Five Golden Rules for Buying a New Car


Buying a new car is a very stressful experience. It shouldn’t be, but it is. There’s a lot of money at stake, and the ‘battle’ (to the extent there is one) is often asymmetric – in that the dealership is match-fit, selling dozens of cars each month, whereas you are probably not in the same league, in terms of experience.

Even so, buying a new car is a game with rules – so here’s how to stack the deck in your favour.

RULE 1: Shop at the end of the month

Dealerships have aggressive sales targets imposed upon them by car companies. They account for those targets – pass or fail – at the end of each month. Significant incentives are paid to dealerships that achieve their sales targets. This means that any dealership that is short of its target towards the end of the month is going to be highly motivated to make any sale, often by sacrificing a little profit on your potential purchase.

RULE 2: Buy a car that is in stock now

Car dealers own the cars that are on the showroom floor. They purchase them from the manufacturer on credit, and the interest bill is significant. This means that any dealer is going to be more highly motivated to sell you a car that is in stock, as opposed to a car that needs to be ordered in for you. Here, ‘motivated’ means ‘more likely to discount when pressed’.

RULE 3: Set a limit

If negotiation progresses, and the dealer offers you a price of, say, $39,990, you would be wise to offer a price you’re not prepared to pay more than: say, $35,000. Here’s how to stick to your limit: You say, “I really want this car but my wife/husband/whomever will kill me if I spend more than $35,000.” It’s critical that the person upon whom you abrogate responsibility for the limit is not present at the negotiations, and is uncontactable by telephone. This way, the dealer cannot go to work on them. You both want the same thing: they want to sell you the car; you want to purchase it. The only impediment is the budget, which is imposed remotely.

RULE 4: Walk away

If negotiations stall, thank the salesperson for his or her time, and leave. You might be surprised how malleable the price suddenly becomes, either immediately or over the next 72 hours.

RULE 5: Don’t place yourself under pressure

A common car sales tactic is to move heaven and earth to get a signature and a deposit from you before you leave. Dealerships know that the chances of you returning and subsequently purchasing are fundamentally reduced if you leave the premises. A good car salesman knows many ways to convince you that there is some great urgency underlying your purchase. (Such as: this offer is good for today only.) The reality is, there is no urgency. The price will be just as good tomorrow. You are in the driver’s seat – so take the time to consider this important choice, and don’t be railroaded into committing to the transaction simply because this suits the dealer.

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