Now that you have hopefully read and digested most of what was discussed in part (A) of this segment. I’m sure you have come up with a few observations of your own when it comes to your past or previous experiences going to a dealership? Everyone has horror stories about automobile dealerships, but rarely do we hear about a good buying experience, either because people in general fear the very mention of buying a new car or they don’t understand the process? This section is intended to not only educate you about the process of negotiation, but also make you feel at ease and come out a winner!
New or Used Vehicles, If you are interested in a new vehicle, we recommend you do some on line investigation to determine the invoice cost of your propose ‘Perfect Vehicle’. Keep in mind there may well be additional dealer ‘ Cash or incentives’ This means the manufacturer pays the dealer additional money for each vehicle they order or sell in a particular model. Slower moving models pay the dealer larger cash incentives. Don’t be afraid to ask your sales representative about dealer’s cash or incentives, including any rebates that might be offered.
As mentioned in our first segment, concerning: (How much you can afford?) There are a few methods to insure a successful negotiation of your ‘Perfect Car’ for you.
A very basic rule of thumb for calculating a payment: While each individual loan is different, it is possible to use the following for an easy means to calculate a loan payment. If your credit standing is good to exceptional or poor to bad? Even somewhere in between this should be something that will be helpful during the negotiating process. We will direct your attention to this equitation, for each $1,000.00 amount financed: You can use the following as a good example: For every Thousand dollars calculated
Exceptional to Good credit: amount financed: $10,000.00 X $17.00In other words a ten thousand dollar loan should be in the area of $170.00 per month
Poor to Bad credit, for every $1,000.00 financed you can expect $23.00 per thousand dollars. Equally a loan or amount financed at this credit condition: $10,000.00 you can expect at least $230.00 per month payment.
Good credit: $17.00 per thousand
Bad Credit: $23.00 per thousand
Selling Price vs. Monthly payment. While you might think the selling price reflects something relative to monthly payment. During the negotiation, you couldn’t be farther from reality. Interest rate vs. selling price and length of term are manipulated in several ways and offered to you by the dealerships sales manager via your sales representative. In many dealerships the first responsibility or your sales representative, maybe even before you have come close to selecting a vehicle that catches your eye. Is to establish if you are a (Payment Buyer). Being a payment buyer allows the dealerships sales manager to actually increase the selling price without you being aware of the fact. By incrementally raising the interest rate a few points and lengthening the term of the loan by a few Months.
This sales practice has a direct reflection and effect on the profit margin the dealership receives from your specific transaction. You can expect this to happen when a dealership employs the following method of selling.
T-O System: T-O simply means: Turn Over the customer to another sales representative or manager as many times as possible, to insure 1. The sale and 2. Greater increase in gross profit.
Straight Sell: Is the other typical automobile industry recognized system of selling. Straight Sell: Straight sell, implies exactly what or how the system operates. Straight sell in most cases allows the majority if not all of your vehicle purchase to be conducted by one sales representative from: The initial greeting to the demonstration and even the negotiation and purchase of your ‘ Perfect vehicle’.
If you wish to deal with Straight Sell or T-O. You can always ask if the dealership uses one or the other. Once the process has begun you will know which is which, very quickly!
Note: The Authors and editors of this web site Strongly Recommend you find a: Straight Sell Dealership.
There is no question Straight Sell dealerships by their very nature, provide a result something more to your liking and an all around better buying experience.
Always remember: Don’t be confused by a lower or higher monthly payment vs. the actual selling price. Because the length of the term is something that confuses the true picture! Monthly payment and selling price have exactly the same effect on your wallet, because the money comes from all of your pockets, not just one. When and if you discuss a payment that works for your particular budget, make sure you have calculated into your proposed budget, vehicle insurance as discussed in sections number (1) one and (8) eight. More car, or a more expensive vehicle means more insurance cost and maintenance responsibility to consider.
