5 Great Ways to Save Money When Buying a New Car
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The mere thought of visiting an auto dealership twists many would-be car shoppers’ stomachs into knots. Blame pre-conceived notions of working with a car salesperson if you want, or the high price tag that comes with buying a new car.
Whether you’re shopping for a new or used car, it’s a major purchase and it’s always made me nervous. When we needed a new (or at least new to us) car several years ago I was afraid it would cost us too much and dreaded the negotiation process. Surprisingly, I learned how to save money when buying a new car; with a little research, we were able to save over $5,000 on our new car purchase. I’ve assembled the following list to show you how we did it.
Knowing Your Budget is a Great Way to Save Money When Buying a New Car
When we bought our new car we had people tell us to let the salesperson know what the monthly amount we want to spend is. If I offend anyone, I apologize, but that is one of the stupidest things I have ever been told. If you offer up that information to the car dealership they’ll only push you towards that price which will only frustrate you and waste your time.
If you’re looking to save money when buying a new car, keep that information close to the vest as it’ll give you more power when it comes time to negotiate a sales price. If asked, pivot the conversation to the overall price of the car and emphasize your desire to get the best deal possible. The other thing you’ll want to account for with your budget is what your cost will be for car insurance. While there are programs like Allstate Drivewise, you want to make sure you shop around to get the best rate possible.
Our last car purchase was roughly five years ago and I spent several months researching what we wanted before we set foot on a local car lot. I knew the price I was looking for and the type/size of car we wanted. We went to probably eight to ten car dealerships over the span of several weeks and that helped us compare cars and narrow down the options to two or three viable possibilities. That only covered the car and how it drove, yet nothing about the price.
Trying to save money when buying a new car can be tricky at best if you do not know the pricing and what dealers are paying for the car. This is where Consumer Reports came into play. They offer a service for $20 that reviews pricing for a specific car (new or used)including what add-ons actually cost the dealership and what the average price per car is in your geographical area. The information they provided was invaluable and gave us huge insight into what to expect in our negotiation.
Work Dealers Against Each Other
This is probably the most overlooked area in regards to how save money when buying a new car. The internet has made it possible for you to negotiate with a car dealership completely over the computer without meeting with them face to face. A friend had told us about this and it, together with our Consumer Reports information, this tactic helped us shave more than $5,000 off the price of our new car.
When we determined that we wanted a Nissan Altima, we knew which dealer we wanted to buy from. Several days before we went in to buy the car we emailed the other two Nissan dealers in town asking them to give us their best price. We had responses back from both within two hours of sending them. The best one was already over $2,000 less than what we had been quoted from the dealer we bought through. This armed us with information to take in when we bought our car.
We went in that Saturday to buy the car and told the salesperson we had been working with what we knew (as much as we could) the car cost and what another dealership would sell it to us for and that we wanted that price. The look on his face was priceless and he said no one could approve it. When we respectfully said that we would walk he got up and said he would speak with the dealership manager. Five minutes later he was back and said that he did not know how we did it, but that it was the lowest price he had seen in his several years there.
Don’t Just Take the Dealerships Financing
Financing is a huge money maker for most car dealerships. Don’t fall prey to it. Shop around beforehand to see what rates and terms you can get on a car loan, that is if you will be financing the purchase. Be firm when you say that you’ll discuss financing at the end and listen to what they have to offer.
At the end of our negotiation, we ended up with the dealer’s financing as it was the best rate we were offered. We knew we’d be paying the loan off early with the money we had put aside in our online savings account, but wanted the best interest rate possible.
If you’re looking to save money when buying a new car remember that the rate does impact how much money you’ll spend over time so please do your due diligence.
I’ve shared some of my favorite tips about how to save money when buying a new car, but it’s all for naught if you don’t maintain your cool. It’s vital to keep an emotionally detached demeanor when looking; otherwise the car salesperson will know they have you. Make up your mind beforehand not to buy on your first trip to the dealership – no matter how good the deal is or how badly you want the car.
One of the best ways to keep that control in your hands is to be willing to walk away. If the car dealership sees you being willing to walk out you communicate that you’re there on your terms and will buy when you’re ready. This’ll likely help in the negotiation process, but you do need to be remember to be realistic; otherwise they may just let you go. Hopefully you’ll have time to buy a car on your terms and not the dealer’s, as it benefits you to avoid a hasty or rushed decision.
Time for you now. What are some of your favorite ways to save money when buying a new car? Have you ever paid for a car in all cash?
Photo courtesy of: Nicole Schmoll
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.