How to get a best deal on a new car?

How to get the best deal on a new car? Practically speaking, the amount of money that you spend on a car depends on various factors. If you do it right and follow some of the tips in this article, you can end up saving a lot of money.

According to Statista research, roughly 3.4 million and 4.7 million cars were sold in the United States in 2020 and 2019 respectively. The US auto sales data show that automotive sales peaks in Spring from the end of February until the end of May, and in Fall from September to November. The high demand causes the increase in the car retail prices in those two periods. On the other hand, the car prices drop dramatically in December due to less demand. However, due to the Covid-19 impact, shoppers may see lower inventory. As a result, car shoppers may have to pay higher prices because of the shortage in supply. 

How to negotiate a car price?

Do some research. 

You should do some research before buying a new car. There are multiple factors which you should look at when you plan to purchase a car.  It is pretty easy for you to do a simple search for cars as well as compute prices for various build options, understand cost to own, compare features, review ratings, and do price comparisons and gather payment details from Kelly Blue Book (KKB) or Edmunds. Importantly,  you should also do some calculations to figure out your budget for owning a new car.

After you obtain all necessary information for which car you are interested in, you should arrange for a test drive in order to make sure that you like the car. Then, you can move forward to negotiate and purchase that car. 

Negotiate a car price at the car dealerships. 

You can go to different car dealerships and make a negotiation in person. Since you already obtained the car’s fair price through your research, you can  try to negotiate within that range or below.  It may take you time, and cause you some headaches because you have to go to many locations and talk to several car dealerships.  The key is that you should be patient and do not hesitate to walk away if a dealership offers more than the fair price.  

Get the best price on a new car with a simple email. 

If you do not feel comfortable negotiating in person, you definitely can send emails or make calls to multiple car dealerships to request price quotes. Sending emails will help you to save a lot of time. And, you can reach out to many dealerships as well. 

Your mail should list some specific information such as car model, features, and so on. Importantly, you should ask car dealers for the price quote along with the vehicle spec. The price quote will tell how much you have to pay for the car besides taxes and other fees. And, the vehicle spec specifies the car’s installed packages and accessories as well as mechanical, interior and exterior features. A small change in any of those features can impact the car price.

After collecting price quotes and vehicle specs, you can make a comparison, and then pick the best option. You may try to ask for a little more reduction on the quote price if it is possible.  

The key is that you should not rush, but take your time and put your emotions away to negotiate for the best deal on the vehicle. 

How much will a dealership come down on price on a new car?

Typically, 10%-12% off the MSRP ( Manufacturer’s Suggested Retail Price) is what most buyers get after negotiation. Buyers may see 20% of the MSRP for cars at the end of their model year. Usually the next model year cars become available at dealerships towards the end of the year and many new car shoppers prefer to buy the next year’s model. However, if you are ok with the current year model then it could help you save some money – but at the same time, you have to remember that if you plan to sell the car, the later the model year, the higher the resale value. 

For instance, after putting all necessary information for a new 2021 Toyota Highlander Hybrid Limited AWD into KBB website, 3 prices including Invoice price, Fair Purchase price, and MSRP are shown below. So, the fair price to buy this car is $43,510.  The prices may vary 

depending on season and location.

Do car dealers give discounts on paying cash?

You may get 20% discounts off MSRP on some new cars if you choose to pay cash. Also, you also can save a lot of money on interest. Moreover, you do not have to worry about qualifying for financing as well as being responsible for monthly payments for 24 months – 84 months.  If you decide to pay cash, you should tell the car dealer only after negotiating a price that is all set in order to maximize the discounts on the car deal.  

It seems better to pay cash on a new car if you have money readily available. However, in many situations, in particular from an economic standpoint, you may want to reconsider whether you should pay cash or choose a loan to finance your vehicle.  

Why should you not pay cash on a new car?

Depletion of funds for emergency or necessary expenses. 

You may not have enough funds for emergency expenses. As a result, you may have to use your credit cards, typically with high interest rates. If you have not set aside a significant emergency fund, it may not make sense for you pay to cash to own a new vehicle.

Improve credit scores. 

In addition, you should choose to finance if you need to improve your credit scores. Making timely monthly payments on your car loan is an excellent way to build your credit score. Having a high credit score is very beneficial in many circumstances. For instance, you can save a lot of money on many transactions such as buying a house if your credit scores are good or excellent. 

Take benefits of the low interest rate. 

If the interest rate for financing is low, a financing with a low interest rate will not make a big difference to the overall cost of the car. So, you should choose financing instead of paying cash. Moreover, you can always refinance the vehicle when there is a chance and you would like to do so. 

Lose investment opportunities and return on investments. 

When you pay cash instead of financing a vehicle, you may lose the investment opportunity as well as returns earned from the investment. For instance, if you decide to finance and use the available funds to invest in the stock market. You can generate a high return after several years of investment. Therefore, you should do some calculations in order to figure out whether paying cash is better than financing. 

