Don’t buy a new car without this cheat sheet!
![This article originally appeared on NerdWallet](https://www.getrichslowly.org/wp-content/uploads/nerdwallet.jpg" "This article originally appeared on NerdWallet")
Congratulations — you’re about to snag a new ride! We’re assuming that you’ve already done some research: You know how much you can afford to spend, which car you want to buy, and the true market value (what other people are paying) for that car in your area.
And now you’re ready to buy. Follow these steps to get a good deal and make the car-buying process at the dealership as painless as possible. To help make it easier, download our cheat sheet and take it with you.
At the dealership, evaluate the car and the salesperson. (Photo from Getty Images)
Before You Go to the Dealership
Arrange financing ahead of time to make the negotiation easier and help you get the best deal.
- Check your credit score. If you need to build your credit, consider waiting until your score will let you get acceptable financing terms.
- If it looks good, apply to get preapproved or pre-qualified for an auto loan.
- Select the best interest rate and the shortest loan term you can handle.
- Consider calling the dealership to confirm the car is still for sale.
- If you call, prescreen the salesperson: Does he or she listen and seem knowledgeable?
- Decide if you’ll want extras like an extended warranty, paint protection, or additional anti-theft devices. Remember, these are high-profit items for the dealer and you can always buy them later.
Bring These Items
Think ahead and be prepared with the right documents and information. Take with you:
- True market pricing from Edmunds.com, Kelley Blue Book, or NADA, the National Automobile Dealers Association.
- Information about incentives, rebates or special financing deals.
- Proof of insurance and a check for your down payment (aim for 20% for a new car, 10% for a used car).
- If you’re trading in: the car’s title or loan documents and extra keys.
- A snack and water in case the deal takes a long time.
Arriving at the Dealership
A salesperson will greet you and urge you to take a test drive. Afterward, be ready for increased pressure to begin negotiations.
- Evaluate the car, but also the salesperson.
- Is the salesperson: Listening to your needs? Knowledgeable? Relaxed, yet efficient?
- If asked, don’t consent to a credit check before the test drive. Say you’re already preapproved for a loan.
- Avoid naming the monthly payment you want. Just say, “I’m a cash buyer.”
On the Test Drive
The test drive will provide the sensory information you need to decide if this is the right car for you. Don’t rush this step, and don’t let the salesperson distract you with a chatty sales pitch.
- Tell the salesperson you need to test drive for at least 15 minutes.
- Drive a route that includes tight corners, hills, rough pavement and highway.
- Turn off the radio and pay attention to acceleration, braking, visibility and seat comfort.
- Check the cargo area and backseat legroom.
- If you don’t like your salesperson, ask to see a sales manager or just leave.
- If you’re still undecided about the car, don’t be pressured into buying it.
Negotiating the Price
If you like the car and are comfortable with your salesperson, it’s time to make a deal in the sales office. Try to remain unemotional and be ready to leave if you feel pressured or the pricing doesn’t line up with your research.
- Ask the salesperson to name a price instead of responding to the common: “Make me an offer!”
- Compare the dealership’s price to your numbers from Edmunds, Kelley Blue Book, or NADA.
- Make a counteroffer of $1000 below the true market price.
- You can say: “My research shows the market price is…” Or, “I’ve gotten offers from other dealerships that are lower.”
- If necessary, increase your offer by $250 increments until you reach the true market price.
- If the salesperson says, “I’ll take this to my boss,” tell them your time is limited.
- If there’s too much back-and-forth, ask to speak directly to the sales manager.
Closing the Deal
Before you say “yes,” there are a few questions you should ask to make sure you know what you’re agreeing to.
- Ask for an “out the door” price and a breakdown of fees.
- Question the fees (except for the sales tax, documentation fee, and registration costs).
- Ask the dealer to remove any unwanted dealer-installed options such as alarms.
- Use your cell phone to take a picture of the deal sheet to use in the next step.
In the Finance Office
You’re not done yet! You’ll now be handed off to the finance and insurance manager, who will pitch warranties and extras. Verify that the terms you reached with the salesperson are in your contract.
- Say no to extras you probably don’t want such as fabric and paint protection.
- Deflect the extended warranty pitch by saying, “I’ll probably trade in my car before it’s out of the included factory warranty.”
- If the finance manager offers to beat your preapproved loan rate, fill out a credit application.
- To easily compare loan offers, keep the down payment and loan length the same.
- Make sure the numbers in the sales contract match the agreed-upon price.
- Review the prices in all the boxes and question anything unexpected.
- If anything is missing from the car or it needs repairs, get it in writing.
- If everything looks good, sign and get your keys!
Woohoo — you did it!
- Why to get preapproved for a car loan
- How to negotiate to buy a car
- How to trade in a car when you owe money on it
The article Don’t Buy a Car Without This Cheat Sheet originally appeared on NerdWallet.
Become A Money Boss And Join 15,000 Others
Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)
There are 14 comments to "Don’t buy a new car without this cheat sheet!".
Thank you for writing the post and the great tips. When I purchased my new car a few years ago I went the week after Christmas at 5pm. It was great timing because dealers want to drive up their sales numbers by year end and are willing to make a deal just to get the sale. Also, going at 5pm cuts down on the back and forth as everyone wants to go home by 9pm. I did my research and knew the price I wanted to pay. I even had the model number of the car that I wanted to buy, which you can get online. I told the salesperson, here is my price. Take it or leave it. After 2 or 3 back and forths, all under 45 minutes, we had a deal. But we warned, you need to be willing to walk away for this to work.
