Think you’re equipped to negotiate the best possible price on a new car or truck?
Most people do, and so they go it alone when buying a new vehicle, negotiating with dealers who have years of sales experience and trade secrets on their side.
We asked Viraf Baliwalla, owner of Automall Network, a Toronto-based auto broker and licensed car dealer, to offer 10 tips to avoid what he calls “buyer’s regret.”
Set a budget
Before all else, get your figures in order.
“The salesperson is not there to educate you on the best way to buy a car,” warns Baliwalla. “They are there to sell you one.”
Instead, seek advice from a financial planner first, whether it’s a bank loan expert, an accountant, or a friend or relative with money-management skills.
If you are considering a broker to find your vehicle, be wary of your choice.
“There are many brokers out there who are lead generators for the dealerships, and not working for customers,” Baliwalla says. “You have to make sure the broker isn’t getting any compensation from a dealer. Research the broker and ask for references.”
Make a checklist
Know the type of vehicle you want to buy and narrow it down to the models and brands you are considering. Decide which options and features you want and don’t want.
The Internet is a great place to research your potential vehicles, and to check out reviews from people who already own one.
“Get this information from the comfort of your home and away from the high pressure in the dealership,” says Baliwalla. “Once you are in there, they don’t want you to leave without doing the deal right then and there.”
He also suggests steering clear of dealer add-ons, such as rust-proofing, leather and cloth treatments, and extended warranties. They can be bought for far less elsewhere.
Be willing to walk away
If you feel you are not getting the deal you want, simply walk away.
“They know that the minute you walk out the door and take the time to think about it, you may not come back,” Baliwalla says. “Some people might go to two dealers and others are willing to go to several to get the best price.”
He also suggests getting quotes from dealerships farther away, because regardless of where you buy the vehicle, you’ll still be able to get it serviced close to home.
Buy or lease?
“Most people should not be leasing,” Baliwalla says. “Work out the numbers on a spreadsheet first, and make sure you understand what you’re getting into when you lease.”
He says the biggest pitfall in leasing is trying to get out of it. And be wary of the common ploy to get customers to upgrade their cars before the end of the lease term.
“You’re in the dealership getting your car serviced and a salesperson sees you looking at new vehicles. You are two years into a four-year lease, but you’re told you can step up to a new model with all the bells and whistles.”
The dealer is willing to buy out your old contract and draw up another one for the newer car.
“Somebody’s going to be paying for the old lease and, believe me, it’s not going to be the dealership,” says Baliwalla. “They’re going to take that amount you owe and bury it in the next car, by spreading it over a longer term.”
Cash or financing?
Shop for the price and not for the payment plan.
“We live in a cash-flow society and tend to shop on payment plan over price,” says Baliwalla. “Sales people are trained to get you off the price and onto monthly payments, because there is much less negotiating involved.”
“One of the tricks is to ask you what you can afford? If you say $400 a month, the dealer will look at the grid and say it’ll cost $410, and explain that the extra $10 a month is less than a cup of coffee a day. Most people will say they can afford that.”
“Invoice price” is a sales gimmick
“Forget the whole concept of dealer’s invoice price. It’s fake,” says Baliwalla.
“It is designed to set a starting point for negotiating and everything after that is profit,” he says. “It doesn’t matter what the dealer pays or makes. All that matters is what is the best price I can get this car for. We call that the market price.”
There are two levels of rebates: one that is shared with customers and one that is hidden for dealers to use to lock in a deal.
“The hidden, or discretionary, rebates are out there, but not in all cases,” says Baliwalla. “You can ask about these, but the dealers aren’t obliged to tell you about them.”
He adds it can often be better to collect a rebate and finance through the bank, instead of taking the manufacturer’s seemingly low finance rate.
“If you believe 0 per cent is free money, you will learn the hard way that it isn’t. If you’re given the option of a $3,000 to $5,000 rebate, you might be better off to get a bank loan at 7 per cent and take the rebate.”
Trade-in or private sale?
You will always get more selling your current vehicle privately than if you trade it in, because the dealer will give you the wholesale price towards your purchase, not its market value.
“They may give you a bit more (than wholesale), because it’s going to make you happy and it’s what you want to hear, but they will build that into the price (of the new car). You need to focus on what you are paying for the new car versus what you’re getting for the old one.”
Hire a broker or go it alone?
Baliwalla says it should be a fairly easy decision, once you know which car you want and how much it will cost at a dealership.
“We’ll tell you right up front, at no charge, what we can get it for and we will charge you $195 if you decide to go ahead with it. We will make sure that every bit of a discount we get goes back to you.”
He adds they advise their clients to test drive the vehicle first to make sure it suits them. Sometimes the cheapest car isn’t the right one for you.
The hotter the car, the colder the deal
“If it’s a really hot car there’s virtually no negotiating,” Baliwalla admits. “You go on a waiting list and pay the full price.”