6 Rules for New Car Buyers
February 9th, 2008 by admin
Just read this great post from CNN/AOL on rules for buying a new car. Essentially it doesn’t have to be a stressful and wallet-draining experience if you following the following six rules:
1. Buy when you don’t have to
The best way to get a great deal on a new car is to avoid being in the position of having to replace the one you’ve got because it just broke down and it’s beyond fixing (or you just don’t want to put any more money into it). Desperation rarely results in a good deal — for the buyer, anyhow. Smart shoppers anticipate the need for a new car and begin looking at what’s available long before they actually need a new car.
2. Shop for money first
Unless you are buying a new car with cash, you should think about new car financing (and interest rates) before you think about what color to get. Many buyers forget that the cost of money is just as important to the bottom line as the new car price. Whatever you saved up-front on the new car price can easily be lost over the course of the loan if you sign up for a loan with a higher rate than you could have/should have paid.
Check with several potential lenders — including credit unions, banks and the automakers’ captive financing arms (GMAC, etc.) — then buy a new car. This way, you can focus on one thing at a time instead of two things at once. You will know you got the best deal you could have on at least one of them.
3. Compare incentives
To jump-start sales, many automakers offer various incentives (cash back, “customer loyalty” discounts, special financing deals, etc.) that can be worth several thousand dollars off the new car price. If you’re considering two similar (but different brand) vehicles, incentives on one of them could be all the incentive you need to make the choice between them.
You can also use incentives on one brand as a negotiating point for the purchase of another. Point out to the salesman that you could buy new car brand “x” for $2,000 off the sticker and ask if there’s anything he can do to make his brand more cost competitive — such as tossing in a no-cost extended warranty or free oil changes for two years, etc.
4. Know what you’re buying
Most models of new cars (and trucks, SUVs and minivans, too) come in several trim levels, with your choice of engines, transmissions, safety equipment and other features. You should always know at least as much about your next new car as the salesman does so you can talk about the car knowledgeably with the salesman. You don’t want to get pushed into buying a new car with things you don’t really need or end up with one that lacks some things you end up wishing you had bought. Information is readily available: see the automakers’ Web sites and read as many expert reviews as you can find.
You should also take a thorough test drive of at least two hours before buying a new car. Make sure the vehicle is comfortable and there are no design problems (excessive blind spots, uncomfortable seats, noisy engine/hard to shift transmission, etc.) that you might hate to have to live with if you actually owned the car. You may save yourself a big headache and a lot of money, too.
5. Know how much your old car’s worth
A big mistake made by many buyers is to focus on the new car, and its price, while forgetting to know just exactly what their old one’s worth. It doesn’t do you much good if you save $2,000 on the new one but lose an equivalent amount on your trade-in.
The exact value of every used car is vehicle-specific, there are almost always significant differences in condition, equipment and mileage. However, you can still get a very solid “ballpark” idea by checking current trade-in/resale prices for cars like yours in the classified ads and in trade guides such as Kelley Blue Book and the National Automobile Dealer Association’s used car price books. You can adjust the value up or down for things like higher-than-normal mileage, excellent (or just average) condition and so on.
Be aware that there is a difference of about 10 percent in retail vs. wholesale prices. “Retail” refers to what the used car would be advertised for by a private seller or dealer; “wholesale” refers to the offer the dealer would make you for the car as a trade. The difference reflects his profit margin as well as the costs involved in cleaning up and otherwise “prepping” the vehicle for resale.
And finally …
6. Don’t wear your heart on your sleeve
Getting emotional about a new car or truck is fine, once you get home. But when you’re buying a new car, you’ll almost certainly do better if you can remain as aloof and detached as Mr. Spock. Never portray more than casual interest in a car; salesmen react to emotional buyers like sharks react to blood in the water. If you feel your heart might get ahead of your head, bring a spouse (or a good friend) along to keep you out of trouble. You should convey a “take it or leave” it impression — and the more convincing your performance, the more likely you’ll drive home a deal.
This entry was posted on Saturday, February 9th, 2008 at 6:05 pmand is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
February 17th, 2008 at 3:05 am
Obviously the person who wrote this has never sold cars? A 2-hour test drive? No way! Doesn’t happen. Also Kelly Blue Book values are way over what cars are really worth. Dealers and wholesalers laugh at the prices Kelly quotes. I don’t know where they get their numbers but it isn’t based on any real world data.
Typical… some staff writer is given the assignment to write a piece on buying a car. They go out on the Internet or talk to some “Ivy Tower” factory representatives but never talk to the people on the front lines. I meet people every day who have read articles like this and they think they know - but they don’t. All they do is waste their time trying to get what Kelly says their car is worth only to be disappointed.
On new vehicle pricing, KBB is correct most of the time. Invoice is what the dealer pays to purchase the vehicle from the manufacturer and MSRP is the Suggested Retail Price. KBB also has info. on “incentives, rebates, lease deals,” etc. Again, mostly correct. The biggest time waster I see is the person who comes in, wanting to buy the hottest model on the lot - one that is in short supply and the manufacturer can’t build enough of for invoice price or below. This is usually after they have been given a complete “walk-around” demonstration, a 15-20 minute ride and a tour of the service department, coffee bar, and customer waiting area. (Total time 1 - 1.5 hrs). They then leave, hit the internet and contact every “like-brand” dealer within a 200 mile radius trying to buy the car for a cheaper price.
Driving 2 hours to save a couple of hundred dollars could come back to haunt you when you need your local dealer in a pinch. Is it realistic to expect him to bend over backwards to get you a loaner car and squeeze you into his service department if you used him to demo the vehicle (wasting 1 -2 hrs of his time) and then purchased it somewhere else? That’s like trying to return the dress you bought at Marshall’s (overstock discount store) to Nordstrom (full service high-end department store).
As far as different brands are concerned, here is a hint - big rebates and 0% finance rates = “distressed or overstocked merchandise. Be realistic, supply and demand rule the market. There is a reason that Ford, Chrysler, and GM are offering all kinds of crazy deals - they are producing too many vehicles and their market share is shrinking.
Don’t expect to walk into a Honda or Toyota store and have them react to the fact that Jeep has a $5k rebate so therefore the Pilot or Highlander should be discounted too - apples vs. oranges. If the $5k means that much - buy the Jeep - just don’t expect it to be worth what the Honda or Toyota is worth at trade-in time. Remember - every time a manufacturer comes out with a rebate on a specific model to move it off the showroom floor, the used vehicle market adjusts accordingly and devalues that models overall value. When customers come in and say; “Why should I buy that used 2005 model over there when I can buy a new one for nearly the same money?” What they are really saying is - “You paid too much for that trade-in Mr. Dealer.” Therefore, why would a dealer pay big money for a trade-in that had all kinds of discounts applied to it over its lifetime? The truly insidious thing is that the customer who is looking to trade the car in today, might not have even got the benefit of those discounts and rebates when he purchased his car. They may have been given to subsequent customers who purchased that vehicle months or even years after but because the wholesale market has adjusted to the “newer, cheaper” price, it hurts him just the same.
The Internet is a great tool - I encourage people to use it and educate themselves about the product and prices. It just gets me crazy when so-called experts write these “how to buy a car articles” when they just don’t know what they are talking about and have no first hand experience with the subject matter. I also object to being characterized as “a shark reacting to blood in the water.” I use a patient, consultative sales approach and give my customers all the information they need to make an informed purchase decision. I believe that most people appreciate good service and will come back to me as a result. I guess the writer feels it’s OK to paint all in my business with the same brush by using that tired shark cliché.