Decide how much you can afford and how much you are willing to pay before you shop for a vehicle. If, you have to borrow money, shop for a loan before you shop for a vehicle. Calculate what you'll have to pay each month, including interest. Therefore, if you borrow $10,000 for 4 years at 8 percent interest, your monthly payments would be $24.41 times 10, or $244.10. Borrowing that same amount at 8 percent for 3 years would raise the monthly payments to $313.40 ($31.34 times 10).
You will probably need a down payment of about 20 percent (in the example above, about $2000), unless your trade-in is worth that much. The total of your loan, down payment, trade-in, and any factory rebate will have to cover the price of the car, as well as fees and sales tax. Your bank or credit union can discuss loan options to help you set a realistic price range that fits your means and budget.
Buying a new car is a financial stretch and out of reach for quite a few. Many have turned to used cars and others to leasing, hoping to avoid a hefty down payment and lower their monthly payment. As greater numbers of consumers wind up in bankruptcy or with insurmountable credit problems, even a used car becomes difficult.
• Know what you want, but be flexible. Narrow your list to two or three models that best suit your needs.
• Total the list and invoice prices for the models you're considering. If a manufacturer's rebate is advertised for a vehicle, deduct it from both the list and invoice totals. Your "target total" is the invoice price, though the final transaction will end up between the two figures. The final price will depend upon your knowledge and your ability to negotiate-and the salesperson's resolve.
• Research your vehicle's fair-market trade-in value. A vehicle's trade-in value is expressed as its "wholesale" value. Some dealerships can provide access to trade-in values at Black Book Online, a web-based service from the Black Book, which is one of the price guides used by dealers.
• You might want to "shop" your vehicle to a few dealerships'. Ask what the dealer would pay for your vehicle in an outright sale, and get it in writing. You can usually get more if you sell it yourself to a private party. If a dealership isn't particularly interested in the vehicle that you have, the price offered is sure to be low.
• Shop competing dealers to compare prices on the same vehicle, with the same or similar features. You're not likely to get the dealer's "best" price for a vehicle just by asking. This will however, give you an idea of how willing the dealer is to negotiate. Never put a deposit on a car just to get a price quote. Don't be "steered" toward a more expensive vehicle or a version that includes features you don't want.
• Find out if the dealer has exactly what you want. If not, find out if they can obtain one from a dealer in another area. Don't give the impression that you're "in love" with a particular vehicle, though. A well-trained salesperson can use your emotions to gain the upper hand in price negotiations.
• A good deal on a slow-selling model might be below dealer invoice price, but a popular vehicle can the full suggested retail price or even more. If you see large numbers of a certain model on the lot, it's probably not a hot seller.
• If you have a trade-in, don't let them know this until you secure a firm selling price on the new vehicle. This way, they won't be able to "inflate" the trade-in value by manipulating the selling price of the new vehicle.
• Never hand over your trade-in's keys. Your vehicle could wind up being held hostage while you are pressured into signing a sales contract on the spot.
• Test-drive the vehicle you want before you buy.
