Saving money is great feeling, and saving money while you drive off the lot in a brand-new car feels even better! If you’re in the market for a new car, you’ll want to read our car buying tips before you head to the dealership.
To get the insider’s secrets on the industry, we interviewed a finance manager with almost a decade of experience, and general sales manager that has worked for seven different automobile manufacturers over the last twenty-five years.
In this quick guide, we’ve uncovered all the secrets that your auto salesperson and dealership don’t want you to know. We’ve also explained the insider’s terms you need to know to prevent overpaying on your next car, and few easy savings tips that won’t require any negotiating.
Quick Article Guide:
1. Take Advantage of Rebates and Memberships
2. Go on a Weekday or at Month’s End
3. Wait Until the Newest Model is Released
4. Buy in the Fall or Winter
5. Understand the Money Factor
6. Ask for the “Buy Rate”
7. Improve Your Credit Score
8. Get Your Own Financing
9. Purchase Your Vehicle Online
10. Shop More than One Dealership
If you belong to belong to AAA, USAA, or even Costco, you may be able to save money on your car just by being a member. As an example, “The Costco Program” can save you a thousand dollars or more on the cost of your vehicle. However, most dealerships will not tell you about these types of programs unless you ask, and you must have your membership card or number.
You can also call ahead before arriving to dealership to ask about any special programs or manufacturer’s rebates that may be available for the month. In addition, ask the salesperson or operator if the dealership is currently running any ads. Car dealerships often advertise lower car prices and specials in the newspapers and online.
Most car dealerships do the bulk of their business on the weekends. According to Jennifer, a finance manager in the industry, “When the salespeople, finance managers, and sales managers are extremely busy, you’re less likely to get a good deal.” She explains that when the dealership is full of customers who are willing to pay full price, salespeople and managers are less-likely to negotiate with someone.
According to Bankrate, you’re also better off buying your new car towards the end of the month, when managers are more likely to offer better deals to pump up their numbers at month’s end. Jennifer confirmed this fact and offered further explanation:
“Over the years I have worked at several dealerships, and at every dealership we were expected to work the last weekend and the last day of the month. The goal at the end of every month is to sell as many cars as possible, especially if we are having a slow month.”
The cars that are not sold in-time often become loaner vehicles for the dealership’s customers. This is often the last option for a dealership, who would have rather sold the car for a little above their cost, than potentially face a decreasing monthly allotment of vehicles from the manufacturer they represent.
If you’re leasing a car, you may want to wait until the newest model is released before you pick out your car. If you’re buying your car, this may also be the best time to get a great deal on an older model. Most automobile manufacturers update their car models every four years to stay competitive and trendy. The cars made during these four years are almost indistinguishable, but the difference between the previous model and newest model is usually noticeable.
For a lease that is three years or less, this usually plays into your advantage if you lease your car during the first year that the new model is released. With a lease, you are basically paying for the depreciation of your vehicle, and a vehicle that still looks like the other “new” cars on the road is going to have a higher resale value when you return it. This means your vehicle will likely depreciate less during your lease, resulting in lower monthly lease payments.
In addition to the day of the week, the time of the year can also have an impact on the price of your vehicle. Most automobile manufacturers release their newest models for the following year during the fall. This gives dealerships a huge incentive to get rid of their older vehicles by winter to make room for the newer vehicles.
If you want a unique or specialized vehicle, you’ll probably want to buy your vehicle in the fall as soon as the sales start. But, if you’re less partial to the color of your vehicle or its features, you may want to hold out even longer until December when prices typically reach rock bottom. Many car manufacturers also offer winter sales with cash back incentives and dealer rebates that can save you thousands of dollars.
Car dealerships have lots of tricks up their sleeves to make sure they always make money. While most people tend to focus on the price of the car, it’s also important to understand the money factor on the vehicle you are buying. While it may sound confusing, the money factor is nothing more than a fraction of a number that is used to calculate your loan’s interest rate.
To calculate the interest rate of your loan, multiply the money factor your salesperson provides you by 2400. With good credit, the interest rate for buying or leasing a car should never exceed 5%, so if your money factor is over 0.0021 (0.0021 x 2400 = 5.04%), you may want to consider going to a different dealership.
If the money factor or interest rate that the dealership offers you seems high, ask your finance manager for the loan’s “buy rate”, or the interest rate that the bank is charging the dealership for your loan. This will probably make your salesperson squirm, but it’s a fair question to ask, especially if you have excellent credit.
Anytime you finance at the dealership, some markup on the buy rate is to be expected, but if your dealership is charging you more than a percent or two, there is room for negotiation. If your salesperson refuses to give you their buy rate, go elsewhere! If the dealership is offering a fair deal, they shouldn’t hide anything from you.
One of the easiest ways to say money on a car is to have good credit. To quickly improve your credit score, pay off or pay down any open credit lines that carry a large balance. According to Experian.com, your credit card debt accounts for 35% of your credit score, so paying down your debts help may qualify for a better interest rate on your auto loan.
It may take some credit card companies up to 30 days to report the lower balance to the credit bureaus, but when they do, you can expect your credit score to improve substantially. The credit bureaus recommend utilizing less than 30% of your available credit for the highest score, and the lowest interest rates are usually reserved for individuals with a credit score of 720 or higher.
Car dealerships tend to offer extremely competitive financing, but if your credit score and your interest rates don’t add up, you may want to consider getting your own financing elsewhere. Credit Unions are usually the most competitive with car dealerships, and some may even offer you an incentive for financing with them.
Financing with your own bank or credit union may be more convenient as well, especially if you bank online. Many credit unions and banks will allow you to set up automated payments online, you can pay you can your payment manually each month when you check your balance statement.
Just about everything on the internet is competitively-priced, and the same goes for automobiles. Dealerships in metropolitan areas tend to offer the most aggressive pricing on the internet because they know how tough their competition is. At the end of the day, all of the dealerships pay the same price to the manufacturer, but some may be willing to make less profit on the car to improve their sales numbers or meet sales goals.
In addition to making “gross” or profit on each vehicle, dealerships and sales managers may also receive other bonuses or recognition for selling a specific vehicle, a specific vehicle model, or an overall number of vehicles. This is another reason it pays to compare rates from more than one dealership before buying a car.
Buying a car is no different than buying life insurance, auto insurance, or applying for a home loan. It pays to shop the market and compare your options before you make a purchase. Dealerships don’t want to be outbid by their competition, so if you live in area where there is more than one dealership nearby, compare your options.
You may be able to save a few hundred or even a few thousand dollars on the cost of your car by enticing a little friendly competition. Just be warned, most these salespeople are wary of these sorts of tactics, so don’t expect a quote over the phone. The dealership will want you to come in and negotiate the purchase price in person.
JRC Insurance Group is an independently-owned life insurance agency that is dedicated to saving our clients money.
If you would like to learn about saving money on your life insurance, please feel free to give us a call toll-free at 855-247-9555.
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