There is a lot of information available over the Internet and a couple of sites offer excellent resources. Autoweb.com and autobytel.com both allow you to pick out the model and features you'd like and then searches for the car near your zip code. Several also allow you to put in the price you'd like to pay and then search for cars that match your purchase price. We also really liked the ease of CarPoint.com. This site allows you to enter all the criteria that you would like in your new/used car and it will email you when a car matching your description is available in your area.
All sites also offer advice on insurance and a complete review on the car's history and safety record. Also check on our site for more information about auto insurance.
We also strongly suggest going to the Kelly Blue Book site (www.kbb.com) to determine what a valid trade-in value for your current auto would be. Click on Used Car Values and type in the year, model, and features and it will give you a figure that a typical dealer would offer for that car on a trade-in. You can also find out what your car would be priced at if it were for sale in the retail market. Both figures will make you a better negotiator when you go in to purchase your new car. Also consult Consumer Reports for articles of car prices, features, maintenance costs, crash test results, used car values and much more.
The first decision in the process is determining whether to buy a new or used car. The decision may be easy if you don't have the cash to pay for the car or your budget can't afford a high monthly payment. In those cases, a used car may be the best choice.
You'll also need to consider how the car will be used. Will it be used for short distances or long-distance trips? What is your tolerance for mechanical breakdowns? How important is styling and the model of the car? Mechanics and your insurance company can also offer information about the types of cars you are considering. (Also see our insurance page for details about the premium costs of a new car.)
Once you've determined the type of car you want, note the names of "corporate twins" (i.e.- the Ford Taurus is the same car as the Mercury Sable). The styles are often sold under different names and may have vastly different prices.
In order
to make an educated offer, the first step is to find out approximately
what a dealer has paid. There are two sources that will provide you with
this information.
Weigh the value of "package" options, which may include anything from special sound systems to paint sealant. Profits for these may range from 100 to 200%, but dealers aren't pushing these as much as they used to. Remember, you can have most extras installed at a later date for a lower cost, but they usually can't be removed from a car already on the lot. Be firm with the dealer and insist you will wait for a car without the extras or use the extras to negotiate with the dealer.
Often, it is cheaper to move up to the next "trim line" of the car's model range instead of equipping the car with a package of options. Trim lines are the same basic car with different equipment offered as standard (trim lines are the model name followed by designations like ST, GT, Turbo, LX, LS, etc.). Variations between the trim lines may be as minor as leather seats to something more major such as a larger engine. The higher the trim line, the more options that are included as standard equipment.
Flexibility on your car choice could also save you a great deal of money. Determine two or three models you'd be happy with and decide exactly which options you want. Chances are, you can find a dealer for at least one of the models who will be offering a special deal when you decide to buy. You will be able to take advantage of these offers.
Your starting point in deciding how much to pay is the invoice price plus any applicable shipping charges. The difference between the invoice price and the sticker price is where you can negotiate.
Experts say you should pay 2-3% over the invoice price for cars under $20,000 and up to 5-6% for cars over $20,000. However, some dealers use a bottom-line or fixed sticker price approach so there will not be any negotiating other than the extras.
Second,
you will need to find out if there are any rebates from the manufacturer
to the dealer. These can be found at:
Once you think you've figured out what the dealer has paid for the car, adding in advertising and subtracting rebates, you're ready to come up with an offer. However, you could still be overpaying, depending on supply and demand of a your particular model. If it's the end of a model year, a dealer may be willing to accept a smaller profit to clear out the lot so buying at the end of year may offer you another advantage.
Make your offer (stick to the 2-6% range over invoice) and be prepared for rejection or even anger. You need to be prepared to walk out at any time. You are simply looking for the best deal and now you have a price to test on other dealers. If one says no, another may say yes, and you need to shop around anyway so you have nothing to lose.
Once your price has been accepted, you will need to reject the list of closing options unless the dealer will include them for free. These options include Scotchgard, stripping, alarm systems, and other items. If you want any of these, you should have them calculated in the cost of the car before you make your initial offer. These items are tacked on at the end because of their enormous profit margin to the dealer. A dealer will also offer you special service plans if you buy a car from them, however, you'll receive the same treatment regardless of where you buy the car. The bulk of a dealership money is from its parts and service department so they will never turn you away even if your car is from a different dealer.
The
final hurdle is financing. The big decision here is whether you should
finance the car, lease it, or pay cash for it. (Be sure to read the lease
page before you sign anything!!) Banks and car dealers are very competitive
with car loans so you will need to shop around to find the best interest
rates.
USED
CARS
The
same advice will apply if you have decided to buy a used car, however,
it will be more difficult to determine what a dealer actually paid for
it. You have numerous choices when buying a used car and each has its advantages
and disadvantages.
A new car dealer can offer some of the best used cars available. They sort through the trade-ins, keep the best for themselves, and sell the rest to a wholesaler. Dealers also have service departments and can offer limited used car warranties. This route will probably cost you more than other options, but it may be worthwhile if you are unprepared to deal with mechanics and breakdowns.
Program or "Nearly New" cars are new cars that the manufacturers sold to rental car companies, with a guarantee to buy them back after a few months. Because these program cars usually offer low mileage and a new car warranty at 20-30% less than brand new cars, they have become a popular option. It is now harder to find bargains for nearly new cars because the manufacturers have eliminated the incentive for rental companies to turn over their fleets as rapidly. However, you will still be able to find a growing selection of two to four year old returned lease cars on the market.
Used car dealers tend to offer lower prices, but their cars may be auction rejects, retired taxis and police cars, and other risky buys. They also may not have the service departments or warranty offers of a new car dealer. Be sure to check the dealer's reputation with your local Better Business Bureau and look for dealers who have been in the same location for many years.
Private sellers offer the least protection if something goes wrong with a car you buy through an ad. Also, unless you buy a car from a friend, you won't know the car's history and you'll need to have a mechanic check the car before you buy it. There are several things to be aware of such as collision damage, rust, leaks, tires, mileage, etc. You can take the car to a garage for a full range of diagnostic tests (usually about $60) and listen to their advice.
In order to determine a price, you will need to check with your bank, a credit union, or the Kelley Blue Book site to determine a book value. Your offer should be below that figure and be sure to make adjustments for higher- or lower-than-average mileage.
Another option is to obtain the services of a broker, but you will be paying a fee for their work and they are generally only advised for buyers who are looking for a specific, hard to find type of car.
Please
contact our office for more information & additional resources (corporate
twins, highest/lowest retained value, pricing worksheets, safety test results,
accident information, etc.).
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