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By Jamie Smith
Buying a new car is an exciting experience that can provide you with a safer and more enjoyable driving experience. The financial side of the purchase can cause some stress, especially if you've been saving and budgeting to reach your goal of buying a new car. We've put together a helpful guide that you can use to get the best price the next time you buy a new car.
Walking into the dealership and talking about pricing first is how people used to start shopping for vehicles. But taking this approach these days won't get you the best price. The first step in negotiating a great deal on your purchase is shopping online. Thanks to easy online shopping, local dealerships and auto sellers around the country are now competing with one another. Start on the manufacturer's website and build the ideal vehicle that includes the features you want. Use that tool to request quotes from local dealerships.
Since all dealerships will compete for the sale, the salespeople are more motivated to put together an attractive offer. You can also avoid the hassle of talking to pushy salespeople who want to get you into a car before you leave the dealership. Shopping online indicates that you're a savvy buyer who can't be pushed into a purchase with traditional sales tactics. You can also review quotes with no pressure, as the salespeople aren't directly in front of you, talking to you about the options.
When you shop online, you may notice that sales quotes for similar vehicles fluctuate by hundreds or thousands of dollars. You can use these differing prices as leverage when talking with salespeople. A significant price difference may be enough to get a dealership to cut the cost to earn your business. Many dealerships also have price-matching policies that allow them to beat out a competitor.
After you have your quotes in hand and you've decided where you want to buy your new car, take some time to research your financing and leasing options. You can also use this time to learn more about the car-buying process so you know what to expect. Some salespeople may try to take advantage of first-time buyers or those who aren't as familiar with buying from a dealership. By doing your own research, you can go in feeling confident and ready to take the next step.
Going through the dealership where you're buying your vehicle for financing might seem logical, but doing this can actually cost you more. Walking into the dealership unsure of how much you're qualified to borrow or how your credit might impact your interest rate creates vulnerability. Some dealership financing teams may take advantage of this and prioritize making money on you rather than giving you the best possible deal.
Instead of going in without a plan, consider getting preapproved with a trusted lender. A preapproval tells you what you can qualify for and shows the salespeople that you know exactly what your budget is for your new car. The process of getting preapproved for a car loan is straightforward and can be done online. You'll just need to give your personal information, including documentation of your gross monthly income, Social Security number, and employment details. Preapproval can often be granted the same day you submit the application.
In addition to getting preapproved, think about the terms you want for your auto loan. Most auto loan terms are available in 12-month increments, up to 84 months. A shorter term means you'll pay off your auto loan faster, but your monthly payment will be higher. Try to keep your total monthly automotive costs, including the loan or lease payment, insurance, fuel and parking, and maintenance, below 15% of your total income each month.
Every dollar of the new car price you finance will cost you more over the life of the loan, thanks to the interest. Even with a low interest rate, you'll still pay your lender back a percentage of the total price financed. Depending on who you finance through, you may also incur financing charges, which can increase the total cost of your new car. Saving up for a larger down payment and lowering the amount you finance can reduce the total cost you'll pay over the life of the loan.
Another way to decrease how much you're financing is trading in a vehicle and applying the value toward the purchase price. This transaction with the dealership cuts the total cost by the determined value of the car you're trading in, lessening how much you finance. If you don't get a good offer for your vehicle, consider selling it privately and applying the cash you get to your down payment on your new car.
Automotive manufacturers and dealerships offer a wide range of incentives and deals to entice customers, particularly during certain times of the year. Many locations offer special pricing around specific holidays. If you can wait for the next big holiday to buy your car, you may be able to save some serious cash. Other incentives that may be available include:
Before you agree to a deal, look at the incentive pages on the various dealerships you're considering buying from to make sure you're getting all the discounts and incentives for which you qualify. It never hurts to ask if any additional incentives are available, as the salesperson may not know that you're a new graduate or part of the United States Armed Forces.
When you think you're finished settling the deal for your new ride, the seller may start offering you extras. Many of these extras will sound tempting, such as an extended warranty that protects the vehicle for longer. However, the cost of these additions will often get rolled into the financing, which means you'll pay interest on them. A few hundred dollars for an extended warranty may not seem like a lot of money, but it will add up over the life of the loan.
If you do want to invest in any extras for your new car, research what you want and need before you buy. New cars already come with warranty coverage, so you may end up paying for something that doesn't add a lot of value. Certain features might seem essential in the moment, but when you take the time to research whether they're really necessary, you may find that your car will be just fine without them. Be prepared to walk away, the greatest power you have is the ability to walk away from a bad deal. Remember that it’s a business transaction, and the more you keep your emotions in check, the better the deal you’re likely to get.
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