Tips For Negotiating The Price
Use these tips when settling on a price for your vehicle.
- Compare other models. When settling on the price, compare other models. Exploring other options, including older models, helps you stay on budget while getting the extras you want.
- Avoid buying extras. Extended warranties, window etching theft protection of a VIN number, key fob protection, tire nitrogen costs, paint and fabric protection, and windshield, tire, and dent protection. These are just some of the add-ons dealers will try to upsell during the sales process. Many times you dont need these protections because the car comes with them. You can also ask your car insurance provider what, if anything your policy covers. Sometimes the add-on is only a few dollars.
- Ask for price upfront. Yes, its a tactic for dealers to lure buyers into the showroom. But its also a safety net for you to see the price first. For example, it gives you a starting point from which to negotiate a car if you pay with cash. If the car gets financed, never give out what car payment range you prefer. By seeing the price first allows you to keep the upper hand during the deal while buying within your budget.
- Consider No-haggle pricing. Many wonder if no-haggle pricing truly comes without the haggling. In a word, yes. But know its a fixed price. It makes the process easier but its probably not the best price a dealer offers.
Get An Insurance Quote Before You Buy
Imagine walking out of the showroom with the keys to a new car, then looking up insurance quotes only to find that its going to cost hundreds or thousands more than you expected.
Its so easy to look up insurance quotes online using the big comparison sites that theres not really an excuse for getting into this situation any more.
Be aware as well that some insurers arent open on a Sunday so if you want a quote on the phone, do so during the working week.
Consider Your Buying Options
If its not on the sales floor at your dealership, go somewhere else to get an in-person look at your car, even if you dont intend to buy it there. Photo credit: David Traver Adolphus / AutoGuide.com.
Already shaken up by the pandemic, the traditional dealer landscape is about to undergo another change, this time driven by the manufacturers. In addition to efforts like GMs upcoming used car network, Fords CEO James Farley said his company would probably go 100% onlineinventory goes directly to the customer, 100% remote pickup and delivery, selling at a non-negotiable MSRP just like any other online retailer. A long-established local dealership with ties to the community is still a good option, especially if you have friends or family who have bought cars there. Reputation and repeat business is important when a dealer isnt part of a big chain, and there are sometimes referral, loyalty, and other bonuses available.
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Can I Get My Own Loan When Buying A New Car
Many of our families have taught us that buying a car requires you to take out the financing option offered by the dealership, but this isnt always true or the best idea.
In fact, its an insider secret that many dealerships make huge profits in their financing offices. The banks offer them a cut of the deal when the buyer finances the vehicle at the dealership.
Sometimes factory-sponsored events and amazing credit unions really do offer the best deal, but you wont know this if you havent shopped around for auto financing.
Rather than blindly take chances on your budget, get a preapproval from your bank, credit union, or car insurance company. Having this can help the dealer understand that you arent joking around. As such, they are likely to offer you a better deal!
Getting the pre-approval is fairly straightforward. The applicant fills out a few online forms and gets the answer shortly thereafter. With the online approval, youll be able to request a check or put the financing down on the car of your choice.
Another pro tip is to check your credit score before you do any of this. If you have bad credit, getting a loan to buy a car will be difficult. You may need to put down a large down payment, find a cosigner, or take out a high-cost loan.
How To Buy A Car In 2022
Brad TuttleKristen Bahler8 min read
This article is part of Money’s January 2022 digital cover, which features 22 ways to make 2022 the best money year of your life. Browse all 22 articles here.
The most frustrating part of buying a car has traditionally been tense negotiations at the dealership. Lately, buyers should consider themselves lucky if they can even find a car worth haggling over.
Spiking demand, manufacturing slowdowns and supply chain problems have hit the auto market particularly hard during the pandemic, and the results are slim pickings and soaring prices for anything with four wheels.
Buyers accustomed to scooping up bargains on used cars have been hit with sticker shock, with the average price now topping $29,000, up 28% year over year according to data analyzed by Edmunds. New cars are in short supply in September, inventory was down 60% compared to the same month in 2020 and super expensive, with the average vehicle going for $45,872 in November, or $662 over the manufacturer’s suggested retail price . That’s up from $39,984 just 12 months prior, when the average car sold at a discount of $2,123 off the sticker price.
