Negotiating (or haggling) is the process of discussing the actual terms of an agreementwith a seller. Consumers skip this step when making day-to-day purchases because prices in most stores are firm. With high-priced items especially appliances, furniture, fine jewelry, and vehicles there is an opportunity, and often an expectation, that offers and counteroffers will be made before arriving at the final price. Negotiating is challenging for consumers when buying vehicles because many variables must be considered, including the price of the vehicle, the trade-in value (if any), the possibility of a rebate, the prices of options, the interest rate, and possibly a service contract. The dealer can appear to be cooperative on one aspect and make up the dif- ference elsewhere. The key to successful negotiation is to be armed with accurate information on all variables, especially the price, interest rate, and trade-in value.
Negotiate Your Price
The complexity and uncertainty involved in negotiating the price of a new vehicle have inspired the development of special services intended to assist buyers. A new-vehicle buying service is a no-fee organization that arranges discount purchases for buyers of new cars who are referred to nearby participating automobile dealers that have agreed to charge specific discount prices. After you sign up, a local dealer will call you to offer a no-haggle price, which is often within 4 percent of the invoice price. The buying service earns its income by collecting a finder’s fee from the dealer. Professional shoppers, in exchange for a fee (perhaps $150 to $450) based on the sticker price, will find the best available price from a nearby dealer and finalize the sale. Alternatively, for a lower fee (perhaps $100 to $200), they will obtain price quotes so you can finalize the deal yourself. The following websites offer more information about these services:
• www.MyRide.com
• www.autos.msn.com
• www.carsdirect.com
• www.autoweb.com
• www.autoadvisor.com
• www.carbargains.com
• www.carsource1.com
When negotiating a vehicle purchase, the key is to obtain a firm price from a dealer for the vehicle and optional equipment desired before discussing any other aspects of the deal. Do not mention financing or a trade-in until you have pinned the salesperson down to a price. You will know from your preshopping research and comparison shopping what a good price for the vehicle in question would be. Start your bargaining from this low price rather than the asking price or sticker price on the vehicle. Obtain prices from three or more dealers and then let each know that you have done so and whether or not their price is low compared with the others. The dealer will then have the chance to reduce the asking price to meet the competition. This smart strategy pressures the dealer to meet your needs rather than the other way around. Consumers have caught on to the fiction of new-car sticker prices and now focus on the invoice price or seller’s cost, which reflects the price the dealer has been.
Negotiate Your Price
The complexity and uncertainty involved in negotiating the price of a new vehicle have inspired the development of special services intended to assist buyers. A new-vehicle buying service is a no-fee organization that arranges discount purchases for buyers of new cars who are referred to nearby participating automobile dealers that have agreed to charge specific discount prices. After you sign up, a local dealer will call you to offer a no-haggle price, which is often within 4 percent of the invoice price. The buying service earns its income by collecting a finder’s fee from the dealer. Professional shoppers, in exchange for a fee (perhaps $150 to $450) based on the sticker price, will find the best available price from a nearby dealer and finalize the sale. Alternatively, for a lower fee (perhaps $100 to $200), they will obtain price quotes so you can finalize the deal yourself. The following websites offer more information about these services:
• www.MyRide.com
• www.autos.msn.com
• www.carsdirect.com
• www.autoweb.com
• www.autoadvisor.com
• www.carbargains.com
• www.carsource1.com
When negotiating a vehicle purchase, the key is to obtain a firm price from a dealer for the vehicle and optional equipment desired before discussing any other aspects of the deal. Do not mention financing or a trade-in until you have pinned the salesperson down to a price. You will know from your preshopping research and comparison shopping what a good price for the vehicle in question would be. Start your bargaining from this low price rather than the asking price or sticker price on the vehicle. Obtain prices from three or more dealers and then let each know that you have done so and whether or not their price is low compared with the others. The dealer will then have the chance to reduce the asking price to meet the competition. This smart strategy pressures the dealer to meet your needs rather than the other way around. Consumers have caught on to the fiction of new-car sticker prices and now focus on the invoice price or seller’s cost, which reflects the price the dealer has been.
