Buying a new vehicle can be a big and costly decision. For some consumers, it’s downright scary. When first starting to shop, few people really think about the size of the investment – years of payments equaling tens of thousands of dollars. They’re thinking more about how they’ll look in that shiny new car. The fact is that the more prepared you are when car shopping and the more you know about the process, the better off you’ll be financially. We hope these steps provide you with the direction needed to get on the right path to great car buying experience.
1. Know what you can afford to pay.
Take a close look at your current budget. How much can you comfortably fit in each month for a car payment? How much do you have set aside for a down payment? Step one is an honest understanding of what you can really afford. There’s a big difference between the price of a Ford Focus and the price of a BMW. Know where we’re going with this? Don’t bite off more than you can chew! Consider your long-term costs as well. A great tool is Kelly Blue Book’s calculator of what it actually costs to own a car for 5 years. It factors in fuel, insurance, maintenance, etc. It’s a great way to compare vehicles and get and fairly accurate assessment of all the costs involved in car ownership. This is great for budget planning as well. You may also want to select a model that has excellent resale value. This will help when you want to eventually trade it in for your next vehicle. After you’ve analyzed your budget and crunched the numbers, you can establish your target price range.
2. Be realistic about your vehicle needs.
A shiny new Corvette is not going to cut it if you have 3 kids, a dog and like to camp. You get what we mean. Stay real!
3. Do your research before you step foot in a dealership.
Now that you know what you can afford, it’s time to do a little research. This includes pre-financing options. Dealership interest rates are typically much higher than loan rates you can get from your local credit union. The perfect online starting point is Spirit Financial Credit Union’s CarShop365. Here, you can check out the prices on various makes and models, see loan rates, check used car values and locate a dealer right from the comfort of your home 24/7. There’s also a handy finance calculator and loan pre-approval. While you’re doing your homework, be sure to check out the websites of various area dealerships to compare prices. It gives you much more power when you walk into Joe’s dealership on Main Street looking for a Chevy Malibu and know what the same car costs at Frank’s across town. You’re better off having a couple different makes and models that you’re interested in. Again, it will help you to get a better deal if you’re not locked into one particular vehicle. Be sure to look for different manufacturer rebates and other incentives as well.
4. Get pre-approved for an auto loan.
If there’s only one piece of advice you take away from this, it’s to get pre-approved! It gives you much more power as you walk into a dealership when you know you already have financing in place. Remember, credit unions like Spirit Financial offer great auto loan rates for members!
5. Time to take your shopping on the road.
Now that you’ve armed yourself with as much online information as your brain can handle, it’s time to hit the dealerships. Even if you feel you can do it all online, you really need to take potential vehicles for a good test drive. Remember, this is a big investment, and you want to try it before you buy. It’s best to shop during off hours if possible. You’ll have fewer customers to compete with and salespeople will be hungry for a sale. Nights and weekends are typically the busiest for auto dealerships. Try to visit dealerships at the beginning of the week and at the end of the month when they are looking to meet their monthly sales quotas. Another opportunity for a deal is at the end of the summer when there may be two years of certain vehicle model on the lot. Make sure you have your smartphone handy. Kelley Blue Book and Edmunds can help you with the invoice price on the vehicle, that’s the price the dealer paid for the car. You can use the window sticker to enter all information about accessories, engines, etc. Not only will you get the invoice price, but the MSRP, which should be similar to the retail price on the sticker. You will also find the average transaction price, which is what others are paying.
6. When in a dealership, don’t offer any information up front.
A dealer may ask about a trade-in or possibly even ask for your social security number while you’re looking around. Don’t offer any information, you want to hold everything back for negotiating the best price. If you tell them about a trade in early on, they make take that into consideration when giving you a price. You want to keep that in your back pocket until you’ve gotten the best deal. This goes for any rebates or incentives you've found as well. It’s best to lock in the lowest price and then present your trade-in and any rebates, etc.
7. Take it for a test drive.
Pick out a few cars you like and be sure to test-drive each one. Believe it or not, in this age of the Internet, some people don’t actually test drive the vehicle they purchase. They just pick it out online and think it’s fine to purchase it without trying it out. That’s always a bad move. In fact, it’s always best to visit several dealerships in your area to shop around and see and test-drive as many vehicles as you can. Be sure to test drive in town at lower speeds and get it out on the highway to see how it rides at higher speeds. Try to parallel park and see how it maneuvers for you.
8. It’s negotiating time.
So you’ve found a vehicle that you think is THE ONE. That’s very exciting, but try to calm down, and put your negotiating skills to work. First off, you want to negotiate based on purchase price, not on monthly payments. Secondly, don’t let the salesperson sell you on all the bells and whistles unless you really need and want them. This may include a rear seat entertainment system, built-in navigation, or even a self-park system. If you don’t think you’re ever going to use it, why pay for it? Try to avoid non-factory add-ons as well, such as paint or fabric protection or an extended warranty. Let the salesperson know you are ready to buy if he or she can meet your price. If not, let them know you’ll be continuing to shop around. Be prepared for a little back and forth with offers and counters. You want to start with a number that’s close to the invoice price (what you know the dealer paid) and work your way up from there. Hold your ground, stay confident, and be fully prepared to walk away. There are plenty of car dealerships out there. Ok, so this dealer decides to play ball and give you a great price. Now it’s time to put your trade-in on the table, as well as the rebates and any other special offers you’ve found. Remember, you’re treating your trade-in as a separate transaction, so you can get the best deal up front. By now you will have done your homework and know ahead of time what your trade-in is worth via the power of the Internet. If the dealer is telling you that your trade-in is really not worth that much, it’s easy to bring it up on your smartphone and show them a great estimate of what it’s worth. You can quickly check Spirit Financial’s CarShop365, Kelley Blue Book, or NADA Guides. Ah, the power of technology! And maybe that cash rebate you found online is just icing on the cake! After all of this is factored in, you really should have that rock bottom price you were looking for. Just don’t think you can handle face-to-face negotiations? You know, you can always negotiate with a dealer via email. Of course, this is after you’ve actually gone to the dealership and looked at, inspected and test-driven a vehicle.
9. Be sure to read over the contract completely before signing.
Check the math and read all the fine print. Make sure everything in the contract is exactly what you agreed on. Errors can be made, so be sure to read everything carefully.
10. Avoid impulse buying!
Take your time and stick to the tips above. Just because you didn’t buy the car you just drove today doesn't mean you’ll never find another one you like. There are millions of vehicles out there and with a little careful planning and patience, you will find the right one for you.
As you’re going through the process, remember an auto is a major purchase and a big expense. You want to be sure you’ve thoroughly researched your options and equipped yourself with the knowledge you need to get the best deal. Watch for more informative Spirit Financial blogs and follow us on Facebook and Instagram for tips to help you improve your finances.