Special thanks to Capital One for sponsoring today’s post.
I’m super competitive and I view car buying as a mental competition. You might think the odds are stacked against you since the dealer sells cars every day and you only buy one every few years. The odds are actually in your favor as long as you know these tricks for how to get the best deal on a new car.
I’ve got four kids, a husband who likes expensive toys, and a family that likes to travel. In order to afford all that, I have to rely on several money saving tips. And I have to avoid paying one penny more than I have to on our cars.
There has been a steep learning curve, but I’ve gotten WAY better over the years. I only wish I could go back and share this advice with my first time car buying self! At least I can help someone by sharing it with you.
Here’s my advice on how to get the best deal on a new car:
Don’t Buy a New Car
I’m not saying don’t buy a car, just don’t buy a brand spanking new one. The average car loses almost 20% of its value in the first year, and half of that occurs the minute you drive it out of the lot. Your car will lose another 15% of its value during the next two years. Depreciation slows dramatically at the 5 year mark.
You’ll save thousands of dollars by buying a car that’s even just one year old. So, unless it’s worth THOUSANDS to you to have a brand new car, buy used!
The tips below work just as well if you decide you really must have a new car, but you’ll get a much better deal if you buy one that isn’t.
Pre-Qualify for Financing
Unless you’re paying cash for your vehicle, your best bet to save on financing is to shop around beforehand. Find the best rate and pre-qualify before you head to the dealership. Capital One will pre-qualify you using a “soft inquiry” (i.e. it doesn’t impact your credit score) so you can determine how much you can finance.
Don’t rely on special financing offers offered by the manufacturer that might contain hidden fees. Beware of low interest offers that often contain hidden loan origination fees.
Do Your Homework
An hour or two at home BEFORE you go car shopping can save you hundreds, even thousands of dollars.
1. Choose Type of Vehicle
First, decide what type of vehicle you want (e.g. sports car, sedan, minivan, truck, etc.). The next step is where I think a lot of people go wrong and I’ve done it too.
After deciding on what TYPE of car, most people dig in and research the best make and model of that type. It makes sense, right?
If you know you want a minivan, doesn’t it make sense to find the one that is safest, gets the best mileage, costs the least to maintain, etc.? Of course! Until you head out to buy the car you’ve decided you MUST have because it’s the best and discover that it’s outside your budget, or that the only models available within 100 miles of you don’t have the features you want.
If you took my advice to consider a used car, it might be even harder to find the exact make and model you’ve decided on. And though the dealer will convince you doing a “dealer swap” is no big deal, they won’t negotiate as low on a swapped car and you run the risk that the other dealer won’t agree to the swap anyway.
2. Choose Location
For all the reasons I just stated, instead of choosing the right car next, instead I look at what’s available in my area.
Find the vehicles that are the TYPE you want within a comfortable driving distance.
3. Narrow Your Selection
After you’ve found a selection of cars in your area that are the type of car you want and within your budget, you’ll have a much shorter list to work with. Research the cars on that list for safety, reliability, maintenance costs, etc. Using that data, narrow your list to 5 to 10 vehicles you’d be willing to purchase.
4. Determine Fair Prices
There are so many resources for determining the value of a vehicle, there’s no reason to go to the dealership without this information. Here are some reliable sources:
Since you have the EXACT details you’ll need to get an accurate estimate (because you’ve searched for existing inventory not an “ideal” that you may or may not find), you’ll be able to come up with a very precise price range.
5. Compile Your Information
I like to go into a car buying negotiation armed with knowledge. More importantly, I like the car salesman to KNOW I’m armed with knowledge. I’ve found that walking in with a folder full of printouts typically hastens the negotiation process.
I recommend having information for at least five vehicles. This lets the salesperson know you don’t have your heart set on one specific car so he or she is going to have to work harder to make the sale.
The vehicle you choose and the amount you finance can impact APR and you won’t know those details until you’re ready to make a purchase. Capital One Auto Navigator® lets you make adjustments to factors like vehicle type, price, down payment, trade-in value and term length so you can easily assess your payments as you consider different options. You can even input the VIN for the specific car you are considering.
Even better, these adjustments can be made on your phone while you’re at the dealership! No risk of heading to the dealership with information that’s inapplicable because you change your mind about what you want once you start looking at cars. You can view your options right on your phone to do a side by side comparison with whatever financing they offer you at the dealership.
And again, when the salesman sees that you have all that information at your fingertips, it cuts back dramatically on the time he or she will spend trying to convince you to use their financing.
State Your Price and Hold Firm
People who LOVE to negotiate, enjoy the dance. Low offer, high counter-offer, slight increase in offer, same counter-offer with a perk, and on and on. Back and forth until both sides feel good about the deal. It’s a great system and it works.
But I’m a busy mom and I don’t want to spend 8 hours at a dealership negotiation a fair price for my car. I’ve found that if you know the price you’re willing to pay, it’s equally effective to just walk in and state it and refuse to budge.
The salesperson will use all sorts of ploys, “Come on. You NEED to work with me. My manager will never go for this. I need to show him you were willing to give a little so we can meet in the middle.” My response? “This is the price I’m willing to pay. I’ve done my research. I know it’s fair. You make a profit and I get a decent price. If you can’t meet my price, I won’t waste any more of your time.”
This response works EVERY time as long as you have done your research. Plus, you have to…
Be Willing to Walk Away
Remember I said to show up with five different potential cars? This is why. If the first salesperson won’t match your price, you can move on to the next car.
The salesperson has to hope a new buyer will show up. You know you have other options.
This power imbalance will tip the scales in your favor, as long as you’ve asked for a price that leaves the seller with a small profit. Remember that they have expenses to cover beside the cost of the car (the land and building expenses for the dealership, the sales staff salary, etc.).
My dad once told me that you know that you’ve got the absolute best deal when they let you leave but chase you down and catch you at the door. That’s exactly what’s happened the last two times we’ve bought a car from a dealership. That’s why I’m confident that if you follow my advice on how to get the best deal on a new car, you will!