Buying a car can be like sitting down at a poker game. It takes patience and the ability to not give away your hand while negotiating for the best price. Following some simple car buying tips can save you thousands of dollars when the game is over.
Make no mistake. Shopping for a car is a game and car salespeople are trained to get you to put as much money on the table as they can before it is over. There are honest car salespeople and dishonest ones. But either way, they will still try and get as much profit as they can.
What are some good guidelines to follow when car shopping?
Getting the best price on a car or any purchase starts with research. Luckily, the internet has made researching car buying much easier than it was before it existed. Websites, such as Edmunds.com, Kelly Blue Book, and Consumer Reports, contain a wealth of information when it comes to looking at cars. Use these sites to your advantage and read the reviews. It does not take long to learn about a car’s maintenance expectations, fuel economy, and the experience other drivers have with a car you may be considering to buy.
Know the car you would like to buy or a few different ones before you go shopping. Learn as much as you can about them. This will give you some points to discuss with the person selling the vehicle and also the knowledge to know you are getting the one you want.
Research when buying new vs used
With new cars researching models, reading reviews, and getting a good price to start negotiations should be all required reading. Get the invoice price on what a new car sells for and not the MSRP. The invoice price of a car is closest to what a car dealer may have paid, but it is not going to be the exact price. This can be challenging even for seasoned car buyers. The styles and options need to match up precisely to get a good invoice price, but try to come as close as you can. Having an idea of a car dealers’ net price they paid to get it puts the buyer in a good starting position.
Researching used cars is somewhat similar, but the price has a lot more to do with supply and demand. Historically automobiles like Honda or Toyota tend to have higher resale values compared to other vehicles because they are known to be dependable as a used car. Search for pricing on sites like Cars.com or Autotrader.com and get a feel for the range of pricing for the car you are considering. Make sure to look at private sellers and dealerships to get an idea for the pricing difference. Generally, a private seller is less expensive compared to a car dealer.
Maintenance history is a big factor when it comes to buying used. If someone neglected a car, it could be your nightmare once you buy it. Use a service such as Carfax to look at the history of a car. It can point to possible issues that may exist. Most of the online car listing websites will include the VIN number in their description. Use this to get more information on a vehicle’s history you are thinking about buying.
Although services, such as Carfax, are useful, use caution. They are not absolute and may not reveal everything about a car’s history. These services should only be used to initially rule out car choices. You will have to go further to ensure the chances of buying a lemon are limited. The issue with a site like Carfax is only things that are reported will show up. If for example a car was in an accident and it was not reported, it will not show up on a report.
I have used Carfax in my buying decisions in the past. My recommendation is to stay away from cars previously registered as a lease, taxi, or rental car. Some people might argue these are fine cars, but I disagree. Just stay away from them.
Do not overlook the cost of insurance during your research. Get some quotes on the cars you are interested in so you are not surprised by the insurance cost. There may not be a big difference in the cost of insurance from the car you may be driving now or it may be a significant price increase. This could change your buying decisions from the start.
Financing a car is not something you should do if you can avoid it. Pay with cash. If it comes down to a decision of buying a new car that you have to finance and buying a used one that you can pay for, then buy a used car. I am a big proponent to buying used due to the fast depreciation of a new car. Most people will tell you that having an auto loan is just normal and part of life. It does not have to be and it shouldn’t be. The quickest way to be in debt is to have a car loan. Here is a previous article on why auto loans are not a good idea.
Although auto loans are not a good idea, I am a realist. I realize having one may not be able to be avoided in some circumstances. Take out the smallest amount possible to get good reliable transportation and have financing set up before going to shop for a car. You will need this for a private seller and should have it before shopping at a car dealership.
Car dealerships will often have financing of their own. Most of the time their financing is more expensive compared to a bank or credit union. Knowing what you can spend and having this with you will put a stop to a car dealer trying to squeeze more money out of the sale through their own financing.
Know your credit score before car shopping. Even though you should get financing from a bank or credit union if financing is unavoidable before looking at vehicles, you should still know your credit score. This will give you an idea of what a bank might offer and in the off chance a car dealer wants to try and get a better rate you will know what your score is. You should take a look at your credit report annually. Even if you will not be financing a car use this time to look at your report. Popular credit reporting agencies will let you pull your credit annually for free. Experian and TransUnion are two of the more popular reporting agencies.
