Tuesday, 26 November 2019

How To Negotiate Like A Pro When Buying A Car

How To Negotiate Like A Pro When Buying A Car

Let's talk about how to buy a car and how to get the best possible deal when negotiating for buying a vehicle. Lets be honest, the car buying process for most people it can be stressful, it can be time-consuming and it can be just outright not fun but hopefully, this article can give you some ideas as to how you can get the best possible price for a vehicle and if you've ever walked into a car dealership and gotten the price of a vehicle in a 15-minute span then there's probably a good chance that you aren't getting the best possible deal. It usually takes some time, take some effort in order to negotiate going back and forth to get that perfect price that you're looking for. 

But it's important to realize that the car dealer is trying to make money and you're trying to save money. So we have this conflict of interest and you have to meet somewhere in the middle in most cases. So let's talk about how to actually go through this process of buying a vehicle.


1. Knowledge - Power

This first step is to build some knowledge, gain some knowledge on this vehicle to know how much they're worth. One of the biggest mistakes that so many people make is they walk into a car dealership not knowing the true value of the vehicle that they're looking to buy. 

In 2019 it's never been easier to get this information to know how much a car is going to be worth, so you can go on to something like kelly Bluebook or turecar or a variety of other websites that will give you the value or at least a price estimate of how much a vehicle is worth based off of the made and the model, the year and the mileage on that vehicle, to give you a range of maybe that car is worth between $17,000 and $19,000 you can use that information to bring it into the car dealership and say this is how much these sources are saying that these cars are worth, they might try to discredit them say all those aren't accurate but it's something that you can use to help prove your point and negotiate for getting a better price for a vehicle.


2. 20/4/10 Rule

Something else that you want to do is you want to keep something in mind called the 20/4/10 rule.

Read: How Much Car Can I Afford | 20/4/10 Budget Rule

This is a rule of thumb that is important to at least keep in mind. You don't have to necessarily follow it but you want to be aware of it. So the 20/4/10 rule essentially is you want to be able to at least afford 20% down on a vehicle. If you have no money in your bank account and you're taking advantage of no money down a car loan at a car dealer, that might be a sign that maybe you shouldn't be buying this car, maybe it's too expensive for this vehicle if you can't afford to pay at least 20% down on that vehicle.


  • That doesn't mean that you have to use 20% down, you can buy a car using cash or you could do 0% down but make sure that you have at least enough money that you could afford it theoretically if you wanted to.

The 4 in the 20/4/10 rule stands for 4-year loans so you want to be able to at least afford to be able to pay monthly payments on a 4-year loan. If you have to stretch those loans out to 6-year, 7-year, 8-year loans, maybe 60 month loans or 72 month loans or 84 month loans and you have to stretch it out to be able to afford those monthly payments, then that's also a sign that you're paying too much for this vehicle, maybe you should get not the BMW but maybe you should get the Ford Focus or get a cheaper $15,000 or $10,000 car to suit your needs to get you from point A to point B.

I think a lot of people go for those cars that are just too expensive and out of the rang because they want to look cool or they want something that's a little bit more flashy or can show their neighbors that they're doing very well, when in fact it's actually making you poorer. Because cars are very expensive we've talked about that many times on this site, the true cost of a vehicle is very expensive when you factor in depreciation insurance, wear-and-tear, taxes, a variety of other different expenses on cars it's going to be so expensive.

Read: How Cars Keep You Broke

The 10 in the 20/4/10 rule stands for 10% of your income should be going towards the cost of owning and operating this vehicle. This is just another rule of thumb that you can stick by, so if you are paying $600 in monthly payments for a vehicle when you're only making $3,000 a month, that could be a sign that you're paying too much for this vehicle when you should be getting a cheaper less expensive car.


3. Trade-In Value

If you have a current vehicle at the moment you're thinking about trading it in to buy a new car or a used car at the car dealership. You want to know the value of that vehicle before you walk into the dealer. I want you to do some homework before you even go into a car dealership before you step foot into any car dealership, there are a few things you want to do.

Get some offers on your current vehicle or your trade-in so that you're able to see how much people are actually willing to pay for this vehicle. You can list it as a private sale, maybe see what kind of offers you get on that vehicle.

You could even go into smaller dealerships and say you know what, I have this car I'm willing to sell it, how much are you willing to pay me for it, and they can give you those numbers and once you get those numbers make sure you compile them and bring those numbers, those printout or those papers to the car dealership where you're thinking about buying a car so that when they talk about your trade-in car, you can say you know what, I actually have offers from these other different buyers who are willing to pay $500 or more $1,000 more for this car. So that's a way to call them out and say that this dealership is low balling you when you're trying to use it as a trade-in. That's just another bargaining chip that you can use.


