Buying a new car is one of the most stressful financial situations that you’re likely to encounter. There are many reasons for this. After, this is one of the biggest purchases (aside from a house) that you’ll make, and you want to get a good deal. One big obstacle for many is dealing with salespeople who try any number of tricks to get you to spend much more than planned.
Understand the process
While there are honest car dealers out there, dealing with a bad dealership can leave a very bad taste in your mouth. If you know the tricks of the trade, though, you can go in prepared to get a fair deal for your next car.
Today I wanted to cover some of the most common tricks you’ll encounter when buying a car and/or when you do a trade-in.
Trading in your old car help to offset a portion of the purchase price on your new car, but it’s rarely the best deal. In most cases, you’d be better off selling your old vehicle yourself and then putting the proceeds toward the new car. It’s more legwork, but if you’re patient, you can get a much better deal.
Inflated trade-in values
If you do decide to trade in your car, the salesperson might come back with a fantastic offer – perhaps much more than any other dealer would offer. Seeing as this deal is much better than what you can get elsewhere, you may go ahead and start making a deal for your next car.
The problem with this situation?
All too often, the sales guy will eventually claim that the trade-in price was rejected by his manager. He’d like to keep the deal with the new car since you’re almost done, but will offer a smaller amount for the trade-in. At that point you may be so emotionally invested with the process that you’re likely to accept his offer.
Don’t fall for this trick. Stand up, start moving toward the door, and ask the salesperson to lower the new car’s price correspondingly. If they won’t budge, you may just want to walk away.
Holding your keys
Another possible gotcha occurs after you hand the dealer the key for your trade-in. There have been stories where dealers kept potential customers in the showroom by “misplacing” their keys. In fact, our friends had it happen to them. Upset with that old trick, they wound up leaving without purchasing anything.
Scams when buying a car
The biggest advantage you can have when buying a car is knowledge. Don’t go into a dealership without knowing what kind of car you’re looking and how much it should cost. If you’re prepared, you’ll be able to spot outrageous offers and comfortably walk away.
Foursquare – bad math
If a salesperson asks how much you’re willing to pay per month for your car, watch out! Some dealerships coach their salespeople pull out a foursquare chart to maximize their profit by only focusing on your monthly payments.
Payments can be reduced by extending the length of your loan, or by including a balloon payment. Know what you’re looking for and tell them what – and how – you want to buy. Use sites like Kelley Blue Book and Cars.com to see what your dream car is worth and how much people are paying for in your area.
Instead of getting into the tricky math at the dealership, focus on the bottom line – the total price you’re willing to pay for the car. If you need financing, you should consider lining it up on your own rather than including that in your negotiations.
Lowball first offer
Similar to the overly-generous trade-in offer discussed above, it’s not uncommon for a salesperson to give you a too-good-to-be-true price on the car you want to buy. As you rush to close the deal, however, the manager inevitably comes in and says that the price is too low. They can’t sell it to you at that price because they would “lose money.” Don’t fall for it.
If a salesperson has been at the dealership for any reasonable amount of time, they’ll know what sort of deal will pass muster and what will get rejected. Simply tell them that you understand, but that you’ll need to find a deal that is better suited to your situation. Then get up and head for the door. If they capitulate, great. If not, keep walking.
Push you to pay more
Finally, be on the lookout for attempts to add extras to your purchase. Maybe they’ll claim that the bank requires you buy a warranty before they’ll approve the loan. Another tactic is to use your credit score as an excuse to get you into a ridiculously high rate car loan. They may be right that your score won’t get you the lowest interest rate, but it doesn’t mean you have to take the worst.
The best way to prepare is to know your credit score. You should also check with your local bank or credit union to see what sort of interest rate you can qualify for. Knowing these things in advance can help you evaluate any deal you come across.
Your car dealer experiences
Not all dealerships are shady, but you still need to be very cautious.
What sorts of car buying experiences have you had? Good? Bad? Any tips or tricks for getting a great deal?
Note from Nickel: My preference is to avoid the showroom entirely, and to negotiate the deal via e-mail and/or fax. That way you can play dealerships against each other and find the bottom of the market without racing all over town. It also keeps you out of the sales office, so you avoid any shenanigans.