Understandably, many would-be buyers have been holding off on picking up a new set of wheels. But experts don’t see the supply of new vehicles bouncing back to pre-pandemic figures until at least 2023, and it’s likely to take even longer before it feels like a buyer’s market for used cars again.
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Car Dealer Fees By State
Here is a state-by-state table showing the estimated amount you can expect to pay in required fees when purchasing a new or used car from a dealership. We used Edmunds data: the maximum car tax rates, the average Department of Motor Vehicle fees and the median document fees in every state. Then we did math based on the average amount borrowed for new cars and used cars to estimate what you would pay in fees. If you buy a car that costs more or less your fees will go up or down, accordingly.
Note that the data above does not include destination fees for new cars. As we mentioned earlier, this can tack on about $1,000 to the cost of your car.
Do Your Research Ahead Of Time
Once you narrow down the type of car you want, do some research online as to the pros and cons of specific models. Check for: Gas mileage, safety ratings, reliability, and for used cars, check the Kelly Blue Book price compared to what the cars are listed for. For new cars check True Car to get the average selling price for new vehicles.
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Maximize The Only Bargaining Chip You Have
Remember: There is a supply crunch. So if you have a car to sell or trade in, you are in possession of a highly in-demand asset that’s probably worth more than you think. Make the most of it! The average trade-in in November was worth roughly $23,000 up an astonishing 50% year over year.
Before agreeing to a dealership’s trade-in offer, shop the vehicle around to ensure you’re getting a fair price. “If I have a Ford to trade in, I’d go to a Ford dealership and see what they’d pay to buy it outright,” says Newman. Ask some local used car lots to make you offers as well. Selling the vehicle may seem like more of a hassle than using it as a trade-in, but you could wind up with hundreds or even thousands of dollars more by taking that extra step.
Choose A Type Of Dealership
There are two types of car dealership options from which to choose. New car dealershipfranchises are typically more costly to set up, and they operate on a larger scale. Used car dealerships are run on a smaller scale and often work well as a small business, because they require less capital and lower operating costs.
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Wield A Secret Weapon
A Monroney sticker is your secret weapon against dealer add-ons and markups. Car dealers are legally required to affix these stickers to their entire inventories. A Monroney sticker prominently displays the MSRP of any new car.
If youre not keen on any add-ons, never pay a cent over the MSRP. The MSRP, as displayed on the Monroney sticker covers all costs, including tax, title, and license.
Never be suckered into paying additional costs in the guise of transfer fees. The cars shipping costs are tucked into the MSRP, often stated as a destination charge.
Anything above the sticker price is a money grab by the dealership pure and simple.
How To Buy A Car Online
Traditionally, if you wanted to buy a car, then you would head out to a car lot and start kicking tires. But today, its easier than ever to shop for and buy a car online. And that may be preferable, given the social distancing requirements associated with the COVID-19 pandemic.
There are different avenues for purchasing a car online, depending on whether you want to buy a new or used vehicle and whether youll pay cash or use financing. But generally, you can explore these avenues for buying a car online:
- Facebook Marketplace
- Car-buying concierge services
- Dealership websites
Any of these options could be suitable if youre looking for used vehicles to buy. But if youre interested in buying a brand new car, then you may need to head straight to the dealership website or use a concierge service.
When buying a car online, keep in mind that some parts of the process may require you to go offline. For example, you may want to test drive the vehicle to see how it runs or have it inspected by a trusted mechanic. But other things, such as negotiating a sales price, discussing add-ons or extras such as a warranty package, and applying for a car loan, can be done virtually.
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Dealer Fees You Cant Avoid
Some fees are required by law, and dealers must disclose what theyre charging. However, if theres a $100 fee you dont like, you could ask the dealer to take $100 off the cars price. Your contract will still show that $100 fee for legal reasons, but youll be saving the money off the total cost.
Documentation fee: $85 to more than $895
The doc fee covers the cost of preparing and filing all the paperwork. Some states set limits on the doc fee California caps it at $85 but other states have no limit. In Florida, the median doc fee is $895.
