The Ultimate Guide to Buying a Car

Buying a New Car - easisalary

Buy with confidence and make sure that you get a great deal on your next car

Congratulations on your decision to buy a new car!

Buying a new car should be an exciting and positive experience, however, it’s hard to avoid feeling a little bit nervous.

This free resource was written to ensure that you understand the possible pitfalls when buying a new or near new car and designed to give you, the buyer, a little bit more information about the process from the seller’s point of view to help you get the best possible deal when you go car shopping.

In this concise, yet informative article you will learn;

  • What will happen when you arrive at the dealership
  • What questions you should be asking
  • How to identify tricks that dealers use to ‘hard sell’ you
  • How to work out how much your trade in is worth
  • Where dealers are making their money
  • How to make sure you get the best deal

So, let’s get started!

Before you go to the dealership

The most important thing to do before you even consider going to a dealership to buy a car is to do your research!

Find out as much as you can about the car you plan to buy before going to the dealership. It is now easier than ever to find out as much about the car you plan to buy as the sales person selling it to you knows. Educate yourself by looking at manufacturer websites, forums, reviews, blogs, dealership websites and talking to friends and family members who have purchased the same or similar car.

In addition to researching the car that you intend to purchase, research the dealership that you intend on purchasing it from. Chances are that you will be taking it back there for servicing and maintenance over the life of the vehicle so Google them. If you find out that other people have had an issue with after sales service, then there is a good chance that you will too. Choosing your car dealer is just as important as choosing your car.

When you get to the Dealership

Find the right sales person. A good car sales person will be well dressed, personable and have good product knowledge. If your sales person doesn’t possess these three qualities, ask to speak to a different sales person or go to a different dealership.

You are paying good money for a high-priced item, you deserve to deal with a professional. You will find that those sales people that take pride in their presentation, have a likable personality and have taken the time to know their product will be better to deal with and will leave you having had a better experience with your new car purchase.

You may find, more often than not, that you will be approached by one of the retail sales people in the yard when you arrive. Remember, it’s their job to serve you. Most purchasers will immediately put up a barrier by saying something like “I’m just looking” or “I’m not purchasing today, thank you” …this is what the sales person has come to expect and will just be going through the motions at this stage so that when you are ready to buy (whether it’s today, tomorrow, next week or next month) you are their client and they will earn the commission. That being the case, why not make her earn it?

If you come back saying “yes, you can help me” or “I was hoping someone would approach me, thank you” this will give you the option to ask any questions that you have about the car, gauge whether she is someone who you would like to deal with and ensure that there will be absolutely no objections when you want to take the car for a test drive.

Stuck for questions to ask? Why not try;

  • What is the fuel consumption for this vehicle?
  • What is the ANCAP safety rating?
  • How many child seats can it fit in the back?
  • Does this model have good resale value?
  • What colours are available for delivery this month?

It’s all about the qualified lead

A qualified lead is a customer who is ready to buy today. Car sales people become experts at working out who is ready to buy today, their livelihood depends on it. It’s a waste of your time and the sales person’s time to start negotiating a price unless you’re ready to buy today. If you do happen to negotiate a great price with a sales person, but you’re unwilling to sign an order you will find that the next time you come in and you are ready to buy, you might not get to the same point, or get the same level of service.

Negotiating the price

When you’re negotiating the deal, it’s the sales person’s job to get you comfortable with the price and sign an offer to purchase to present to the sales manager for acceptance. The sales person is your agent, she wants to sell the car just as much as you want to buy it so you need to work with her.

Be committed to the vehicle you want and a price that you’d be happy to pay before you start negotiating. If you have your end game set in your head, all you need to do is stick to your guns and make sure you get there. If you do, you’ve had a win. If not, there’s always room to re-assess away from the negotiating table.

Last minute freebies

If you don’t ask, you don’t get. If you want a set of mats or tint (or both) to be included in the price that you negotiate with the sales person, ask this before she takes it to her manager to sign off. Once you’ve done the deal, you have a significantly lower chance of getting these included at the same price.

What’s in it for the sales person?

The industry standard for a car sales person is to earn a base salary plus 15% of the gross commission that they write, so it’s in their interest for you to pay as close to the retail price as possible. This means that if the dealership makes $1,000 from the sale, the sales person will get paid $150.00

Pick a colour, any colour

Choosing the colour is an important part of choosing your car. Different colours will have different availabilities and you may be able to have your vehicle supplied sooner if you are willing to be open to other colours. It’s a good idea to have a shortlist of colours, in preference order before going to the dealership. All manufacturers will have a colour chart available on their website so that you can get an indication of the colours available. Vehicle colours look different on the computer than they do in real life, so make sure you see the colour ‘in the flesh’ before making your commitment.

What about resale value?

