Car buying, part 2 of 3

Mique’

When we left off last time, we had walked through some of the challenges and best practices of getting yourself ready to buy a new vehicle.  This month let’s take it a step further and get you prepared to negotiate and complete a transaction.  We are again referencing US News & World Report and NerdWallet for the following suggestions to help you get the best deal possible:

18) Remember Sales are Usually Final

The reason you want to do so much due diligence is most vehicle sales are final. Once you sign the papers and leave the seller, the car is yours. Even if the vehicle’s condition has been misrepresented, you’ll likely still be stuck with the car. If it’s a new car or a CPO vehicle with a warranty, you’ll be able to get problems fixed through the dealer’s service department. If it’s a used car without a warranty, you’ll have to pay the repair bill out of your own pocket.

A few manufacturers and used car superstores have limited return policies, but most of them are loaded with fine print, which makes returning almost any car cost you money in the end.

19) Know Your Trade-In Value

A lot of people like to trade in their old car, so they can resolve all their car-buying hassles at the same time. But this could be a costly choice. While trading in a vehicle is convenient, dealers may try to low-ball customers and only pay the wholesale price. Failing to know the value of your trade-in invites the salesperson to manipulate the amount to make it seem like you’re getting a great price on your new car. Before you negotiate the trade-in value of your old car with a car dealer, you should have a good idea of what it is worth. Many online sources can give you a range of trade-in values based on the vehicle’s equipment, mileage, condition, and age. Be realistic when you assess your vehicle’s value; otherwise the estimate won’t be accurate.

Another way to get a reasonable estimate of your trade-in’s value is to offer it to other dealers or used car superstores. There’s nothing that says you must sell it to the dealership you are buying your new car from, though doing so can reduce your sales tax liability.

To see how much that is, go online to a pricing guide, look up your car and compare the trade-in price (what you would receive) to dealer-retail (what the dealer will try to sell it for).  Often, the difference can be $3,000. For example, Edmunds.com’s True Market Value used-car pricing shows that for a 2013 Honda Accord EX, the difference between trade-in and dealer-retail is $3,100.

New trade-in options are available, such as selling the vehicle to CarMax. Or, you can sell it to a private party.  At the very least, look up the trade-in price of your car and negotiate the highest possible price for it.

20) Keep the Transactions Separate

When you start negotiating the price of your new or used car, the salesperson will likely try to merge the price of the vehicle, the value of any trade-in, the cost of financing, and any down payment into a confusing stew of numbers that produces a monthly payment. Car shoppers, on the other hand, want to keep each of those transactions as separate as possible, focusing solely on the price of the car.

Knowing the value of your trade and having a pre-approved financing offer in place helps to get those numbers out of the game. Don’t be at all surprised, though, when the salesperson keeps trying to pull them back into the equation. Politely try to keep the focus on the price of the car and be prepared to walk away if the salesperson refuses.

21) Don’t Negotiate on Payment

The biggest arrow in the salesperson’s quiver is their ability to keep the discussion centered on the monthly payment. While, as we discussed earlier, the monthly payment needs to fit your budget, negotiating solely on the payment is a sure way to spend way too much on a vehicle. Doing so simply allows a trained salesperson to manipulate all the other numbers in the deal to maximize the total amount you will spend on the car. It’s a tried and true dealer trick that works well for their profitability.

In many cases, buyers who only look at the payment will find themselves with auto loans that are way too long, include unwanted extras, and have high interest rates.

22) Know What to Negotiate

There are things in an auto purchase that can be negotiated and those that can’t. Don’t waste your time trying to haggle over the car’s registration, taxes, or destination charge (the cost the manufacturer charges to ship the car to the dealer.) You can, however, negotiate the dealer’s documentation (doc) fee, advertising surcharges, additional dealer markup, or unwanted extras. If you make any price concessions, ask for something in return, such as floor mats or lifetime oil changes.

Negotiate slowly and repeat the numbers you hear. It’s easy to get confused, so go slow and even write down the numbers thrown at you. Make sure you know whether you’re talking about the “out-the-door” price, which includes all taxes and fees, or just the sale price of the car.

23) Don’t Overshare

Any skilled negotiator will tell you that the more they know about the person across the table, the more powerful their negotiating position. From the moment you step on the car lot, they will be looking for information, both verbal and non-verbal, to use in later discussions. They’ll look at how you’re dressed and even how clean or dirty your car is. If the car is spotless, they’ll know that you’re ready to trade it in that day and are looking for the highest value.

One of the first questions they will ask is how much per month you are willing to spend. The more vague you are with your answers, the more power you will have later in the negotiations. Naturally, you shouldn’t be impolite, as it’s easier for them to stick someone who they think is a jerk with a lousy deal than it is to overcharge someone they like.

24) Shop Around

One of the best ways to get a good deal on a new or used car is to shop at several dealerships. Due to discounts, bonuses (called holdbacks in the business), different franchised new car outlets can pay different dealer costs for the cars they sell. It’s OK to let them know that you’re shopping around, though most dealers will assume you are anyway.

If one dealer has hit their sales goals and another hasn’t, the one that has not will have much more of an incentive to make you a deal, especially if it’s near the end of a sales period. Even if there is only one dealership of a specific brand in your area, you should expand the geographic territory for your car shopping to include at least one more.

