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If you follow me on Instagram, you may have been keeping tabs on my stories about the death of my last car and my pursuit of purchasing a new one. I’ve been planning to buy a new car since last year and have been working on improving my credit to get into better financial positioning for a car loan, but my car’s life was cut incredibly short and I was forced to get a new one very quickly in order to continue my autoimmune treatments on a regular schedule. I am by no means wealthy, & Jun did so much to keep my last car running, but alas, my last car would no longer fire up, so not buying a car wasn’t an option for me.
After a few weeks of doing my research and doing rigorous car hunting, I finally bought a Kia K5! Over the past 2 years, I’ve fallen in love with Kia as I’ve been doing sponsored events with them every so often, which gave me chances to test out their newer vehicles. Coming from a household of Hondas and Toyotas (my family) as well as another household of BMWs (Jun’s family), I’ve gotten the taste of both reliable vehicles and performance vehicles, and I feel like the Kia K5 offers both in a single package- it won both Top-Rated Sedan by Edmunds and Carbuzz 2020’s People’s Car Award. It’s reasonably gas efficient, has a lot of interior features that luxury vehicles offer for much less, is loaded with smart driving technology, offers a comfortable drive, looks very sporty, and gives a lot of value for the price. The K5 has everything I needed in a vehicle and I paid a price that I was pleased with. By the way, my car is not sponsored by Kia in any way whatsoever – I received no discounts or special treatment during the purchase of this car! I am truly blown away by Kia and felt confident to take home my very own Kia to own for many years to come.
But enough about my car! Many of you found my tips on negotiating with car dealerships very helpful, so I wanted to share them on a blog post that you can always refer back to. Trust me when I say I understand if you’re in the same position where you need a new car, but the last thing you want is another mountain of debt. Buying a car is more stressful than it is exciting, and it’s very common for people to have a lot of anxiety when it comes to working with car dealerships as salespeople can be very aggressive and pushy. However, with proper research and knowledge, you can navigate the dealership confidently and walk away with the vehicle you want at a price that you’re satisfied with.
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Tip #1: Plan Ahead
This first one is obvious, but I don’t just mean just saving up for a down payment. It’s also important to monitor your credit so that you can get a good idea of what kind of interest rates you’ll qualify for. The higher the credit score, the better, as you can get a lower interest rate, which means you’ll wind up paying less interest on the overall financed purchase. You can actually Google these rates to see what you can expect with your current credit score. And you don’t need to run a credit check to get your score: free services like Credit Karma (which I personally use and love) can show you your credit score across 2 credit bureaus to give you an idea of where you stand. You can also check for anything on your credit history that may have hurt your credit score, giving you the opportunity to fix your credit.
I’ve been working together as a sponsored partner with Lexington Law Firm this past year to build my credit as much as possible prior to buying a car, and together we were able to increase my credit score by about 100 points in just a few months. If seeking professional help to fix or build your credit isn’t within your budget, you can always work on increasing your credit score on your own by creating a strategy to effectively tackle your existing debt. Building your credit does take some time, so if you’re not planning on purchasing a car in the immediate future, you can focus on building your credit over the course of several months or 1-2 years prior to purchasing a vehicle.
Tip #2: Save as Much as Possible, and Then Save Some More
Regardless of whether or not you’re planning on trading in your current car, you always want to make sure that you have as much cash as possible for a down payment to lower the amount that will be financed in a car loan, which minimizes the interest you’ll have to pay. Many people recommend putting down at least 20% of the vehicle price, but sometimes it’s not possible to save that much if you’re strapped on time to replace your current car like I was. Because I threw most of my savings at my medical bills, I fell short of that percentage, but it was still enough for me to take the vehicle home.
The more money you put down also means you may qualify for a shorter loan term. Most of the time, shorter loan terms come in tandem with a lower interest rate. For example, a 6-year term may entice you with a lower monthly payment but gives you 3.99% interest, while a 4-year term may be slightly more in monthly payments but gives you 2.75% interest.