3. Shopping Not Buying
Once all of your research is done, it is time to go shopping. The key at this stage is shopping and not buying. You will have to use some self-control and arm yourself for battle if you go to a car dealership. Use this time to look at the cars you are considering buying.
It does not make a difference if you are looking at used cars or new. Test drive the ones you may want to purchase. This might be at a car dealership or through a private seller.
Test Driving New
With a new car test drive, it is important to feel comfortable with the vehicle. Ensure it is something that you would be happy driving around each day. Does it have the handling and power you want? Does the car have any quirks that would be a problem?
Take a few different models of the same car for a drive to get a feel if any of the differences would be something of interest.
Test Driving Used
Test driving a used car is a little different from getting the feel of a new one. You want to ensure there are no issues and it takes a little more thorough inspection. Make sure to take the car not only around the local neighborhoods but also drive it at highway speeds. Ensure the brakes are working properly and stopping. Turn on the air and heat to ensure they are working as well as the radio and sound system. Listen for any strange noises and pay attention to anything that does not appear to be normal.
Take the time to test drive some different cars and walk away. The car dealers will try to pressure you into buying after doing some driving but do not make a purchase yet. Under no circumstances fall for the deposit gimmick to hold a car. You might be told in the case of a used car that it might be sold. If there is one you like and it is purchased by someone else, there will be another one you can buy that will be just as good or better.
Use the test-driving time for what it is. A time to drive some different cars to get a feel for the one you want.
4. Buy a Car
Once the research is done and some different cars are driven, it’s time to make a purchase decision. Price combined with quality are typically the deciding factors when it comes to buying a car. Negotiating a good deal and ensuring a bad purchase decision is not made are the main focus at this point.
You might be lucky and one of the test drives you previously made or a car dealership formerly visited might still have the same car. This is a good starting point to go back to and see if you can get the car for the right price.
Picking the right time to buy
With car dealerships buying a new or used car there is evidence that points to certain times being the best to get a good deal. Generally, better deals are made during the week with Wednesday being the best. This is due to the supply and demand with car dealerships typically having more customers on the weekend. A salesperson might not be willing to negotiate much knowing that there will be another buyer waiting.
Better deals can also be found at the end of the month. This relates to sales goals and incentives usually being calculated at this time. There can be a real motivation for a salesperson and car dealership to make a better deal at the end of the month to reach their sales goals.
Just like there are monthly sales goals there are also yearly ones. The end of the year can be a good time to buy with September through December good months. Yearly sales goals will also come into play with previous year car models. Even though the newest year’s car model may be on the sales floor, it might be a good time to make a deal on a new one from the previous year.
Go to the dealership around lunchtime. Early in the day might be slow and there might not be many people around. It could take longer to get a sale finalized. The end of the day is not a good time to buy a car. Service departments and banks might be closed. It could be a lot of work just to have to wait to get everything done the following day.
Picking the best time to buy a car from a private seller may not have much of an impact. It all depends on the seller and their situation. If they are motivated to sell, a better deal can be negotiated.
If you decide to purchase a vehicle from a dealership, the game will begin the moment you drive in and get out of your car. It is likely a salesperson will approach you within minutes. The conversation will begin friendly and quickly move to what you are interested in. Some of the common things they may ask are if you have a trade in and what type of payment you are looking for when purchasing.
Do not talk about car payments. Hopefully, you will not be financing, but if you do intend to do this still do not talk about what type of payment you can afford. Car dealerships can fit you into a payment you want by increasing loan terms or even eventually offering a lease to get you to the payment you want. You are not interested in monthly payments. Tell the salesperson you are more interested in the final price.
You will also be asked if a trade-in of your old car will be made to purchase a new one. Do not mention that you will trade in your current car or even that you might be considering it. You will want to get the final price of a car before ever mentioning a trade in. The better alternative is just to not trade in at all. A better price will always be made selling a vehicle on your own compared to trading it in at a car dealership.
When you have the car in mind that you intend to buy start with a low-ball offer. You can always come up in price. With new cars use the invoice price you obtained in the research step. If purchasing a used auto, start low as well with the prices researched.
