SO YOU’VE DECIDED IT’S TIME FOR A NEW CAR.
Maybe your car is old, and those maintenances are starting to add up. Or you’re tired of that stain on the passenger seat. You’re older now, more adult, and want a more established vehicle than the one you were driving in high school. It’s your birthday. The gas is too expensive. You want something sportier. It doesn’t matter why – the point is, it’s time.
Then what’s the problem? Dealerships. Salespeople. Negotiating. How do you make sure you get the best deal?
As someone who has been selling cars for about two and a half years, I see people of all ages and backgrounds struggle with the easiest way to get a good deal. A lot of them assume they’re going to get lied to, and they end up making the process a lot harder than it needs to be. Others don’t do any shopping at all and pay a lot more than they should. So let me help you make the best deal with the least amount of effort!
1. WHAT KIND OF CAR DO YOU WANT?
This is pretty easy. What are you looking for in a car? Is gas an important consideration, or would you rather have horsepower? Do you need a lot of room or do you want something smaller? How reliable are the cars you’re looking at? How comfortable? How fun? Compare which car has the most of what you’re looking for using sites such as Edmund’s and Car & Driver. Figure out what kind of car you want and start from there.
As an ongoing example, I’m going to use the time when I helped my mom get her car. She likes sedans and drives 30,000 miles per year. She wanted a car that was reliable with good gas mileage. She decided on the Toyota Camry Hybrid.
2. CHECK YOUR CREDIT.
If you’re a first time buyer, your credit will be light. That doesn’t mean it’s bad. You can have a 730 credit score with two pieces of credit. It’s just important to be aware of what your credit is and what it means.
This home credit score might also be different than your auto credit score. I don’t know how credit bureaus work (all I know is pay your bills on time and don’t live beyond your means = good credit) but the fact that no one has an exact formula on how to get a perfect score versus merely a very good score is pretty bunk. Down with the patriarchy, I say. But on a practical level, it’s just something to factor in when checking your credit score at home versus checking it at the dealership. Check your score at home to have an idea, of course, but don’t be surprised if the number for your auto score is a little different – especially if you’ve never bought or leased a car before.
If necessary, get a cosigner. I know it might suck, but if your credit isn’t great you could end up paying thousands of more dollars per year than if you had just gotten that cosigner.
3. LEASING OR BUYING?
More and more people are leasing now than ever before. I would say 80% of my sales are leases. Leasing is a fun way to change out your car every few years while making smaller monthly payments. I myself am currently leasing. On the flip side, I also drive less than 10,000 miles per year, and my credit score is decent. If you drive over 15,000 miles per year, or if you don’t want to deal with getting a new car every two or three years, or if you want to own the thing you’re driving instead of borrowing it, then buying is a good way to go as well.
Since my mom drives 30,000 miles per year as I mentioned, she bought her car.
4. NEW OR PRE-OWNED?
If you can afford it, I would steer towards new. Most pre-owned cars I sell are fine, but literally 100% of new cars I sell are perfect. (I also work at Lexus, so I would hope the new cars are perfect.) Plus, your warranty is going to be the best it could be, nobody’s driven your car yet, and that smell is fantastic. If you’re leasing, definitely go new – pre-owned leases don’t tend to make sense financially. This is because the residual is lower. The residual is the amount you owe at the end of the lease if you want to buy it out, which is a set percentage based on the miles, time leased, and the original selling price (Manufacturer’s Suggested Retail Price, or MSRP, for new cars; on a pre-owned car this number is based on a weird calculation of wholesale and other factors that honestly I don’t 100% understand). If the residual is lower, that means you’re paying for a greater percentage of the car, which means your monthly payments go up.
However, buying a new car can be expensive. If you can afford it, great! If not, and you decide you want to buy a pre-owned, make sure you have the Carfax. The Carfax will give you the auto history of the car so you know if it’s been in an accident or had any serious damage.
Also, buying a certified car from a dealership means they did a full inspection on a car and it comes with a warranty backed by the manufacturer. If you buy pre-owned, I would recommend certified.
