Car Buying Advice

Buying a new car: 5 steps to getting the best price

	Photo by Tracey Kroll

Ideally, a dealership should help you find the right vehicle at a fair price. But some dealers place more emphasis on their profit margins than on satisfying their customers. When buying a car, keep your interests front and center--and avoid common pitfalls that can cost you extra money--by following these tips:

1

Do your homework. Many dealerships prey on the unprepared. Going into a showroom “cold”--without having gathered key facts and preliminary pricing figures--gives the salesperson too much control over the buying process.

Thoroughly research your choices. Read a variety of reviews. Check the reliability, safety, fuel economy, and pricing of any models you're considering. And don't wait until the day you plan to buy to test drive the vehicles.

If you have a trade-in, know its approximate worth. That will depend on the vehicle's age, condition, mileage, and equipment, as well as where you trade it in. You can get an idea of your trade-in's value at auto-pricing Web sites or with CR's Used Car Price Reports (see below). Focus on your car's wholesale, or “trade-in,” price; the retail price is what you'd expect to get if you were selling it yourself.

2

Don't assume that the sticker price is the purchase price. To get the lowest price, go in with a starting price that's based not on the sticker price but on how much the dealer paid for the vehicle. The dealer invoice price is commonly available on Web sites and in pricing guides. But the invoice price isn't necessarily what the dealer paid. There are often behind-the-scenes bonuses, such as dealer incentives and holdbacks, that give the dealer more profit margin.

You can find sales-incentive information on the Consumer Reports Cars Best Deals Plus service, in CR New Car Price Reports, or at some auto-pricing Web sites. These CR services include the CR Wholesale Price, which factors in the dealer invoice, holdback, and any incentives or rebates to give you a close approximation of the dealer's real cost. A reasonable price to start negotiations is either 1 to 5 percent over what the dealer paid or the CR Wholesale Price, depending on the demand for the model.

You can also check the quotes at auto-buying Web sites such as the ones listed below. The services are free, and you aren't under any obligation to buy. Keep in mind, however, that you can often get a lower price through effective negotiation at a dealership.

3

Negotiate one thing at one time. Salespeople like to mix financing, leasing, and trade-in negotiations together, often asking you to negotiate around a monthly payment figure. This tactic gives the dealer more latitude to offer you a favorable figure in one area while inflating figures in another.

Make clear that you want the lowest possible markup over your starting price. Add that you intend to visit other dealerships selling the same vehicle and will buy from the dealer with the best price.

Only after you've settled on the price should you discuss financing, leasing, or a trade-in, as necessary. Negotiate each item individually. Remember, you're in charge and can leave at any time. Heading for the door can sometimes jump-start a slow-moving negotiation or bring a lower offer.

4

Arrange financing in advance. Compare interest rates at several banks, credit unions, and loan organizations before checking the dealer's rates. If preapproved for a loan, you can keep financial arrangements out of the negotiations. Automakers may offer attractive financing terms, but make sure you qualify for them. Otherwise, the salesperson may try to sign you up for a higher rate than you could get elsewhere.

5

Don't pay for extras you don't need. Dealers often try to sell you extras such as rustproofing, fabric protection, and paint protectant, or push etching your Vehicle Identification Number on windows to deter thieves.

Don't accept those unnecessary services and fees. If the items are on the bill of sale, put a line through them. Vehicle bodies are already coated to protect against rust. And CR reliability surveys show that rust is not a major problem with modern cars. You can treat upholstery and apply paint protectant yourself with good off-the-shelf products. You can also do your own VIN etching with a kit that costs about $25.

Sources for pricing information
	Consumer Reports services: Cars Best Deals Plus ($13 subscription for ConsumerReports.org annual subscribers, $39 subscription for new ConsumerReports.org annual subscribers). Provides unlimited New and Used Car Price Reports, in-depth test reports, tools and information for researching and comparing vehicles, Bottom Line Pricing, and more. New Car Price Report ($14). Includes the CR Wholesale Price, dealer holdbacks, option pricing, and feature recommendations. New Car Price Report Canada ($29.95 USD, $39.95 USD for 2, $49.95 USD for 4). Arming you with behind-the-scenes dealer incentive and holdback information as well as knowledge of customer rebate and incentive amounts, the New Car Price Report provides you with all the tools you need to get the car you want at an optimal price. Used Car Price Report ($12). Helps you price a used car or find out the value of your current car. Includes CR reliability ratings and buying, selling, and trade-in advice.