For a used car you will want to take it to a trustworthy mechanic before starting price negotiations. Let the salesperson know you are interested but want to have your mechanic look the car over. Also, if you haven’t already looked at something like a Carfax report, ask to see one. Most car dealers will have a report on the vehicle’s history. This can also be a good negotiation tactic if something comes up on the report that is a reason for lowering the price. Another possible trick with a report is you might be able to see a date on when the report was generated. If the car has been sitting for some time, they might be willing to let it go at a reduced price.
Play dealers against each other in the process of negotiating. If you can get the same car at another dealership for a lower price, use this to your advantage and let them know you will be buying from someone else if they can’t match the price or come in at a lower price.
With used cars, if a price can’t be agreed on and it is close, ask for them to throw something into the sale to make it more attractive. If the car you want has tires nearing the end of their life, ask for a new set. These extras can help to get the price closer. The dealer pays cost for them and the savings are passed to you.
Negotiating a good deal with a private seller can be either easier than a dealership or more challenging. Start by asking the seller what the lowest price is they are willing to take. If it seems to be less than what you wanted to pay great. If it is more, do not be afraid to show them some of the selling prices of similar cars when you were researching.
Private car sales almost always tend to be lower in price compared to a dealership. You might catch someone who is very motivated to sell and just needs it gone. They may also just really need the money at the time.
With a private seller, it is crucial to get a mechanic to take a look at the car. Ask the seller if they mind this being done. If they have an issue with it, you might want to walk away. It could point to possible issues they do not want someone to uncover.
Ask the seller a number of questions about the car.
- Has it been in any accidents they are aware of?
- Are they the original owner or do they know who previously owned the car?
- Have there been any issues with the car?
- Do they have maintenance records?
- Ask why they are selling the car?
- Who typically does the maintenance on the car?
If a price can’t be agreed on to make a deal happen, be polite and walk away. But give the seller your contact information and let them know you are interested but need to be around the price you are comfortable with. Not all the time, but sometimes you may get a call a few weeks later with a seller that was not willing to let a car go at your price now willing to make a deal happen.
6. When a price is agreed on and it’s time to finalize the sale
Once a final price is agreed on its time to sit down and make everything final. Chances are with a car dealership they have not truly given you the final price yet. There will be taxes, title fees, and add-ons to pad their profit.
Things like rust proofing, paint sealers, and fabric protection might seem like a good idea, but the dealer will charge much more than getting this done through a third party. Turn them down. Also, you will see things like dealer prep fees documentation fees and possibly advertising fees. VIN etching is also a popular add on. The dealer will tell you it will prevent theft. It won’t and it’s a waste of money. Refuse the add-ons.
An extended warranty will also be offered. These are almost always never worth the money spent. It can seem appealing with a used car, but if the vehicle checks out still turn the extended warranty down. You just have to know that you are buying a used car and budget for possible repairs. Extended warranties can cost thousands of dollars and they rarely will cover all the expenses. Car dealerships make large profits on extended warranties.
When it comes to a new car that has a warranty a dealership may still offer one even though there is already a warranty in place. You will often be told that buying the extended warranty now will be less expensive compared to getting one in the future. It’s not true. If you want an extended warranty in 3-5 years you could still get one. My Honda that I own I am still sent offers for an extended warranty from the dealership to this day. It is not more expensive than it was when I bought the car.
Some of the add-ons are negotiable. Do not be afraid to ask to have delivery or prep fees removed and reduced. This is also a good time to let the dealership know that you may like to trade in your old car. A final price is already agreed on so you can see how they will truly value it. I would still recommend selling an old car privately opposed to trading it in. But if you are going to use a trade-in this is the time to do it.
Once you start to see the finish line of finalizing everything and it might not be where you want it yet, do not be afraid to walk away before signing the paperwork. I can almost guarantee you will get closer to the price you want either at that moment or in a day or two the dealership will call you willing to lower the price.
If the dealer is not willing to come to terms, do not leave any money to hold the car. They will tell you it might be sold while you are trying to make a decision. There are plenty of cars for sale and you will find another one.
If you are financing
Although financing is the last option, if you must do this, make sure you have pre-financing setup as mentioned earlier. If you do not have this due to poor credit, this will be a critical time to pay attention.
