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4 Car Buying Tips You Absolutely Need to Know

4 Car Buying Tips You Absolutely Need to Know

4 Car Buying Tips You Absolutely Need to Know
March 26
18:55 2018

Buying a new car is always exciting, but some find the process stressful. Many people lose sleep over the prospects of negotiating with a car dealership.

The fact is that buying a new car is a routine business transaction. In 2017, the U.S. auto industry sold over 17 million vehicles.

The reality is that prepared buyers walk away with great deals. You should not step into a car dealership without being armed with knowledge. Read on to learn 4 car buying tips that you absolutely need to know.

1) Download an Auto Loan Calculator

If you are financing a vehicle, an auto loan calculator is a great way to set a monthly budget. Generally, there are three inputs into the calculator.

You need to know the desired sales price, the interest rate, and the length of the loan. Interest rates and loan terms are easy to find.

A simple internet search shows you the average interest rate on a car loan. In terms of length, the loan term on an auto loan is generally 3 to 6 years and depends on what the buyer can afford monthly. This is a great way to settle on the price range of the vehicle you are shopping for.

2) Shop Around for Financing

One of the big mistakes that buyers make is saving financing for the dealership. Instead, you should shop around and get pre-approved for an auto loan before arriving at the dealership.

Auto dealerships commonly use the financing process to maximize profit. For example, consider a scenario in which the dealer helps you find a car for $400 per month.

At face value, this sounds great because it meets your monthly budget. However, the dealer extends the loan term from 72 to 75 months to squeeze an extra $1,200 profit out of the sale. The auto dealer can make similar upward adjustments on interest rates.

3) Do Not Fall in Love With a Specific Vehicle

Another mistake that buyers make is falling in love with a specific make and model. The ability to walk away from a dealer is powerful.

Once the dealer knows that you are set on a specific vehicle, they hold all of the negotiating leverage. Even if you do have your mind set on one vehicle, keep that fact hidden from the dealer.

4) Determine the Fair Market Value of the Vehicle

This is one of the most important car buying tips. Preparation is key to getting a good deal.

A prepared buyer researches and finds the fair market value of a vehicle before shopping. The auto dealer wants to sell the vehicle to you at the sticker price, which maximizes their profit margin.

The first step is to obtain the invoice price of the vehicle. This is the price that the dealer pays the auto manufacturer for the new car.

This price does not include dealer fees or profit. Fair market value is generally going to fall between the invoice and sticker price.

Car Buying Tips – Wrapping It Up

These are just a few of the many car buying tips that buyers should consider before shopping. Spending a few hours researching auto loans and invoice prices could save thousands during negotiations.

If you enjoyed this article about car buying tips, please check out our auto blog for other great pieces.

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