Congratulations! Buying a car is one of the most important purchases of your life. Coming online for help was a wise decision. This is the most comprehensive guide on the internet on how to buy a car and save thousands of dollars at any dealership.
What I am about to tell you is going to anger a lot of people. Auto Dealerships and Auto Brokers benefit from the knowledge that Auto Buyers lack: most profit thousands of dollars from sales and services by any means necessary. I am not against businesses doing well financially, but they must behave ethically.
I made this guide for you. Use it. Remember, acquiring knowledge is only half the battle. You must put what you learn into action.
Read all the way through, and you will know enough to confidently negotiate your next deal. The information in this guide is for Auto Buyers of all levels and expertise: everyone will benefit. If we succeed, dealerships will be forced to change their business model to stop preying on unsuspecting customers. Read on and spread the knowledge.
I am The Auto Buying Coach, but before I became the A.B.C. I was a car salesman; I know their motivations and techniques. I cannot stress enough how important it is to keep your ego in check, and to not make any assumptions about your level of expertise when negotiating your next deal.
The last deal I made before I realized that I was finished working on the side of the dealership was with a man who would not stop boasting about how many cars he bought, and how he knew every trick in the book. He came back the next day after realizing that he made a huge mistake, and he paid for it by overspending $5,000 dollars on his car. The day before, he was smiling ear to ear as we shook hands and I congratulated him on a great deal. Don’t be that guy (or gal).
You do not know every trick in the book because car salesmen do not generally write all their tricks in books. They constantly come up with clever ways to squeeze more money from you.
In this comprehensive guide, I am going to include the tricks that salesmen will use to throw you off your game, but it is up to you to keep your eyes and ears open, and catch the different techniques as they come up.
Onward, friend! I believe in you!
The most important step when buying a car is to do as much research as possible. Come prepared; the salesmen at the dealership are prepared for you. Some have years of experience while others, the “green peas,” maybe a few months, but all of them are hungry, and they are ready to capitalize on any mistake you make.
Remember, this might be the ninth car you buy in your life, so you feel confident in your expertise, but this is your salesman’s ninth car sold in just this month, and he practiced with thirty other customers before you came along. If you do not prepare, you will be at a huge disadvantage.
Do not be fooled by your salesman's possible inexperience; he has the entire dealership to back him up.
You might get lucky and come across the deal of a lifetime, but dealerships are set up to make sure that they leave no money on the table. It is our job to make sure that there is no money for them to take.
You will be prepared. Just follow along and do your part.
What is your monthly income? How much do you spend on bills, rent, mortgage, insurance, entertainment, food, healthcare, clothes, education, transportation, children, pets, the mistress, etc.?
Find out how much money you make monthly, and subtract how much money you spend per month. This number is not your car budget unless you prefer living paycheck to paycheck.
Make sure you subtract money for savings, investments, and emergencies. Also, consider that a new car means a new insurance payment, maintenance costs (LINK), and money for gas.
Give yourself some breathing room, or don’t, but make sure you know how much you can afford to spend monthly on a car payment, and how much you can afford to take from your savings for a down payment.
If you have good credit and a long enough credit history, you might not need a down payment, but try to be prepared with at least a thousand dollars, just in case. If you are a cash buyer, the number is set.
Read on. We need to find out your credit score.
There are a few free ways to find your credit score online. You can also find it for free in the real world. I am going to share a couple ways, so you have options.
The best place to do it online is with Credit Karma. They provide free updates on your Transunion and Equifax scores that you can see any time without sacrificing a hard inquiry on your credit report. This will give you a good baseline, so you do not go into the dealership blind.
Again, do not get overconfident. The dealership you go to will pull a credit report detailing your entire payment history, credit card debt, open and closed loans, credit inquiries, bankruptcies filed, and lawsuits against you. This is what they will ultimately use to make their financing decisions.
It is in the dealership’s best interest to make you believe your credit is worse than it actually is. They might plant doubt, or let you believe false assumptions. This gives them a chance to charge you more in interest because a worse credit score means higher risk, and more interest means more profit especially if the dealership decides to provide the financing themselves. Do not give them the chance to play with the facts. Know your credit score.
This brings us to the second free way to get your credit score. This is the best way because you will also find out if you need a cosigner to secure financing, but it is risky if you are easily convinced by sales people. Only do it this way once you are ready to make a purchase within one to two weeks. Think of this as a training session, so that when you negotiate your deal you will be ready.
Visit the dealership of your choice. Today’s visit is only for a test drive, and to find out your credit score. You can purchase your vehicle today if you want, but make sure you do the rest of your homework first. Contact me, if you need help.