You should already know your credit score. If the car dealer offers to finance, let them know you are aware of what your score is. If they come back with a rate you are not comfortable with, let them know it does not seem to be correct taking your score into consideration and the research you have done.
The dealer may tell you they might be able to get a lower rate or they are working on a lower one. If this is late in the day, they might tell you to just take the car home and come back in the morning. Do not drive the car away at any time until the deal is done.
A typical scam a less than trustworthy car dealer will pull is to tell you the following day that financing fell through and more money needs to be put down or the rate will need to be higher to finalize the sale.
During the sale process if you are financing, do not budge on the terms you were originally told. A typical tactic is to first work with the salesperson. Following this comes the sales manager and then the finance manager. Along the way, they will try to tell you they can’t lower the price or they need to increase the loan term. Stick to the original agreement. Do not give in to putting more money down or having the time of a loan term increased.
Do not lease. If through financing a monthly payment is not affordable, the car dealer might offer a lease with a lower monthly payment. Walk away and do not lease. There are several reasons why leasing a car is just a bad idea. Here is a previous article I wrote on leasing cars and the reasons for not doing it.
Financing with bad credit
Not everyone has the best credit if you do need to finance a portion of a vehicle. At all costs, you should avoid financing. However, if you must finance as a last resort and have bad credit, you need to be particularly cautious when it comes to financing. Car dealerships prey upon people with poor credit.
If you need a good reliable car you can finance and pay off quickly for whatever reason, do not take out a 6-year loan term or more just to get into a car you can afford. With the high-interest rate a bank or car dealership will charge it will keep you in the same situation you are currently in.
A 12% or 15% interest rate on an auto loan is not good. If you take this deal to get a car, you will be behind on what it is worth very quickly. This is especially true if the loan is 72 or 84 months. You are better off buying something used that will get you from point A to point B.
There are plenty of car dealers that prey on people with poor credit that need a car. They might even offer free vacations or televisions as an incentive. These are not free. You will be paying for it. Buy a car someplace else and save your money to take a vacation.
To finalize the sale on an automobile from a private seller there will be some things required. You will need the title. If the seller does not have one, then walk away. They either still have a loan with the bank on it or they are not the owner. If the seller does provide one, ensure they are the owner listed. Things that could point to an issue on a title are ones that indicate a salvage, rebuild, or factory buyback. Items like these spelled out on a title are reason enough to not buy it.
If the seller provides a payoff note and does not have the title yet, you will need to verify this with the lender. There should not be a financing company listed on the title at all.
Get a bill of sale and list out the following information on it.
- Date of the sale
- Sale price
- The name and address of both the buyer and seller
- VIN or Vehicle Identification Number
- Note any conditions placed on the sale.
- If you live in a state that has emissions testing, check for this paperwork to ensure there are no issues.
Transfer the title
Purchasing a car from a private seller will require a signature from both the buyer and seller on the title along with the date. If for some reason there are multiple people listed on the title, you will need to get all of the signatures for the people listed.
The odometer reading with the number of miles on the car is also recorded at the time of sale on the title. The sale price may also be required. One thing to note is that some people may ask to list a lower sale amount than agreed on. Do not do this. Many buyers will ask to have this done to lower the tax fees. There are states that have caught onto this and it will likely catch up to you if the sale price listed is far below market value.
A notary might be required for the title transfer depending on the state you live in.
7. Drive off in the car and be happy with it
If you followed the tips in this article and drive away in a car you purchased, be happy and confident with your decision. Buying a car is not an exact science, but doing everything you can to ensure a great deal is made is all that can be done.
Hopefully, the information in this article will help you with purchasing a vehicle. Although I have picked up much information over the years when it comes to buying a car, I still to this day do exhaustive research when I am in the market for the next purchase. Each time I pick up more information on how to get a better deal.
Don’t just read this article on car buying tips and then go out to buy. Take the time to do as much research as you can. When it comes to buying a car it is important to arm yourself with as much information as possible. This is particularly important when it comes to shopping at a car dealership. They are there to make money as a business, which is understandable. But this does not mean you have to be taken advantage of.
If you have more helpful information on how you get the best deal when buying a car, let us know. Car purchasing for most people is not a fun way to spend time. Let us know how you work at getting the best deal.