Buying a car that is new (or new to you) is perhaps the biggest purchase you can make after buying a home. Indeed, it is one of the only purchases, besides a home, that nearly everyone expects to finance, rather than buy outright. No one wants to pay too much for a car. As a monthly car note will be one of your biggest expenses, saving money at the time of purchase will pay dividends over time.
Don't Concentrate On Monthly Payments
This seems like a counterintuitive tip, as monthly payments are what you need to budget for. However, this is also one of the ways many people end up spending too much on a new or used car. A car dealership can do lots of things to make a car fit your monthly budget, such as a longer term. However, an extra year of payments or a slightly higher interest rate can mean additional costs for the overall price of the car in the thousands. Balance your desired monthly payment against the total cost of the car to avoid paying too much.
Use Competition To Get A Better Deal
There are no shortage of car dealerships anywhere. Dealers know this and will go to great lengths to seal the deal and keep you from buying from the competition. Websites like Cars.com, CarWoo, CarsDirect, MyRide and Edmunds.com allow you to price shop every dealership in your area, and some a little further out. If negotiation is stalling, don't be afraid to walk away. Make sure to mention that you're going to be checking out what the competitors have to offer.
Trade In? What Trade-In?
There's an art to negotiating a good deal by trading in your current vehicle. The best way to do this is to negotiate the price of the car first. Don't make any mention about a trade-in. In fact, don't even admit to owning a car if you don't have to. If the dealer asks, tell him that you drove a friend or family member's car to the lot that day. After you've negotiated the "rock bottom" price on the car, then ask the dealer how much he can offer for trade-in. You won't win any popularity contests down at the dealership, but you will probably get a much better deal on the car.
Know The Market
Whether you're researching trade-in value or the value of buying a new or used car, you need to come to the negotiating table armed with information. Kelly Blue Book is the gold standard in auto pricing. Whether you have your heart set on a particular model or you're just scoping the field, know what you should reasonably expect to pay for a vehicle before you start talking price. Don't be afraid to bring notes in with you. This will strengthen your bargaining position by showing that you aren't an easy mark.
Timing Matters
It's often said that the end of the month is the best time to buy a car. This is because salesmen are — sometimes desperately — trying to make quota. The best way to go about reaping the benefits is to show up in the middle of the month. Test drive cars, then politely excuse yourself. Spend a couple weeks lining up some financing and doing your research. Then return to dealerships on the last couple of days in the month. Remember that buying a new car is a big deal. Don't try and do everything in a single day or even a couple of days. Give yourself time to get the best deal.
Buy What You Need
Your purchase should be tailored to your driving needs. For example, if you commute a long distance to a low-paying job, a giant truck or SUV probably isn't the best option for you. Similarly, for the man who works construction close to his house, a truck for hauling materials is almost a necessity. Don't forget to factor in additional costs like gas, oil changes and insurance when you buy a car.
Avoid Dealer Add-Ons
Dealer add-ons are almost always a total rip off. An extended warranty can be in your best interest, but you have to consider the cost vs. what you reasonably expect to spend. Don't throw down your hard-earned cash for things like "environmental prep," "VIN etching" or "rustrproofing." It's just not worth it.
Don't Pay Too Much
As stated above, your car note is going to be one of your biggest monthly expenses. Minimize your payment by getting a good deal on the car and good financing. You'll thank yourself later.
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