How to Get the Best Price on Your New Car

Buying a new vehicle is a major financial investment. But there are also many additional factors that come into play when buying a car. By being prepared with some research before you set foot in a car dealership, you can save yourself thousands of dollars on your next new car. Here are some suggestions.
First, set a budget -- and be realistic. “Set your budget before you start looking at cars,” recommends Maxine Sweet of Experian, a company that provides consumers with tools and products to help them understand, manage and protect their personal credit profiles. “You won’t be tempted to spend more than you can afford if you only look at cars that fit your budget.” When determining your budget, be sure to factor in how much you can afford to spend on maintenance, gasoline, and other items required for auto upkeep.

Now is also the time to make sure your credit is in order so that when you find the right car, you’ll be ready to drive it home. “You don’t want to be ready to seal the deal only to find out that you don’t qualify for financing,” says Sweet. An easy way to check on your credit is to log onto www.experian.com. You’ll get quick and easy access to your credit report and a credit score to help you learn what positive and negative factors are affecting your credit risk, as well as find out what lenders will see when they review your credit.

With this information in hand, start researching vehicles that are in your price range. All major manufacturers have Web sites where you can get details on various models, as well as available options. You can also gather information from auto magazines and the auto section of your local paper. Be as open-minded and flexible as you can at this point. Don’t base your choice on looks alone -- find out how different vehicles rate in terms of value, repairs, safety and gas mileage. All of these factors will affect the long-term costs of owning the vehicle. Also, don’t forget the impact of a potential increase in insurance premiums on your monthly budget.

After you’ve narrowed down your automobile choices, it’s time to test drive your top contenders. Make it clear to the salesperson at the dealership that you’re not there to buy so you don’t spend your time on price negotiations at this time. When you’ve tested the cars on your list, eliminate any you don’t like, and rank the remaining cars in order of preference.

Don’t make a beeline to the dealership yet, though. Once again, a little research is in order. You need to find out the factory invoice price -- the amount the dealer pays for the car. The difference between this price and the manufacturers suggested retail price (MSRP) is generally what makes up the dealer’s profit. “You should barter up from the factory invoice price, not down from the MSRP,” says Sweet.

If the dealer isn’t prepared to negotiate, you should be ready with Plan B. That might involve heading down the street to the dealer that sells your number two choice, or it might mean being patient and biding your time until the dealer is ready to talk terms. For example, if the car you have your eye on is a hot, popular model, the dealer won’t have to concede to any special deals to move it off the lot. But if you’re willing to wait six months or so until the buzz dies down, the dealer might be more anxious to move the car out the door, hence more willing to deal. Many car shoppers wait until the end of the month or the end of the quarter to buy. Salespeople have certain quotas they need to make, and if they’re short in a given month, they may be more willing to talk terms.

So now you’ve got the car you want at the price you want -- congratulations! But don’t let your guard down just yet. You still have to make the smart financing choice. Once again, this is where preparation pays off. Find out about any special promotions, rebates, and warranties that may apply, but be sure to read all the fine print. Terms and conditions may vary after an introductory period, or other clauses may apply. Also, unless a dealer is offering a special interest rate as an incentive, chances are the interest rate the dealer will offer you will be higher than what you could get through a bank or credit union. So, if you’re not getting a special deal, you may be better off arranging your own loan. This is where knowing your credit rating comes in handy -- the better your credit rating, the better rate for which you will qualify. If you know you qualify for a good rate, you’ll be less likely to fall for a less favorable financing pitch.

And now that you’ve got a handle on your credit situation, why not use the anniversary date of your car purchase to remind yourself to conduct an annual review of your credit report. That way, you’ll be ready for your next big purchase.