Negotiating The Deal
Remember: Everything is negotiable. Never buy a car in a hurry. Be prepared to take as long as several weeks to find and negotiate the deal you want. Keep in mind that everything is on the table - no matter what the salesperson says. This includes:
- The price of the vehicle you are buying
- The trade-in value of your current vehicle
- Your financing options
- Insurance and service contracts
Do not negotiate on monthly payments alone. Make buying your new car, selling your old car, and financing your new car three separate transactions. This helps you understand exactly what you are paying for each step.
Get the best interest rate. Always ask the dealer if the interest rate being offered is the lowest rate he or she can offer and whether it includes a profit for the dealer. You may be able to pre-qualify with a bank or credit union to lock in a better rate before you go to the dealer.
Don’t lower your monthly payments by opting for a longer loan term. Lowering your monthly payments by adjusting the length of the loan may seem like a good idea at first, but it may cause you to pay thousands of dollars more in interest over the term of the loan. What’s more, vehicles begin to depreciate the moment they leave the lot and continue to do so every year after. The longer the term of the loan, the more likely it is for the value of the car to fall below the amount left on the loan. This creates "negative equity." If you later decide to sell or trade-in a vehicle for which you owe more than it is worth, you will still be responsible for paying off the negative equity.
Beware the "numbers game." Do not assume salespeople are your friends - no matter how friendly they may be. Their job is to sell you a car. Most are paid on a commission basis, so the more you spend the more money they make. This includes the person who goes through your financing options and final paperwork with you. They also get commission for selling additional products such as service contracts, add-ons and other services like credit life insurance. Many of these products have a very high profits margin.
Avoid the numbers game by making sure you understand the total cost of the vehicle and services being offered. If you just negotiate based on monthly payments, it is even easier to get tricked into paying more than you need to.
The Attorney General offers the following adivce to avoid losing at the numbers game:
- Take notes. Once you have agreed on a price with a dealer, make written notes of what the agreement is and stay alert. Make sure to include the cost of each item.
- Bring a calculator. Some dealers will try to change the deal later without you noticing. Compare the agreed-upon prices with the prices listed in the purchase agreement and make sure they add up to the same price before you sign anything. For example, you may think that you are getting a great deal on your trade-in, but in exchange the dealer may have increased your interest rate.
- Take someone with you. They can take notes while you ask questions. Two people are less likely to miss something.
- Do not believe a salesperson that tells you that additional products or services are free or included in the cost of the car. Pay close attention to the purchase agreement to verify there are no hidden charges or fees before you sign it.
- Be cautious about purchasing aftermarket add-ons or treatments offered by the dealer. Examine the cost and need for such extras and whether you can afford it. Some add-ons are unnecessary, or are significantly overpriced, and may greatly increase the price or cost of your overall financing.
- Ask to take a copy of the purchase agreement home with you. It is well within your rights to keep a copy of every document you sign – in its entirety.