STEP 3
Be Prepared
Once you've decided which vehicle
to purchase or lease, you'll need to catch your breath before
heading back to the showroom. Be aware that the selling
or leasing price of nearly every new car or truck is negotiable,
except for Saturn cars, which are still sold at full list
price. Never buy or lease a vehicle based solely on a particular
monthly payment the salesperson may quote. Unfortunately,
most people dread haggling over the price of a car or truck
about as much as an IRS audit. This is in no small part
because salespeople are highly trained at preying on your
emotions to obtain the highest selling price you're willing
to pay. Even when buyers have negotiated an excellent deal,
many of them still drive home feeling ill-used by the process.
Still, it's your money, and if you
prepare yourself properly and conduct yourself rationally,
you can save hundreds or even thousands of dollars off list
price, depending on the vehicle, without suffering any "buyer's
remorse."
Start off by consulting a new-vehicle
price list to establish a "target" bid for the
vehicle of your choice. Take the stated invoice prices for
the specific model of your choice, plus any options or option
packages you'll select, plus the vehicle's delivery charge.
A dealer's actual cost is typically a few percent below
the stated invoice price. If a manufacturer's rebate is
being advertised for a vehicle, be sure to deduct it from
your target price. This will be your first "offer"
once you sit down with the salesperson to begin negotiating.
If you'll be financing the purchase,
shop around beforehand to find the lowest interest rates;
credit unions typically offer the best terms, overall. Have
your credit checked by a financial institution to see if
you qualify for the loan at the lender's best rate, which
is typically available only to those having flawless borrowing
histories.
You'll also need to think about what
to do with your present vehicle, if you have one. Selling
it outright will always net you more money than will trading
it in at a dealership. However, many consumers are uncomfortable
with selling a car or truck themselves, or they simply don't
have the time to place ads, answer calls and so forth. If
this describes you, and you will be trading in your current
vehicle, always consider your trade-in to be a separate
transaction from the new car or truck deal.
As such, you'll need to determine
a "target price" for the trade-in, just as you
already have for the new vehicle. You can ascertain what
would be a fair "wholesale" price for your car
or truck (a dealer pays wholesale and sells at retail) either
by consulting a bank's car loan department, checking any
of the used car value guides at your local library or bookstore
or by "shopping" it to the used car department
of one or more new car dealerships. If you can, obtain a
bona fide estimate in writing of your vehicle's trade-in
value from the used car department of the dealership at
which you intend to buy the new one.
STEP 4
Negotiate the Deal
Now it's time to be strong; your
hard-earned money is on the line. But rather than try to
"beat the dealer" at his or her own game (you'll
surely lose), keep in mind that the idea here is to determine
through careful negotiations what the dealership's lowest
price will be for that vehicle on that given day. And, yes,
you'll have to negotiate to find out what that figure is;
no dealership will give you its "best price" if
you just ask for it.
Begin the process by greeting your
salesperson cordially; you'll be led into a small room or
a partitioned-off desk at the back of the showroom to begin
bargaining. Take a pad of paper with you, a pen and a calculator
also, and take frequent notes, just to show you're a serious
buyer.
If you have a trade-in, try not to
acknowledge this fact until you've secured a firm selling
price from a salesperson; this way he or she won't be able
to "inflate" the trade-in value by manipulating
the selling price of the new vehicle. (Though this can sometimes
work to your advantage if you need a larger down payment
-- which includes the trade-in -- to qualify for financing.)
Once you're ready to talk price,
start negotiating by making the first offer, which should
be your predetermined "target price," as detailed
above. Tell the salesperson how you arrived at your offer
and that if he or she can meet it or come very close to
it, then you'll close the deal on the spot. While this is
sometimes all it takes (especially if the salesperson thinks
the dealership will still make a profit from you later at
the "back end" of the deal; see Step 5), chances
are good that the salesperson will dramatically roll his
or her eyes and complain at length about the unreliability
of consumer-publication price lists and so forth.
Once the initial hyperbole has diminished,
the salesperson will typically come back with a counteroffer
that will be slightly less than the vehicle's retail price.
You should now raise your initial offer by incremental amounts,
say, one or two hundred dollars at a time; the salesperson
will likely lower his or her price in the same manner. When
the two offers become close, the salesperson will typically
leave to "present your offer to the sales manager"
(though sometimes he may just be just grabbing a quick cup
of coffee or a drink of water). He or she will probably
return with a higher bid. If it's close to your last offer,
try standing firm; if it's considerably higher, continue
the negotiating process.
If the salesperson goes to "see
the manager" a second time, his or her counteroffer
will probably be the dealership's lowest price on that day
for that model. It will then be up to you whether to accept
the offer, leave and try another dealer or keep negotiating.
Be aware, however, that if the vehicle you're buying is
in top demand and in limited supply, your chance of obtaining
the deepest discount is much slimmer than if you've selected
a car or truck of which the dealer has an excess inventory.
If you have a trade-in, give the
salesperson the keys to your old vehicle after the preliminary
paperwork on the new one has been completed. Again, the
salesperson may bluster and act betrayed that you didn't
tell him or her about your old vehicle earlier, but keep
calm and proceed. Tell the salesperson that you're already
aware of what your old car is worth and quote the source;
if you've gotten a bid ahead of time from the dealer's used
car manager, you shouldn't get much of a fight.
STEP 5
Watch Your 'Back End'
Unfortunately, once you've agreed
upon an equitable transaction price, you can't allow yourself
to relax. This is because you'll be passed on to the dealership's
"finance and insurance" (F&I) manager's office
where, you'll be told, the final paperwork will be completed.
