- Do Your Research
Before you even think about walking into a dealership or putting an offer on a vehicle, you MUST do some research. You must search on market pricing; value and history of vehicle so that you can get the best deal possible. The more information you have, the more leverage there will be in negotiating the sell or “out of the door” price.
Here are some websites that will provide free valuable information:
www.kbb.com – Kelly Blue Book provides a spectrum of pricing and value for your vehicle, ranging from Fair Market Price to MSRP (Manufacture’s Suggested Retail Price) See below for detailed definition.
www.truecar.com – True Car provides you with upfront pricing from your local certified dealers. It also gives information on what others have paid for your vehicle, helping you create a benchmark of what you can expect to pay.
www.carfax.com – Carfax provides you with a history report of your vehicle. This simple search can help you avoid purchasing a vehicle with costly hidden problems. Do not skip this step if you are purchasing from a private party or non-certified pre-owned vehicles.
- Don’t Rush, Take Time to Shop Around
Buying a car is much different from buying a pair of shoes or a purse. You cannot “try” it out and expect to bring it back for a full refund if it doesn’t work out. Once you take the keys, you cannot return the car and get full price because value depreciation starts when you drive off the dealer’s lot. In most cases, there is no cooling off period (time frame permitted for you to return vehicle without any consequences). If you purchase from a private party seller, once the money is in their hands, there’s a good chance you may never see or hear from them again. Don’t make the mistake of rushing because buying a car is a BIG deal!
- Negotiate or Bring Someone Who Can
To get the best deal, you have to ask! This is a great time to sharpen up on your negotiating and bargaining skills. As discussed in #1, the more information you know, the more leverage you will have. Whether you are buying from a dealer or a private seller, don’t assume that they are giving you the best offer. If don’t know how to haggle, bring someone who can. Don’t be afraid to walk away if the seller is not willing to negotiate.
- Double Check Documents and Know What You Are Signing For
Don’t be afraid to ask plenty of questions if you are not clear on what you’re getting into. After all, you’ll be stuck paying for this purchase in the next few years! Be sure to look at every line on the purchase contract and understand all fees/charges. Don’t assume that the dealer is always 100% honest in disclosing fees and add-ons.
When buying from private seller, make sure the person who is selling the vehicle is the same person on the title. Ask for their identification. Only the person on the title can legally sell the vehicle. Contact DMV if you are unsure of your state laws. You don’t want to risk not being able to register the vehicle in your name because the title is not perfected.
- Put Cash Down
If you can buy your car with all cash – terrific! If not, try putting 10-20% cash towards your purchase. By doing this, you are borrowing less from the bank and this will help keep the equity of your vehicle as it depreciates over time. When you have cash down, you can also avoid purchasing costly asset protection insurance.
Terms as defined by Kelly Blue Book (www.kbb.com)
Fair Market Range
The Fair Market Range for new cars is Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for a vehicle configured with their selected options, excluding taxes, title, fees and any available rebates or incentives. Each dealer sets and controls its own pricing.
Kelley Blue Book® Fair Purchase Price
Updated weekly, the Kelley Blue Book® Fair Purchase Price for new cars is generally the midpoint of the Fair Market Range. It is Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for a new vehicle configured with their selected options, excluding taxes, title, fees and any available rebates or incentives. It’s based on actual new-car transactions, plus data from other reliable third-party sources as well as market conditions.
Invoice
The Invoice price is the price the manufacturer charges its dealers for a new vehicle, but it does not necessarily reflect the total price actually paid by the dealer for the vehicle. The Invoice price includes destination charges, but doesn’t include dealer advertising costs or costs for selling, preparing, displaying or financing the vehicle. Also, Invoice price does not include factory-to-dealer incentives and other factors, which can reduce what the dealer pays for the vehicle.
MSRP
The MSRP, or Manufacturer’s Suggested Retail Price, is the price set by the manufacturer. MSRP includes destination charges and minimum required equipment, but excludes service and handling fees and state and local tax, title and license fees. MSRP is a reference point for negotiations, however dealers can choose to sell a vehicle above or below its listed MSRP.
Red Zone
The red zone falls above the Fair Market Range. Special circumstances such as exceptionally low supply with high demand, options installed by the dealership, and seasonality may all be contributing factors to sales that occur in this range.
White Zone
The white zone falls below the Fair Market Range. Special circumstances such as retiring model years, unpopular color, excess inventory and seasonality may all be contributing factors to sales that occur in this range.