If you’re like most Americans, you probably find buying a car as thrilling as it is frustrating. And, like most Americans, you probably find that the bulk of the frustration comes from dealing with manipulative or just plain dishonest salespeople.
Worse? Buying a car is not the investment that buying a home is. Cars immediately depreciate in value, which makes it even more crucial that you get the best deal you can.
The good news is that staying informed about dealership sales practices is pretty easy if you know where to look. While you’re still bound to get the best price if you’re on friendly terms with someone on the sales team, a bit of research can still turn up plenty of opportunities for you to beat them at their own game.
Here are some tips to help you get the most bang for your buck next time you find yourself looking for a new car.
Do the Homework
Doing research before going to the dealer is a no-brainer. 90% of prospective car buyers conduct online research before making a purchase. In fact, 48% of people take anywhere from one to three months to research their options before setting foot on a lot.
Unfortunately, a further 38% of car buyers make a purchase within four hours after they’ve committed to buying a car, which probably indicates that people aren’t weighing their options as thoroughly as they should. The same goes for buying insurance: most drivers are unaware of just a few basic changes you can make to shave a considerable chunk of change off your premium. For example: combining auto insurance with homeowner’s insurance could net you a savings of up to 15% on your bill, for an average total savings of $285 every year.
Likewise, research will tell you not only what kind of car might fit your lifestyle, but also show you the full range of financing options. Take your time and get the full story.
Look Out for Interest Rate Mark-Ups
Would you be surprised to learn that dealerships regularly mark up the interest rates that they offer their customers? It’s true. Research suggests that the average mark-up is about 2.7%. What does this mean for you? It means that you’d be better off dealing with your financial institution directly instead of relying on the dealership to be the middle-man.
According to the Center for Responsible Lending, about 79% of all auto loans are made through third-party lenders that partner with dealerships. That’s a lot of money that American drivers are leaving on the table: a cumulative $25.8 billion paid in interest each year. If that’s not reason enough to start thinking differently about how you finance your next car, I don’t know what is.
This probably means that you’ll want to commit to a phone call or a visit to your bank or credit union before you even make it to the dealer. To put it another way, anything that makes you less reliant on the dealership will give you an advantage.
Beware the Bait-and-Switch
For another example of a time-honored dealership “technique,” let’s look at the bait-and-switch. This tactic is almost too simple: it involves the dealership advertising a highly attractive price to lure in potential buyers – but when they arrive, that wonderfully low price they’ve been promised is nowhere to be found.
To be honest, I’m as guilty of falling for this tactic as the next person. Last time I was looking for a new car, I got swept up in the aggressive marketing spread throughout the Sunday paper, courtesy of the many car dealerships in my area. When I got to the dealership, though, all of their too-low-to-be-true prices and rates were nowhere to be seen.
As with anything in life, buying a car is another example of a situation where skepticism is your friend. Again, do the requisite research, and take the time to study valuable resources like Kelley Blue Book to get a more realistic idea of the prices you can expect.
Negotiate Each Expense Separately
Dealerships also tend to make use of a tactic known as the Four Square Method. The simplest explanation of this tactic is that they choose to lump together each of the major expenses associated with car buying, including the actual price of the car, the down payment, the trade-in value of your current car, and the monthly payments. You’re well within your rights to negotiate each of these elements as their own transaction; in doing so, you’re very likely to save money versus combining them into a single expense.
As a final note, I’d be remiss if I didn’t also remind you, once you’ve successfully driven off the lot, to avoid distracted driving at all costs. In 2010, some 3,092 people died as a result of distracted driving. While you might be riding the high of getting a great deal on a new car, remember not to let your mind wander.
Hopefully you’ve enjoyed this brief look at a few ways to save money at the dealership. If you’ve had success with techniques of your own, feel free to let us know in the comments below.