Women

Five Steps For Getting The Best Price (Part 1)

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Save money and avoid dealer tricks

Getting a discount off of a car’s sticker price doesn’t mean a lot if you give back the savings in other areas of the car-buying process. If you really want the best deal, you need to pay attention to every step, from setting up the right financing to the right financing to fending off last-minute sales pitches for unnecessary extras.

 
If you really want the best deal, you need to pay attention to every step, from setting up the right financing to the right financing to fending off last-minute sales pitches for unnecessary extras.

If you really want the best deal, you need to pay attention to every step, from setting up the right financing to the right financing to fending off last-minute sales pitches for unnecessary extras.

Based on the experience of CR staffers, who buy about 80 vehicles from dealers every year, the following pages give you a proven blueprint for saving the most money, while avoiding the dealer tactics that can cost you extra.

1.    Set up your loan in advance

If you’re borrowing about $25,000 for a new car, a difference of only two percentage points in the interest rate can add up to more than $1,000 over the lifetime of the loan. And that can easily happen if you’re not paying attention to the financing terms.

Even before you know which vehicle you’re going to buy, you can get a jump on the process by comparing interest rates and getting pre-approved for a loan. Go to websites such as BankRate.com, ELoan.com, or LendingTree.com, to see what typical interest rates are in your area. Then check with your bank or credit union (if applicable), as well as other local banks and lending institutions to compare rates.

BankRate.com

BankRate.com

Focus on the annual percentage rate (APR). And try and keep the loan length as cost as possible, while still having an affordable monthly payment. A four-year loan costs you far less overall than a five-or six-year loan at the same rate.

LendingTree.com

LendingTree.com

Also, call the dealerships that sell the models in which you’re interested to see how their rates compare. Go online to the manufacturer websites and check for any special financing rates. You may find that a model on your short list has a special low-interest rate available. But if so, call the dealership to make sure you qualify for it; such incentives are often only available to buyers with high credit scores. Getting pre-approved by a bank or credit union keeps the negotiations at the dealership simpler and removes some of the stress. And you can still decide to take a dealer loan if it’s a better rate.

Red flag:

“Don’t get ‘bumped’” When arranging a loan, dealers often make extra money by bumping your interest rate up several percentage points over the rate for which you actually qualify. That’s why it’s critical to compare interest rates before you go to the dealership to buy the car.

2.    Find your trade-in value

A common dealer tactic is to give you a token discount on a new car, and then make up for it by giving you less for your trade-in. You can avoid this by knowing the value of your current car before you go shopping. This depends on its age, mileage, condition, trim level, options, and your area.

 
You should be known the value of your current car before you go shopping

You should be known the value of your current car before you go shopping

To get an idea of your car’s worth; check its “book value” in printed pricing guides or at used-car pricing websites, such as Kellley Blue Book (www.kbb.com) and the National Automobile Dealers Association (www.nadaquides.com). Focus on eh wholesale or trade-in value; the retail value is what you would pay for the car at a dealership.

To help, we offers Used Car Price Reports for $12, which give you the initial value of a model and walk you through the process of adjusting the value according to options, mileage, and condition.

To get a better fix on your car’s worth; check car-buying websites and local classified and dealer ads for models similar to yours. But keep in mind these are asking prices, not what people are paying

Get an appraisal.

If you want a rock-solid figure to use for comparison in your negotiations, take your car to the used-car department of several dealers or used-car lots and ask what they would give you in a straight-up sale.

Of course, you can always sell the car yourself; you’ll usually get more money than by trading-in, but probably less than the highest asking prices you found. But if you need the money for a down payment, you’ll have to sell your old car before buying a new one. Trading in can also lower the sales tax you’ll pay on the new car.

3.    Set a target Price

Before negotiating with a dealership, you should have an idea of what good price is for a particular model. This can range from a figure that’s close to the full manufacturer’s suggested retail price for a hot new model to thousands below MSRP for a slow-selling model.

The invoice price can be found in printed pricing guides or on car-pricing websites.

The invoice price can be found in printed pricing guides or on car-pricing websites.

It helps to know the dealer’s cost. You can estimate this by finding the invoice price and subtracting any dealer rebates or holdbacks from it. The invoice price can be found in printed pricing guides or on car-pricing websites. Some sites also list dealer rebates and holdbacks, but it may take a little searching. Our New Car Price Reports do the math for you with CAR’s Bottom Line Price, which is a good place to begin your negotiations. Try to pay as little above that figure as possible.

CR’s Price Reports also now show you the average price that buyers are paying for a model.

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