How to Get the Best Deal On a Car

April 27, 2016

My first car was a beat-up 1987 Ford Tempo that I called Shirley Tempo (nerd alert!). I paid cash to a family friend who had been using her as a loaner at his auto repair shop. Shirley got me around town in high school but when I went to Kalamazoo for college, my dad helped me negotiate for a slightly newer Geo Metro (aka “Ginny Geo”) – a car that could make the 200 mile trip without breaking down. By senior year, Ginny’s radiator was shot, the door locks didn’t work and my mechanic deemed her “unsafe to drive.” Needless to say, I was anxious to get a “big girl” car now that I had a “real job” upon graduation.

As soon as I returned from my graduation trip the summer after college, I found myself at the Saturn dealer test-driving a fully loaded coupe. Of course, I was in love and I signed a lease on the spot for Sally. Fast-forward a few months when my student loan payments kicked in and I was wishing I’d done a little more shopping around for that car. Sally was super fun to drive, but her payments were WAY outside my budget.

As my husband and I begin shopping for a bigger car now that his sedan is starting to wear out, we are being much smarter about this purchase. Here are some of the tips we’re using to find the best deal on a new ride:

• Shop at the end of the month. The car sales guy actually told my husband this. They have quotas to meet, so if you head to the dealer toward the end of the month when the pressure’s on to meet that quota, you should be able to negotiate a few thousand more off the price. That could be a negligible amount to the dealer, but a nice chunk in your bank account.

• Consider buying certified pre-owned. You’ve probably heard that a new car loses more than 10% of its value the minute you drive it off the lot. By getting in line as the second owner, you are paying significantly less for an almost-new car that still has warranty protection.

• Know the wholesale price. If you just can’t resist a new car, at least know what the dealer paid for it. This is easy to find now by searching the make and model of your dream car along with the phrase “factory invoice price.” That way if the sales person tries to tell you they’re “losing money on this deal” when you’re negotiating (and you should at least try), you’ll know if they are trying to pull as fast one.

• Remember that a car is NOT an investment. A car is what we CPAs call a depreciating asset. This is financial speak for it loses value over time and unless you’re a car collector, you will be selling the car for less than you paid for it. Remember that when you’re thinking about financing. (Try to pay as much in cash as you can).

• Get full value for your trade-in. We took our car to CarMax and they gave us a trade-in estimate for no cost. This is just a best guess, but gives you a starting point when negotiating with the dealer. Edmunds and Kelley Blue Book are good online sources and you might also take it to a dealer to see what they will offer you. Depending on the make and model of your car, the dealer may be seeking used cars. SUVs are particularly hot right now due to low gas prices.

• Don’t get cheap and choose an insurance deductible that’s too high for your savings. If you have a $2,000 deductible, you should have $2,000 on hand in case something happens. Use these best practices from my colleague Tania, who learned the hard way to make sure you’re properly covered.

Finally, as exciting as buying a new (to you) car is, try not to be impulsive. Take your time in researching and test driving to make sure you’re getting the best deal while also making a purchase that fits your lifestyle and budget. That new car smell fades pretty quickly. A too-high car payment takes a LOT longer to wear off.