We’ve talked about how to decide when to buy, finance, or lease a new (or new-to-you) car, but once you know how you’ll acquire your new ride, actually deciding which car is right for you can be difficult. We turned to the experts for money saving tips and advice about how to really get a deal whether you’re buying, leasing, or financing.
Quoted wondered whether all those “year-end” or “such-and-such holiday celebration” car sale and lease promotions really save customers money. As you might’ve guessed, experts and insiders have different opinions about car sales and special deals, and whether you save money seems to boil down to fine print and negotiating.
Matt DeLorenzo, managing editor for Kelley Blue Book’s KBB.com, told Quoted that holiday sales, and year-end events in particular are good times to buy cars because it’s a time when manufacturers are motivated to move their product. During these times, DeLorenzo told us, dealers are often offered extra bonuses from the manufacturers for selling the on-sale cars. This means that comparing prices and shopping at a few different dealers might yield extra savings.
On the other side of the argument is Mike Rabkin, of From Car to Finish. He told Quoted that, “There’s no such thing as a ‘sale’ when buying a car, because a sale suggests a temporary discount off a normally non-negotiable price. As we all know, cars are negotiable at any time, so how can you have a sale off a price that is not fixed?”
Philip Reed, Sr. Consumer Advice Editor at Edmunds, says the best way to know if you’ve got a potential deal on your hands is to compare the sale price with Edmund’s True Market Value (TMV) price calculator, which will give customers the average price paid for a specific car in their area.
Reed explained that calculating whether a leasing promotion makes financial sense can be complicated for the average consumer because leasing is a complicated formula. Shoppers can use Edmund’s lease calculator to generate an expected payment and then compare it with an offered promotion.
Charles Cannon, a BMW dealer in Houston, TX, told us that those “zero down and X% per month” lease deals can be cost saving for the right type of customer. He cautions consumers to read the fine print, though. For instance, national ads usually don’t include the TT&L (Tax Title and License) costs, which would therefore be added to any deal you see. They’re also usually calculated for 10K miles per year, so if you drive even a couple thousand miles more a year, your costs could increase substantially—per mile penalties for overages are typically 15 to 25 cents per mile.
Rabkin told Quoted that any leasing ad you see offers numbers based on the MSRP (manufacturer’s suggested retail price). “You wouldn’t buy a car at MSRP,” Rabkin argues, “so why base the lease on it, rather than the same price you’d negotiate for a purchase? Doing it on the latter should significantly lower your lease payment, negating the need to put money down (other than 1st month’s payment, security deposit, and a one time acquisition fee from the lender, typically an amount in the high $100s). Putting money down on a lease (which is really a long term car rental) is like putting down a down payment on an apartment you’re renting.”
Don’t forget, if you want to stay local, check out The Zebra’s own car insurance calculator.
Tips For Financing
DeLorenzo, from Kelley Blue Book, gave us the inside scoop on financing: “Smart financing loans typically are the subsidized rates from either the manufacturers or their credit affiliates. And most large lenders and credit unions offer fair rates. However, if you have substandard credit, that is where you are likely to find much higher rates because of your credit risk and that’s where you’ll end up paying rates that some would call predatory and others view as a fair rate for a risky loan.”
Mike McWethy, from First Service Credit Union in Houston, TX, advises car shoppers to secure financing before going to a dealership. Credit unions and community banks can give customers an idea of what to expect price-wise when shopping at a dealer. “For example,” McWethy advised, “ask your credit union or bank about the cost of a warranty policy. Dealerships charge anywhere from three to five times the actual cost of the policy.” Reed, from Edmunds, also suggests shoppers apply for financing ahead of time both to understand their credit worthiness and to use that pre-approved rate as a bargaining chip with the dealership. Often, he says, the dealership can beat private interest rates with their own lenders. And if they can’t, you’ll still have a good rate with a private lender.
Michael Harley, Chief Analyst of AutoWeb, a vehicle search engine designed to help car shoppers decide and find the right vehicle, says, “Predatory programs take advantage of consumers by putting them into vehicles that they traditionally would not be able to afford. These often ask for little or zero drive-off and extend payments upwards of 84 months — to a point where the consumer is upside down on their vehicle, meaning they owe more than it is worth, out of warranty. They simply don’t make financial sense.”
The financing bottom line, from Edmunds: “Your car payment should not be more than 20 percent of your take-home pay. Finance cars for no more than 5 years and try to put 20 percent down. Finance used cars for 3 years with about 10 percent down. If you are leasing, do not lease for longer than 3 years and only put about $1,000 down to start.”
Our experts weighed in with shopping “dos” and “don’ts” for both new and used cars.
New Cars “Dos” and “Don’ts”
Mike Rabkin, of From Car to Finish offered his list of car shopping “dos” and “don’ts”:
- Get quotes by phone from 3-4 dealers, as opposed to in person, where dealers can read your body language and size you up.
- Deal with managers (i.e. sales manager, fleet manager, general sales manager, internet manager) as they’re the ones who can decide price on the spot, and aren’t on commission.
- Shop at the end of the month, when dealers may be looking to meet quotas.
- Get an actual offer for your trade-in [ahead of time](autotrader.com).
- Avoid (or at least get back to the dealer) on everything they try to sell you after you agree on the price of the vehicle itself. It tends to be overpriced, unnecessary, or both. At the very least, compare elsewhere to be sure, as you don’t need to decide anything at the point of sale, and may give back everything you’ve saved up until that point if you’re not careful.
We heard from car-buyer Mark Aselstine who seconded Rabkin’s last point. He told Quoted that when he and his wife purchased a new Ford Fusion Hybrid, they used the True Car price as a jumping-off point for negotiating, rather than using the MSRP. Aselstine told Quoted he said “no” to everything in the finance office—no to things like extended warranties and paint protection. He said they paid in the low 20’s for their car, but could have been in for another $8,000 if they’d added all the extras.
Former car salesman Sam Carter offered Quoted his advice:
The two best times to generally buy a car are in December, as well as July through October where the previous year’s models are on clearance.
Dealerships also may sneak in other fees like a dealer prep fee, which can be taken off if you ask.
The test drive can be an important step in the car buying process. Make sure to go in on a weekday afternoon when it is less busy so you can get your questions answered. Make sure to really choose wisely and don’t be afraid to ask questions, that’s what the salesman is there for. If you feel like you are getting pushed around, do not hesitate to ask for another sales person.
Used Cars “Dos” and “Don’ts”
Christopher Basso, of CARFAX, is a used car expert with 11 years of experience. He told Quoted:
- Don’t shop online where vehicle history information isn’t available for the cars listed.
- Don’t buy with your heart. Too often people fall in love with a car and don’t heed warnings that may result in costly problems.
- Don’t buy any used car without also taking it for a thorough test drive and getting a mechanic to inspect it first.
- Do factor the vehicle’s history into how much you should pay. Many cars look the same, but no two cars have the exact same history – things like prior accidents, regular maintenance and recalls all can impact the value of a used car.
- Do consider manufacturer Certified Pre-Owned (CPO) vehicles, which come with many new car benefits (warranty, roadside assistance, etc.) at a used car price.
We’d love to hear from you about your recent vehicle purchases—what did you learn? What would you do differently next time?