Photo Courtesy of ToeStubber
After posting my article, "When Buying A Car (and in Life), Knowledge Is Power", several people left comments and sent emails asking for more details regarding the negotiation with the car salesman. I left this part out of the original post because it would have made the post extremely long and boring.
There are several key tips to remember before you step on the car lot to search for your next vehicle. You don't want to go into a dealership "without a clue". The car salesman will see it and probably use it to make a sale of a car you probably didn't need to buy. (I want to make it clear that I am not saying that all car salespeople are bad but they are there to earn a paycheck. The majority of their paycheck is earned by the commission they make from selling you a car).
Tip #1: Know What You Are Looking For. If you don't know what kind of vehicle you are looking for, the salesperson may point you to a vehicle that is in their best interest and not in your best interest. My cousin and I researched different vehicle types and we narrowed it down to two vehicles (a Honda Civic or a Nissan Sentra).
Tip #2: Know Your Price Range. My cousin and I sat down and discussed the maximum amount he could afford to pay for a car. This is usually easier once you've done Tip #1. Don't just look at the monthly payment. You also need to consider insurance and maintenance costs.
Tip #3: Arrange Financing in Advance. Once you know what you are looking for and the price range you are willing to pay, the next step is to arrange financing. Of course, being a personal finance blogger, I have to say you should not finance a depreciating asset and save until you have enough money to pay cash. The rational side of me realizes that paying cash is not possible for everyone due to different circumstances. If you are going to use credit to finance the purchase of your new car, the best place to start is your local credit union. Most credit unions offer low cost auto loans. Check this website to see if you are eligible to join a credit union. If you aren't able to join a credit union, the next place to check is an online website like Bankrate to compare interest rates among various lenders.
Tip #4: Know the Value. Searching websites like Vehix.com and Edmunds.com can help you determine a fair market value of the vehicle you are looking to purchase. Once you know what the the fair market value, you can be in a better position to negotiate with the dealer.
Tip #5: Negotiate, Negotiate, Negotiate. Once you know what vehicle you are looking for and the fair market value of the vehicle, you are ready to make your purchase. The price on the window is not set in stone. The posted price is set allowing room for negotiation. Car dealers know that the educated buyer is aware that the window price is just an asking price and not what the buyer will ultimately pay. If the salesperson is not willing to be reasonable, don't be afraid to walk away. There are plenty of car dealerships out there and alot of them are hurting for business.
Hopefully, this post will help you make a better deal on your next vehicle purchase. If you've recently purchased a vehicle and used any of these tips, feel free to share your experience.