Which is better: a lower interest or cash back?

Car manufacturers may offer some attractive terms to shoppers. For instance, you can take either cash back or a lower interest rate when you make a car purchase. It depends on your specific situation to decide whether you should take the lower interest or cash back deal. If you make a car purchase with a high value trade-in, a cash back seems to be a better option. Since, you will not have to borrow a large loan, a lower interest rate will not be helpful and attractive compared to a cash back. Therefore, you should do a cash back vs low interest comparison to decide which option is best for your situation. 

When is the best time to buy a car?

Car prices may vary due to car model, seasons and locations. However, the best month to buy a new car is in December, especially New Year’s Eve and New Year’s Day. As December comes, some car dealers may try to meet their annual sale goals. If they do not meet the sales goals, they will likely offer shoppers better terms so that they can get more business. As a result, you may get a better deal. In addition, if dealers do meet their sales goals, they may also like to increase sales so that they can earn a bonus.

Moreover, around year end, the old inventory models need to be moved out. This is another reason why shoppers may be able to get big discounts on year end model cars. 

You should search for good deals when you plan to buy a new car. Simply, you can send emails to multiple car dealers and ask for information about attractive deals.  And, you should be ready to get the deal when it is still available.

How does a pre-approval on a car loan work?

How to search for a pre-approval?  

When you decide to finance a new car, you can choose to get a loan amongst multiple lenders. You should talk to multiple lenders in order to find the best one. 

It is good to look for pre-approval. You can simply reach out to lenders by making a request for a loan quote online or making calls to them. Many lenders may reach out to you when they receive your request for loan quotes. So, you may find the best interest rate since many lenders will compete to earn your business. 

Lenders will obtain all necessary information about your total income and expenses. if you qualify, a lender will issue a pre-approval letter. It usually happens fast.

How does a pre-approval on a car loan work? 

A pre-approval may tell car dealers that you are a serious buyer. Then, they will assist you more promptly when you ask them for car price quotes and other information as well as with price negotiation. It is more helpful and convenient when you reach out to car dealers by sending emails. 

A pre-approval will show the lender’s and borrower’s information, the loan amount, the interest rate, the type of loan, the pre-approval expiration and so on.  If there are not any major changes on your overall financial situation, a final loan approval is highly granted. The other conditions have to be satisfied prior to approval to close.  

Questions and Answers – How to get the best deal on a new car?

1. What is the best way to negotiate a car?

If you do not feel comfortable negotiating in person, the best way is that you send emails  to multiple car dealerships to request quote prices. Sending mails will help you to save a lot of time. Also, you can reach out to many dealerships at the same time. 

Your email should list some specific information such as car model, features, and so on. Importantly, you should ask car dealers for the price quote and vehicle spec. A price quote will tell how much you have to pay for the car besides taxes and other fees. And, the vehicle spec specifies the car’s installed packages and accessories as well as mechanical, interior and exterior features. A small change in those features can vary the car price.

You should have a loan pre-approval if you choose to finance a vehicle.  A pre-approval may tell car dealers that you are serious. Then, they will assist you promptly when you request price quotes and other information. In particular, you reach out to them by sending emails.

2. How much off MSRP is a good deal?

Typically, 10%-12% off the MSRP ( Manufacturer’s Suggested Retail Price) is what most buyers get after negotiation. Buyers may see 20% of the MSRP for cars at the end of their model year. Usually the next model year cars become available at dealerships towards the end of the year 

3. How to find a dealer invoice price?

You can easily find an invoice price for a specific car from KBB. After you simply input all necessary information about the vehicle in the Build and Price feature, you will see 3 prices which are the invoice price, the fair price and MSRP. Also, you can search for an invoice price from Edmunds website.  Otherwise, you can ask car dealers to provide you those prices. 

4. What is the best month to buy a car?

Car prices may vary due to car model, season and location. However, the best month to buy a new car is in December, especially New Year’s Eve and New Year’s Day because car dealers may need more sales to meet annual sales goals, to earn bonus or to get rid of the old inventory. 

However, due to the Covid-19 impacts, shoppers may see a low inventory. As of a result, car shoppers may have to pay more because of the shortage in supply. 

5. Can you get a car cheaper if you pay cash?

You may get 20% discounts off MSRP on some new cars if you choose to pay cash. Also, you may save a lot of money on interest as well.  If you decide to pay cash, you should tell a car dealer that you are paying cash only when a negotiated price is all set in order to maximize the discounts on the car deal.  

It seems better to pay cash on a new car if you have money ready to do so. However, for some situations, in particular from an economic standpoint, you may need to reconsider whether you should pay cash or get a loan to finance your new car.  

6. Does getting pre-approval affect your credit scores?

Inquiries for a pre-approval will not affect your credit. When you go through the process to apply for a loan, lenders will need to pull and review your credit reports. The lenders need to understand your overall financial situation in order to decide whether you qualify for a loan. When there are several credit enquiries, then your credit scores may be affected.