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Buying a car from a dealer is no easy feat. The dealers and financers have been professionally trained to deceive and coax you out of as much money as possible. Luckily, with the right mindset and information on your side, you will be able to defeat the bullies of a traditional dealership.
Firstly, before you even think about going to the dealership
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Buying a car from a dealer is no
easy feat. The dealers and financers have been professionally trained to
deceive and coax you out of as much money as possible. Luckily, with the right
mindset and information on your side, you will be able to defeat the bullies of
a traditional dealership.
Firstly, before you even think
about going to the dealership, decide which car you want to purchase. What is
most important to you? Longevity, resale value, mileage, safety, etc.? Write
out a list from most important to least and research on the internet what car
works for your wants. For instance, if you're looking for a simple family car
that is compact, affordable, has good mileage, does not require
more-than-routine maintenance, has high safety ratings, and will last for over
ten years, then a Honda Fit may be the car for you. Or if you're looking for a
masculine car that looks sleek and has a durable engine, then possibly a Dodge
Challenger may be your choice. No matter what car you're looking for, do your
research even if you already think you know what car you want. Maybe you've
always dreamed of owning a certain sports car just because of how it looks. But
after some research, you may be surprised to know that the vehicle is far less
from dream worthy. Too many horror stories have been revealed where car
shoppers did no research and just picked what seemed to be the best car for
them at the time.
Once you have one or two car
choices in mind, search the internet for dealerships near you that have your
vehicle in the color you desire. Don't hesitate to look for a car that may be
somewhat far away. If you can't get a better deal at a dealership except for
one that's over 50 miles away, it is worth the extra few bucks in gas and time
to at least check it out.
Next, go to Edmunds.com and get
price quotes for the cars. One of the many great things about the internet is
that you can actually haggle online instead of doing it in person. Unlike
truecar.com, Edmunds can tell you the invoice, delivery, and advertising cost
of a certain car at a certain dealership so you know what a good price offer
for the vehicle should be. To be frank, dealerships HATE Edmunds.com. Better
yet, it even submits personally requested price quotes from the dealers who
will then determine what they will offer you for the vehicle in an email. So
let's say you select a price quote from two dealerships for the same car that
has an MSRP of $20,000: one comes back with a price quote of $19,000 and
another comes back with one of $18,000. You can then call the dealership that
originally offered $19,000 and tell them that you have an offer of $18,000 from
a rival dealership and you want to know if they can do better. If they say they
will do better, than ask them to email you a guaranteed new price quote (just
in case they want to retract their offer when you get to the dealership). If
they offer to match the price, tell them that matching does you no good because
you'd rather go with the guys that were nice enough to offer you the lower
price to begin with; this other dealership would have never even offered the
lower price if the cheaper guys didn't do it first! So tell them that you're
not interested in being matched. You want them to beat their offer, otherwise
there will be no deal. Then of course you can call the other dealership that
offered you $18,000 and tell them the other dealership offered it for less and
so forth. However, do not try to lie and tell other dealerships that you were
offered less than what they emailed you. The dealership WILL call the other
dealership to verify the amount offered. Try to get price quotes from multiple
dealerships including those up to 100 miles away. If you can save hundreds or
even thousands of dollars, the extra gas and time is worth it.
Next, if you're going to get a car
loan, get preapproved by your bank or credit union first. This gives you two
advantages:
1) you will know if you can
actually be approved for the price of the car (don't forget to add a few
thousand extra to account for DMV fees and taxes) and
2) you will probably get a much
lower interest rate than what the dealership's lender can offer.
At this point, once you have a
guaranteed offer and a preapproved car loan, show up to the dealership and test
drive YOUR vehicle. The reason I capitalized 'YOUR' is because sometimes
dealerships will have you drive their test model which may have more features
and drives perfectly. But then when you buy the actual car, it doesn't have the
features and something may be wrong with it. After you've signed the contract,
they no longer have an obligation to fix any issues and you're stuck with the
problems.
Once you've decided that you want
this vehicle, tell them you're going to buy it but you want it for $500 less
than what was agreed over the phone plus some free accessories (like floor mats
and splash guards). This may not work, but it certainly can't hurt to ask. They
may tell you that you're already getting a good deal from the internet
guarantee so they can't go lower. Sometimes, this is actually true, but you
never know when it's not. If they deny your requests then ask them to either
take $500 off or include the accessories. They may agree to one or the other.
If they deny you again for both, ask for $250 off or a free accessory. If they
still deny your request, it is then up to you to decide whether you should walk
or just be happy that you're already getting a great deal from the internet
guarantee and go with their offer.
Once you've agreed on the price
and possible free extras, then it comes time for the REAL fun: financing.
Because a lot of people sometimes aren't very well versed in terms of car
loans, the dealership will use certain mischievous tactics to confuse you and
cost you money. Some typical tactics they use are:
Incorrect sales tax: California's
current sales tax is 8.5%. Make sure the sales tax dollar amount they have
listed on their proposal is in fact 8.5% AND is based on the ACTUAL sale price
of the vehicle. It may be 8.5%, but they may base the tax on the TOTAL FINANCE
CHARGE. So let's say you're approved for a 3% APR for 5 years and the vehicle
is $15,000; the total you will pay including interest in a total of 5 years
will be approximately $16,300. What the dealerships do sometimes is base their
sales tax rate against the total financing cost of $16,300 instead of the
actual sale price of $15,000. So instead of paying $1,275 for the sales tax
like you should (8.5% of $15,000), you're paying $1,385.50 (8.5% of $16,300).