Somewhere between the negotiating process and now, you have undoubtedly completed at least a five (5) liner. Meaning the first five lines, of an automotive credit application. This is to ensure the dealership what your credit score is and to determine a basis of credit worthiness. This allows the dealership to access the amount of money your credit standing will support or budget. Lenders or banks traditionally calculate your ability to service debt when a prospective lender reviews your completed application for determining an approval for an actual vehicle loan. In the case of poor credit or previous payment issues that show up. Lenders require a higher rate of interest to be charged in order to cover the spread? The spread or increased interest allows lenders to reap greater odds in their favor if and when you possibly default on your loan obligation. Increased interest has a direct reflection on lenders willingness or greed to loan you money on your purchase. Obviously the higher the interest- rate the greater the amount of profit to the lender. Later we will give you a more complete list of possibilities for alternatives to Dealerships (In-House Vehicle financing).
If your previous credit history has a few issues or unsolved opportunities. You should expect a greater request for additional down payment. First and foremost a larger or greater amount of down payment required by the lender does several things. First it makes a greater investment towards the vehicle purchase, insuring the buyer won’t walk away from the obligation id something goes wrong. Second the lender may ask the dealership for a portion of your down payment to be held in reserve to protect the lender from possible default.
This is commonly referred to as a (Discount) example:(The dealership gives a portion of their profit to secure financing) may be requested by a lender in order to provide a cushion against possible loss again due to a default of the vehicle loan.
Exceptional and Good Credit standing: This requires a much greater relaxed requirement for down payment and interest rate.
Getting your own financing, first: Providing your own financing rather then dealer assisted financing, before you actually purchase a vehicle is one of the best recommendation we can give. Rather then putting yourself over a barrel. Getting a pre-approved loan before you purchase a vehicle or maybe even before you begin to negotiate? Is the single best decision, you can make to save yourself tons of money. With a pre-approved loan and locked in interest rate. The dealership begins immediately to compete with the rate you have secured. This provides you with an even greater way to save yourself money. There is no better way to save money, and then have two or more possible lenders all competing for your business.
Lenders: We feel your best bet when getting a vehicle loan is: Your own Credit Union. Credit unions are lending members or depositors money, instead you money that is purchased in bulk from the ‘Fed’ at the prevailing interest rate. Credit unions have rates far more attractive then traditional banks. Credit unions provide an entire array of services you should take advantage of. ‘Free checking or reduced rates’ for members. Credit Unions also offer at very attractive prices: Extended Warranties: Extended warranties offered by dealerships traditionally start at $995.00 and up to and possibly higher then $2,995.00 depending upon the make and model. It is entirely possible for a Credit Union to offer a similar Extended warranty at less then One Half the rate offered by the competing dealerships. Many models with a high rate of reliability offered by a dealership for $995.00 we found them with similar coverage and terms, including exact same deductibles. We priced them at 30% of the dealership cost to the Credit Union member…not too bad when you consider you just saved yourself a few hundred dollars in addition to the money you saved by getting a much better interest rate.
If you were originally attracted to s specific dealership because of a monthly payment was quoted. You can be assured the payment quoted from for Tier (1) one or Level one credit. Anything less then perfect credit will definitely change the amount you might expect.
Other conditions that definitely affect the sales price of a vehicle are: Factory rebate or Factory insensitive: Vehicle manufacturers offer larger rebates and insensitive on slower moving and vehicles that are piling up in inventory. For a new vehicle purchase you can expect and should take advantage of these as a way to save more on your purchase. Being flexible and considering these factors is important and shouldn’t be ignored.
Comparing the advantage of in house financing with attractive advertised rates vs. something you know is available to you through own bank or credit union is equally important when making your decision.
While you review this information why not click on a few links made available for different services? Auto loans, Extended Warranties, Service Contracts, Vehicle Insurance and much more. This additional information is also offered free of charge and without obligation. Why not take advantage and save yourself even more money?
The Final segment number (10) ten. We will discuss several forms and documents you will need to sign, including your purchase contract. Getting everything agreed upon by both sides in writing.