Buying a car can be a very intimidating experience, if you let it. Most customers approach buying a car or truck with the enthusiasm usually reserved for having your fingernails removed from the roots or having an arm or leg removed without anesthesia. They also give up all control as soon as they hit the car lot and just let salespeople run roughshod over them.
I was taken' by a car salesperson at the age of 18 and sold a car whose transmission blew up within less than 60 days after purchase. This was the days before the 90 day dealer warranty and used car certifications. After having my step-father intervened, I still had to come up with $1300, splitting the difference with the dealer to replace the engine. Of course I was paying retail and they were paying wholesale for the engine, so I'm pretty sure my half' actually paid for the whole thing without any real contribution by the dealership.
Later in life, I became a car salesperson and then a finance manager. Now I look forward to buying a car because I know how the game is played. I've had to buy a couple of cars for myself and have helped friends purchase new and used cars too.
When buying a car, whether new or used, there are some things you should do before they ever set foot on a car lot:
What payment can you afford? Typically lenders will allow a car payment to be 15-20% of your gross income. However, this doesn't mean you can afford this payment. Set a limit as to what you can afford and stick with it. Keep in mind too, that car insurance will be higher on a leased vehicle, than a purchased vehicle. Call your insurance company and find out what payments will be so you'll know before there are any ugly surprises after you've signed the contract.
Get pre-approved on financing. Go to your bank or credit union and see what financing they are offering and see what you qualify for. This will be important negotiating information later on. You can also checkout the financing available online at websites like Carsdirect.com, Carmaxx.com and capitalone.com. Good credit is important for financing, but even with credit problems, there is financing available for most situations, but buyer beware.
Educate yourself on what you want. With the evolution of the internet, there is plenty of information on all types of vehicles. Compare prices, features, mileage and consumer reports on safety. Find out if there are any recalls on the vehicle you are considering or if there are any types of issues with things like brakes, transmissions or other safety problems or costly things to fix.
On the purchase of a used car, have a trusted person or mechanic that is willing to take a look at the car for you. Many dealerships offer a 90 day warranty on as is' cars purchased, but won't cover some transmission or cosmetic problems.
If purchasing a new car, a day or two before you plan to go shop, check out the ads of dealerships in your area. This can be useful when negotiating a deal on a new car because many times a dealership is willing to meet or beat any competitor's offers.
If you plan on trading in your car, make sure you know the Kelly Blue Book value (www.kbb.com), both the wholesale and retail values. Make sure it is clean, inside and out and free of any junk or unnecessary dirt than can detract from value. You are trying to get the most for this car, so it should look like it deserves that value. Have the current registration available and the current pink slip, if you own the car, free and clear. It is unlawful to sell or trade a car with a title that says "salvage", so don't try to hide the fact. It will not work in your favor.
Now you have done sufficient homework, put all your information in a file folder or large envelope to take with you; vehicle information, comparisons, prices, loan pre-approval and any car ads you found. You are ready to decide where to shop. Ask friends where they bought their cars. Satisfied customers are the best source of information and the best referrals. Make note of the ads on TV. Have at least three dealerships that you plan on shopping at. Armed with your new knowledge and information, it is time to shop!
Rules for shopping day:
- Go early. Car shopping takes time, even under the best circumstances. There are less people shopping during the week, but if you have to go on a weekend, get to the first dealership as soon as they open.
- Don't bring the dog or your posse' and if you can, leave the kids at home. Buying a car can be a long process and kids tend to get tired and grumpy. It makes it more tempting to give in to any deal, just to get the kids home and fed. Avoid as many distractions as possible. Your job is to get the best deal and anything else can threaten your success.
- DO NOT GET EMOTIONAL ABOUT ANY VEHICLE! You should be prepared to walk away immediately from any vehicle, regardless of how perfect you think it might be. IT IS JUST A CAR! In the case of a new car, there is another one down the street at the next dealership and if they don't have it, they can get it within a day or two.
Now you are ready to step on the first lot on your list. Here are a couple of things to consider as you begin dealing with the salesperson that approaches you.
- All dealerships affiliated with the big names like Chevrolet, GMC, Buick, Honda, etc. have what is called a scoring system called Consumer Satisfaction Index. This means that on the purchase of a new car, customers fill out a card and rate the service they have received by the salesperson, the finance person, the dealership and the service department. This information is sent to the manufacturer and kept on record. Bonuses and incentives for the salespeople, management and dealership are based on keeping a high CSI rating. I have been lucky enough to work for dealerships that treat the customers like gold and do their best to make any problem right. Working with this size of dealership, you will usually leave happier than if you go to those no name' places that are a buy here, pay here' shop that does their own financing. I don't recommend ever going to one of those unless your credit makes them the only choice.
- YOU ARE IN CHARGE! You always have the right to walk off a lot if not happy or ask for another salesperson. Never, never, never buy a car from someone you don't like or trust and that goes for ANYTHING you buy. If you don't like them now, you will not be happy having to deal with them if something goes wrong. No one is going to put a gun to your head and make you buy the car. You are the one with the money (or financing) and that gives you the power.
