Last week I decided to trade my car in for something both a little more economical, in regards to mileage and a little more technologically advanced.
After doing some research on which vehicle could give me the most bang for my buck, I settled on a 2013 Honda Civic. Not only could it get up to 39 miles per gallon (highway) but it also had Bluetooth phone and audio capabilities as well as an optional navigation all for under $23,000.
So now that I had an idea of what I wanted to purchase, all I had to do was figure out what the best deal I could get on it was. Here’s how I did it.
First off, when you take a trip to the dealer, there are a few certain key rules you’ll want to remember.
- Don’t go when you’re desperate: Be prepared to walk away on your first day of car shopping.
- Try and go at the end of the month: Dealers tend to want to want to move as many cars as they can at the end of the month to pad their numbers.
- Bypass a salesman and go straight to the manager: A lot of customers waste time with the middle man. A manager will be able to make or break a deal and save you a lot of time.
- Be prepared: The most important thing you’ll want to do before visiting a dealership is know exactly what you want and at which price you’re willing to pay. I’ll tell you the best way to go about that a bit later.
With these rules in mind, figure out what you’d like to put as a down payment. The 2 most common down payments are cash or trade-in of an old vehicle. Cash will make things simple as you will know exactly how much you’ll be putting down and the dealer will be cornered into making his profit on the sale of the new vehicle.
On a trade-in, a slick dealer will try and work a profit on the sale of the new car and the sale of your old car. Find out the Kelley Blue Book value of the car and figure out if it’s worth trading in or selling privately. In most cases, selling to a private party will yield you a bigger return but you will have to deal with the hassle of listing it, negotiating with potential buyers and transferring the title of the vehicle.
Also, if the car you are trading in is not paid off yet, you will want to subtract the remaining loan amount from the value of the car. That will be your down payment.
Once you have figured out how much you will be putting down, check out sites like True Car in order to find out the dealer invoice price plus destination fee. If you are paying sticker price for any car, you are on the losing end of the deal.
Now we have some solid numbers to work with. For the sake of this article, I will tell you how my deal went down using the actual numbers of the transaction put through the Yahoo Auto Finance Calculator (one of the best tools you can use when shopping cars).
I had a 2011 Honda Element that was worth nearly $19,000 as a trade in and close to $21,000 on the private market. With the remainder of the loan to be paid by the dealership, I had roughly $9,000 of down payment for the new car which invoiced for $22,867 including the destination fee (MSRP $24,555).
With local taxes and an advertised 1.9% APR, the Yahoo Calculator estimated my payments to be $279/month over a 60 month term. I scaled it back to $259/month and pitched that to 4 local dealerships in person as well as using the True Car and Edmonds tool to have other dealerships contact me.
At first, I was turned down at 3 dealerships and even got into a verbal disagreement with 1 of them. It’s all part of the game.
Now that you have planted the seed, the dealers will pretend to be uninterested but will start calling you after a few days (remember, time this right so you buy at the end of the month). They will do everything in their power to increase their profit but stand firm. You know what you want so don’t cave in until you get it or are close enough to the number you brought to the table.
Keep pitching what you want to pay monthly over a certain loan term and be sure not to fall for the “we can do it for that monthly price but at 72 months”. That trick will make it seem like you got your number honored but $250 over 12 months is another $3,000!
If you’re realistic in what you’re asking for, there is a good chance that a little bit of patience will go a long way and get you into a new car at a great price. I have done it 4 times since 2001 and it works like a charm. I haven’t made many friends at the local dealerships but in the end, you have to do what’s best for your own interests.