How to Budget for a New Car Purchase - %DEALER_NAME% (2024)

FAQs

Should you tell a car salesman your budget? ›

Pay for the car in cash or get your own financing if you can, but don't reveal how you're going to pay until after you've negotiated down the total car price. (Dealers may be less likely to negotiate if they know they can't profit from your financing.)

Unfortunately, it isn't an exact science because it changes from car to car and dealer to dealer. However, you can use the guideline of 2 or 3% on less expensive brands, and 5 to 10% on luxury brands as a rule of thumb.

Counter the monthly payment conversation: Your dealer may ask what you're hoping to pay for your car each month. Instead, tell your salesperson that you'd prefer discussing the car's out-the-door price and fair market value. If need be, you can always discuss refinancing your car loan down the road.

Once you find a vehicle that fits your budget and your lifestyle, calculate a profit margin that's both within your price range and fair to the dealership. Putting in an offer that's 3 to 5 percent higher than the invoice price is typically fair. Do your research to determine what this figure should be.

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Despite the MSRP sticker price of a car, you can make any offer, and a good salesperson should be willing to consider a reasonable price based on the car's condition. If the car you want has been on the lot for several weeks, use the fact that it isn't moving to bring the price down.

As independent franchises, dealers can sell the car at any price. Some dealerships and brands have developed no-haggle pricing. The price on the window is the price of the car, they say. In most cases, you'll still need to negotiate the value of your trade, the cost of financing and the price of any add-ons.

Be careful, while (almost) everything is negotiable, and you're allowed a lot more “give” in expensive items, overzealous haggling will turn off the seller and lowballing should be steered clear of. A good rule of thumb is any offer below 25 percent of the ticket price is a slap in the face.

The ploy, “Let me go talk to my manager" is called a T O or a turn over. Most dealerships require that a salesperson do a T O before letting the customer leave, in other words, if they cant close the deal then they turn it over and let someone else try.

Why not tell a car dealer you are paying cash? ›

Paying cash may hinder your chances of getting the best deal

"When dealers are negotiating the purchase price, they anticipate making money on the back end, via financing," Bill explains. "So if you tell them up front you're paying cash, the dealer knows he has no opportunity to make money off you from financing.

It is considered reasonable to start by asking for 5% off the invoice price of a new car and negotiate from there. Depending on how the negotiation goes, you should end up paying between the invoice price and the sticker price. Used cards. You tend to have more wiggle room with used cars.

The goal of most buyers is to negotiate a price on a new car that's well below the sticker price, or MSRP. A more attractive objective to try for is the dealer invoice cost, which is theoretically the price that the dealer paid the vehicle's manufacturer.

That's the gap between the wholesale cost from the manufacturer to the retail cost (sticker price). Often people think that this gap is wider than it really is. Typically there is a margin of three to eight percent between invoice and MSRP.

California's ASFA (at California Civil Code Section 2982(a)(6)) specifically requires that all vehicle purchase contract expressly disclose the amount of any deferred down payments that the car buyer has agreed to make.

"Under no circ*mstances should you start talking about monthly payments," says John Nielson, Director of Auto Repair and Buying for AAA. "You should just focus on negotiating the purchase price.

Calculate what you expect to pay for that new vehicle. Again, don't tell the salesperson that you plan to pay cash before negotiating. The dealership may boost the car's price by over $1,000 to make up for the lost profit from not selling accessories or the extended warranty and not handling the loan.