4 Year End Car Buying Tips

4 Year End Car Buying Tips

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If you are considering buying a new car, the last week of the calendar year plus the first few days of the new year are an optimum time to buy a new car. The days on either side of the new year are counted with the most recent calendar year’s sales with most automakers vying to increase those sales before the books close on Jan. 2nd or 3rd (Jan. 2, 2014 for 2013). It’s all about bragging rights and consumers that shop smart can win. Here is what you must do to come out a winner:

1. Know What You Want

Before you set your foot in a car dealership to finalize a deal, you should have a very good idea of what car you want to buy. You can and should visit your dealer to inspect the model that interests you, comparing various trim levels and package offers to find the vehicle that is right for you.

Avoid the pressure from car sales staff to make a deal on the spot. You have more work to do before you are ready to negotiate.

2. Understand Pricing

You are likely familiar with the manufacturer’s recommended sales price or MSRP. You won’t pay that price — in fact, you should save hundreds if not thousands of dollars off of the sticker price. Know that dealers receive incentives from manufacturers to move cars including secret rebates (holdback) that you won’t hear about.

What you should discover is the invoice price for a particular car that you want. The invoice is what the dealer paid for the vehicle and you can often get that price as the dealer makes money from the holdback offered by the manufacturer. That holdback is 2 to 3 percent of a vehicle’s cost, based on the sticker price but not including the destination charge. Services such as TrueCar.com, Edmunds and KBB.com provide that information for free or for a small fee.

3. Consider Rebates and Financing

It is almost always better to arrange financing on your own and take a rebate, if offered. But not always. You may find 0 percent financing offered through your dealer, a rate that no bank or credit union can match. However, if your credit union offers an unusually low rate such as 0.9 percent. You should know that the 0 percent deal is good only for people with excellent credit, that means you may need a credit score of 700, 720 or even 740 or more.

Let’s look at an example of auto loan choices as well as a possible $1,500 rebate that can be applied to your down payment. You usually can’t take both the low rate and the rebate, so we need to see which deal is better. We’ll look at a hypothetical vehicle you’ve negotiated that will cost you $23,500 and value your trade at $3,500 with no money down. Your $20,000 auto loan would look like this:

  • From the dealer (excellent credit): $20,000 x 60 months at 0 percent interest rate = $333.33 per month
  • From the dealer (fair credit): $20,000 x 60 months at 5 percent interest rate = $377.42 per month
  • From your credit union (approved credit): $18,000 x 60 months at 0.9 percent interest rate = $306.91

Your credit union deal allows you to take the rebate, saving you more than $26 per month or $1,560 over the life of the loan.

4. Get Multiple Bids

Check with at least three car dealers for prices on similarly equipped vehicles. You may find a difference of several hundred dollars, making it worth your while to drive a bit further for a better deal.

You don’t need to share with the other dealers your offers, unless the dealer you prefer to do business with says that they will match the best price. Don’t worry about about a car dealer crying poverty — the dealer holdback will still be applied; you won’t know what that amount is.

What You Should Know

You should also know that your salesperson is eager to make a deal as every car sold for the month, quarter and year can increase his or her bonus. That bonus is tiered and based on sales: for instance, selling 10 cars a month provides one level, while selling 15, 20 or 25 units per month or more increases not only the compensation but the bonus offered.

Just keep in mind that if you wait until Jan. 1 or Jan. 2, dealer showrooms may be crowded — have your deal arranged as soon as possible and you’ll avoid crowds and secure your purchase quickly.

See AlsoHow to Shop For a Car Loan

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