4 aspects of buying a car that people don’t realize you can bargain for
- While working at a car dealership, I learned that there are a lot of factors to negotiate when you are to buy a car. During a recent car purchase with a friend, I realized that most people think their only chance to negotiate is the price.
- However, interest rate, warranty and protection services, and even trade-in values are negotiable. And by starting your negotiations based on the invoice price instead of the MSRP, you can save more.
- By negotiating on the interest rate and the price of the car, and by eliminating unnecessary maintenance plans, my friend and her mom were able to lower their car payment.
- Learn more about personal finance coverage.
I used to work in a car dealership so naturally I’m that friend you bring to car shopping. Last weekend my friend and her mom asked me to go with them to the local Hyundai dealership and I agreed to go with them.
Their car buying process reminded me that many drivers don’t think about negotiating on several parts of their car purchase: everything, from the price to the interest rate, is to be negotiated.
1. Everyone knows you can negotiate the price of a new car, but they look at the wrong price to begin with
Most people know that you can negotiate the price of a new or used car. But, many do not know that they are really thinking at the wrong price. Most people start their negotiations based on the Manufacturer’s Suggested Retail Price, or MSRP. But the number they should be thinking of is not on the sticker: the price charged by the dealer.
This is the price the dealer paid for the car. It is not marked on the window sticker, and it is not mandatory. But, the typical bill price can be found online; Kelley Blue Book publishes and regularly updates this information. Base your negotiations on this number.
Try to get as close as possible to the price charged. Dealers often receive incentives that further reduce the cost of the invoice to them. Negotiating on the basis of the invoice price leaves you with quite a bit of money to save on MSRP, and still some room for the dealer to make a few bucks.
2. Interest rate
If you choose to finance through a dealer, don’t take the first interest rate a seller offers you. My friend and her mom worked hard to negotiate their interest rate and it saved them big money.
The dealers make money on the financing. The dealer’s offer usually includes a little extra for them. They sell your loan to a bank, and any mark-up is their profit and your loss.
You can negotiate their interest rate. Or, you can get pre-approved by online lenders, the banks you often work with, or even
. Then you can walk into a dealership with a number to beat and have more bargaining power with an offer in hand.
3. The value of your trade-in
Dealers love to buy used cars – they can make more money out of it. Automotive News reports that the average dealer’s profit on a new car in 2015 was $ 2,014, and the average used car earned them $ 2,396, a difference of $ 382 in profit.
Trade-ins are a great source of income, especially when a dealer can buy you the car for less. Whatever offer they have, the value of your trade is up for negotiation and you should try to get as much of it as possible.
Prepare to know your car’s Kelley Blue Book value and try to get as close to that number as possible to get the most out of your trade-in. Or, avoid it all together and get the most out of your car by sell it yourself.
4. All the maintenance packages they offer are to be negotiated – or eliminated
Towards the end of the case, the dealership offered my friend and her mother maintenance and protection plans, including lifetime oil changes and a five-year warranty extension for a few thousand dollars. . These things are completely negotiable, can be sold separately, or are completely optional.
This dealer offered lifetime oil changes for $ 700 and factored that into price considerations when working out financing. But, that comes down to $ 70 a year for oil changes if they keep the car for 10 years – more than what the typical driver would spend. Most newer cars only need oil changes once a year or every 7.00 to 10,000 miles, and oil changes typically cost between $ 30 and $ 60.
My friend and her mom saved big by eliminating that $ 700 fee (plus interest). Consider how much this coverage is worth to you and how much you would benefit from it. If you think you need maintenance packages, negotiate for them. If they’re not worth it, skip ahead.