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Karen Timofeev
Karen Timofeev

Tips For Buying New Car From Dealer

But many Americans make big mistakes buying cars. Take new car purchases with a trade-in. A third of buyers roll over an average of $5,000 in debt from their last car into their new loan. They're paying for a car they don't drive anymore. Ouch! That is not a winning personal finance strategy.

tips for buying new car from dealer

"The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender," says Philip Reed. He's the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site So Reed is going to pull back the curtain on the car-buying game.

For one thing, he says, getting a loan from a lender outside the car dealership prompts buyers to think about a crucial question. "How much car can I afford? You want to do that before a salesperson has you falling in love with the limited model with the sunroof and leather seats. "

So Reed says having that preapproval can be a valuable card to have in your hand in the car-buying game. It can help you negotiate a better rate. "The preapproval will act as a bargaining chip," he says. "If you're preapproved at 4.5%, the dealer says, 'Hey, you know, I can get you 3.5. Would you be interested?' And it's a good idea to take it, but make sure all of the terms, meaning the down payment and the length of the loan, remain the same."

So at the dealership, Reed and Van Alst both say, the first step is to start with the price of the vehicle you are buying. The salesperson at the dealership will often want to know if you're planning to trade in another car and whether you're also looking to get a loan through the dealership. Reed says don't answer those questions! That makes the game too complicated, and you're playing against pros. If you negotiate a really good purchase price on the car, they might jack up the interest rate to make extra money on you that way or lowball you on your trade-in. They can juggle all those factors in their head at once. You don't want to. Keep it simple. One thing at a time.

"Concerning the extended factory warranty, you can always buy it later," says Reed. "So if you're buying a new car, you can buy it in three years from now, just before it goes out of warranty." At that point, if you want the extended warranty, he says, you should call several dealerships and ask for the best price each can offer. That way, he says, you're not rolling the cost into your car loan and paying interest on a service you wouldn't even use for three years because you're still covered by the new car's warranty.

NPR has a personal finance Facebook group called Your Money and Your Life. And we asked group members about car buying. Many said they were shocked by how much money some other people in the group said they were spending on cars. Patricia and Dean Raeker from Minneapolis wrote, "40 years of owning vehicles and our total transportation purchases don't even add up to the cost of one of the financed ones these folks are talking about."

When you are prepared with the right information and go into the price negotiations in the proper frame of mind, there's no reason negotiating with a dealership should trigger your anxiety. By following some simple rules, knowing what you can and can't negotiate and removing as many variables as possible from the deal, you can remain focused on one thing, the price of the car.

Remember, a dealership's sales consultants sell cars all day long, every day. If they're not negotiating a car sale, they're learning how to negotiate a car deal successfully. They do so by incrementally moving you to the deal they want you to accept. On the other hand, most car buyers only get a new car a couple of times per decade. Knowledge is your best tool to help level the playing field, and your ability to walk away from a bad deal is your most powerful negotiating tool.

In the age of the coronavirus pandemic, buying a car has changed. With online sales processes and home delivery options now becoming commonplace, the only reason you need to visit a physical dealership is to take a test drive.

Today's car shoppers have more information at their fingertips about vehicles and the car-shopping process than ever before. That lets you find the exact vehicle you want, know how much you should pay and set up financing before you ever leave your house. You can find out about trade-in values, get an instant cash offer, explore dealer inventories, look and talk to multiple dealerships using your phone, computer or tablet. Our new car deals and lease deals pages help you find special offers from automakers.

While dealers are happy to arrange financing for car buyers, you'll want to research your car loan options just as thoroughly as you study the vehicle you want to buy. You can talk online with local banks and credit unions, along with online lenders. In many cases, you can get financing offers from multiple lenders by filling out one online application.

Not every car dealer is as consumer-friendly as others. Online reviews allow you to find car dealerships with better reputations than others. Of course, no dealer is going to have 100% positive reviews, but you can get an idea of how a retailer performs from their overall ranking and the tone of their reviews.

You don't want to offer up your current vehicle as a trade-in without having a good idea of its value. You can find that out online, through an instant cash offer and by looking at what similar cars are selling for from private-party sellers. You'll rarely get the amount dealers are selling similar vehicles for, as the dealership's refurbishment and other costs are built into those prices.

If a dealer tells you that credit insurance and gap insurance are required, you should insist that you know they are not. If they continue to pressure you to take them, consider it a red flag and tell them you're walking away from the deal. While some leasing companies do require gap coverage, both products are typically available outside the dealer from lenders and insurance companies, and they're often sold at much lower prices.

Dealerships won't negotiate the destination charge that's listed on the vehicle's Monroney sticker. It's the cost of getting the car from the factory to the dealership, and it's charged by the automaker. You do, however, need to look out for unscrupulous dealers trying to add a second freight charge to the final paperwork. That charge should be negotiated, or eliminated, as the cost of getting the car to the dealer's lot is already part of what's on the sticker price.

You want to cast a wide net, contacting dealers from across a metro area, for example. If the car is popular or in tight supply, you might look beyond local dealers to other states. Some dealers will ship vehicles to you, or you can plan a road trip to get your new car.

While timing your purchase or lease right can save you some money, there's one auto-buying urban legend we can dispense with. Some shoppers believe the myth that by showing up just before the dealer closes, they'll get a great deal. They think that the dealership staff will make a quick deal so they can go home for the night.

It's better to time your car buying by looking at the calendar. Dealerships and their salespeople have monthly, quarterly and annual goals. If they haven't quite met them as the end of the period nears, they'll be much more likely to make a deal. Of course, it only works if they haven't met their goals. That's another reason to shop at multiple dealers.

Some products, such as gap insurance, may be required by your leasing company or lender. You don't have to buy it at the dealership, though. You can generally get more affordable policies from your car insurance company or lender.

A week or so after you've taken the car home, grown fond of it and made it part of your life, you'll get a call from the dealership telling you to come back. You'll be told that your financing fell through, and you have to sign for a new loan, often at a much higher cost. You'll likely face extreme pressure and be told that you don't have another choice.

Plan out buying a new car to avoid making common mistakes that result in excess debt (like rolling over the loan balance on your current car to your new loan or telling the dealer you need financing before picking out your car.)

Smart buyers never get near a car dealership without having a pre-approved financing offer from a bank, credit union, or other lender in their back pocket. Without a pre-approved offer, the dealership's finance officer will have no incentive to try to find you a better deal on financing.

Politeness and professionalism should be the name of the game in all phases of the car buying process, including the test drive. Remember that the test drive is a time to get familiar with the car, not a chance to demonstrate your driving prowess. Showing off on the test drive can get you thrown out of a dealer, and any groundwork you laid toward getting a deal will have been wasted.

When you have set a price and are nearing the end of your car-buying odyssey, you'll be ushered into the dealership financing office. You probably think the negotiation is over, but that's far from the truth. Many dealers make the majority of their profit in the finance office. It is where you will likely be pressed to buy expensive add-ons. Take a look at our article on things never to buy at the dealership to learn more about what you should buy there, skip altogether, or purchase outside of the dealer.

A curbstoner is a person who makes money from buying used vehicles and reselling them. They're unlicensed dealers who don't comply with state or federal laws. You have no legal protection when dealing with them.

Don't just assume you will finance through the dealer. Sometimes, you can get better financing from your bank or credit union. You should also check your credit score before you go shopping as this can affect the terms such as the interest rate you are offered. By shopping around, you may be able to negotiate a better deal. Note that Texas law sets maximum interest rates for financing used cars. The rates vary according to the age of the car and the amount owed on it. 041b061a72


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