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Buying a New Car? Be a Smarter Shopper.

February 19, 2013

Buying a new car

3 Common Negotiating Mistakes by New Car Buyers

Most consumers making any big purchase will undoubtedly comparison shop prices. This is definitely the case when it comes to the second most expensive purchase most consumers will make aside from their home – a new car.

The difficulty is that it can be an intimidating and time-consuming process. The old fashion way of buying a new car for most people involves spending their evenings and weekends driving between different dealerships and negotiating with sales people and sales managers.

The reality is that very rarely does a consumer pay full manufacturer suggested retail price for most vehicles, and often two people can purchase the exact same car but at vastly different prices that could amount to hundreds or even thousands in lost savings, depending on how well they negotiate. And so it is worth it to do your research to make sure you’re being smart about your money and getting a good deal.

Luckily, there are some great online tools that can help make the whole process a bit easier – saving you both time and money. Here are three common mistakes consumers make when negotiating a new car deal:

1. Negotiate the Total Price, Not the Monthly Payment

Most people will finance or lease their vehicle and are focused on whether their monthly payment is affordable. When it comes to negotiating though, you should negotiate based on the total vehicle price including all fees and taxes, not the monthly payment. It is easy to forget that a $10 or $20 change to a monthly payment may not sound huge, but it can quickly add up to hundreds or thousands of dollars over the life of the vehicle.

It can also be difficult to compare monthly payments between different dealerships as you may be looking at different maturities or down payments. Negotiate based on the total vehicle price, and remember that all dealerships will be able to provide you with the same advertised financing or lease rates from the manufacturer, so the dealership with the best total vehicle price will still be the best deal whether you lease or finance.

2. Check for Manufacturer Incentives

When negotiating a discount, make sure any available manufacturer incentives are applied before you start negotiating. You’ve seen the advertisements where a vehicle manufacturer offers a big cash incentive that can be worth thousands off the vehicle price. For example, if there is a $4,000 incentive from the manufacturer and a dealer offers you only $4,000 off the manufacturer suggested retail price, well then the dealer is not really offering any discount at all. Keep in mind that the $4,000 incentive comes from the manufacturer and everyone will get it. So your negotiation with the dealer should start after subtracting all applicable incentives.

3. What is a Good Deal?

The most common question consumers ask when buying a new car is “What is a good deal?” Unfortunately, the answer is that it can be different for each car. One of the most effective ways to negotiate is to find out the dealer invoice cost, which is the wholesale cost of the vehicle, essentially what the dealer paid to purchase it from the manufacturer before adding profit and selling to the consumer. The difference between the full manufacturer suggested retail price and the dealer invoice cost is essentially your negotiating room. Keep in mind that dealers are businesses and they do need profit to keep the lights on and provide good service, but getting the dealer invoice cost gives you a better understanding of the negotiating room.

You can get dealer invoice cost reports for free from Unhaggle.com if you’re preparing to negotiate on your own. Unhaggle.com also offers a tool called Quote Your Own Price that allows you to make offers to local dealers for the price you want to pay from the comfort of your computer. This lets you skip any awkward in-person negotiations. Unhaggle.com’s tools will also provide you with an estimate of the average price of what other consumers have paid for the same vehicle and a recommend target price for your negotiations based on data gathered from a national network of new car dealers.

In any case, it’s okay to buy nice things once in a while and a new car is definitely one of those exciting things. Just remember to be smart with your money and follow these tips to ensure you’re getting the best deal.