For many Americans, buying a new car is a stressful experience, and consumers are right to feel that way: The process is expressly designed by car dealers to separate you from as much of your money as possible. And if you don't follow several basic rules, they'll succeed in taking you to the cleaners.
True, there are exceptions to the rule -- those rare dealerships that don't pressure their customers or manipulate the car buying process to get the maximum possible profit from every sale. But you shouldn't plan on being lucky. Instead, be prepared.
The car buying process is one of the most hardball consumer experiences in the United States, hence the sooner you recognize it, the more likely you'll buy a new car for a reasonable price -- not what the dealer wants you to pay.
The keys to getting a fair price are patience, preparation and perseverance.
1. Be Patient. If you are patient, you're more likely to buy a car for a fair price. This is the most important rule of new car buying, but it's amazing how many adults fail to obey this golden rule. Conversely, if you are not patient, the dealer will win.
Being patient, though, doesn't mean waiting to buy a new car until your used car no longer functions and you desperately need transportation. Better to buy a new car when you don't need one immediately, so you have the freedom to walk away from the dealer's first, second, and even third offers. Negotiate from strength.
2. Know the Right Months. In the new car business, dealer showroom traffic varies seasonally. All other factors being equal, you want to be negotiating for your new car when showroom traffic is low. For this reason, the Christmas shopping period is an excellent time to scout new cars.
If your first response to that idea was "I wouldn't want to look for a new car when I also have to shop for presents, make the rounds of holiday parties, etc.," you've hit on precisely the reason it's such a good time to hit the dealerships. Auto dealers can't stand the period from Thanksgiving to Christmas, when their showrooms tend to get very quiet. Late September is perhaps the second best time start looking for a new car: New model year vehicles arrive, increasing dealer inventories at the same moment as they're hit with a traffic lull from Americans returning to work and school. Dealers are more likely to lower their prices during these periods to generate sales than during high-traffic periods.
In the northern parts of the country, late January is the third best time to car shop. It's the dead of winter, and many Americans considering buying a new car will put off the decision because they are weighed down with winter sluggishness and winter heating bills. That makes it a smart time to visit Mr. Lonely Car Salesman.
3. Know the Right Weeks. Don't set a foot on a dealer lot until the third week of the month. Most auto salespeople make most of their pay from commissions. Hence, early in the month many "go for the jugular" -- play hardball on the price at the risk of losing the sale -- knowing that if they blow three or four leads by being too aggressive, they can make up for it in the second half of the month. You don't want to be there for the aggressive period. You want the lonely, desperate-for-a-few-more-sales-to-have-a-decent-month auto salesperson. Also, never visit a dealership on a Saturday. That's normally a high traffic day of the week.
4. Pay Cash. Obviously, this isn't possible for all prospective car buyers: Financing for 48 months or 60 months often is a necessity. But cash rules. If you can skip the loan, your negotiating power increases substantially.
Here's a hypothetical example: You're evaluating a 2011 Ford Fusion (non-hybrid edition) (F) on the dealer's lot with a manufacturers' suggested retail price of $26,895. You tell the salesperson on your second visit that you're prepaid to write out a check for $17,000.
The salesperson's likely response will be something on the order of: "You're crazy. You're nuts. What are you talking about? That wouldn't even cover our costs."
At that point, leave your card with a number for him to call you the next day if he reconsiders, and leave.
If that salesperson doesn't call back, start reviewing cars at another dealership in the area.
Odds are, however, that salesperson -- the one who a day earlier implied that you needed psychiatric help -- will call you back, at which point you can start negotiating from your $17,000 cash base. You're much more likely to get that Fusion for $20,000 -- or even less -- by paying cash.
Similarly, the larger your down payment, the stronger your leverage with regard to financing. If, after suggesting a $10,000 deposit on the 2011 Ford Fusion, the dealer offers a financing rate that is high, again, leave your card and number, and move on to the next dealer. Odds are, you'll eventually get a more reasonable auto loan, even if the first dealer doesn't call you back.
5. Be Prepared to Walk Away at Least Twice. Here again, you have to exercise your "no" muscle. The salesperson will tell you: "This is our final offer, our best offer," or "It's as low as we can go, we're losing money on the deal." But know that when they says this, there are one or two lower offers below it. Never accept a salesperson's first or second offer. After you reject the first, the dealership invariably will call you back. If it doesn't, as noted before, move on to the next one. If you don't haggle and negotiate, you're playing in to the dealer's hand.
You're in the Driver's Seat
There are exceptions to the above rules. Vehicles that are in high-demand -- including luxury cars, sports cars, hybrids, and trendy vehicles -- tip some of the power back toward the dealership. Don't expect to negotiate a low or even fair price for a Toyota Prius or a Chevrolet Corvette. But those vehicles are the exceptions.
The new car buying process is harsh, and a stamina test. It's designed to wear you down, get you to panic, and give in to the dealer on price. But for the most part, if you shop with patience, preparation, and perseverance, you can beat the dealership at its own game.
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