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Updated v.3.16 - Will Cover's 2018 buying guide to purchasing a new vehicle
Posted on 4/22/18 at 5:37 pm
Posted on 4/22/18 at 5:37 pm
About time I updated my original guide.
I hope that all of you who are in the market or plan to be in the market for a new vehicle are able to find some nuggets of information that will help you in your negotiation process and save you money.
Be forewarned, this is rather "lengthy." But then again, so are loan payments.
v.3.16
Do your homework first by researching and arming yourself with as much information as you can before you step foot into a car dealership (Invoice vs. MSRP, manufacturer rebates, dealer holdback, etc.). Do not rely on your friends or family members as everyone thinks they got a “good” deal and I am here to tell you that most of them did not.
Here are some interesting facts about buying a vehicle and the consumer behavior behind it:
• The average auto loan now exceeds $30,000.00 – CNBC
• Consumers borrow an average of $19,329.00 for used vehicles and $30,621 for new vehicles - ValuePenguin
• The average monthly auto loan payment is $502.00 – CNBC
• The average auto loan term is now 68 months (CNBC) with loans of 72 and 84 months becoming increasingly common. The longer loans make monthly payments more manageable even as interest rates rise.
• More than four out of five (85.1 %) new car buyers use financing to buy a car – MagnifyMoney
• Leasing accounts for 30 % of all new car sales. This is due to the high average price of new cars and the changing buying habits of American Customers – U.S. News & World Report
• The average household is now carrying $15,983.00 in credit card debt – NerdWallet
• 78 % of full-time working Americans are living paycheck to paycheck – Fox News
• Only 39 % of U.S. adults have enough to cover a $1000.00 emergency - Bankrate
• It is a good rule of thumb to assume that a new car will lose approximately 20 % of its value in the first year and 15 % each year after that until, after 10 years, it’s worth about 10 % of what is originally cost. That means a $30,000.00 vehicle will be worth $24,000.00 after the first year, $20,400.00 after the second year and $17,340.00 after the third year.
• Vehicles that depreciate the least (ranked in order): Jeep Wrangler, Toyota Tacoma, Toyota 4Runner, Nissan Frontier, Honda Pilot, Chevrolet Colorado, Honda HR-V, Jeep Renegade and Subaru WRX.
Car dealerships and car sales people love an uneducated and impatient buyer. The average person buys a new vehicle once every six years. The dealership and their sales people do this every day. They will try to tag-team you and wear you down, by having you wait for an extended period of time while they “check” with their manager. If you find this to be the case, know what power you possess by being able to “walk-away.”
If there were betting odds on this type of matchup, the sales person and dealership would be a heavy favorite. Why? Because, the car sales person and dealership usually have the most information. When the average buyer walks into a dealership, they’ll usually and automatically divulge information to the sales person which vehicle they want, how much they can pay per month and the vehicle they’re looking to trade in.
During the car negotiating process, you the buyer, need to keep a grasp on reality. If you can afford $20,000.00 vehicle and the object of your affection lists for $30,000,00, you might be able to negotiate it down to, say, $27,000.00. But there's no way you're going to be able to buy it for $20,000.00 unless there's a $7,000.00 rebate.
Below are excellent sites to research the vehicle of your choice (know the dealer’s “hold-back” price and what type of “incentives” that may be offered from the manufacturer or dealership):
https://www.realcartips.com/car-incentives/best-car-deals.shtml
https://www.carclearance.com
https://www.kbb.com/new-cars/car-incentives-and-rebates
https://www.edmunds.com/car-incentives
https://cars.usnews.com/cars-trucks/best-car-deals
https://www.nadaguides.com/Cars/Incentives-and-Rebates
1. Prior to taking a test drive, make a copy of your driver’s license and insurance card. By doing this, if the dealer happens to “accidentally” misplace either or both of these items, you can still leave at any time, because you kept your originals.
2. Never show emotion when taking a test drive. Never show emotion negotiating. Never offer the first price. The opening number defines the entire negotiation. Start off negotiations by saying, “well, we have to start somewhere,” or “that’s not good enough.” Never accept the first price. And never offer a counter price. Silence is golden and can be the key to getting the deal that you want. It is the car sales person and dealership’s responsibility to provide you with the numbers. Your only responsibility is to either accept or decline the number(s) presented to you. Know what power you possess by being able to “walk away.”
