How to Buy a Car
What's the best way to buy a new car? As long as you choose the right car, get a good loan and pay a fair price, there's no one right way to buy a new car.
But here are seven foundational steps that should be taken before visiting a dealership and purchasing a new vehicle. You might call it homework, but its time well spent if the end result results in saving thousands of dollars.
The important thing is that if these steps are followed, buyers will have realistic expectations about what they are willing to pay and what they are willing to accept for a trade-in. In addition, the dealer will like dealing with someone who is not asking for the moon.
Here are the 7 steps to make the vehicle buying process less stressful and more productive:
1. Shop online There aren't many bad cars nowadays, but you want to choose the very best car for you and your needs. Then you'll want to know the fair price of that car so you don't pay any more. You can get more info from your computer than you ever could hopping from dealer to dealer.
2. Know what your trade-in is worth It's easy to miss out on hundreds or thousands of dollars if you don't know the market price of your trade-in.
3. Get a firm offer for your trade-in It doesn't get any easier than Instant Cash Offer.
4. Take a test drive Is the seat comfortable for you? Does your favorite cup fit in the cupholders? There's only one way to find out.
5. Get pre-approved for a loan Negotiating a fair price is only one part of the process. If you don't secure financing ahead of time, you'll find yourself at the mercy of the dealer.
6. Research the dealer's reputation If you live in an area with several dealers to choose from, why not go to the best one?
7. The final price If you've done your homework and know you've chosen a good car and you're paying a fair price, you won't feel compelled to haggle over every last dollar. Just enjoy your new ride.
That's the short of it. Here's a more in-depth look at how to buy a new car:
Check out the KBB.com to determine which model is best for your lifestyle – minivan, SUV, sedan, pickup, something else. You can also determine what equipment is standard and what’s optional. If safety is a high priority, check out the vehicles that offer new technology like 360-degree object detection, lane departure warning and low-speed automatic braking, and intelligent cruise control, for example.
Also, you can find out what you may expect to pay by using the Fair Purchase Price tool for the vehicle of your dreams. This is extremely valuable information to have before you sit down and negotiate a deal. And you can use the site for valuable expert reviews to find out if the vehicle will match up to your expectations for it.
“That is always a point of tension. Our new car is always priced too high and their trade is never enough,” said a Northeast dealer. “They want the retail price for their trade-in. I realize that is not everybody but that is pretty much a truism in the new car business.”
KBB.com lists trade-in and private party sale values and when using the tool, be honest in the assessment of your car’s condition and mileage.
“Some people view their trade-in with rose-colored glasses,” said the dealer who asked for anonymity. “Pretty much most trades that come through need tires, a fair amount of reconditioning, plus they have dings, dents and scratches. We look at $1,000 to $1,500 for reconditioning to get the car ready for resale,” he said. “They are not going to receive the retail price for their trade-in.”
Kelley Blue Book’s Instant Cash Offer (ICO) is another option in selling or trading a vehicle. Using the ICO tool on KBB.com, the seller types in the model name, mileage, condition and then local dealers participating in the program can make an instant cash offer for the vehicle or offer a guaranteed trade-in price for that car or truck with a certificate that is valid for three days. Some dealer sites also participating in Kelley Blue Book’s ICO program will offer this service on their websites in which you may receive an offer for your vehicle from that store.
The offer may not reflect the highest sale price or trade-in value available for your vehicle, and may be less than the Kelley Blue Book Trade-In Value or the Trade-In Range for a similar vehicle. The seller is guaranteed to receive at least that much for the vehicle, and that is an offer that can be used by the seller as the trade-in amount that will be applied to the new car or truck. The seller decides whether to apply the instant cash offer as a trade-in amount, sell the car for the instant cash offer, or try to negotiate a higher price with another dealer for the trade-in. The ICO effectively sets a floor on your car’s value.
While some in the industry are touting online sales as the wave of the future, smart buyers will always check out the vehicle in person. “People will shop quite a bit on the internet, they will do a lot of that research ahead of time, but you still have to see if you fit in the car,” the dealer said. “You have to drive it. The seats have to feel good, it’s got to be tailored to your back, your torso. Sometimes the seating positions don’t work for some people and they have to find a different model. It is such a personal choice.”
Tap into as many financial sources as possible to determine the best interest rate. Check out several banks and credit unions as well as online sites offering financing. This will set a cap on the interest you will pay and the dealer is free to beat the deal you have in hand.
“Pre-approval is great because we know we have somebody ready to buy a car, ready, able and willing,” the dealer said. A counter finance offer by the dealer could save the buyer hundreds of dollars in interest payments.
“Once you feel that you have a good price or you think you have gotten close, start to look at other things,” dealer source said. “Start to look at do you trust these people? Do you like them? Do you want to do business with them long term. The price might be very attractive but what kind of reputation do they have,” Go online for reviews about the dealer. “When it breaks a month after warranty, which dealership do you think will take care of you?”
“We are in kind of an adversarial relationship by design, the way the distribution model is designed, right? We are in a variable price world so inevitably it is in the consumer’s interest from an economic standpoint to work for the best price he can get,” the dealer said. “They need to fight to get the lowest price and the dealer is trying to keep the price up. If you are going to give someone buying advice, I would say make sure you get a good price but don’t drive yourself nuts trying to get a great price. From a buying standpoint you can pull the trigger in the course of a day or two, but there are diminishing returns by the time you have gone to four dealers and you are trying to whittle down that last $50. Your time is worth something and then which dealer experience do you want?”