The dealerships have a powerful weapon to maximize their potential profit when selling a car to you: information. They know many details such as all of the available manufacturer incentives and rebates, the true market value for your trade-in, the popularity of the model you are considering, their invoice cost for the new car, and, of course, the lowest price they are willing to sell it for. The key is to do some preparation ahead of time so that you can take the information advantage away from the dealership.
The first step is to determine your budget for the monthly payment, which (along with your down payment and equity in your trade-in) will determine how much car you can afford. Even if you think you have a number in mind, it s a good idea to review your finances before making such a large purchase. On a piece of paper, start to list all of your monthly expenses, including rent/mortgage and utilities, groceries, insurance, credit card payments, entertainment, clothes, student loans, savings, and any other regular expenses.
Then, add these up and subtract this total from your monthly take-home (after taxes) income. This result is your maximum affordable payment, though it is not advisable to spend up to this limit. The second aspect of preparation is to know exactly what you are shopping for. As a simple exercise, take a piece of paper and divide it into three sections labeled “Need”, “Want” and “Don t Want”. Begin to fill in each section with short words or phrases describing features that apply to cars.
For example, if you have a large family you might put “room for 7 people” in the “Need” section. The “Want” section is used for features that are nice to have but are not required for the purchasing decision. The “Don t Want” section helps you eliminate features that don t match what you are looking for, such as “four-wheel drive”. Once you are done, you’ll now have a clear picture of the kind of car you are looking for, which will make locating that car much simpler.
If you are shopping for a new car, check the manufacturer s website for information on all available incentives and rebates keep in mind that a low-interest APR may be available only to highly qualified customers. Many websites will help you estimate the value of your trade-in, or you can pick up a copy of the Kelly Blue Book at major booksellers. Do some research on dealers around your area so know what kind of inventory is available popular cars will sell at a premium, while slow-moving models are prime for a good discount.
Buying a car is a highly emotional experience and the test drive is your first opportunity to decide if you’ve found the right vehicle for your needs. You will likely get very excited over the idea of driving home in your vehicle, especially if you are buying a brand-new car or are upgrading from an old clunker. Unfortunately, the enthusiasm you feel after getting behind the wheel of your potential new toy often gets you into trouble when it comes time to sit down and negotiate with the dealership.
