you can be better informed before you sign on the dotted line.
Before you start shopping, you may want to find out how much you can afford. Calculating your debt-to-income ratio can be a smart first step. The percentage of your total debt payments (i.e., to credit cards, rent or mortgage, and loans) in relation to your gross income can help you determine what you can afford for both a down payment and the monthly car payments. Of course, taxes and registration are in the initial mix, and insurance premiums will be due regularly, raising your total cost. It's generally best to put down as much as possible for the down payment, which lessens the amount of money you may need to borrow.
Financing does not necessarily need to come from the dealer. You could first decide on how long you're willing to carry a loan, then contact your lending institution, bank or credit union to get the current interest rates. You could consider several reputable online financing services that can provide lower rates, even if your credit is less than stellar.
Often, this is the step that many people skip in the car-buying process, but it could cost you. Knowing your credit score will not only help you understand what your financing boundaries are, but it could also discourage any less-than-honest dealers from trying to convince you that your credit isn't up to par. Getting your credit score from more than one national agency is usually a good idea, so you can compare them and so you can make sure the information is consistent and accurate.
Once you know what you can afford each month, you can start paring down the options based on the estimated monthly payments. Of course, certain models will have more wiggle room on price than others. Overstocks, for example, may have more or better rebates and incentives than cars that are currently hot in the market.
Once you've targeted the car you want, the amount the dealer paid for it can be the starting point for the negotiating process. The sticker on the window stating the manufacturer's suggested retail price (MSRP) is usually the worst starting point for a buyer. The dealer expects to make money on each deal, but you will probably want to whittle your purchase price down as close as possible to the dealer's cost. A little time spent searching will yield dealers' invoices, some of which will also list current holdbacks and incentives that manufacturers typically use to reward dealers.
Get clicking. Pricing out the competition no longer means going from dealership lot to dealership lot. You may save time and energy by researching online to get quotes from several sources. You might decide to print out these quotes to use as your bargaining chip with various dealers as you hunt for the lowest price.
The more informed you are, the more equipped you will be at the bargaining table. This starts from the moment you approach a dealer face-to-face to the final contract points. You always want the upper hand, so it's wise to keep it to yourself if you are in a rush to buy or are in love with a particular vehicle, even if it's true. If there are fees you don't understand, there's nothing wrong with asking what they are for until you get satisfying answers. Doing your homework ahead of time will ultimately give you peace of mind that you're driving home with a good deal.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.