3. The best time to buy a vehicle is when you are ready to buy. However, waiting until the latter part of the month can work to your advantage, as dealers have projected sales in units they have to meet as well as the lending financial institutions. As the month progresses and less time on their side, the dealership may be more likely to want to move a vehicle to receive more back-end money from the manufacturers.
4. Special ordering the vehicle of your choice allows the dealer more profit, as they do not have to finance (floor plan) a vehicle that is ordered. When used correctly, such as if dealer tries to strong arm you and say they are not making any money on your sale, this should give you more leverage in the negotiation process.
5. Never negotiate off “MSRP.” The negotiation process should start from the DEALER COST (which is less than INVOICE) price or the WHOLESALE price if purchasing a USED vehicle.
6. Rebates can be deducted from INVOICE price and not MSRP as the dealership will lead you to believe.
7. Don’t discuss a trade-in until you’ve settled on a price for the vehicle you’re buying. Each transaction should be separate and are not dependent upon one another.
8. Talk price, not payment. If a dealer can get you to focus on a monthly payment, they have a better chance of making a lot more profit from the sale of a car. Always focus on the final price of the vehicle you’re negotiating.
9. Settle on the price of the vehicle you’re interested in before you bring up financing – don’t let the rate of a loan influence the price of the vehicle. Have your financing pre-approved before you walk into a dealership. The little differences in the numbers can be huge. Consider this: $20,000 financed over five years at 3.9% costs $2,045.80 in interest. The same deal at 7.9 percent costs $4,272.20 -- a difference of more than $2,226.00. If you’re intent on financing, I highly recommend Pentagon Federal Credit Union or Lightstream (a division of SunTrust Bank) for auto financing.
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
I hope that all of you who are in the market or plan to be in the market for a new vehicle are able to find some nuggets of information that will help you in your negotiation process and save you money.
Be forewarned, this is rather "lengthy." But then again, so are loan payments.
v.3.16
Do your homework first by researching and arming yourself with as much information as you can before you step foot into a car dealership (Invoice vs. MSRP, manufacturer rebates, dealer holdback, etc.). Do not rely on your friends or family members as everyone thinks they got a “good” deal and I am here to tell you that most of them did not.
Here are some interesting facts about buying a vehicle and the consumer behavior behind it:
• The average auto loan now exceeds $30,000.00 – CNBC
• Consumers borrow an average of $19,329.00 for used vehicles and $30,621 for new vehicles - ValuePenguin
• The average monthly auto loan payment is $502.00 – CNBC
• The average auto loan term is now 68 months (CNBC) with loans of 72 and 84 months becoming increasingly common. The longer loans make monthly payments more manageable even as interest rates rise.
• More than four out of five (85.1 %) new car buyers use financing to buy a car – MagnifyMoney
• Leasing accounts for 30 % of all new car sales. This is due to the high average price of new cars and the changing buying habits of American Customers – U.S. News & World Report
• The average household is now carrying $15,983.00 in credit card debt – NerdWallet
• 78 % of full-time working Americans are living paycheck to paycheck – Fox News
• Only 39 % of U.S. adults have enough to cover a $1000.00 emergency - Bankrate
• It is a good rule of thumb to assume that a new car will lose approximately 20 % of its value in the first year and 15 % each year after that until, after 10 years, it’s worth about 10 % of what is originally cost. That means a $30,000.00 vehicle will be worth $24,000.00 after the first year, $20,400.00 after the second year and $17,340.00 after the third year.
• Vehicles that depreciate the least (ranked in order): Jeep Wrangler, Toyota Tacoma, Toyota 4Runner, Nissan Frontier, Honda Pilot, Chevrolet Colorado, Honda HR-V, Jeep Renegade and Subaru WRX.
Car dealerships and car sales people love an uneducated and impatient buyer. The average person buys a new vehicle once every six years. The dealership and their sales people do this every day. They will try to tag-team you and wear you down, by having you wait for an extended period of time while they “check” with their manager. If you find this to be the case, know what power you possess by being able to “walk-away.”
If there were betting odds on this type of matchup, the sales person and dealership would be a heavy favorite. Why? Because, the car sales person and dealership usually have the most information. When the average buyer walks into a dealership, they’ll usually and automatically divulge information to the sales person which vehicle they want, how much they can pay per month and the vehicle they’re looking to trade in.
During the car negotiating process, you the buyer, need to keep a grasp on reality. If you can afford $20,000.00 vehicle and the object of your affection lists for $30,000,00, you might be able to negotiate it down to, say, $27,000.00. But there's no way you're going to be able to buy it for $20,000.00 unless there's a $7,000.00 rebate.