Only the same make can certify a car. For example, Toyotas can only certify Toyotas. There is no such thing as a certified pre-owned Hyundai on a Toyota pre-owned lot.
5. TEST DRIVE.
You’ve narrowed down your list to a few types of cars you like. Now it’s time to make sure you like the way they drive. Set an appointment with the dealership. If you have a friend or a referral at a particular dealership, set up your appointment with that person (hey, that’s me!). It is so much easier to do this with someone you trust.
Ask the salesperson about the different features available. Sometimes you can build the car online in a way that has absolutely nothing to do with the way the car shows up on the lot. Figure out what features are most important to you and which ones aren’t. Sometimes the features come bundled – you have to get navigation if you want blind spot monitor, for example. That’s annoying. It’s also just how it is.
My mom set up the test drive without me to make sure she liked the car. (She did.) She doesn’t like test driving, but my dad and I made her do it.
6. SHOPPING.
MSRP, as mentioned above, is Manufacturer’s Suggested Retail Price. It is the price they put on the car before you start negotiating. Once you negotiate, you agree on the selling price. On a lease, that price is call the “capitalized cost,” or “cap cost” for short. “Out the door” is a term for purchase only (the term makes no sense on a lease), and it means the final, total, tax-title-license-and-fees-included amount for the car (the amount you’d write a check for if you weren’t financing). Finally, keep in mind that tax is based on where you live, not where the dealership is located.
These are basic terms. There are a lot more terms to know, but I wouldn’t say they’re necessary to getting a good deal.
You’ve test driven the cars and you’ve narrowed it down to one or two, but now it’s time to price it out. Leasing is confusing because the rate isn’t APR, it’s something called a money factor. For example, if you have good credit, you might get a money factor of 0.0009. What does that mean? You have to multiply that number by 2400 to get the rate to a percentage number that makes sense.
For leasing, then, you have to shop to get the best payment. It matters a little bit what the selling price is (your payment is based off that number), but if the dealership jacks up the money factor, or your credit isn’t very good, your payment will go up anyway. Put in an inquiry online after knowing what you want and ask for the best deal. Once you put out the inquiry, give yourself about a week or two for the timeline. Incentives change on leases every month. The pricing a salesperson gives you on June 30 may literally not be available July 1 because the rebates and special money factor rates from the bank have changed.
While shopping, please keep in mind the salesperson/best friend/referral who test drove you at whatever dealership (hey, that’s me again!). Salespeople are only paid on commission. If you like the guy or girl who explained the car to you and let you take it for a spin and spent that time with you, but you still want to shop around to make sure you’re getting a great deal, it’s only fair to give them final shot at your deal. (If she can’t beat it, at least you did right by her by giving her that last shot.)
If buying, get financing on your own, either through a credit union or a bank. If the dealership can match the rate, that’s great! If they can’t, you at least have a back-up and you’re not stuck with a higher rate than necessary.
Also, go on Truecar or Edmund’s and price out the typical savings on your car. Keep in mind what the price of the car listed on Edmund’s is versus the price of the car you’ve chosen. For example, if Truecar thinks you can get a selling price of $22,000 on a Toyota Corolla that has an MSRP of $24,000, and you ask for $22,000 on a Corolla that has an MSRP of $26,000, you won’t get it. This is not the dealership’s fault. They can probably give you the same discount ($2,000), but they can’t match the selling price. I bring this very obvious fact up because it is surprisingly not obvious to a lot of customers who insist on viewing me as a slimeball. Please don’t do this! Use common sense!
Additionally, AAA and Costco have really great programs you can check out as well. These programs insist the dealership give the customer the invoice of the car in question. Even if you don’t go through AAA or Costco, always ask for the invoice.
Finally, there are often rebates for active military members or recent college graduates on some models. Always ask about those rebates. It costs the dealership nothing and can save you a good amount of money!
When helping my mom get her car, I made sure to get the invoice. I asked a coworker who had a referral to get me the car. My mom was particular on color, and it was a very rare color, but because I had an in with my referral they were able to get it for me. I checked Truecar to make sure the discount looked right, and it did (had to account for the truecar MSRP being less than the MSRP of my mom’s car, but the discount itself was the same!). My mom got financing through her credit union. We were able to set everything up via phone, email, and text because I had the invoice pricing, the proper research done ahead of time, and a good reference.