Miscategorized sale price: They
also might try to put the finance charge of the vehicle in the sales price
field. They will tell you that they need to include the finance interest with
the sale price as the actual listed price. So like in the example above, they
might list the sale price as $16,300. Guess what? They're double-dipping! They
are basically now making the sale price $16,300 instead of $15,000 and THEN
charging interest on the $16,300, making your total price after 5 years almost
$18,000 total! Be sure the SALE PRICE FIELD in their proposal is EXACTLY the
amount that you agreed on earlier.
Reneging on an offered APR %: The
situation above allows the dealers to offer you a low interest rate. They know
they're jacking up the purchase price so they don't mind if you get a low APR.
Once you call them out on the situation above, they may come back and now tell
you that the APR % is higher. Tell them you want the original APR that was
offered before or you're walking. If they offered the low APR % before when
they tried to screw you on the purchase price, there should be no reason why
they can't give it to you with the price YOU BOTH AGREED ON to begin with!
Telling you they cannot process
your bank loan's offer and that you have to go with THEIR preferred lender: You
were preapproved by your bank or credit union. If their lender can't offer a
better rate, there is NO reason why your preapproved loan offer cannot be
processed. They will try to tell you that the offer you were given by your bank
was in 'a best case scenario' and this is the REALITY. They will make you think
that YOUR bank lied to you when you were preapproved so that you will take a
higher interest rate with their preferred lender. If your bank preapproved you
for a 3% APR, you are guaranteed that rate! Do not let the dealer lie to you
and tell you that THEIR lender's APR is lower because your bank's preapproved
APR went UP. If their lender is HIGHER, do not go with theirs. If it is LOWER,
however, then it can't hurt to go with theirs. If you do happen to go with
their lender because they're offering a lower APR, make sure that their lender
does not charge prepayment penalty fees for paying more than the minimum
payment. If your minimum payment is $250/month, try to pay $300/month instead
to save money on interest. Even an extra $5/month is better than nothing. But
first make sure that their lender will not charge you extra for paying extra!
Lying about the price: Going back
to negotiating on the sale price, they dealer may bait and switch the agreed
upon price during the financing phase. They may tell you that the prices of the
cars just went up today and so your original agreed upon offer is too low. This
is NEVER true! The MSRP is quoted by the manufacturer, not the dealer. Tell
them to show you on the internet that the prices have gone up according to the
manufacturer (like Honda). If they show you some kind of print-out that shows
an increase in sale price, then ask to go with them outside to the lot and tell
them that you want to watch them remove all the advertised posters on EVERY car
since they are supposedly now 'incorrect'. They will back down and say they
were misinformed or some other lame excuse.
Miscalculation of the total cost:
Be sure to have a calculator handy and add up every one of their stated costs
and be sure the total is the total you come up with. Sometimes they will
actually put the right amounts in every field but somehow the total field (the
one that actually matters and determines what you're going to pay) is higher.
Also, be sure to question every cost. If they have a 'delivery fee' or
'advertising fee' listed, tell them to take it off. Delivery and advertising
fees are included when a dealer buys the car to sell on their lot; it is not
your responsibility to pay them. Also, if the car has added features and they
have them listed for you to pay for them, tell them to include those features
for free or remove the features and the associated charges for them. They
cannot charge you for something extra that they installed that you didn't ask
for. It actually COSTS them to remove features so most likely you will get
those added features for free. No matter what, do not pay for any added
features. This includes extended warranties, window tinting, floor mats,
rustproofing, paint protection, etc. They can all be purchased somewhere else
for a fraction of what the dealership wants to charge. Also, for things like
rustproofing and paint protection, most good car manufacturers these days
already do those tasks when they're making the car before they even ship them
out to the dealers in the first place!
All in all, you must maintain your
composure and never back down. Until you sign all the final forms, you can
always walk away if you feel like the dealership is taking advantage of you. Be
sure to receive copies of ALL documents that you sign with the dealer and
financer! When you receive the information in the mail a couple weeks later,
double check that nothing has changed on the documents. If you signed for a
$250 monthly payment and the one that shows up in the mail is $300, call the
dealership and tell them to fix their error or you will be contacting law
enforcement and filing a suit for mail fraud.
One last piece of advice: never
fall for their guilt trips. You may want to leave or ask for a lower price
after they may have spent hours with you. They may ask you if you even care
about the time they spent with you and if it's worth anything to you. They may
say that the dealer needs to make a profit to feed his family. Remember, the
dealers get paid even if they don't sell a car that day AND this transaction is
about YOU, not THEM. Don't ever let them, or yourself, forget that!
Overall, this may seem like too
much hassle and you'd be fine with just going to truecar.com, getting a measly
$200 off, and calling it a day. It IS unfortunate that car buying is such a
hassle, but in order to receive a price that the car is WORTH and to not get
screwed during the financing phase, you NEED to be PREPARED and VIGILANT.
Thousands of dollars are at stake and for most middle or low-income families,
thousands of dollars matter! That's a sizeable amount that could go towards
your kid's college tuition, retirement, paying down other debts' shoot, even if
it's blown on a vacation getaway, it at least still gets more use than
overpaying for a car. Do your homework and save YOUR money!