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Buying a new car:
5 steps to getting the best price
Ideally, a dealership should help you
find the right vehicle at a fair price.
But some dealers place more emphasis
on their profit margins than on satisfying
their customers. When buying a
car, keep your interests front and center--and avoid common pitfalls that
can cost you extra money--by following
these tips:
Step 1
Do your homework.
Many dealerships prey on the unprepared.
Going into a showroom "cold"--without having gathered key facts and
preliminary pricing figures--gives the
salesperson too much control over the
buying process. Thoroughly research your
choices. Read a variety of reviews. Check
the reliability, safety, fuel economy,
and pricing of any models you're considering.
And don't wait until the day you
plan to buy to test drive the vehicles.
If you have a trade-in, know its approximate
worth. That will depend on the
vehicle's age, condition, mileage, and
equipment, as well as where you trade it
in. You can get an idea of your trade-in's
value at auto-pricing Web sites or with
CR's Used Car Price Reports. Focus on your
car's wholesale, or "trade-in," price; the
retail price is what you'd expect to get if
you were selling it yourself.
Step 2
Don't assume that the sticker price is
the purchase price.
To get the lowest price, go in with a starting
price that's based not on the sticker
price but on how much the dealer paid
for the vehicle. The dealer invoice price is
commonly available on Web sites and in
pricing guides. But the invoice price isn't
necessarily what the dealer paid. There
are often behind-the-scenes bonuses, such
as dealer incentives and holdbacks, that
give the dealer more profit margin. You
can find sales-incentive information at
some auto-pricing Web sites, or CR's New
Car Price Reports or New Car Buying Kit.
These CR services include the CR Wholesale
Price, which factors in the dealer
invoice, holdback, and any incentives or
rebates to give you a close approximation
of the dealer's real cost. A reasonable
price to start negotiations is either
4 to 8 percent over what the dealer paid
or the CR Wholesale Price, depending on
the demand for the model. You can also
check the quotes at autobuying Web sites.
The services are free, and you aren't
under any obligation to buy. Keep in mind,
however, that you can often get a lower
price through effective negotiation at
a dealership.
Step 3
Negotiate one thing at one time.
Salespeople like to mix financing, leasing,
and trade-in negotiations together,
often asking you to negotiate around a
monthly payment figure. This tactic gives
the dealer more latitude to offer you
a favorable figure in one area while
inflating figures in another. Make clear
that you want the lowest possible markup
over your starting price. Add that you
intend to visit other dealerships selling
the same vehicle and will buy from the
dealer with the best price. Only after
you've settled on the price should you
discuss financing, leasing, or a trade-in,
as necessary. Negotiate each item individually.
Remember, you're in charge and
can leave at any time. Heading for the
door can sometimes jump-start a slowmoving
negotiation or bring a lower offer.
Step 4
Arrange financing in advance.
Compare interest rates at several banks,
credit unions, and loan organizations
before checking the dealer's rates. If
preapproved for a loan, you can keep
financial arrangements out of the negotiations.
Automakers may offer attractive
financing terms, but make sure you qualify
for them. Otherwise, the salesperson
may try to sign you up for a higher rate
than you could get elsewhere.
Step 5
Don't pay for extras you don't need.
Dealers often try to sell you extras
such as rustproofing, fabric protection,
and paint protectant, or push etching
your Vehicle Identification Number on
windows to deter thieves. Don't accept
those unnecessary services and fees.
If the items are on the bill of sale, put a
line through them. Vehicle bodies are
already coated to protect against rust.
And CR reliability surveys show that rust
is not a major problem with modern cars.
You can treat upholstery and apply paint
protectant yourself with good off-the-shelf
products. You can also do your
own VIN etching with a kit that costs
about $25.
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