Below are excellent sites to research the vehicle of your choice (know the dealer’s “hold-back” price and what type of “incentives” that may be offered from the manufacturer or dealership):
https://www.realcartips.com/car-incentives/best-car-deals.shtml
https://www.carclearance.com
https://www.kbb.com/new-cars/car-incentives-and-rebates
https://www.edmunds.com/car-incentives
https://cars.usnews.com/cars-trucks/best-car-deals
https://www.nadaguides.com/Cars/Incentives-and-Rebates
1. Prior to taking a test drive, make a copy of your driver’s license and insurance card. By doing this, if the dealer happens to “accidentally” misplace either or both of these items, you can still leave at any time, because you kept your originals.
2. Never show emotion when taking a test drive. Never show emotion negotiating. Never offer the first price. The opening number defines the entire negotiation. Start off negotiations by saying, “well, we have to start somewhere,” or “that’s not good enough.” Never accept the first price. And never offer a counter price. Silence is golden and can be the key to getting the deal that you want. It is the car sales person and dealership’s responsibility to provide you with the numbers. Your only responsibility is to either accept or decline the number(s) presented to you. Know what power you possess by being able to “walk away.”
3. The best time to buy a vehicle is when you are ready to buy. However, waiting until the latter part of the month can work to your advantage, as dealers have projected sales in units they have to meet as well as the lending financial institutions. As the month progresses and less time on their side, the dealership may be more likely to want to move a vehicle to receive more back-end money from the manufacturers.
4. Special ordering the vehicle of your choice allows the dealer more profit, as they do not have to finance (floor plan) a vehicle that is ordered. When used correctly, such as if dealer tries to strong arm you and say they are not making any money on your sale, this should give you more leverage in the negotiation process.
5. Never negotiate off “MSRP.” The negotiation process should start from the DEALER COST (which is less than INVOICE) price or the WHOLESALE price if purchasing a USED vehicle.
6. Rebates can be deducted from INVOICE price and not MSRP as the dealership will lead you to believe.
7. Don’t discuss a trade-in until you’ve settled on a price for the vehicle you’re buying. Each transaction should be separate and are not dependent upon one another.
8. Talk price, not payment. If a dealer can get you to focus on a monthly payment, they have a better chance of making a lot more profit from the sale of a car. Always focus on the final price of the vehicle you’re negotiating.
9. Settle on the price of the vehicle you’re interested in before you bring up financing – don’t let the rate of a loan influence the price of the vehicle. Have your financing pre-approved before you walk into a dealership. The little differences in the numbers can be huge. Consider this: $20,000 financed over five years at 3.9% costs $2,045.80 in interest. The same deal at 7.9 percent costs $4,272.20 -- a difference of more than $2,226.00. If you’re intent on financing, I highly recommend Pentagon Federal Credit Union or Lightstream (a division of SunTrust Bank) for auto financing.
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
This post was edited on 4/22/18 at 5:51 pm
59
Posted on 4/22/18 at 5:38 pm to Will Cover
11. Dealers often make as much money in the “business office, i.e. F&I room” as they do on the showroom floor. Insurance, dealer add-ons, extra fees and interest rate changes are among the common ploys you could get clobbered with on your way out the door (administrative fees, handling charges, advertising fees, paint protection, VIN etching – simply do not pay these as these are deal breakers). And believe it or not, even “delivery” charges are negotiable.
12. GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.) in the event of an accident. Do you need it? Only you can decide. However, it is optional insurance coverage and you are NOT required to purchase it (unless specified by your auto loan terms). Car dealers sell GAP insurance coverage at a ridiculously inflated price. Figures can reach as much as 4 x the actual cost versus purchasing GAP insurance at your local credit union or insurance company.
13. Get the deal in writing. Full disclosure, in writing, of all fees pertaining to your vehicle purchase, such as destination, title, documentation, licensing and registration. If the dealer will not put it writing, “walk away.”
14. If asked, do not share pricing with another dealership. The less they know, the more aggressive they need to be to compete for your business.
