Auto Advice - Purchasing
For most people, the negotiation process is the least favorite
part of getting a new car. No surprise there. To walk into this
process unprepared is to set yourself up to possibly lose hundreds,
even thousands of dollars on the deal. That's the bad news. Now
the good news - armed with some basic information about your present
car, the new car, and dealer costs - you can pocket that extra
cash and drive away a truly good deal.
The New Car
Do you know what that new car is really worth (the dealer's cost)?
Here's a hint - probably a lot less than the MSRP printed on the
window sticker. On a typical car, the dealer markup could be anywhere
from 10% on a low-end car to 25% or more on a luxury model. Those
percentages are your bargaining chip. Before you can bargain,
however, you'll need a resource for tracking down dealer cost
information. Fortunately, there are a number of resources at your
disposal. Unfortunately, not all of these tools are alike. Odds
are, your credit union has or can recommend their preferred resource,
whether it is on the web, in book or magazine form, or even as
software in use at the credit union itself. These resources usually
carry dealer costs, and may even offer information about manufacturer
incentives and bonuses.
Don't be shy about letting the dealer know you know this information.
It lets them know you're an educated buyer, and have already been
When beginning the negotiation, don't worry about starting too
low. Around 2% over invoice is a reasonable first offer. Then
it's the dealer's turn to make a counteroffer. So long as they
continue to negotiate, they're still making a profit. With each
offer and counteroffer made, you're coming closer to the target
price of the vehicle. It's possible you could reach a stalemate,
where neither you or the dealer will budge from an offer. At that
point, your search may need to continue at another dealer. Don't
hesitate to walk away if the deal doesn't seem reasonable. After
all, you're the one with the most power during the negotiation
Once you reach a deal on the new car, you can now begin discussing
If you trade your car in for a new one, you're actually going
through two negotiations. And like the new car, you'll want to
do some research on your trade. What's the fair market value and
trade-in value of your car? What are cars like yours going for
in the local market? Are there any mechanical problems or cosmetic
defects that will lessen the value of your car? Gather this information,
and share it (including repairs needed) with the dealer. This
will give both parties a better idea of an ultimate target price
for your trade. Keep in mind though, you'll usually get more for
your vehicle if you sell it outright rather than trading it in.
That only makes sense - After all, the dealer is taking your trade-in
assuming he or she will be able to sell it to someone else at
The hardest part of the negotiation may be over, but you're not
quite done yet! Dealers can (and most likely, will) try to tack
on a few extra charges before you drive that new beauty off the
lot. Keep your eyes out for... The Extended Warranty - Be clear
on exactly what this covers, and feel free to shop around for
a better price elsewhere - you don't need to buy one from your
dealer, or at all if you don't want to. Sealants/Rustproofing
- Proceed with caution. These are often high-profit dealer frills
of dubious value that can do more harm than good if installed
improperly. Special Order - Only under the most unusual circumstances
should you ever consider paying extra simply to order a car. Manufacturers
impose no such charges. Dealer Preparation and Handling - Virtually
all manufacturers pay an allowance to dealers to clean a new car
and prepare it for sale to you. To pay these charges is like paying
the dealer twice for the preparation.
...And just what is "handling" anyway?
For the dealer, profits can vary greatly on the particular models
they sell. The question is, how can they turn a good profit on
each and every vehicle they sell? By promoting the extras -- like
extended warranties, rustproofing, and sealants for paint and
fabric. Granted, none of these are a bad thing. But should you
pay extra for them? Many people do, but their usefulness can be
considerably less than the purchase price.
The reliability of new cars these days is far ahead of vehicles
even a decade ago. Still, the dealer may strongly recommend an
extended warranty that covers various components. Be aware, however,
that not all such warranties are created equal. Before signing
up, determine the following:
- Is the insuring company insured? That is, will someone still
honor your policy if they went bankrupt?
- Is the policy transferrable if you sell your car?
- What is the deductible on the plan?
- Exactly which parts are covered by the plan and what are the
Many standard car warranties these days provide coverage to 70,000,
even 100,000 miles. Do you plan to keep the car long enough to
get some use out of the warranty, or are you even paying twice
for the coverage provided by your standard warranty? If you decide
you want this coverage, feel free to shop around for it - you
may find a better policy from another provider.
Modern technology has also provided us with cars that hold up
better to rust. In the end, rust will probably win, but quite
possibly long after you've traded the car. Today's cars of galvanized
steel (even plastic!) come with generous "rust though"
warranties, in the event that inner rust comes through to the
outside of your car. Some would argue that a rustproofing job
can make a car rust even faster with all the drilled holes necessary
to spray the coating through the body. Rustproofing isn't as common
(or necessary) as it used to be, and typically a high markup service
performed by the dealer.
Most all of us want to keep that new car look and feel long after
our cars are really new, but are paint and upholstery sealants
the answer? It's hard to tell. Again, advances in painting processes
and materials have made new car finishes and interiors tougher.
But if your car sits out in harsh sun or punishing winters, a
sealant may help some. So would a good old-fashioned coat of wax
once or twice a year, at a fraction of the cost. And certainly
no seat is immune from a nasty tangle with a chocolate bar or
ice cream cone. A sealant would help in the cleanup, but you'd
probably get the same protection if you went out and bought a
can of fabric protectant for under $10 and sprayed it on yourself.
The bottom line is this - Many products serve to protect the sizeable
investment you have in your car, but there's usually no need to
pay high prices for them - especially if they already come with
the car, or can be done inexpensively on your own.