4 Steps to a Smooth New Car Purchase
- Deon Llewellyn
- Oct 10, 2016
- 6 min read
Throughout my years of auto sales, I've had customers on each end of the spectrum; some have no idea what they wanted and some have unrealistic expectations when it comes to new vehicle purchases. This article will give you tips on things to know and do BEFORE coming to a dealership to make the process smooth and simple for everyone!
So without further delay...I give you 4 Steps to a Smooth New Car Purchase!
Step 1: Know Your Shopping Style
As the buyer, you should be making many choices along the way before you even set foot in a dealership. With all of the reliable information available, even if you already have a strong preference about what you want, if you take some time to do some research AND be open-minded you may be surprised at the outcome.
Here's one way to start: Look at the following list of different types of shoppers and decide which one best describes you. After that, simply follow all 5 steps to a Painless New Car Purchase to cover all of your bases.
Value Shopper
You want a good price, but you are willing to pay for quality
Image Shopper
You are concerned with what your vehicle says about you. Does it project a desirable image?
Methodical Shopper
You enjoy the chase as much as the conquest, and cover every base, becoming a kind of 'new-car expert
Safety-Conscious Shopper
You want a safe and reliable vehicle that you can trust to keep you and your family safe on the road
Whatever your shopping style, the information you gather and the effort you put into the process will serve you well and help you avoid buyer's remorse.
Step 2: Narrow Down Your Shopping List
Let Your New Car Find You
With all of the makes and models available, how do you narrow down your list? Imagine the activities you will use your new vehicle for. If you have small children, you will need something spacious enough to carry everything that you have to take with you that also is strong in the safety area. Or perhaps you're more performance or style oriented. If you have to haul or tow something, the choices are pretty obvious.
When considering a vehicle, everything counts: Number of seats, doors, size, performance, color, comfort, and sometimes towing capacity. The key is to narrow down your search by creating a short list of choices before ever stepping into a dealership. Where to start? With the convenience of the internet and great sites like KBB.com, easy-to-use decision guides can help you narrow your list in no time!
Side-By-Side Comparisons
Another tool that will help narrow your search is KBB's Side-By-Side Comparison, this allows you to compare specifications and see standard or optional features on each new car. This is especially helpful when you are down to a few choices and want to compare the finer points.
Step 3: Calculate What You Can Afford
Let Your Budget Do the Driving
When considering a new vehicle, the lines of affordability can easily become blurred due to the multiple financing options available. A wise buyer shops for a new vehicle based on what he or she can truly afford. Keep an open mind and you could be pleasantly surprised by the list of vehicles within your price range, especially if you are willing to extend the finance terms.
Far too many buyers shop for cars beyond their budgets, want small down payments, drastically misjudge their capabilities regarding monthly payments and then want to reduce the monthly payments by stretching the length of the loans, all of which leads to trouble in the future.
Deciding what to do with the current car is another key element. As a general rule, it may be worth more to sell it yourself, to a private party, than to trade it in. But many people don't want to take the time and make the effort to do that. Especially if it is an older car and the trade in value vs private party value is comparable.
The biggest issue for most buyers is the price of the new car. Fortunately, determining the MSRP is easy, and figuring at least a range for a realistic transaction price is also not terribly difficult.
Calculating Affordability
The new-car buying process is greatly simplified when you discover the bottom-line vehicle price you can afford ahead of time whether you plan to lease or buy. Here's an example:
"The trade-in value of the vehicle I currently own is $10,400."
"I owe $2,200 on it." Meaning, you have about $8,200 of equity (down payment) in the car.
"I've also got $2,000 in savings I want to put down" Meaning, with the trade, you will be able to give the dealer a total of about $10,200 down towards the purchase.
"I want to keep my payments under $400 per month for 60 months." That monthly payment schedule will finance roughly $20,000. The total price of the whole package can be the $20,000 plus the $10,200 you have handed the dealer, or $30,200. This means a new car in the price range of $28,000, because there will be, generally, about 10 percent added in taxes, license, fees, and so forth.
It also means that the whole deal, by the time you have paid it off in five years, will have cost you about $34,200 ($400 times 60 months is $24,000, plus the $10,200 you gave the dealer in the form of your trade and the $2,000 down).
Your Current Vehicle - Trade-In or Private Sell?
If your car is in excellent condition (off-the showroom floor by KBB standards), and you have impeccable service records then you should probably try selling your vehicle private party and use all or part of the cash as a down payment. If it needs work then you may end up spending more getting it ready to sell than you would make back - so be REALISTIC when deciding.
For most of us, that means we would be trading in. So the first thing you should do is pull a Kelley Blue Book Trade-In value on your vehicle. This allows you to have a good idea of what your vehicle is worth to a dealer on trade-in. Keep in mind that every mile you put on it after you pull your value decreases the vehicle's value.
If however, you are Mr. Pristine, you should use KBB.com's Private Party Value to find a fair asking price for your vehicle as a private seller. Remember, these sites are only guides and asking prices, and should be used as such.
Loan Amount
To discover the amount you need to borrow, calculate the monthly payment you can afford using a payment calculator. This tool factors in the interest rate and terms for your loan. You can then add your available down payment cash to the loan amount to arrive at a price that works for you. Don't forget to add any dealer incentives that may be available to your down payment amount and remember to add state tax and license fees. Both of which are available at your local DMV.
New Car Pricing
Invoice Pricing
The new car pricing report details the invoice price on each trim level. Dealer Invoice is the dealer's cost for the vehicle only and doesn't include any of the dealer's costs for advertising, selling, preparing, displaying, or financing the vehicle.
MSRP (Manufacturer's Suggested Retail Price)
The dreaded MSRP aka "sticker price." This is required by law to be posted on every new vehicle and is usually the highest market price.
Fair Purchase Price Range
KBB has a great tool on their website when checking new vehicle prices. Updated weekly, the experts at KBB have developed the most accurate pricing guidelines for new-car buyers based on purchase data collected across the country.
When you stick to a budget it will give you piece of mind for both now and the future. Also, remember that you pay more than a dollar back for every dollar that you borrow which means that a larger down payment could make more sense long term. There are times however, when it would make more sense to use the money towards more useful, ie. if you get a low interest rate on a vehicle and can afford the payments, you could use the money you have saved for a down payment to pay off credit cards with higher interest rates. This will end up saving you money in the long run in another area. With these principles in place, you should be able to begin in-depth research on your new, shorter list of cars.
Step 4: Do Your Research Online
What makes a new car the best new car for you?
With the overwhelming amount of data available online, what specifically should you research? There are pricing and equipment options to consider, but what else? Information about safety, quality, and five year cost of ownership are other important facts to discover. These ratings will help you achieve some piece of mind. Follow up by researching owner opinions and expert reviews.
I hope you find this guide useful when purchasing your next vehicle. All of the tools when used properly and in unison will greatly improve your car buying process before you even set foot in a dealership.
If you would like to stay up to date when new posts are published please subscribe to the mailing list. I also hold a live chat every Thursday from 2-3 pm EST.
Comments