15. Put deposits on a “credit card” only. Do NOT pay with a check.
16. The “If I” sales tactic. This is the last step in the sales negotiation process. Ex. If I decide to purchase the vehicle today, you have to include free window tinting. If I decide to take the red vehicle instead of the white vehicle, you have to include 5 free oil and tire rotation services. If I decide to purchase the vehicle today, you have to include floor mats at no additional cost. If done correctly, this will allow you to get another “service and/or product” that you normally would not have received and by this time, there is no way will the dealership allow you to “walk” because there is too much time invested between both parties. The dealership knows you are in a buying mode and doesn’t want to run the risk of you becoming a “be back” customer for another dealership since most people buy within 48 hours of stepping onto a dealership’s lot.
17. If you got a great deal, show your appreciation. Thank the dealer and be sure to send your friends to them when they go car shopping.
Final thoughts. Do NOT become emotionally involved or attached to a vehicle. Remember, if you aren't able to come to an agreement to your liking, you must have the discipline and self-control to walk away. After all, it’s your money and you get to decide what you want to do with it. In short, don’t let your heart rule your head – it can lead to aching in both body parts.
And while a vehicle for many is considered a “need” today, the type of vehicle you are looking to bring home is most likely a “want.”
Best of luck to you in your decision-making process!
12. GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.) in the event of an accident. Do you need it? Only you can decide. However, it is optional insurance coverage and you are NOT required to purchase it (unless specified by your auto loan terms). Car dealers sell GAP insurance coverage at a ridiculously inflated price. Figures can reach as much as 4 x the actual cost versus purchasing GAP insurance at your local credit union or insurance company.
13. Get the deal in writing. Full disclosure, in writing, of all fees pertaining to your vehicle purchase, such as destination, title, documentation, licensing and registration. If the dealer will not put it writing, “walk away.”
14. If asked, do not share pricing with another dealership. The less they know, the more aggressive they need to be to compete for your business.
15. Put deposits on a “credit card” only. Do NOT pay with a check.
16. The “If I” sales tactic. This is the last step in the sales negotiation process. Ex. If I decide to purchase the vehicle today, you have to include free window tinting. If I decide to take the red vehicle instead of the white vehicle, you have to include 5 free oil and tire rotation services. If I decide to purchase the vehicle today, you have to include floor mats at no additional cost. If done correctly, this will allow you to get another “service and/or product” that you normally would not have received and by this time, there is no way will the dealership allow you to “walk” because there is too much time invested between both parties. The dealership knows you are in a buying mode and doesn’t want to run the risk of you becoming a “be back” customer for another dealership since most people buy within 48 hours of stepping onto a dealership’s lot.
17. If you got a great deal, show your appreciation. Thank the dealer and be sure to send your friends to them when they go car shopping.
Final thoughts. Do NOT become emotionally involved or attached to a vehicle. Remember, if you aren't able to come to an agreement to your liking, you must have the discipline and self-control to walk away. After all, it’s your money and you get to decide what you want to do with it. In short, don’t let your heart rule your head – it can lead to aching in both body parts.
And while a vehicle for many is considered a “need” today, the type of vehicle you are looking to bring home is most likely a “want.”
Best of luck to you in your decision-making process!
This post was edited on 4/22/18 at 5:47 pm
Posted on 4/22/18 at 5:48 pm to Will Cover
I’ll never buy a new vehicle again. Cash money for medium mileage Toyotas from here on in my life. To hell with making auto companies rich off my dime.
Posted on 4/22/18 at 5:51 pm to Will Cover
I’m about to lease a BMW convertible.
Posted on 4/22/18 at 5:53 pm to Will Cover
Thank you WC!!
I never plan on buying a new car again but I love educating myself about anything financial.
I never plan on buying a new car again but I love educating myself about anything financial.
Posted on 4/22/18 at 6:01 pm to Will Cover
Posted on 4/22/18 at 6:05 pm to Will Cover
Will, in your opinion, should folks aim for new over used simply due to low rates and high used prices?
Or too many other factors with used like mileage, condition, owners, year etc?
Or too many other factors with used like mileage, condition, owners, year etc?
Posted on 4/22/18 at 6:08 pm to Will Cover
Thanks will, this came in handy during my last purchase
Posted on 4/22/18 at 6:18 pm to Will Cover
No emotion is ok, but annoyed a-hole is a perfectly good one to use as long as you have your facts. I knew what kbb value on the trade was, interest rates, and invoice on what she was buying.
Bought my wife a new one last week, ended up pretty well I'd say.
Bought my wife a new one last week, ended up pretty well I'd say.