If you are dealing with a true professional, they will introduce themselves and ask what you are looking for, or ask what features are important to you and help you pick out a couple of vehicles to check out, if you haven't decided on what you want already. Have them open the vehicle up; hood, trunk, all doors and give you a "tour" of the vehicle, explaining the features and benefits of this vehicle and why it would suit your needs.
You will want to drive the vehicle and be prepared to drive a couple of them with different options, just to checkout what is available and see if it is the right car for you. ALWAYS drive the car! If you like the car, look it over thoroughly; scratches, marks, floor mats, worn tires, etc. These could be negotiable items later.
Once you find the car you like, it is time to crunch numbers. Don't be afraid: Remember, you are in charge and can leave at any time.
A professional sales person will seat you in their office, table or cubicle and ask you if they can get you something to drink. Make yourself at home because this is where all your preparation will pay off. At this point, lay your folder or envelope of information on the table and bring out your calculator. You are setting the stage for negotiating and letting the salesperson know you are here to get a good deal.
There are two types of dealerships; "closer" and "straight sell". A "closer" dealership has the salesperson work with the customer on the lot and getting preliminary information and then when it comes time to work the numbers, the "closer" takes over the deal. A "straight sell" dealership has the same salesperson work with the customer through all steps of the sale. If you end up working with another person at this point, no problem. You are in charge!
There will be some preliminary information the salesperson will get; VIN number from the car and sales price. Some places will want to run a credit report. DO NOT GIVE YOUR SOCIAL SECURITY NUMBER UNTIL AN AGREEMENT HAS BEEN MADE ON PRICE. A credit report cannot be run without a social security number. Just inform your salesperson that you will be more than happy to give that information when you have reached an agreement on price.
If you are purchasing the vehicle, most dealerships will want to concentrate on a monthly payment that is affordable for you. This is where you use your calculator. Take the monthly payment they are giving you and multiply it by the number of months they are using. This will give you the sales price of the vehicle. Keep in mind that tax and license will be approximately 11% of the sales price too.
If you are leasing the car, unless you know the lease factor and the formula for figuring a lease payment, a calculator will not work. Leases mean you are only paying for a portion of the total price of the car, over a period of time, usually 24 to 60 months. Mileage is restricted to 12,000 miles or less per year too. Leases are great programs for some people, but not all, so make sure you educate yourself prior to sitting down at the negotiation table. If self-employed, check with your tax person to see if a lease makes sense for you.
You should expect that the first figures the salesperson gives you will be much higher than what you want to pay. His or her job is to sell the car for the highest price and your job is to pay the lowest price. Somewhere in between is a price that works for both of you. You already know how much you can afford and don't let them justify or intimidate you into paying more. Use the information in your folder; ads from other dealerships, internet comparisons, etc. to justify your price. If you reach a point that they will not go any lower. Leave the dealership. If they get to your price, tell them you need to think about it and leave the dealership. This is all part of the negotiation game.
You are not going to buy the car from the first dealership you go to until you have shopped at all dealerships on your list. You will repeat the process at all three dealerships. Then pick the one that you are most comfortable with and that has given you a decent price. Go back to them and see what they are willing to do.
On a used car, this is where you can use the scratches, mileage, marks and any other blemishes to justify paying a lower price. You can also ask for floor mats or rims, audio equipment, etc., if it makes sense.
If you are using your car as a trade-in, you can also negotiate what value can be used toward the purchase of the vehicle you are interested in. They will use the wholesale value to appraise the car. The salesperson will take your keys and drive your vehicle or have a manager check it out. If you do not reach a deal, you are entitled to the keys back in your pocket. Be insistent on getting them back as soon as they check out your car.
Once you have decided on the vehicle and the dealership, you should plan on walking out on the deal three times, unless you get to your number sooner. During the shopping process you will learn a lot about whether or not you are unreasonable about your price and how low they are willing to go. If you cannot reach the payment you can afford, you might have chosen the wrong car and need to look at lower priced vehicles.
Once you have reached an agreement, then let them fill out an application and run your credit report. This is where you will negotiate the financing and see if they can do better than the pre-approval(s) you already have. Sometimes their lenders can beat the interest rate you already have and sometimes they can't. Let the finance manager know what you have been pre-approved for, so they can try to beat it.
In the finance office, they will try to sell you alarms, warrantees, paint protectant, tires, etc. This is a profit center for the dealership and you can usually find these items for less elsewhere. If add-ons are important to you, you should research prices and quality before you go shopping, for comparison. If you do decide to purchase something extra, make sure a "Due Bill" is filled out or there is no legal obligation for that item to be fulfilled. Make sure you get a copy of the "Due Bill" too.
Before you can drive the car off the lot, you must have insurance information on the vehicle. Make sure you have the phone number of your agent and set that up as you are waiting to complete the contract. After the contract is typed up, make sure it is explained to you, so you understand what you are signing. There will be many forms to fill out and these should all be explained to you by the finance person. Check the sales price and monthly payment and if leasing, the allowed mileage.
Once the vehicle is ready to go, have the salesperson explain how to work the radio and audio equipment, show you the spare tire, car jack, oil stick and anything else you might want to know. Make sure you have the floor mats and any other items that should be on the vehicle and that you have an owner's manual.
You now get to drive the vehicle off the lot and this is where all your hard work feels so good! There should be a smile on your face because you negotiated with a car salesperson and got a good deal!