Destination charge: $800 to $1,700
If youre buying a new car, you can expect to pay the destination or freight charge to cover its transportation from the manufacturer to the dealer. Because it is a federally regulated fee, youll pay the same cost regardless of whether you buy it 1,000 miles away from the assembly line or pick it up from the factory floor.
Inspection and emission fee: $7-$40
In many states, a vehicle must pass a state safety and emissions inspection before it can be sold. Then, dealerships pass that cost on to you. Theyre typically nominal, ranging from $7 to around $40.
Tax, title and license: varies by state
How To Buy A New Car In 8 Steps
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Steps
Buying a new car can be a daunting process from trying to get the best deal to avoiding unwanted upsells.
Doing it during a pandemic doesnt help either. Supply chain disruptions and a lack of semiconductor chips have led to inventory shortages and rising prices. You may not be able to find the model you want in stock, and it could take months for it to arrive. If you need a car now, its worth considering buying a used car a similar but often more involved process.
To avoid common car-buying mistakes in the current market, there are some tried-and-true steps youll want to follow, such as determining how much you can afford to spend, which car you want to buy and the true market value for that car in your area.
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Trading In Your Vehicle: The Pros And Cons
Youll make more money selling your car on the open market, but with used car prices so high, the dealership is going to work hard to get your trade-in: Current car owners in the market for a new car have a leg up on first-time buyers since theyve more than likely seen their car appreciate in value over the past year, enabling them to counteract some of that sticker shock with their trade in, said Hsu. She said that in July 2021, Credit Karma analyzed the values of people who had their cars synced to their platform, and found that 25 million vehicles had seen a median retail value increase of around $1,750 in the last three months. 75% of members an increase between $400 and $4,400, she said.
Know how much your trade-in is worth
Youll get more money selling privately, but dealers really want your trade-in. Photo credit: David Traver Adolphus / AutoGuide.com.
Independent Used Car Dealership
Individuals looking to sell used cars do not have the limitation of selling only one brand of vehicle, so there are no fees paid to manufacturers. You can start this type of business with only a small inventory of vehicles and expand as it becomes successful. However, there are still many costs involved:
Business Formation Fees
Business owners must form a business entity and then register for a business license with the state department of revenue. Legal fees for forming an LLC, a partnership or a corporation vary from state to state, but could be close to $1,000. The application fee for a business license will depend on the type of entity you’ve formed as well as your state. For example, in Texas the fees range from $300 to $750.
Startup Costs
Independent business owners must also plan for all their startup expenses. These will vary widely by not only state, but areas within each state. For example, a dealer setting up shop in a rural area can expect to pay less per square foot for a property and building, whereas a dealer in a metropolitan location will pay much higher rates. Some expected startup costs include:
- Rental property for displaying vehicles, including space for a garage and business office
- Beginning inventory
- Computers, printers, phones
- Employees, including mechanic, salesperson, bookkeeper
- Business liability insurance
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Financing Vs Leasing A Vehicle
If you finance your car for lower payments and for a longer time, you may end up being what dealerships call upside-down on your car. That means that you will owe more than it is worthmore than you would be able to sell or trade it in for. If you drive the car very little and put very few miles on it, this might work out okay for you. The average car gets 12,000-15,000 miles per year. If you put a lot more than that, the value of the car will go down quicker.
If you are the type of buyer who wants a new car every two or three years, you should really consider leasing a vehicle. You will get all the warranties and you wont have to worry about resale or trade-in value. You can turn it in at the end of your lease, and lease a new car of your liking. All you have to consider for leasing is the monthly payments. The monthly payment on the lease of a new car is often cheaper than the payment on a five-year loan on a new car. With leasing, you can have a lower payment on a basic car, or you can have a similar payment to having a loan with more equipment and amenities.
Is It More Expensive To Buy A Used Car From A Dealer Than A Private Seller
Not really, private sellers typically go to the Internet to see what dealers are charging for a car like theirs. Then they advertise it at or near the dealer’s price the dealer’s price includes all the legal protections provided by the legislation. An example of this protection is the dealer’s compensation fund, if you buy a vehicle and you have proof that the dealer hasn’t fulfilled their promises you can make a claim of up to $45,000 this protection is not available for private sales.
Bob Pierce, UCDA’s Director of Member Services answers the question: “Is it more expensive to buy a used car from a dealer than a private seller?”
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