You have to be especially sharp here because this is a dealership's
real profit source. Some dealers can make up to twice as
much (or even more) money on the so-called "back end"
of a deal as they can selling the car or truck itself. Worse,
in the hands of an unscrupulous dealer, it's where the most
chicanery can occur.
Here you'll almost certainly be offered
(perhaps pressured) to purchase a myriad of high-profit
services and products. First will be financing. As discussed
earlier, you should shop around for the best deal beforehand,
but still compare this rate to what the F&I manager
has to offer. If you've had trouble obtaining financing
on your own, the dealership may be able to intercede on
your behalf with the lenders with whom they do business,
though you probably won't be able to garner the lowest available
interest rate. If you're going with dealer-arranged financing,
you'll almost certainly be pitched a so-called "credit
life" insurance policy, which is designed to pay off
your loan balance in case you die or become disabled. It's
usually a poor value, however; you're better off with actual
term-life insurance that will probably offer a larger death
benefit for the same amount of money.
Another type of insurance the F&I
manager will try to sell you will be a "service contract"
(also known as an "extended warranty") for the
vehicle. These essentially cover the cost of certain repairs
for a stated period of time. But be aware that they don't
take effect until the original warranty that comes with
the car or truck expires. In other words, if a vehicle already
comes, as most do, with a three-year/36,000-mile warranty,
a five-year/50,000-mile service contract is really only
good for two years, and coverage doesn't begin for three
years after you accept delivery. (Obviously, if you don't
expect to keep the vehicle for longer than it will be covered
by the original warranty, you won't need additional coverage
in any case.) What's more, such extended warranties can
be costly; you'll be charged anywhere from several hundred
to $2,000 or more, depending on the vehicle and the length
of coverage. And if you decide to finance its cost along
with the vehicle's purchase price, you'll be increasing
the extended warranty's price even further. You'll usually
come out ahead by taking the same amount of money and placing
it in an interest-bearing account or investment vehicle
for the duration of the manufacturer's warranty as your
own "repair fund." If you feel you must have a
service contract, negotiate its price with the F&I manager
or shop around after the fact to find one at a lower cost.
(For example, a company called Warranty Gold offers them
directly at competitive rates; call 800/580-9889, or check
its Web site at www.warrantygold.com for a price quote.)
You should avoid buying high-cost/low-value
dealer add-ons like rustproofing, fabric protection, paint
sealant and undercoating at this point as well. Modern cars
and trucks benefit little from aftermarket rustproofing,
which can actually do more harm than good if not applied
correctly. Fabric protection can be duplicated with inexpensive
spray-on products, and paint sealant is little more than
a good coat of wax. Undercoating essentially adds sound-deadening
insulation and is usually most beneficial to lower-cost
vehicles that tend to scrimp in this regard. Still, you
can usually have it applied by an outside shop later, and
often for less money.
As with any transaction, be sure
to read carefully any document presented for your signature,
and check the math in any column of figures for accuracy.
Before signing, confirm that the negotiated price of the
vehicle you're buying or leasing is properly represented,
whether any applicable rebate has been deducted, that any
of the above extra-cost products or services hasn't been
added without your approval and, if you've arranged financing
through the dealer, that the interest rate is the same as
was originally quoted. Refuse to pay any tacked-on charges,
such as for "dealer advertising," or anything
like "ADM" or "ADP" (Additional Dealer
Markup/Profit). Few dealers will allow you to walk out over
these kinds of charges at this stage of the transaction.
And never, ever sign a blank contract, or one that includes
blank spaces which have not been X-ed out beforehand.
Step 6
Take Delivery
When you return to the dealership
to take possession of your new vehicle, it should come fully
"detailed," which means all protective shipping
materials have been removed and the car or truck has been
thoroughly washed, buffed and vacuumed. Be sure to examine
it closely before accepting delivery. Better dealers will
have a representative take you on a final point-by-point
inspection. Look for dents, scratches, broken or cracked
lenses on headlamps, taillights and turn signals, cracks
or chips in windows and so on. Have the dealer fix any defects
before you drive it home or, at worst, have any promise
to make such alterations at a later date put in writing.
Read your new car or truck's owner's
manual from beginning to end as soon as you can. In addition
to providing pertinent information about your vehicle and
how it works, it includes helpful tips for safer and/or
more fuel-efficient driving, details about your warranty
coverage, the recommended maintenance schedule you must
follow to keep the warranty in effect and who to contact
if you have questions or experience problems later on. The
dealership may have added its own recommended maintenance
schedule, which usually includes more frequent (and thus,
to the service department, more profitable) procedures,
but be aware that this accelerated timetable has no bearing
on the manufacturer's warranty coverage.
And though you might not like to
think about such things when there are few miles on the
odometer, problems can occur, and it's best to consider
how best to handle them before they happen. Most states
have enacted so-called "lemon laws" that protect
the interests of new-vehicle buyers within certain limitations
(usually the first one or two years of ownership). It's
prudent to check with your state's attorney general's office
to learn what procedures you'd need to follow to assert
your rights under such laws, just in case the vehicle experiences
chronic mechanical problems within the specified period.
Hopefully, your car or truck will
perform flawlessly, however. And if you've carefully followed
our step-by-step advice, you'll have minimized your financial
investment and maximized your practical and emotional satisfaction
in your vehicle for many thousands of miles down the road.
by Jim Gorzelany from Consumers Digest
Jan./Feb. 1998