You’re still playing their game. It’s way easier to negotiate with the internet manager especially if you have the cash.
Disappointing that this article assumes the buyer will finance. I understand the article was focused on the buying/negotiation process but it could have been a notch better by suggesting cash purchase and talking about the long-term benefits of doing so, especially on a personal finance site. Just my two cents.
That’s a great point, Jennifer. I wonder what aspects of the process are different for those of us who are cash buyers?
In my experience last year, I asked to “just give me the bottom line” cost on the vehicle we were looking at and then we negotiated down from there. It was clear that they were automatically assuming I was planning to finance based on my (younger) age and the vehicle price and I didn’t volunteer otherwise. They came down much more on price because they thought they could make more profit on the financing side. I had to suppress a laugh when we shook hands, they escorted us to the finance department and then realized we intended to write a check. To be clear, we certainly never lied during the process, but it was interesting to see how the tables have turned and it wasn’t advantageous to be walking in as a cash buyer.
I have heard, though I am by no means an expert, that dealerships get a small kick back for each loan they make. I was told to just not commit either way. Everyone I have spoken to on the matter agrees that the days of getting a deal if you can simply write a check are over.
In fact many places offer a kick back for the buyer as well. Current ads in my area are offering $250 for taking out a loan, with no prepayment penalty.
Even if you have the cash, it is sometimes beneficial to finance. With my purchase in February, I was pre-approved with my credit union, but if I made the purchase with a loan from the mnfrs lending branch, a $3000 rebate was applied. I took the mnfr loan (with a terrible rate, 7%), made one payment, and immediately moved to my CU offer.
All told, I paid the extra $100 in interest on one payment and extra $100 to retitle after switching to the CU to save $3000 (on top of the negotiated price). Would a cash buyer have that leverage in negotiations? I don’t know.
Jennifer.
In my opinion you are at a disadvantage paying cash for a vehicle new or used. Dealerships are broken down into fixed and variable operations. Fixed operations are parts/service and body shops and variable operations are selling of vehicles, finance and insurance products (ESC, GAP, Ect.) Our focus is purchasing a vehicle so that is the variable operations. Dealers look at Gross Profit which is not the cost you see on the invoice – there are factory incentives that come into play – but I am going to leave those out for addressing your cash versus finance. You have negotiated the price of your vehicle but now you go to the F&I office for some fun.
Interest Rate – This is called Indirect Lending and banks give dealers wholesale rates and allow them to mark those rates up and pay according the mark up and they can also pay a flat dollar amount to the dealer for sending the contract to a particular bank. You can typically negotiate a lower rate here than what you have been provided on the outside if you do it right. The dealer makes money on these contracts so that is gross profit for the dealership. Trust me you can’t get a wholesale rate through a bank but just know you can negotiate the rate at a dealership.
ESC and other – these also give the dealer gross profit so you can buy then cancel if your careful, I personally would only buy if I wanted the product but you can negotiate anything and it is always no unless you ask.
Doc Fees – these are regulated by the states and each state varies, but typically the dealer doesn’t incur the amount charged for doc fees as an expense so a piece of this is also gross profit for the dealership.
Both F&I products provide gross profit to a dealership and this is where cash buyers are at a disadvantage. If I am looking to purchase a vehicle and everything is the same but I am financing and your using cash, my finance contract could generate an extra $1,000 in gross profit for a dealership thus I could get a lower purchase price on the front end. If I pay $240 in interest over 30 to 90 days I still save over the cash buyer.
Just my two cents.
I buy used cars but they are CPOs: Certified Pre Owned. I always pay cash. I know ahead of time how much I will pay. I tend to stick to American models and a dealership I have had a long term relationship with. With all the computer technology inside newer cars these days, if a lifetime warranty is offered on the car, I get it. Just to fix a NAV system can cost upwards of $1,500.
I found this article to be a complete waste of time.
I would suggest having print outs from cargurus.com, other dealers, etc. so that they aren’t going to assume you are bluffing on “better offers elsewhere.”
Also, I have found it valuable to have print outs of the accessories from the manufacturer’s website as well, especially if they are requirements for you. Last year, we purchased a Honda from a Honda dealership and we said a roof rack and tow package were a requirement for us. They gave me a significantly inflated number for adding them during the negotiations on the vehicle and I called them on it. When they said my information must be wrong, I must be thinking of unbranded parts, blah blah blah I pulled out my print out from Honda.com complete with prices. It changed the tone of the conversation quite quickly in my favor.
We live in E. WA and wanted to buy a new Subaru. Since there is no competition here they would hardly budge on the price. I finally told them I was going to the portland market and took Ramit Sethi’s advice and did it by email letting the dealers know I was shopping around. Found a car with everything we wanted, settled on a great price, and took the train down and picked up the car. Painless!
The local dealer called us the next day willing to go lower but still were not beating our best price.
If you are going to get a loan, it is good to be a member of a Credit Union…….they will usually give you a better loan rate.
The dealers have a book of rates. If you qualify to be a member of a CU that has a good rate they’ll make the loan and you can go and join after the fact.
The minor nightmare described in this article has been an inspiration to explore selling my truck and going car free.
Bikes & electric bikes, public transport, Uber, Lyft, Zipcar, regular car rental, Uhaul/Home Depot/Ryder… I’m thinking I don’t really *need* to own a car.
Thanks, article!