It all boils down to doing some research to find out -
1. The Blue Book value of the car you want to buy, and what that term means. You can find this at edmunds.com
2. The Blue Book "suggested retail" and "trade-in value" of your trade-in and what those terms mean. You can find those at edmunds.com as well.
3. The new and used car loan interest rates are in your area - considering your credit rating of course. Bankrate.com will show you the rates for new and used car loans at the banks in your area.
With information available on the internet, new and used cars have become a commodity - that is they have a known value. This helps you as a consumer and will eventually force car dealers and salesman who can't accept that fact to find other lines of work - or "prey" on the hopefully relatively few unfortunates who don't have the tools to know what fair prices are.
With a little bit of homework at websites like edmonds.com, cars.com, autotrader.com, Official Kelley Blue Book Site, NADA Guides or autos.msn.com, you will be able to find the car that best suits your needs based on user and expert reviews, reliability ratings, gas mileage, size, power and a target purchase price.
These sites all have pretty similar information, and in some cases are using the same databases. If I had to pick one I'd go with edmunds.com. Make sure you read What is the "Kelley Blue Book" Price?.
A simple rule is never pay more than the Kelley Blue Book price. The Kelley Blue Book price is an average "asking price" not the "selling price". This price is the suggested retail price and you may, depending on the car and your location, pay less - or even substantially less. If you are buying a car that is popular because it's a good value; the Kelley Blue Book will probably be close to what you can get the car for - but again...never pay more than the Blue Book price.
Blue Book prices take into account the local market, mileage, options and condition of a vehicle. There are three categories for a car's condition - "excellent", "good" and "fair". Most dealers post the price for a used car that is in "excellent" condition. Which according to the Kelley Blue Book means -
- Looks new, is in excellent mechanical condition and needs no reconditioning.
- Never had any paint or body work and is free of rust.
- Clean title history and will pass a smog and safety inspection.
- Engine compartment is clean, with no fluid leaks and is free of any wear or visible defects.
- Complete and verifiable service records.
If a salesman can't, or won't tell you the asking price for a car - walk away. Actually if the dealer doesn't post the asking price and Blue Book value in the car window you should probably leave before a salesman approaches - unless you enjoy the game of haggling over the price, which is pretty pointless for you as a consumer given cars have a known market value thanks to the internet and you aren't going to fool a car salesman into giving you some super deal (although if you aren't educated he or she might be happy to fool you once the game begins).
If you end up going to a dealer and have to ask for the price and get a response like, "what price range are you looking for?", "what monthly payments are you looking for?" or something like "we can get you in this car for $459 a month"..walk.
If the salesman doesn't know what the asking price is (or won't tell you) and can't communicate to you what makes a particular car a good value, there's really no point in dealing with him or her. If you want to talk about the price and technical merit of a car and the salesperson would rather discuss what color you want, you are wasting your time - unless color is more important to you than cost, gas mileage, reliability, in-service history and whatever else makes a car a good value (of course since you did your research before hand you already know all these things - but it's reassuring and a lot less of a hassle to work with a competent sales person.)
The last car I bought the salesperson was very knowledgeable and helpful, there was no pressure and she suggested I use Edmonds.com to check on cars and go to other dealerships. That dealership posts their asking price and the Blue Book suggested retail price in all their cars.
Another dealership down the street had monthly payments in the windows of their cars, the salesperson didn't know or wouldn't say what they were asking for the car. He went inside to check with his boss (always the same thing...sigh) who came out and told me he was a liquidator - whatever that is. He wouldn't tell me the asking price either and wanted to know what sort of monthly payments I was looking for...or alternately what my price range was. He finally told me what the lease value of the car was (I don't know what that means) but it was $6,000 dollars over the Kelley Blue Book price for this used car. I just calmly told him, "I'm not going to do this" and walked away. I do feel sorry for people who get caught in that trap - but hopefully with the internet, which these shysters hate, it will be less and less common.
Another important item is knowing the value of your trade-in. There are two values for a used car, "the suggested retail" and the "trade-in value". The "trade-in" value is what you expect a dealer to give you for your used car and is less than "the suggested retail" that you would receive if you sell the car yourself. The dealer incurs the cost of safety inspections, reconditioning and other costs of doing business. If you decide to sell your used car yourself you may get some more money for it and you will have to decide if the hassle of dealing with strangers off Craigslist is worth the additional money. I sold a used car a year or so ago, which I posted on Craigslist. I got all kinds of responses (no one actually showed up with cash) - some promised to come and didn't, others had reasons why they needed me to give them the car. I ended up selling it to someone at work, who saw the ad on our internal classifieds. It's really a case by case decision.
After you've decided on the fair purchase price, value for your trade-in, and a good loan rate all you have left to do, is reject all of the add-ons that dealers will offer you. These will be items like extended warranties, upholstery treatment/protection plans, paint sealant/clearcoats, undercoating, window tints and insurance to pay off your loan if you kick the bucket.
Although generally not the case there may be cases where an extended warranty makes sense depending on the age, manufacturer's warranty and reliability of the vehicle. If you are buying a used car that is coming off a manufacturers warranty soon - it might make sense.
If you think you want any of the other optional features (like undercoating or window tints) it pays to shop around to see how the dealers price compares.
I personally think the best car deal is to buy a slightly used car that has depreciated for a year or two and still has plenty of time and miles on the manufacturers warranty. It's nice to have a brand new car but you pay a premium.
Buying a new (or new for you - used) car is a big purchase and should be a good experience. Do your homework and try to avoid the "I've got to have this car now" feeling that you get and that some salespeople will try to encourage. Try to go out to just look, sit in and test drive cars you may want to buy before you actually decide to pay your hard earned cash.
Happy motoring...
