Expert Tips - New Car Buying

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Utilize these Expert Tips from each of the 8 Essential Steps to help guide you through the new vehicle purchasing or leasing process. For even more helpful advice, review each of the 8 Essential Steps in detail.



Step 1 – Select the Right Car:

  • Do not spend more than 15% of your gross income or 20% of take-home pay on your vehicle’s monthly payment. Your total debt (including credit cards, rent, mortgage) should not exceed 36% of your gross income.

  • Always consider the costs for insurance, maintenance, fuel and other ownership expenses. Call your primary insurer or utilize a great company like Esurance for insurance quotes.

Step 2 – Value Your Trade:

  • Alpha CBA recommends that you use at least one online resource such as Kelley Blue Book ® for fair “Trade-In” and private-party-sale pricing information for your area. Other sites such as Edmunds and JD Power can also be used to easily compare information from multiple sources in order to accurately assess your vehicle’s value.

  • Take your old vehicle into CarMax or a similar car buying service for a free “Trade-In” evaluation. The quote is usually good for seven to ten days and their valuation can be used as a bargaining chip with the dealer.

  • If you have a large amount of “Negative Equity”, think about postponing your buying or leasing decision until you’re in a positive equity position or have enough of a down payment to offset the negative amount.

Step 3 – Price Your New Vehicle:

  • Do not get influenced by abnormally low online buying service pricing. Some dealers quote low prices on these sites due to the inclusion of high margin dealer-installed add-on products on all their cars. A $30,000 car may be quoted for sale at $28,000 by one such dealership. You’ll then go in and find out that they have installed $2,000 in “OFIP” items (nitrogen in tires, paint protection) requiring you to pay the same $30,000, if not more, for the vehicle. Since these products only cost the dealership a few hundred dollars, they essentially create an illusion in pricing to draw customers in.

  • Be aware of each “Rebate” and “Rate Incentive” that may be available to you by visiting Cars.com. A manufacturer may also offer you an additional “Rebate” for first-time buyers, college grads, military personnel and many others. Alpha CBA’s “Expert Buyer Report” (available in Level 2 and Level 3 services) will include a summary of all such incentives as published by AISRebates. Qualifying amounts should be deducted from the best price researched online.

Step 4 – Compare Buying vs Leasing:

  • Never enter into a “Lease” unless you expect to keep the vehicle for the full “Term”.

Step 5 – Secure Financing:

  • Only buy an automobile that you can afford. Estimate how much you can spend by using the Affordability calculator.

  • Know your credit score. Utilize one of the free credit score providers such as Credit Karma and Annual Credit Report to get started. A poor credit score such as one below 550 will make it difficult to obtain financing without a large down payment. Knowing your actual credit score will make it much easier for you to negotiate the best finance rate.

  • If you have a low credit score, consider delaying your new vehicle purchase for several months in order to clean up your credit history and to investigate any inaccurate information.

  • Get pre-qualified for a loan from your bank, credit union or a trusted affiliate such as Bankrate before you even step foot in a dealership. You will then know how much you can spend and know exactly what interest rate the dealer would have to beat. Many lenders will negotiate with you on their rates and fees so always ask for a better deal.

  • Try to finance no more than 80% of your chosen vehicle’s “Invoice Price” in order to maintain positive equity in your vehicle throughout the “Term”.

Step 6 – Understand Dealer Products:

  • Alpha CBA recommends that you research all of the “F&I Products” that you are considering before visiting the dealership (STEP 7).

  • If you do decide to purchase any “F&I Products”, always haggle for the best price. All of these products include high profit margins for the dealership and that the cost for each can be negotiated quite easily. As a general rule, never pay more than 70% of the dealer’s originally quoted price or the best price that you can find online from credible third party providers such as CarChex.

Step 7 – Visit the Dealership:

  • Do not get switched into a “Lease” if you were originally expecting to buy and are not fully prepared. Nearly one out of every four buyers end up leasing without having any opportunity to do their homework. Only 5-6% of those same customers actually even considered leasing until it was presented to them at the dealership.

  • Schedule your test drive and dealer visit ahead of time via phone or through the dealer’s website. This will ensure that your specific vehicle is ready when you arrive.

  • Have your car appraised first before you start negotiating the price of your new vehicle or before you sign anything. To save time, have the dealer perform the “Trade-In” evaluation at the same time that you take your chosen vehicle for a final test drive

  • Don’t start your negotiation by using the MSRP or a monthly payment amount. Use the information obtained in STEP 3 to obtain a fair deal.

  • Never pay more for any “F&I Products” than what was researched in STEP 6. Only consider “Extended Warranty”, “GAP” and “Tire & Wheel” plans after reviewing that same step.

  • Do not buy any “Other F&I Products” as these products have high profit margins.

Step 8 – Close the Deal:

  • Review all prior Steps in detail to formulate your own personal winning strategy for all of the dealership games that you will encounter.

  • Do not allow the dealer to sell you on a lower payment by just extending the “Term”. Obtain a lower payment by only reducing the price that you are paying for the vehicle.

  • Do not pay any secondary delivery fees, advertising charges, dealer markups and dealer preparation fees. All fees outside of title, registration, acquisition and disposition should only add up to a few hundred dollars. If a dealership insists on charging you a pre-delivery Service Charge or Dealer Fee, have them reduce the price of the new vehicle accordingly.

  • Double-check the financial paperwork for unknown or unwanted items before signing. Perform your own calculations using one of our many CALCULATORS and your completed “Deal Summary” or “Expert Buyer Report” to identify such items.

  • Never be afraid to walk away at any time before signing a contract if you are not comfortable with the transaction.

Conclusion:

  • Cancel any unused portion of the “F&I Products” still in effect on your “Trade-In”.

  • If interest rates fall or if your credit rating improves since your purchase, consider refinancing your loan at a lower rate. Check with your bank, credit union and an online resource such as BankRate to find the best rate.