8 Ways to Get a Good Price on a Shiny New Auto

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There are deals out there, even for brand-new vehicles if you understand these strategies -- and some of the current car market trends.

Ready to sign on the dotted line so you have some new wheels to drive?

It’s a great year to shop. All kinds of new and refreshed vehicles — with new trim, interior, wheels and more — are rolling into showrooms.

Yes, we’ve told you that pre-owned cars are the way to go because new cars lose a lot of value the second you drive them off the lot. We stand by that advice. However, we know some folks have their hearts set on new cars with all the high-tech bells and whistles. If that’s you, these are pointers for going about it.

Here’s the good news: After 15 years of covering the automotive industry, I can tell you that most major car dealers are pretty darned honest. The days of “bait-and-switch,” where you’re lured into the dealership with a promise of a low-priced car that isn’t available — or “title washing,” hiding a car’s flood-damaged history — are largely gone for major dealers. Car buyers have both state laws that strictly monitor car transactions and seemingly endless online information on their sides. You know how fast news about an unscrupulous businessperson spreads online. Even if the regulators weren’t watching, the public is. And it is true — not every salesperson is created equally, but that’s another article.

Of course automobile dealers are in business to make money, and like any salespeople they have ways to entice you to buy. Before you head out to shop, consider these eight ways to make sure you get the best possible deal:

Do your homework

Dealers often remark that many customers know almost as much about the autos they have in their showrooms as their salespeople do. And that includes the dealer invoice price and MSRP (manufacturer’s suggested retail price). Often you’ll see there is very little difference between the two, notes Popular Mechanics. Other times, generally with luxury cars, there’s a major gulf. Narrow down the type of car you want to buy – subcompact, compact, midsize sedan, light-duty truck or something else – and get an idea of the dealer invoice price and MSRP. Caution: The dealer may not have paid that full invoice price for a variety of reasons, including special promotions. Still, it’s important to have that knowledge as a starting point. You can find invoices, MSRP and more at several sites including Edmunds.com.

Don’t be afraid to negotiate

As mentioned above, a dealer may not have paid the full invoice price to the automaker. The dealer may also receive various bonuses from the automakers for reaching certain levels of sales. These “stair step” incentives — largely unknown to the public — basically give bonuses to new-car dealers that reach certain quotas, sometimes on certain models within a certain time frame. That’s why some dealers can sell way “under invoice” – and then cut the price even more. They know they’ll receive a large windfall from the automaker if they hit a certain goal. So don’t take their “best deal” on faith. Push a bit more.

Behave in a professional way

Large dealers move massive numbers of cars each month and can afford to give great deals on some rare occasions. But no one wants to give a break to someone who is discourteous and will likely not give the dealership good recommendations. It literally pays to be nice.

Be flexible

If you absolutely must have a certain car with specific options in a certain color, you likely won’t get the best deal. Sometimes cars in unpopular colors or with too few or too many options sit on the lot. The manager may offer a better deal to someone who buys the lime green car instead of insisting on the blue car. Compose a list of “must have” and “nice to have” options. Then go to the dealer with an open mind. Caution: An open mind is great, but beware the add-ons that some dealers will try to sell you. That can be everything from an extended warranty to spiffy tires. It’s easy to spend thousands over your budget.  Tip: It’s well-known that subcompacts and midsize sedans — aside from the always popular Honda Accord and Toyota Camry — are generally overlooked. Buyers want SUVs, light-duty trucks and higher end sports cars. So if you want a bargain, look to the smaller, less flashy models. Here’s Motley Fool’s list of the best-selling vehicles in 2015. (Translation — don’t expect a major deal on any of the listed autos.)

Don’t talk about rebates

Auto manufacturers offer rebates. They don’t come from the dealer. So don’t tell a salesperson the automaker will pay you a rebate or the salesperson will factor that amount into your deal. Get the best deal possible from the car dealer, and then you can talk about the rebate. Also, make sure the rebate is deducted from the purchase price. If you have the rebate mailed to you, you’ll pay tax and other charges, notes Car and Driver magazine.

Know financing rates

Many people just assume the car dealer will give them the best auto financing rate. That’s not always true, especially when a buyer belongs to a credit union. Before you make a deal, shop for financing just as rigorously as you would for the actual car, recommends Consumer Reports. When you have secured financing prior to making a deal, you can negotiate from a position of strength. Tip: You may be disqualified from using an automaker’s rebate if you rely on their financing. So securing your own financing, even if it’s the same rate as that offered at the dealer, can still save you money. Here are some tips on landing a good deal on a car loan.

Don’t expect a great deal in return for paying cash

Dealerships make more money on financing and receive the cash just as quickly from the lender as they do from you, according to Popular Mechanics. Reason: The car dealer is the middleman between you and the bank, so they receive a fee for doing so. RealCarTips has a useful explanation of how that works.

Understand the Annual Percentage Rate (APR)

That rate varies daily and can make a significant impact in the overall amount you pay. Consumer Reports notes that a three-year, $15,000 loan at 5 percent APR would save you nearly $500 overall, compared with the same loan at 7 percent. And don’t ever make a deal based on the amount of a monthly payment. A shorter-term loan means higher monthly payments but less money paid overall. Try to keep the length of the loan as short as you can afford, recommends Consumer Reports. One concern with longer-term loans is that it takes years to build equity. That means it could take up to 18 months of payments before the car is worth more than you owe on it. If you trade or sell the car early, you will owe more than the sales price.

What did you learn the last time you went to buy a car? Share with us in comments below or on our Facebook page.

Stacy Johnson

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