Car Buying Process / What to Consider

Here are some quick guidelines that will help you find the right car and get a good deal:

How Much Car Can You Afford?

This should be where you start. Decide how much you have to spend on your vehicle by determining how much you want to borrow to purchase the car and how much you can afford to pay every month. In addition to the monthly loan payment, you should also estimate other costs of the car, such as insurance, taxes, operating expenses, etc. Once you have an idea of how much you want to borrow, you can apply for an online car loan. If your request is approved, you will know how much buying power you have when you go shopping.

How Are You Going To Pay?

Now is the time to decide. Should you pay cash, finance or lease your vehicle. There is no right or wrong answer, because each method offers different advantages for different budgets and lifestyles. Most agree that securing the financing before entering the dealership will get you a better deal on the loan and on the vehicle. So apply now for an auto loan and make sure you get the the deal that’s right for you on the purchase of your new (or used) car.

What Car Or Truck Should You Buy?

Based on your budget and your pre-approved auto financing, find out what your needs are. What features do you need? Research cars or trucks that meet your needs and fit your budget. Check out industry magazines and car publications to see what the experts think. Talk to friends, relatives or co-workers to see if they like their cars or trucks. Use the Internet for your research. Many Websites offer great tools and have a lot of useful information available at no cost. Not only will they let you read the latest car reviews, they will also give you dealer cost (invoice pricing) and allow you to price your trade-in. Find out the history of the vehicle you are looking to buy at www.carfax.com.

Setting Your Price

The most critical part of the car buying process is establishing the sales price. It is here where the greatest savings can be realized. It is important to understand the difference between the MSRP (Manufacturer’s Suggested Retail Price, also known as the “Sticker Price”) and the Factory Invoice Price, which is the price the dealer paid for the vehicle.

The invoice price is where you should start your negotiations, not the price on the window of the car. Negotiate from the Invoice Price up, not from MSRP down. Depending on the demand of the car you have selected and its availability, you should be able to pay no more than $100-$500 over the invoice price. If the vehicle is a hot selling model, you may wind up paying more, in some cases even more than MSRP.

Manufacturers may offer special incentives or rebates to increase the sales of certain models. Sometimes this is passed on from the manufacturer to the consumer in the form of customer cash, cash-back or financing at extremely low interest rates. Other times it is only passed on to the dealer as dealer cash. The dealer can keep a rebate or pass the savings on to you.

What To Do With Your Trade-In

A dealer will rarely pay you what your trade-in is worth at retail. Retail is the “market” value for your car. The dealer might offer below retail because he may invest some money to recondition or repair the car and he may add a profit for himself. Most of the time you will get a better deal if you sell your old car yourself through a classified ad. Still, some shoppers like the ease of a single transaction. The dealership’s used car manager will typically look your car over and take it for a ride to determine how much he will offer for your car. Dealers typically look to offer no more than $1,000 below the low wholesale value. Unless your trade-in needs to go straight to the scrap heap, the dealer will re-condition the vehicle and will turn around and sell it for a profit.

If you do not owe any money on your trade, you will realize the full offer price from the dealer as down payment on your new purchase. If what you owe is less than what the dealer offers, they may pay off your existing loan and apply the difference to you as down payment. Owing more on a trade-in vehicle than it is worth (also known as “being underwater” or “upside-down”) weakens your negotiating ability, so it is even more important to establish your purchase price before discussing your trade-in.

Financing

Dealers may be very anxious to provide you with car financing from their sources, instead of having you use your OpenRoad eCheck®. The reason is simple: They make money on the financing they sell. They often receive compensation when they sell your contract rather than continuing to collect the payments from you themselves.