Whether you are buying a new or used car, it’s essential to know how to get the best deal. Cars are a big purchase, and small negotiation mistakes or failing to prepare can end up costing you thousands of dollars. Thankfully, you can avoid that pain by doing a little prep work in advance.
It should go without saying, but if you want to get the best deal on a new car, you need to have a great credit score. If the bank does not judge you to be a worthy investment, you will end up paying much more throughout your loan than you would otherwise. This often means that your interest rate will be higher, costing you thousands over the years, or you may be required to have a much larger down payment (or not be approved for a loan at all).
In a perfect world, you’d be able to waltz into the dealership with enough money to buy any car you want without taking out a loan–and if that is you, congratulations! But most of us will need to do a little bit more planning. First, you will need to figure out how much car you can afford. Ideally, you’ll put at least 20% down, find a loan no longer than four years, and spend less than 10% of your pre-tax income on the total costs of car ownership.
For most people, buying a car will require saving several thousand dollars for a down payment, so it’s a good idea to get started as soon as you know that you want to buy a vehicle in the future.
Figuring out how much you can afford is one thing, and setting a realistic budget is another entirely. Once you have a ballpark figure of how much you can afford, you should begin searching for vehicles you like and seeing what’s in your price range.
Unless you plan on running your car into the ground, it’s worth considering how much trade-in value you can expect to get when you’re ready to think about buying a new vehicle. Do some research on the cars with the highest trade-in value that fit your specifications.
If you currently own a car, you should also research that vehicle’s trade-in value and have a firm idea of what you will accept from the dealership.
You should always try and get preapproved for a car loan well before you make your way to the dealership. You’ll get much better loan terms at your local bank or credit union than you would at a dealership, and you’ll also be able to know precisely what you are going to be on the hook for before you pick a vehicle.1 It might also help you stick to the budget, knowing concretely how much you can afford versus thinking about it in the abstract.
The more comprehensive your vehicle search, the better your chances for finding a great deal. Expand your search radius as far as it is feasibly possible. At the very least, you should schedule appointments with a few local dealerships to test drive vehicles, and never say yes to the first one you see.
When it comes to sealing the deal, the most important thing you can do in advance is to learn how to talk down a car dealer. To get the best deal, all the preparation in the world won’t help if you can’t maintain confident negotiating skills once it comes time to close. Just say no to additional extras, and learn in advance what fees you should expect to pay at the dealership.
Sales tax? Depending on the state of purchase, legit. Registration fee? Legit. Documentation fees? These vary by state, and you should know what is average for your area by preparing in advance. Delivery charge from the factory?2 Probably fine, but make sure you’re not getting double charged.
If you know you have trouble staying confident in negotiations, bring along someone who doesn’t have that issue–or someone who can reassure you and act as a calming presence. It will change the dynamic of the talks and swing things in your favor. Using every strategy available to you will make the process easier and more likely to land you a great deal.