My neighbor just told me how he purchased his new vehicle and I had to share how he did it.
First, he did his research for what he wanted to buy and how much it should cost (all the usual places, Consumer Reports, Edmunds.com, etc.). Then, he went to the dealership at the end of the month when the dealers feel the pressure to meet sales quotas. He selected his vehicle & didn’t let them talk him into ‘upsizing’ his purchase with a higher end car model or adding unnecessary extras.
Negotiating the price. During price negotiations, he told them he was pre-approved for a loan @ x%, but he wasn’t dead set on using his bank for the loan. He also mentioned he had a late model car he ‘would probably’ trade in, but he held of negotiating his trade-in value until after the new purchase price was agreed upon. That was important because he was able to negotiate only the price of the new car, not the price of the trade-in. Dealers expect most people to be set on getting a great deal on the new car and not being very concerned about negotiating hard for their trade-in, especially after the new vehicle purchase price has been agreed upon. Make sure you get the price in writing!
With the purchase price agreed upon (well under dealer invoice), he went ahead and financed through the dealer. What?!? The add on points and take a commission! That’s exactly what he counted on… He was able to negotiate a couple thousand dollars lower purchase price by using dealer financing. The dealer figured to make up the lower sale price from the kick back on the loan and by giving him a less than stellar deal on his trade-in. Only, my neighbor decided at the end he didn’t want to trade his car in.
Then he drove off the lot, satisfied he got the best deal he could.
After the loan was processed, he paid it off using a cash back credit card (with an introductory 3% cash back for new purchases).
He then promptly paid the card balance with cash. Overall, he saved a few thousand on the purchase price, then got over $750 cash back on his card. Of course, this won’t work for everyone because they don’t have $20,000+ in cash for a new car, but if you have the cash, it might be an interesting option.
Another option is playing the 0% interest transfer game, and transferring the loan to a 0% credit card – effectively buying a car for 0% interest. Be careful with this option, and make sure you pay your card off in time!
However you decide to make your next car purchase, the key is to do your research, put the pressure on the dealer, don’t get talked into unnecessary extras, negotiate one transaction at a time, and look for any other way to lower your cost (in this case dealer financing).