billed from the manufacturer. But this may not be the price the dealer will have to pay when the vehicle is sold. Manufacturers often offer a dealer holdback (or dealer rebate) to dealers. A dealer holdback is a percentage of the invoice price that the dealer can hold back from (instead of paying to) the manufacturer, thereby providing the dealer with additional profit on the vehicle. Because of holdback incentives, dealers can sell a vehicle at or below invoice and still make a good profit. For example, a vehicle might have a sticker price of $27,890, an invoice price of $24,600, and a dealer holdback of 5 percent, or $1230. A negotiated price of $24,500 will still net the dealer a profit of $1130 [$1230 ($24,600 $24,500)]. Remember both the MSRP and invoice price are artificial numbers set by the manufacturer and dealer to allow room to negotiate a profitable price. For this reason, do not hesitate to negotiate for a price that is below the invoice price. Visit edmunds.com for a listing of recent dealer holdback offers on various makes and models of vehicles.
Negotiate Your Interest Rate
Negotiating the interest rate, or APR, on a vehicle loan is not only possible but also essential to getting a good deal overall. Most vehicle borrowers accept that the dealer-arranged financing is the best the dealer can find. Buyers often do not know that the dealer benefits from having the borrower agree to a higher rate. Here is how the process works. The dealer asks the buyer to complete a loan application. The application is submitted to one or more lenders with whom the dealer has a preexisting affiliation. The lenders will assess the application and, if approved, suggest an APR. However, if the dealer suggests and gets an acceptance for a higher rate by the buyer (perhaps by saying that the buyer’s credit score is low), the dealer (and salesperson) receives a higher fee for arranging the higher APR loan. In this way, the dealer can make money even if the profit off the sale of the vehicle itself is minimal. This is why it is so important to know your credit score and arrange the best financing you can on your own and accept the dealer financing only if it can beat your deal.
Negotiate Your Trade-in
Getting a good deal on a vehicle purchase requires one more negotiation your trade-in. You can pay a low price for the car you are buying, arrange a low-rate loan, and still not have a good deal if you do not receive what your trade-in is worth. Success here depends on knowing the value of your vehicle as a tradein based on your preshopping research. The same online sources you used to get that information also have information on the average price at which similar vehicles are selling via private individuals. While it is true that trade-in values are usually lower than private sale values, you also have the costs of selling and the time involved if you decide not to accept the dealer’s offer for your vehicle.
Negotiate Your Interest Rate
Negotiating the interest rate, or APR, on a vehicle loan is not only possible but also essential to getting a good deal overall. Most vehicle borrowers accept that the dealer-arranged financing is the best the dealer can find. Buyers often do not know that the dealer benefits from having the borrower agree to a higher rate. Here is how the process works. The dealer asks the buyer to complete a loan application. The application is submitted to one or more lenders with whom the dealer has a preexisting affiliation. The lenders will assess the application and, if approved, suggest an APR. However, if the dealer suggests and gets an acceptance for a higher rate by the buyer (perhaps by saying that the buyer’s credit score is low), the dealer (and salesperson) receives a higher fee for arranging the higher APR loan. In this way, the dealer can make money even if the profit off the sale of the vehicle itself is minimal. This is why it is so important to know your credit score and arrange the best financing you can on your own and accept the dealer financing only if it can beat your deal.
Negotiate Your Trade-in
Getting a good deal on a vehicle purchase requires one more negotiation your trade-in. You can pay a low price for the car you are buying, arrange a low-rate loan, and still not have a good deal if you do not receive what your trade-in is worth. Success here depends on knowing the value of your vehicle as a tradein based on your preshopping research. The same online sources you used to get that information also have information on the average price at which similar vehicles are selling via private individuals. While it is true that trade-in values are usually lower than private sale values, you also have the costs of selling and the time involved if you decide not to accept the dealer’s offer for your vehicle.
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