Car shoppers looking for pre-owned vehicles from private sellers should look at several vehicles in the community. Often prices are set by local supply and demand, so getting price quotes on several used cars will give you a good survey of the market.

25) Let Your Keyboard Do the Walking

Fortunately, you no longer must drive from dealership to dealership, spending hours in negotiating the prices of new or used cars. Instead, you can visit them virtually, through their websites or by emailing the internet manager at various outlets. Other than the test drive, used car appraisal, and final paperwork, there’s little reason to step foot on a car lot.

Pricing guides, such as Kelley Blue Book, allow you to cut to the chase and find out what other people in your area are paying for the car you want. On the website, accurately input all the options you want and, in some cases, even the color, since all those factors affect the car’s price.

Make sure to see what, if any, incentives and rebates are available for the car you want. Most manufacturer websites list current offers, which usually change each month.

Requesting dealer quotes by email can take the stress out of negotiating. You can ask for a price quote by emailing the dealership through its website. Or, to save time, use a third-party site such as Truecar.com to request quotes from multiple dealerships simultaneously. Compare the seller’s asking price to the average market price you determined through the pricing guides. Chances are, the seller is asking more than the market average.

If a car seller offers you a price, be sure to print out the offer or email. It can help if they suddenly get amnesia when you show up at their door.  If a dealer does not honor any deal they made with you online, you should consider it a red flag and leave the dealership. Unless the price they offer you at the dealership is very close to the internet offer, it’s just not worth wasting time with a dealer that has already behaved in an unscrupulous manner.

26) Don’t Go for the Add-Ons

One of the final steps in buying a car at a dealership is a visit to the finance office to sign the final paperwork. It’s also where you’ll typically be offered a wide array of add-on products and services, ranging from extended warranties to nitrogen in the tires. Though there will likely be some pressure applied so the dealer can include the products with your financing, you’ll want to take a step back and thoroughly evaluate the products before you buy. Buying an extended car warranty at the right price can provide peace of mind. But check first to see how much warranty is included with the price of your new car. Most new cars have a bumper-to-bumper warranty covering at least three years and 36,000 miles, along with a powertrain warranty that typically lasts up to 75,000 miles. The powertrain warranty covers all the parts that make the car drivable, such as the engine, transmission and suspension.  In general, you don’t want to finance add-ons anyway, as you’ll have to pay interest on the purchase for the life of your car loan.

Most of the products you’ll be offered at the dealership are available from other sources, including your lender or auto insurance company. It’s a good tip to check out the company behind the product by contacting the local consumer protection agency where they are based.

27) Check the Paperwork

Signing the documents to purchase and register the car is one of the last obstacles between you and the open road. It’s not a process to rush through, however. Always check for accuracy and completeness. Don’t ever sign papers with errors or blank spaces, as they’re more difficult to correct once you sign your name to them. It’s important to make sure the numbers match the deal you agreed to – especially the price and loan terms.

Take your time reviewing the contract and don’t let yourself be pressured into signing just to get it over with. The contract will include the agreed-on sales price and these additional figures:

a) State sales tax. This is a percentage of the cost of the car. (Note: Tribal Members do not have to pay sales tax if the car is delivered on the Reservation).

b) Documentation fee. As crazy as it sounds, the dealership actually charges you for filling out the contract. This “doc fee” is capped in some states. In states such as Florida, some dealerships charge as much as $700 for doc fees.

c) Registration fees. A dealer can register the car for you, which is convenient.

d) Some dealerships might include additional fees, of which some may be bogus. It’s tricky to know what’s legit and what’s included just to boost their profit. If the dealer’s finance manager can’t explain a fee in the contract to your satisfaction, ask to have it removed.

28) Walking Away Is Sometimes Best

One of your best car-buying tools is your ability to walk away from a bad deal before you commit to years of overpaying on your vehicle or its financing. Many buyers fear the pressure from sellers, embarrassment, or loss of the time they’ve already invested in the deal. It’s important to remember, though, that a few hours of extra work is a cheap trade-off for years of financial pain.

Sometimes you won’t even have a concrete reason to walk away. Sometimes it’s just intuition. Whatever the reason, stay polite and leave your contact information behind. If you were close to an acceptable deal, the seller might just find that little bit extra to make the deal work.

Be unpredictable. Don’t let a salesman leave you trapped in a sales office while he “goes to talk with his boss.” Instead, roam around the showroom or go get a cup of coffee.

29) Know What Is Important to the Dealer

In the age of consumer-based review sites, such as Yelp, and social media, dealers know that they must act professionally, so they don’t face consumer backlash across the internet. Talking up the dealer may score you a few points in the sales or service department, while letting others know about bad experiences may save them from the same struggles.

Automakers relentlessly survey customers on their buying and service experiences. The data from those surveys are used to set bonuses awarded to dealers and their personnel, so they have become critical for dealer management to pay attention to. Indicating your responses to those surveys is dependent on any issues getting promptly resolved is a good tip for getting a favorable resolution.

30) Refinance Your Loan

A few months after taking delivery of your new or used car, it’s a good tip to survey the loan market to see if you can get a cheaper auto loan by refinancing. Credit unions and community banks are the industry leaders in car loan refinancing, often taking a couple of percentage points off existing interest rates

Part 3 of this Car Buying series will appear in the August 2, issue of the Drum.