What is Negotiable when buying a car?- The truth about negotiating and how to negotitate the best deal
Car buying is intimidating for most people; especially when there is that unknowing feeling of what you can negotiate and how much you might be able to save on your purchase or lease. One big question: "What can I negotiate?" troubles most. And the follow-up question: "How much can I negotiate?" is even more important.
1. Car Prices are negotiable. Unless you are doing business with a seller that makes it their unique position to sell with "one price" (code for "no negotiation"), the price of the vehicle itself is negotiable. Three examples of "one price" sellers are Saturn dealers, Scion dealers, and Carmax. Otherwise, the typical mark-up on a new vehicle is 6-8% of the MSRP. That is the mark-up from the dealer's invoice price to the MSRP. Now remember, MSRP stands for Manufacturer's Suggested Retail Price - with the emphasis on "Suggested." Dealers are free to charge more than the MSRP and to reduce the price from the MSRP. The price will be a function of supply and demand. If the vehicle is in short supply and the demand is high, the fair price will be MSRP or higher. If you are uncomfortable with that price, then wait for the supply to catch up or the demand to wane. Vehicles in ready supply which make up the volume models of a line-up are typically sold for prices around the dealer's invoice. Examples are the Toyota Camry, Nissan Altima, Dodge Caravan, Hyundai Sonata, etc. These vehicles are the "volume models" which make up a large percentage of a dealer's volume. Easy to sell, easy to replace, aggressive prices all around. Luxury vehicles are in shorter supply and typically do not sell for their invoice prices. A price reduction of 5% off the MSRP would be a great deal. Prices on used cars are negotiable. Typically, you can expect to negotiate up to 10% off the asking price of a used vehicle.
Those consumers looking for extraordinarily high discounts should look for changes in the model design and changes in the model year. As we approach August, any leftover 2009 new models must be sold and will be sold for thousands less than their 2010 counterparts. As we get to next March and April the same can be said for the current 2010 models. Come August, the 2011's will be introduced for most models and dealers will be selling both 2010 and 2011 models side by side. Clearly, the discounts and rebates will be larger on the 2010's as compared with the 2011 model year vehicles.
2. Your trade is negotiable. If you can remain reasonable you can typically receive more for your trade-in by doing a couple of basic things. First, clean it. A cleaner car will be perceived as having higher value (remember you're selling it to the dealer). Second, pull a CarFax or AutoCheck report on your car. See what the dealer will see. If it has a clean vehicle history, make sure to tell the dealer and be proud of it. Third, have your maintenance records together so you can show the dealer that the vehicle has been properly maintained. The less a dealer has to spend to recondition a vehicle, the more they offer you to buy it. Fourth, get the extra keys and owner's manuals together. The original extras that came with the car are valuable to the purchaser and will save the dealer from having to purchase them to re-sell the vehicle. Fifth, remove your junk from the car - and that includes your glove-box, center console, under the seat, the trunk, etc. Sixth, look up the value of your car online to see what a fair value is. Seventh, research what dealers in your area are selling your vehicle for - and remember - they will want to make a profit - so you they will likely offer you 15-20% less than the asking price - leaving room for reconditioning, negotiating, commissions, advertising, etc.
3. Your interest rate is negotiable. The dealer will use their best effort to secure financing and I would recommend that you strongly consider their services when it comes to financing. Most dealerships will have 10 or more banking relationships. Each lender will purchase retail installment contracts on different terms and the dealer can shop your contract to the lender that makes the most sense. The dealer's portfolio strength will help him obtain a more competitive interest rate for you. That being said, if you are seeking the lowest possible interest rate, you should shop your ability to get financed before going to the dealership. Credit Unions typically offer the lowest interest rates for automotive loans. Get pre-approved and see if the dealer can beat the offer you've received.
Likewise, the term can be extended if you would prefer to spread the payments and lower your monthly payment. Be cautious, however, I do not recommend loans longer than 66 months. Given the additional cost of interest and the shorter trade cycles, it is not recommended to extend the term. The more fiscally conservative strategy is to borrow for a term of 48 months or less. That way your repayment schedule will be in line with the rate of depreciation - meaning you won't be caught in a negative equity position during the second and third years like most car buyers.
4. Extended Warranties, Gap Insurance, and Accessories are all negotiable. If you want to purchase these items, remember that you can negotiate with the Finance Manager on their costs. And a word to the wise, consider only extended warranties which are offered by the Manufacturer - you will receive better coverage, using original equipment parts, and you can use this warranty at any dealer across the Country.
Most dealers are willing to offer price concessions to earn your business. An educated consumer is the best consumer. So long as you know you what is reasonable to ask for - you can be rest assured that you received a fair price from the dealer and you can feel good about your purchase.
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