Many automobile buyers get really excited about the thrill of the bargain. There’s probably no other sales situation where price negotiation is such an accepted part of the process as at a car dealership. A quick search on the Internet will reveal pages upon pages of strategy on everything from how to dress to how to get some premium options thrown in gratis. What many of these tipsters don’t explain is that dealerships make up to 40% of their annual profits through the finance and insurance departments. So, unless you plan on paying cash for the whole thing up front, that sweet deal you think you’re getting could end up costing you in the long run through expensive car loans. Here are a few quick and easy tips to remember if you’re looking to save money on the bottom line, not just when you drive off the lot.
Do the Math
There are a lot of numbers flying around when you go to buy your ride, and it behooves you to crunch at least some of them before you step onto the lot. One thing to especially be aware of is the bottom line between low-interest car loans and cash rebates. Many times, dealers offer instant cash back when people finance their vehicles. But sometimes those rebates are attached to slightly higher interest rates. If, for example, the $500 rebate comes with an extra 0.5% interest over a five-year loan, compare the overall costs. If an extra 0.5% interest rate costs you an extra $800 over the financial term, is that really worth it?
Do Your Homework
The three credit reporting bureaus keep tabs on creditworthiness, and a buyer’s credit history will largely decide the interest rate. Credit scores vary from 350 to 800, and it is highly recommended that a prospective buyer go in to the dealership knowing their number. Armed with this knowledge, a buyer has more leverage to bargain over terms.
Do It Yourself
Another way that auto dealership’s finance departments make money is through bundling. Bundling refers to the practice of adding a bunch of extra features. Extended warranties, satellite radio, roadside assistance, all of these can be folded into one cost that is paid off with the loan. By combining all these costs together with the big purchase, what seems like a few hundred dollars in extras can end up costing thousands after interest. These extras often get thrown in after the sticker price has been negotiated down, and the buyer is less guarded, thinking they’ve already won the day. In fact, it is much cheaper to purchase many of these extras individually from separate businesses.
So, if you’re going to the dealership looking to get a good deal, remember that it’s not just the dollar price on the car, but the car loans that the dealership makes money off of. Keep these tips in mind to save on your bottom line.