Before you buy insurance you need a car! So if you are thinking of a New Car – here are some tips for buying new cars to make sure you get the best price you can. If you follow these steps you will not get ripped off.
If you have any questions about this process or if you need advice on how to do it – simply give me a call at (413) 543-3800 and I will be glad to help you.
Step 1. Determine Your Budget
- Budget your income and expenses to determine how much you can afford each month. Chances are you will have a loan for 3-5 years – so be sure you can safely afford the car payment, car expenses and car insurance each month.
- Expenses to Expect – Title, Registration, excise taxes, gas, oil and maintenance.
- Down Payments – For a new car you should put at least 20% down. This builds immediate equity in the car and keeps your monthly payments reasonable – save up to get this money before you purchase a new car.
- If you have a Trade In – learn How to Value Your Trade In and factor this value into your budget.
- What the Car Dealer is Thinking – They are trying to charge you the most you can – and you are trying to pay the least you can.
Step 2. What Type of Car Do You Want?
- New Car Searches and Reviews – Search for your new car online. Use this trusted link for info and reviews.
- Or Google your local dealership and look at their inventory.
- Interested in Good Gas Mileage? Get a four cylinder – great on gas.
- Two Door or Four Door? Kids? No Kids?
- Transmission – What type do you want? Automatic? Or manual?
- What Options and Features do you Want? These can effect your price so look at what’s available and choose which you would like to have.
- Get Car Insurance Quotes – Once you determine what car you want, call around and get auto insurance quotes for Full Coverage – factor this amount into your monthly budget.
Step 3. Arrange for Your Financing
- Apply for Your Own Financing – Before you go to the Dealership – Unless the dealer is offering 0% interest or 1% interest (you must have a great credit score) get your financing outside of the dealership. Try your bank or a credit union – then you can shop as a “cash” buyer and not let the dealer use their financing to make even more money off of you.
- Bad Credit No Credit Financing – There is financing available for you but it is high interest rates. If you need to do this, be sure to pay your first eight months right on time, then you can search out refinancing to lower your interest rate.
- Taxes on Your Vehicle – Be sure to factor this into your final price. Discuss this with the dealer once you negotiate your deal – you want to know the “out the door price” including fees and taxes – no surprises!
- Learn about Gap Insurance – If you do not put 20% down or anything down you should consider Gap Insurance. This is insurance that covers the difference between what you owe on the car and what the insurance company is going to pay out if the car is totaled. It is not expensive and provides good peace of mind.
- Leasing versus Financing – If you drive very little – say under 12,000 a year then Leasing could be a good option. It is like renting the car for three years. You can buy it out after three years or simply hand it back into the dealer. With Financing after the loan is paid in full you own the car. Up to you.
Step 4. Go Test Drive the Car
- Why go to the Dealer? Only to test drive the car! Do not negotiate at the dealership or you will lose every time.
- The Car Sales Person and Sales Manager – They want to sell you the car that day. They will do all they can to have you sign the paperwork and put a down payment. You must resist this. Just politely tell them you want to just test drive the car and you will get back to them if interested.
- What to do at the Dealership – Test drive the car you are interested in, get the sales person’s business card and leave. Do not put a down payment – you must first research the car and get online pricing.
- Should you Buy based on Monthly Payment? Never! Do not fall for this trick. They will ask you “How much were you looking to spend on a monthly basis”? Just tell them you would rather discuss the price of the vehicle – then test drive the car and leave.
- The Test Drive – Drive with the radio off. Is the car comfortable? If you love the car do not let them know it. Does it run smoothly? Does it feel solid? Sit in the back seat. Is it roomy? Check out the trunk. Take your time and be sure it is the car you want and need.
- Do not tell the dealer you Have a Trade In until after you have negotiated a price for your new car
- After you settle on a price tell them “Oh, by the way I have a Trade In – they won’t give you what it is worth – but they will come close.
Step 5. Get Online Pricing
- New Car – Online Price Quotes – This is where to start your research.
- True Car is the best way to buy a new car. Go through the quick steps and you will get a “Target Price” and under that you will see”Factory Invoice” – this is the price that you want to shoot for. If you can get a new car for close to this price – you are way ahead of the crowd and you just saved literally thousands on your new car purchase!
- New Car Incentives and Rebates – Check for these savings. Look up the car to see if there are additional Incentives and Rebates to lower your price or get great financing.
- What to Do After you Have your Invoice Price – Now that you have your approximate price – look up, on line, the new car dealers in your area who sell this car – then email 2-3 of them your offer for the vehicle. It’s as easy as that! This is how you will negotiate with them – NOT in the dealership.
Step 6. What is Your First Offer?
- New Car First Offer – It is $500 less than “Factory Invoice” – the price you got from True Car. This is a good place to start – this is your first offer.
Step 7. Contact the Dealer and Make Your Offer
- Make your Offer from the Comfort of Your Home or Office – Simply email your first offer to each dealer – then sit back and wait for the replies. Tell them you would like to offer $_______ for the vehicle (describe it exactly how you want it including all options, color etc) . Tell them this is your “out the door price” including all fees – taxes not included.
- Let Dealers Compete for Your Business – Once you get the replies – chances are one of the dealers will come pretty close to your offer. Then take the lowest price and resend your email to the Internet Managers – telling the dealers you have an agreed on price and you are writing to see if they are willing to beat it.
- Get the lowest price, call that dealer, finalize the price – you have it in writing and arrange a time to go sign the paperwork. This sounds simple but it works and guarantees you will not get ripped off.
Step 8. Present Your Trade In Two Options
- Know Your Trade In Value
- 1. Tell the dealer you have a trade in and ask how much they will give you for it.
- 2. Sell Your Car on Your Own – Try Auto Trader, CraigsList, CarMax or put an ad in the newspaper – there are many ways – bottom line is that if you sell it on your own chances are you will get more than if you trade it in to the dealer.
- Tax Advantage of Your Trade In – If you trade in your used car when you purchase a new car – it reduces the taxable amount. For example, if the new car cost $25,000 and your trade in is valued at $5000, then you only pay taxes on $20,000.
Step 10. Pick Up Your New Car
- Pick up your New Car – Print out your agreed price from the dealer, have your financing already approved – whether done inside the dealer or outside the dealer, have it done before you go to pick up the car.
- Have your insurance agent ready and waiting for the paperwork.
- Check out the car you are getting – thoroughly inspect it and take it for a quick test drive.
- The Finance Sales Person – Watch out! This is the best sales person they have. This is where they try to wipe out all your hard earned savings. Politely tell them you have already negotiated the price and that, at this time, you are not interested in any extras.
- Do not let them slip in a Dealer Fee of some type except the Destination Fee – this is legit.
- Dealer Fees – Read this info and learn about possible dealer fees.
- The Paperwork – Be sure that all the information is correct – name, address, price and loan terms.
That’s it – if you have any problems:
- Car Dealer Problem Resolution – Attorney General (413) 784-1240. If you have any problem with a dealer just mention to them that you will contact the Attorney General – this usually gets action. The Attorney General over sees all dealer licensing.
- Lemon Laws – These apply to New Cars only not Used Cars.
Follow These tips for buying new cars and You Will be sure to Save Money on Your New Car Purchase!