Updated v.3.16 - Will Cover's 2018 buying guide to purchasing a new vehicle

**older topic - has been anchored. Not sure why. Great advice.

to Will Cover

LINK to original thread

---------------------

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.