All cars go down in value, no matter what you purchase. However, some decrease at a faster rate than others. What your car is going to be worth when you are ready to dispose of it is as important as what you pay for it today. Do your research and make sure that your car is going to hold its value. You can find this out by checking what the equivalent superseded model is trading for in your local paper or at a free online directory such as www.redbook.com.au or www.glassguide.com.au or ask your sales person for their recommendation.

After the sale

Finance and Insurance

There are many ways to pay for your new car, you may have saved cash, you may draw down on your mortgage, you may get a personal loan from the bank or you may choose to finance your new car using a secured loan.

If you’re going to finance your car, a secured loan is a very good option to consider for most people, because you will get a much better repayment structure than taking out a personal loan and it doesn’t require you to reduce the equity that you have in your biggest (mostly appreciating) asset; your home.

Dealers will almost always have a relationship with an insurance broker who can quote for comprehensive insurance on your car, you may also choose to go online to get indicative pricing on a number of different insurance websites, or even one of the many comparisons sites available. It’s a good idea to get a few quotes and make sure that you compare the product disclosure statements to make sure you are getting what you want from your insurer. If you finance your car the financier will require that you take out comprehensive insurance prior to settlement.

The other option is to consider salary sacrificing a car, which is also known as novated leasing. A salary packaged car loan will generally cover everything from the price of the car to the running costs like petrol, servicing, etc.

After Care

You should always talk to the After-Care sales person because they have some very good products to offer, if you haven’t already negotiated this into the price. Tint will help keep your car cool during the warmer months. Mats, Paint Protection, Fabric Protection and Rust Proofing will protect your car and keep it newer for longer.

It’s important to remember that dealerships will generally mark up the price on these accessories heavily. Remember, you can shop around for these products, it’s not just dealerships that offer these products. Often you can find an independent supplier who will come to you, and do it cheaper after you’ve taken delivery of the car. Don’t pay full retail on aftercare products.

How does the dealership make their money?

You may think that the key area of income for a car dealership is in selling you a car. It’s not. This is just the tip of the iceberg.

If you are buying a new (or near new) car, chances are you have an old car to trade. Dealers will generally only buy your car off you for less than they expect to be able to re-sell it for, either on their lot or through a wholesaler.

Once you’ve committed to purchase by signing the ‘offer to purchase’ or OTP you are then introduced to the business manager, whose job it is to arrange finance for you, if you haven’t already arranged it. The Finance and Insurance Department (F and I Department) is often the most profitable area of a well-run dealership, here the dealership makes money from brokering finance business through their partnered financiers and reselling comprehensive insurance and warranties.

Depending on the dealership you go to you may be introduced to someone from the aftercare team on the day, or perhaps a few days after you’ve purchased your car (before you take delivery) who will try and sell you tint, mats, paint protection… and whatever else they can think of. Dealerships often sell these products with a significant mark up over their cost price. If you want to take up the offer on one or all of these products, remember you can negotiate the price on this too.

After your new car, has been delivered, a good dealership will follow up with you a few weeks later, firstly; to ensure that you’re happy with the purchase but secondly and most importantly, to ask you to have your vehicle serviced and maintained at their dealership, so that they can continue to serve you (and make money from you) for as long as you have the car.

If you are happy with your car purchase experience and have been looked after well by the service center, there is a good chance that you may even choose to buy your next car from the same dealership… and the cycle starts again.

Trade in tips

If you are trading in your old car on the purchase of your new car the dealer will insist that you focus on the “change over figure” which is the difference between the price of the new car, minus your trade in value.

You may find that you will achieve a better result not making the “change over” price the focus. By negotiating the two deals separately it means that you can ensure that you are getting the best possible price on your new car and the most money possible for your trade. It also means that if you choose to sell your trade in privately, or to another dealer or wholesaler you can do that without having to renegotiate the deal

When it comes to your trade valuation it’s important to be realistic. You are trading your car in, not selling it to a retail buyer. Cars advertised in the paper or online classified rarely sell for the price that they are advertised for. Just think, when you are buying a car you want to pay the lowest possible price… and so does everyone else. A very rough guide for what you can expect as a trade valuation is;

How much it’s advertised for How much you can expect
$5,000 $2,000
$10,000 $6,000
$20,000 $16,000
$25,000 $21,000
$30,000 $26,000
$35,000 $30,000
$40,000 $35,000
$45,000 $40,000

Remember, your trade in value will vary depending on the condition, kilometers, colour, transmission, and accessories. If you have a well-maintained car with low kilometers in a popular colour you’ll generally get more for it than a poorly maintained car with high kilometers in an undesirable colour.

A final word

You are there to buy a car and they are there to sell you a car, you have the right to choose to purchase or not to purchase and you have the right to control the experience so that it is enjoyable for you and you get your next car at a price that you are happy paying.

Be courteous, honest and direct… if you are unhappy with the way that the negotiation is going then say something, you will find that your honesty and forthrightness will be appreciated and respected and will generally result in a positive outcome for you.

Have fun car shopping!