For a first time car buyer the process can be both exciting and a bit overwhelming. The key to getting a good deal is to put aside your emotions and focus on the hard realities of the deal. After all, buying a car is the second-largest financial commitment - after purchasing a home - most people will make. The good news is there are many tools available to arm you with the information and strategy you need to arrive at the best deal.
Research your options
To snag a good deal on a car you'll first have to understand what a good deal is. Even if you're a great negotiator, getting a dealer to drop a car price from $50,000 to $45,000 isn't much help if the average selling price in your area is $40,000.
Talk to friends who have recently bought cars and read magazines describing the types and prices of available cars. Use the internet to search for typical selling prices and side-by-side comparison tools - available on Autoblog - to give you a feel for the type of price you should be shooting for.
Set up your financing
If you're borrowing to pay for your new car, get your financing in order before you talk to a dealer. Your credit union or local bank can often offer you a better rate than the car dealership, where interest on car loans generates a significant amount of profit. If your dealer can offer you a better rate once you're in the showroom, great — you can likely thank your pre-approved loan for getting you that lower interest rate. If you're having trouble getting financed at a reasonable interest rate, consider using a co-signer with good credit, such as a parent.
Get competitive quotes
Automotive sales are one of the most competitive industries in the world. Use that to your advantage by cross-shopping among several dealers. The internet makes getting competitive quotes particularly easy; most dealers these days have dedicated internet sales departments to handle these exact types of requests. Once you've decided on the type of car you want, send out requests to all of your local dealers asking for their best price. Once you get a quote you're comfortable with, be honest and upfront — tell the dealers the lowest price you were quoted and ask them if they can beat it.
Negotiate your price and terms
If not comfortable going the internet route, flex your negotiating skills in person at local dealerships. As a first-time buyer you may not be prepared for the negotiating skill set at which car dealers excel, so consider bringing an experienced car buyer with you to help you see all the angles.
Buying a car is a multi-step process. If you're financing, avoid the temptation to focus solely on a low monthly payment. While attractive, a dealer can hide a lot of extra profit in a low monthly payment by adding a high interest rate loan or a longer financing period, for example. At the end of the day, you want to negotiate the lowest overall cost for your car and not just the lowest monthly payment.