Hey guys - there are a few things I wanted to share with you guys about what I've learned in the car business. When the time comes for you to get a car, these might help you out a bit.
OFFICIAL DISCLAIMER: I am not trying to sell you guys a car :-) Whatever car or dealership you end up choosing, all of this stuff will still apply. No pressure from me whatsoever, and I'll do everything I can to help you both when you guys are ready to buy, when or wherever that is :-)
OK....there are basically five factors in buyng a new (or used) car:
#1) The selling price of the car.
#2) The amount of cash you put down
#3) Your interest rate as determined by A) your credit score B) the length of the loan
#4) The length of the loan (3 years, 4, years, 5 years or 6 years)
#5) The amount of your trade-in
You can control precisely two of these; the amount of cash you put down, and how long the term of the loan is. You can negotiate a little on the rest, but ultimately you're at the mercy of the dealer.
The value of your trade is determined by how much it will sell for at an auto auction - this is called selling the car wholesale. This is determined by entering the information about your trade into a dealer-only auction site. If the dealer thinks he can sell the car for more money to a regular person, they may give you more money for your trade - this is called selling the car retail. The value of a trade is based on the condition of the car, the mileage, and various other factors such as popularity, market trends, etc. (For example, a large SUV with poor gas mileage may not fetch as much money as a small gas-saving sedan when gas is at $3.50 a gallon - stuff like that.) The value of your trade-in (which is called Actual Cash Value or ACV) has ZERO to do with how much money you owe on it - this upsets a lot of folks, but it's true.
You can get a very rough idea of the value of your trade by using NADA - you can go to www.nada.com and see what your car may be worth to a dealer or if you sell it yourself. people often choose to sell their car back to a dealer because the deal is a sure thing, and they don't have to endure the uncertainty of finding a buyer and negotiating a price themselves. The price between what the dealer will pay and what you could sell the car to an individual to will be different, but whether or not the extra money is worth the extra trouble is up to you. Kelly Blue Book (www.kbb.com) will also give you a number, but Texas doesn't use Kelly Blue Book as a standard, and it will be useless to mention Kelly Blue Book in the process.
Trade-in value is based largely on the CONDITION of the car. Before you bring your car in, do everything you can to make it look perfect. Wash, wax, clean the entire thing so it sparkles. Make it look as wonderful as possible. Clean cars trade better.
If you are upside down on your car (this means that you owe more on the car than what the car's market value is) I strongly urge you to keep driving it, at least until you have reached a break-even point, or, even better, actually have some equity built up in your vehicle. If you have a lot of negative equity in your vehicle, you will be forced to purchase a more expensive vehicle than can handle the extra cost that the debt you have on your vehicle adds to the price, and your payment will go up. If you have equity in your car (meaning that your car has value) it can be used as a trade-in and will actually lower the cost of the car you are buying.
Dealerships make money two ways - the "front" end and the "back" end. The front end is the amount of profit they make by selling it at a higher price then they bought it for. The "back" end is the money they make from finacing your car loan. The dealership may manipulate the numbers to move the money around to where it works out best for them and for you, and the dealership will always make money no matter what you do. For example, if they lower the sale price of the vehicle, they may have to adjust the interest rate of your loan to recover that cost. Or, conversely, if you hold your ground and insist on a very low interest rate, they may not discount the sale price quite as deeply.
Dealerships will generally have something called "add-ons", or extra features they add to the vehicle. This increases their profit to be sure, but lot of people balk and refuse them because they think they are getting ripped off in some way. True - the add-ons do increase the sale price to the vehicle, but they are generally offered as extra insurance to protect the car against damage. before rejecting the add-ons out of pocket, I recommend hearing about them and carefully weighing them to see if they have any value to you. For example, a one-time payment for $300 tire protection program may very easily pay for itself if you damage a tire, or worse, bend a rim. Weight these options carefully before rejecting them, especially on a new car.
Do a LOT of research on any vehicle you're looking at. Edmunds, Car and Driver, Cunsumer Reports - any resource you can get your hands on. The more informed you are, the better decision you can make. Test drive all the cars you are interested in. This will irritate the dealer to no end, but it's better to weigh out all your options and KNOW what you like (and don't like) before you make that large a decision. However, once you find a car you like enough to own, it's OK to stop looking. Be forewarned - the dealer does NOT want you to leave the store without buying a car, so be prepared to hold your ground when it's time for you to go. Always be 100% honest about the car - if you hate it, tell them, and then tell them why.
Have what you NEED in a car firmly in your mind before you start, and don't settle for less if it's a major thing. For example, if you NEED four doors, don't let them talk you into a coupe. Sometimes wants are more negotiable, and can be used in your favor when negotiating. For example, if you want a gray car buit they only have white, you may can force them to drive down the price a little by making that an issue (purchasing a car that's not the color you want.)
Do you guys have any questions about any of this?
Part 2 will be about the "negotiating" process.
No comments:
Post a Comment