Buying a new car can be a white-knuckle ride. Emotions run high, decisions are often made quickly, and financing comes with twists and turns. These four steps can help as you negotiate a deal on the automobile you want.
Stick to the plan. Before you start negotiating, decide what you want, how much you can afford and stick to it. You may be tempted by extended warranties or a high-end sound system, but remind yourself of your priorities and don’t end up with a pricey case of buyer’s remorse.
Square up. Auto dealers use a worksheet called a “four-square” when they negotiate your transaction. To get ahead of the game, figure out each worksheet component beforehand and keep details, except for the total purchase price, to yourself.
- Total purchase price. This is the only one of the squares you should discuss with the dealer. Know the new vehicle’s base price, add-ons and other potential charges.
- Trade-in value. Find the value of your old ride and decide whether you’re better off selling it yourself. Only discuss the trade-in after finishing up your purchase price negotiations.
- Down payment. Strive for 15 to 20% of the total price, if possible.
- Monthly payments. Remember, these can be influenced by other factors such as loan term or interest rate, which can make you lose sight of the actual purchase price. Keep your total transportation costs — loan payments plus fuel, insurance and maintenance — around 10 to 15% of your take-home pay.
Pick your battles. Be flexible on minor details like color, trim and less-expensive options if they give you negotiation room. When a lower payment is at stake, do you really care whether the seat covers are taupe or gray?
Get pre-approved. If possible, show up with a pre-approval from a lender of your choice. That way you know what loan terms you can get, and you’re not relying on the dealer for a financing package that may cost you more in the long run.
235359 – 0916