7. GET RID OF YOUR OLD CAR.
If your current car is on a lease, just return it to the old dealership. Make an appointment (you’ll be in and out faster if you do). If you’re switching makes, you will get charged a disposition fee. This fee will be on your contract. This is what I like to call a “because we can” fee, and there’s not much you can do about it. If the make (car talk for “brand”) is the same, the disposition fee is waived, because the car manufacturer wants to incentivize you to return. You may also get charged for excess wear and tear, which consists of any major scratches, dents, or dings to the car you might have incurred during the lease, unless you bought that waiver program the last time around.
If your current car is something you own, do not take it to a dealership first. All too often I see customers pass up on amazing deals for their new car because they didn’t like the numbers the dealership gave them on their old car. These are two separate transactions. It makes the most sense for you to keep it that way.
Go to Kelly Blue Book to get an estimate (and be honest with yourself on the quality of your current car). Go to your local Carmax, a nationwide used car dealership, and sell it to them. Sell it on craigslist. Donate it. Dealerships have to put money into your car to sell it on the lot, and then they have to make money on your trade in. They are a business. So they will give you a number that still allows them to spruce up the car, maybe even certify it, and then sell it for profit. That is the biggest reason the number they give you is typically not the number you had in mind. Your old car deserves better than that number.
If you want to sell it to the dealership for convenience’s sake, at least go to Carmax first to see if they can match that number. Sometimes they can’t. Sometimes they can. Then it’s up to you. What’s more worth it – a little more money, or the convenience?
If your car has a payoff worth more than the car itself (for example, you owe $12,000, but the car is only worth $9,000), you might have to come out of pocket to get rid of your old car, or that negative equity might just be rolled into your payments. If you own it outright, bring the title with you to the dealership.
My mama just gave her old car to my brother when she got the new one.
8. GOING TO THE DEALERSHIP.
Okay, you know what car you want. You know what features you want. You know what color you want. The salesperson you’re working with got the car for you (maybe they traded for it, or maybe it was already in stock).
Make sure you have everything in writing before you go. Selling price, rate, out the door number. If it’s a lease, confirm that the amount they’re asking for includes everything (for example, it’s $1000 down, not $1000 down plus drive-offs, which ends up being at least twice as much as you expected; or the monthly payment is $350 including tax, not $350 plus tax). Confirm the features. Get it in writing.
You’ll need your driver’s license and current proof of auto insurance to be able to drive the car off the lot. If your credit is light or there are some issues, they may ask you for some more information (proof of income, proof of residence, more references, etc). Have that with you too – if necessary.
By the time my mom and I made an appointment to pick up our car, we were in and out of the dealership in 45 minutes. Everything was as promised. No need to make this harder on yourself than it has to be!
9. FINANCE DEPARTMENT.
Now it’s time to sign the contract in the finance manager’s office. This room can be intimidating. The one thing to keep in mind is that every single item they are offering you is optional. You do not have to purchase any of these extra warranties.
However, some of these items can be helpful, and it’s worth listening to the options to see if any of them interest you (but again, per federal law, you do not have to buy anything to take delivery of your car, no matter what your credit score is).
What you should buy in this department depends on what you like and what you plan on doing with the car. If you’re buying the car and keeping it for 10 years, an extended warranty isn’t a bad idea. On a lease, I absolutely 100% recommend the excess wear and tear which waives any charges at the end of the lease due to damages and then you don’t have to worry about anything when you turn it in.
Some of those items you have to buy right then and there. Tire and wheel, for example, or the aforementioned excess wear cannot be purchased after sale. You can buy the extended warranty at any time, so I would recommend shopping online for pricing before purchasing an extended warranty. You will probably be overcharged in the finance department for extended warranty. The upshot is that you can spread the amount into your car payments instead of paying it all at once.
See how easy that was? Don’t you just want to do it over and over again? Now you can walk confidently into a dealership, knowing you’re about to get a killer deal on any car you want. You go, girl!
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