Lexus’ December to Remember from 1999 is credited with turning sluggish winter car sales into a race for annual sales targets, training buyers to hunt for bargains around the winter solstice and dealers to get the best deals.
Do you want to maximize your leverage? Shop from December 26 to 31 for the best odds. Have a good attitude in the game, ask as many questions as you want, and know that it’s okay to walk away from a deal you don’t like. Here are some of our favorite tips.
Shopping for a new car
Three deals, not one
Buying a car doesn’t mean you have to make one deal on the price; it means you have to make three: the out-the-door (OTD) price, the trade-in value, and the financing. For best results, keep each deal separate. Negotiate the outside price, then the trade-in value and then the financing. Be resolute in this. Don’t let the seller mix them up.
Because these are three deals, we recommend that you do not purchase a car during the same visit where you agree to the terms (but haven’t signed anything yet). Take an afternoon or evening to go over the numbers in peace. The dealer has a team that works on the numbers and works on you. You only have you.
Start with a number
Buying a car is a business transaction that will haunt you for years to come, so research is key. The more you know, the better you’ll understand what dealers are giving you in return and the better you’ll be able to negotiate through gray areas.
Build your car on the manufacturer’s website to get the recommended retail price for your car in your preferred trim level and with the options you want. Keep in mind that flexibility with model year, colors and options can save you money. Build it again through online searches.
The Car and driver Marketplace can also help you view a range of vehicles currently for sale and get an idea of fair prices nationally. If there’s enough data for your region, you’ll get the average price local buyers pay for the build you want.
Then view the dealer lists for asking prices. Look at the window stickers in the listings to see what extras dealers often add. Save the window stickers of cars you want to view.
It also helps to know how long the car you’re looking at has been on sale; dealers don’t like to hold inventory for more than 90 days. Listings on sales sites show the date the vehicle was first offered for sale. Given two options for the car you want, one on the lot for eight days, the other for four months, you can push for a better deal on the four-month old car.
Consider those numbers and figure out the price you would be happy to pay and the maximum price you would be willing to pay. Important point: these are your field numbers, including all taxes and fees.
Finally, if you have a trade-in, visit research sites for your car’s trade-in value. Some sites make instant cash offers that you can print out and use as proof when the time comes.
Find the incentives
Car manufacturers and dealers receive all kinds of incentives. GM offers discounts to those who working at GM suppliers. Military incentives and incentives for first responders are common. There are loyalty bonuses for buyers who stick with a brand, conquest cash for buyers who switch brands, and perks for recent graduates.
Costco, Sam’s cluband AAA have car buying programs designed to save members money.
Incentives can also be fun. Volvo is running an overseas delivery program that provides a 4 percent discount on the suggested retail price, and Volvo will pay for two round-trip tickets and two nights’ accommodation in Gothenburg, Sweden.
Ask the dealer about all the benefits you are eligible for.
Financing 1: Pre-approval
Tap on loan pre-approval lenders and shop around. Try your local bank or credit union, a national lender like Chase Auto, or an aggregator that returns multiple offers with a single request. Many vehicle listings include financial calculators with different deal structures; play with that too.
Negotiate the price
Now you are ready to go to the dealer if necessary. Once you’ve found a few examples of the car you want to buy, you can fill out the contact information on the listing pages, let the dealers know you’re looking for the lowest sales price, and then wait for offers to come in.
Whether you’re at your computer or in the store, always stick to the outside price and keep it separate from what comes after. Start negotiations just below the amount you’d like to pay, and if the seller asks if you’ll pay cash, finance or trade-in, or asks what you’d like your monthly payment to be, be determined to focus the conversation back on price. Say, “Let’s agree on a final price first, then we’ll talk trade-in and financing.”
If you offer a monthly payment number, the seller may try to find ways to reach that number that are not in your best interest.
The trade-in
Once you and the seller have agreed on an OTD price, proceed with your trade-in. Question: “How much can you give me for this if I trade it in?” You can compare that number to the numbers from your online appraisals and instant cash offers.
Additionally, most states allow you to use your trade-in to reduce your tax burden if you trade in and buy from the same dealer. Buy a car for $50,000 and get $8,000 for your trade-in, and you might only pay state taxes on $42,000, potentially saving hundreds.
Funding 2: F&I
You got the price for the new car and the trade-in value you wanted. Congratulations. Time to visit a back office to review the terms and record the deals made.
Dealers can earn bonuses if they sign you up for automaker financing. In rare cases, they will refuse to do a deal that is not through this ‘captive financing’ because the deal they offered was conditional on the financing bonus.
Since you’re pre-approved, you have a baseline that the dealer can beat. You can let the dealer know you agree if it exceeds your pre-approved terms by at least 0.25 percent. You don’t have to disclose your pre-approved terms; Make sure you ask the dealer if the interest rate they are offering is the lowest you are approved for, and decide from there.
F&I is also a profit center where dealers will try to sell protection packages, extended warranties and more. Insist that they address anything you disagree with (and you can purchase an extended warranty later). Then take your paperwork somewhere and read it again. If the fine print confirms every detail of the deals you’ve made, go back to sign and take home your winnings.
Happy shopping.
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