Posted on 4/22/18 at 6:20 pm to Will Cover
quote:
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
Thanks for posting/updating. Number 10 is not my experience, in every case it had paid off for me
Posted on 4/22/18 at 6:52 pm to Will Cover
I plan on paying cash for a gently used SUV this week. Any tips for that specific scenario?
Posted on 4/22/18 at 6:57 pm to Will Cover
quote:
v.3.16
Posted on 4/22/18 at 7:09 pm to Will Cover
quote:
7. Don’t discuss a trade-in until you’ve settled on a price for the vehicle you’re buying. Each transaction should be separate and are not dependent upon one another.
What’s the response if you’re explicitly asked? Seems like anything other than a hard no up front is a yes to them.
Posted on 4/22/18 at 7:10 pm to Will Cover
quote:
5. Never negotiate off “MSRP.” The negotiation process should start from the DEALER COST (which is less than INVOICE) price or the WHOLESALE price if purchasing a USED vehicle.
How do you KNOW the difference when they put a piece of paper in front of your face? They have given me papers in the past that claim to be what the dealership paid or invoice and it’s usually not much lower than MSRP. I would assume the 2 would have a pretty dramatic difference in amount. No?
Posted on 4/22/18 at 7:18 pm to Will Cover
Thanks, but can you provide something in your first post that refers to sections updated? I’ve followed your previous posts, but it’d be nice to know what’s new without reading it all again.
Posted on 4/22/18 at 7:21 pm to Will Cover
If I'm somewhat interested in a vehicle (used a couple years old) that's about $19k and I can pay up front. How much does that affect negotiating down the price?
Posted on 4/22/18 at 7:28 pm to Will Cover
Will Cover, great info. I rarely buy new and it appears most of your info is regarding new cars. I have found most times dealers are much more willing to negotiate on new vs used. What is your advice for purchasing used?
Posted on 4/22/18 at 7:28 pm to Will Cover
I agree with nearly everything you said. But the reality is pick your sales person. Find the guy who's hustling. The one who is working deals. And grind his day to a fricking halt.
As for warranty, they will easily pay for themselves if you buy them at the right price. Just explain from the start, you will buy warranty, but you will only pay 100 bucks over cost. The FI guy will have a bible. Printed. Tell him you buy it if he shows you cost price for the OEM warranty. If he shows you on a computer screen, he's lying
Financing, NEVER fill out a credit app at a dealer until you have negotiated a cash price and sit down with the FI guy. If your credit score will qualify you for the 0% rate, tell him he can send it to one and only one place. If your credit sucks (or at least wont get you 0%), walk in with a preapproved offer from a local credit union.
Lastly, what is your time worth to you? Is the day wasted worth $500 bucks more off?
And finally, you ignore the financing advice, please read your paperwork or at least understand what it means.
In a recent thread, 80% of respondents could not understand what a Conditional Delivery doc was.
As for warranty, they will easily pay for themselves if you buy them at the right price. Just explain from the start, you will buy warranty, but you will only pay 100 bucks over cost. The FI guy will have a bible. Printed. Tell him you buy it if he shows you cost price for the OEM warranty. If he shows you on a computer screen, he's lying
Financing, NEVER fill out a credit app at a dealer until you have negotiated a cash price and sit down with the FI guy. If your credit score will qualify you for the 0% rate, tell him he can send it to one and only one place. If your credit sucks (or at least wont get you 0%), walk in with a preapproved offer from a local credit union.
Lastly, what is your time worth to you? Is the day wasted worth $500 bucks more off?
And finally, you ignore the financing advice, please read your paperwork or at least understand what it means.
In a recent thread, 80% of respondents could not understand what a Conditional Delivery doc was.
Posted on 4/22/18 at 7:34 pm to Will Cover
Thanks for this is excellent info. But it leads me to the conclusion that I'll keep buying used cars. Much easier to negotiate and you don't take the depreciation hit.
Posted on 4/22/18 at 7:58 pm to Will Cover
How do you recommend handling the dealers that have a "one price"? In other words, it's a fixed price posted on the vehicle.
I bought a used vehicle at one of these places and that price was under the kbb.com "true value". I arranged my own financing through my credit union and I got the car with minimal to no negotiating.
Honestly, I enjoyed that process, but is there still efforts to be done more to help yourself?
I bought a used vehicle at one of these places and that price was under the kbb.com "true value". I arranged my own financing through my credit union and I got the car with minimal to no negotiating.
Honestly, I enjoyed that process, but is there still efforts to be done more to help yourself?
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