4. Pre-Approved Loan

Before you step foot in a car dealership is you want to make sure that you can get some private lending or go to a bank, your local bank and see what kind of loans you can get through them. Walking in with financing beforehand is going to be such a benefit because this will do one of two things.

It can either save you a lot of headaches from talking to the finance department at a car dealership but also you can actually make them bid against each other and pit them against each other. if you go through the whole car buying process, you talk to the salesman, they're talking to the manager, you get the price that you're looking for, then you talk to the finance department and if they slap you with some high-interest rates, you can say you know what, I actually have a loan offer from the bank down the road that's going to give me a better interest rate so if you can beat that interest rate then I'll consider getting a loan with you. So you're bidding them against each other to get the lowest possible rate. it's a very smart idea in a lot of cases to walk in with pre-approved for a loan from your local bank or some other financial institutions.

This is like playing poker, when you go into the dealership you want to hold your cards close and some of those cards are your trade-in, you don't want to talk about financing as much it's better for them to know less about your trade-in and your pre-approved financing so that you can be focused on getting a better deal for the actual price. of a vehicle.

We have already talked about the four square method

Read: How Car Dealerships Rip You Off



Where the car dealer will talk about the trade-in value of a car, the price, monthly payments, and then the down payment for that vehicle. This is the 4-square method and what they'll do is they'll try to talk about anything except for the price of that vehicle, but what it turns out is that you want to focus on getting that price of that vehicle down so they might try to smudge some monthly payments, they might try to lower those monthly payments or to lower the downpayment, but you really want to focus on the price of that vehicle first.

There are a couple different tactics that you can use but generally speaking you'll probably have to go back and forth between talking to the salesperson then they're going to go back to their sales manager, talk to them and maybe lower the price by a couple hundred dollars and then go back and forth a couple of time. Now, you want to hold your guns and stick to your price as much as possible, what I would say is it usually takes at least two to three times of them going back and forth to get to a price that you're more satisfied with.

If you go in there saying that you want to pay $20,000 for this car that they listed for $23,000, hold your guns make sure that you are able to display some confidence. When you walk in with confidence rather than your head down afraid to speak up if you don't like a price if you don't like something about the car point out and be able to do that. Because knowing that you're afraid to speak, they will throw you around like a rag doll because that's what some dealers will do and no offense to them you know car dealers have to make their money as well.

If you're walking in there timid and afraid and not able to speak up and voice your opinion then you are going to get beat up essentially and end up signing a paper for something that you really didn't want and end up with a car for a price that you weren't satisfied with.


5. Dealership Don't Like To Talk About The Interest Rate

In a lot of cases and this happens to some of my friends they'll ask me if they should buy the vehicle or not and I say well, how much are you paying for the monthly payments and they'll show me the chart and I say how much does the interest rate, in a lot of cases they just don't know and sometimes the dealers won't talk about it, they'll just talk about the monthly payments.

What they'll do if they get you down into the monthly payment area where they're trying to save you some money what happens often is if you say you know what, I can't afford this monthly payment, this 4-year loan for $400 a month, I just can't do it I'd like to get it lower. And they say well, let me see what I can do and they fudged some numbers and the next thing you know you're signing a 7-year, 5-year or 6-year loan of that car for a lower monthly payment 

But if you actually calculated it you're actually sometimes paying more over the long-run for those payments. They're trying to save you money but they're actually making more money off of you so there's something to keep in mind.

What I would consider doing either walk in with a physical calculator with you or have a calculator on your phone so you can calculate those payments and calculate the math for yourself right there.


6. Walk Out If You Can't Afford The Price

When you're negotiating with car dealers there's just going to be times where they're not willing to come down further than a certain price and they're going to hold their ground on it and you for most cases it's going to be because they do need to make some money, they need to make some money off of you and they might not be able to come lower than a certain price and in that case I would suggest walking out especially if it does not meet your needs.

If you're willing to pay $20,000 because you know that the value of that car is $20,000 and they're trying to get $23,000 and they're not coming down further than to $20,500 or $22,000 and you're not happy with that just walk away. You have to go in there knowing that you're willing to walk away. The number of times that I've walked out of car dealerships is kind of ridiculous and it can take a lot of time, it can be time-consuming, but if you can hold your guns you're going to get a better deal over the long run if you're willing to do that and not get bullied around.




Conclusion

The most important thing as I said is to focus on the price of that vehicle nothing else but the price of that vehicle. Then over time you can talk about your trade-in, try not to talk about it at first and if they keep buying you about it just say you know what, you haven't made up your mind yet, you're not quite sure you'd rather just talk about the price first.

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