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How to Get the Best Deal on Your Next Car
By Tara Baukus Mello
Shiny paint, gleaming chrome, and state-of-the-art high-tech amenities — hitting the car dealership lot can leave you feeling like a kid in a candy store. But when it comes time to make your purchase, all of the potential discounts and payment options can make it tricky to tell if you’re getting a good deal. We understand, and we want to help!
Here are four tips to consider as you purchase your next car.
Research Before You Visit the Lot
The process of finding and buying your car should begin long before you pull into the dealer's lot. Research is key — visit automaker websites as well as independent auto information sites such as Kelley Blue Book, Edmunds.com, and Cars.com to better understand the current market. Be sure that your research notes include the sticker price — also called the MSRP — and the invoice price. To calculate the sticker, go to the manufacturer's website and use the "build your own" to spec out the car. To calculate the invoice, go to an independent site and follow the same steps. (Note that this won't be the exact invoice since the price a dealer pays is dependent on many factors, but it will be close.)
Less formal research can be just as important. Pay attention to cars that catch your eye as you go about your day. If possible, perhaps even strike up a conversation with the vehicle’s owner. People may be more willing to chat than you presume and the perspective of another person on a vehicle they've spent time with will be invaluable.
Find All the Discounts You Deserve
Sometimes automakers advertise "cash back" deals. These rebates usually offer a choice between a discount on the purchase or a reduced interest rate. To see which is a better deal for you, try Bankrate.com's car rebate vs. low-interest calculator.
Many buyers also qualify for "personal" discounts, frequently extended to, for example, former or current members of the military, students or recent college graduates, or members of certain credit unions, employment unions and wholesale clubs.
To find out which discounts you may be eligible for, visit the "offers" and “special programs” sections of automaker websites. Keep in mind, the personal discounts may be listed separately from rebates that are available to everyone, so be sure to spend some time poking around.
Know the Value of Your Trade in Advance
The amount you can expect to receive for a trade-in vehicle can vary according to the car's condition, mileage, and even color — not to mention by the inventory and policies of the dealer to which you choose to bring it. To get the most for your trade, spec out your current car's value on one of the independent auto information sites we mentioned above — Edmunds.com or Kelley Blue Book, for example. Be sure to calculate the estimated value on the condition you feel it is in and one level lower. This will give you a better idea of what is reasonable when a dealer makes an offer.
Once you've decided which car you’d like to buy, take a quick moment and do the math to determine how much you’re willing to pay. Your formula will look like this: Invoice Price – Cash Back Rebate – All "Personal" Discounts – Value of Trade = Final Sale Price You may want to calculate a high and low to account for whether you opt for the cash back vs. cut-rate financing and the value you’re able to get for your trade. Once you have these numbers, you'll be better equipped to understand whether you’re getting a fair offer.
As you negotiate with the dealer, avoid talking about the monthly payment price — an easy way for dealers to extend the terms of the loan and, ultimately, charge you more for the car. Instead, focus on the overall sale price. If you name a price, name one close to the invoice number. Once you come to an agreement on that price then discuss the value of your trade. Once both are negotiated, you can go back to the new car sale price and list the cash back rebate and any other personal discounts you qualify for.
Taking these steps may not be quite as simple as walking into the first dealership you come across and paying sticker price, but with a little effort and a solid plan you'll be able to enjoy that new car with the peace of mind that it came with a fair price tag.