Talk to any salesman; test drive a vehicle that interests you, and step into the office. You can try to be upfront from the beginning by telling your sales person that you are interested in buying a vehicle within a couple of weeks, but today you are only interested in test driving and obtaining a copy of your credit report. Depending on the salesman, that might not work.
Remember, no matter what they tell you, salesmen live off commission. If you run into a bad, aggressive salesman, he might tell you to come back when you are serious, or he might recommend that you do not pull your credit until you are ready to buy.
If you’re lucky, your salesman will oblige and put on his best sales pitch to try to convince you to buy today, or to get you to come back to him in the future. Get a bad roll of the dice however, and you might run into a good, aggressive salesman; you will overspend a minimum of $5,000 dollars, and you will be happy when you drive off the lot. Be careful.
For guaranteed results, it is best to pretend that you will buy today up until you receive a copy of your credit history and credit score.
After the test drive, fill out the credit application and wait until they come back with a monthly payment, contract length, interest rate, and down payment for the vehicle you drove. Do not be shocked with the numbers; this is where the negotiation usually starts to get serious. At this point, they should have already hit you with outrageous monthly and down payments to test where you are financially, to set the bar high for negotiations, and to check if you are a Laydown. This is not the time for negotiation.
Once your credit has been pulled, ask for copies of your credit report and credit history. Depending on your state, the dealership will be required by law to give you a copy of these documents. Find out (LINK), so you can pressure the dealership if they refuse to give you your report.
They might try to delay by saying that you will get a copy as soon as you go to the finance office. This is not required. Keep things friendly, so that they will cooperate, and assure them that you have a bit more homework to do, but you will come back to your salesman if you decide to buy that car.
Keep your promise. Save your salesman's business card. He might call within a few days with a better price on his vehicle and better contract terms without you having to do any negotiating.
Mission accomplished! Now you know your credit situation. Ask the salesman to make sure, but in general you now have two weeks before this dealership has to pull your credit again, if you decide to buy from them. We can use this report to shop at other dealerships and get accurate price estimates without having to pull your credit multiple times, and risk lowering your score. The next step is finding the right car.
Some buyers will already have the perfect car in mind, and they already know how much they can spend. Those buyers can skip a few sections while the rest of us continue with the COMPREHENSIVE guide.
So you’ve done some homework. At this point, you should have your maximum monthly payment and your maximum down payment. These two numbers are for you. Write them down on your Auto Buyer Cheat Sheet (LINK).
Do not make the mistake of walking into the dealership and saying, “I don’t like to play games. This is how much I can spend. I need a car.” In a perfect world, you will run into a salesman who directs you to the perfect car for your budget, and sells it to you for a small profit, so that he makes a good commission, the dealer makes money, you don’t overspend too much, and everybody goes home happy.
Sorry to break it to you friend, the world is only as perfect as our lack of knowledge allows it to be. Humans are imperfect. We all have needs and responsibilities, and unfortunately, it is more tempting to satisfy ourselves before we are willing or able to satisfy our brothers and sisters. Keep those numbers to yourself. They are meant to help you determine what car you can afford.
Most dealers now offer standard 72 month contracts, 6 years. They also have the option to shorten or lengthen your contract. The most I have seen is 84 months, but you can also shorten your contract length and save on interest. It is up to you to decide how long you want to have car payments, but keep in mind a shorter term means a less expensive car since our monthly payment and our down payment are set.
For the sake of simplicity, I suggest you go with the standard 72 month contract. Multiply your maximum monthly payment by the number of months you are willing to make a car payment. Next, add your down payment. Awesome! This is the total amount that you will spend on your loan including the car price, your state’s sales tax (other taxes may apply), rebates, the vehicle license and registration fees, dealer fees, the total loan interest, and any extra warranties and insurances you might want to purchase. Write this number in your cheat sheet under, "Total Amount Spent."
When you sign the final contract in the finance office, this number (or a number close to it) must be disclosed (LINK or picture of actual contract). Knowing this number will help you stay within your budget. If this number varies a lot from what they show you on the contract, you are probably being overcharged.
To make your shopping easier, we need to figure out what car price you can afford before adding the warranties, taxes, fees, and interest. This is where it gets a little more complicated. Do not worry. This is a step by step guide, baby steps.
We are going to need some help from our friends at www.Cars.com. Navigate to their Affordability Calculator. Enter you maximum monthly payment, and your maximum down payment. Leave the Trade-In Value at zero. We will deal with trade-ins later. Enter your local sales tax. Finally, enter the interest rate (APR)... THANKS FOR READING, GUYS. THE COMPLETE GUIDE IS COMING SOON
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