Lastly, you want to make sure that you’ve saved more than your down payment because you don’t want to completely empty out your bank account after the sale. Make sure you have enough in your savings account as well as a few month’s worth of car payments in the event a financial crisis happens.
Tip #3: Do Your Research
I can’t emphasize this enough. In order to have the most negotiation power and leverage, you must know the ins and outs of the vehicles you’re looking at to better understand which dealerships or vehicles will give you the best value and which ones don’t. Start your research by narrowing down your vehicles to just a few, and then compare all of the features between the trim levels (different configurations of the same vehicle that offer different features).
You want to compare a few different things: features, trim levels, performance specs, and MSRP price. Understanding the differences between all of these allows you to see the difference in pricing for the features. Dealerships don’t charge MSRP: they either charge under or over, so doing as much research as possible allows you to clearly see if a dealership’s vehicle is a good deal or a rip-off.
After you’ve narrowed down your choices, consider test driving them at a local dealership (if you feel comfortable going to the dealership at this point) to get some hands-on knowledge about the vehicles in question. I always recommend test driving the vehicles you’re interested in, because it may save you a lot of time and energy on doing further research and making inquiries if you wind up not liking the vehicle in-person. My general rule of thumb is to walk into a dealership without scheduling an appointment (making an appointment requires them to take down your information and call you repeatedly afterward) and have a very casual approach. Also, be honest about just wanting to do a test drive so that you aren’t giving the salespeople any mixed signals, which may result in them pushing you into a purchase on the spot.
Tip #4: Consider Buying During Certain Times of the Year
October, November, and December are usually the best months of the year to get a vehicle, as the holiday season often offers a lot of manufacturer rebates that can get the price below MSRP easily. Some dealerships may also offer a dealership discount on top of the manufacturer rebates, which can give you even more savings. And lastly, this is the best time to get the lowest interest rates if you choose to finance through the dealership, as they offer special financing terms during the holidays.
If you aren’t in the position to wait until the end of the year for the best savings, you can also look into the end of August or early September, as during this time the models for the upcoming year are added to dealer inventories, which means you can get the current year’s vehicle for a lesser price.
Other holidays like Memorial Day, Fourth of July, Labor Day, or President’s Day may also offer good sales throughout the year.
Above all, if you’re in urgent need of a new vehicle, it may be worth it to purchase when you can, regardless of the sale. Oftentimes waiting months for a new vehicle will cause you more inconvenience and stress than simply purchasing at the time you need a vehicle.
Tip #5: Test Drive Like a Race Car Driver
This tip actually drove my parents crazy when I took them with me to the dealership to look at cars, LOL. If you’re test-driving a vehicle, make sure that you do some extraordinary maneuvers to really test the vehicle’s limits. There’s no point in going 45 MPH around the block – accelerate fast so you can see how hard you’ll need to press the gas to avoid a vehicle merging too slowly on the freeway. Slam on the brakes to get a feel of how the car will do in stop-and-go-traffic (but not too hard because you don’t want to upset the salesperson!). Weave in and out of lanes to see how responsive the car’s steering will treat you if you ever need to quickly move out of harm’s way. Of course, you probably don’t normally drive like a maniac, but it’s crucial to know what your car is capable of doing it in an emergency situation, should it ever arise.
During your test drive, you also want to thoroughly test all of the interior features. I like bringing a friend or family member to a test drive so they can fidget with the things in the back seat or passenger’s seat while I drive, which gives me a second pair of eyes and hands to offer feedback and point out any critical flaws to consider in the vehicle. Try out as many of the features as you can, especially features like parking assistance, backup cameras, cruise control, or lane-keeping assist. They will require you to pull over and take your time, but don’t feel obligated to move fast.
If you’re a performance junkie like Jun and I are, pop the hood and take a look at the engine and everything else to get an idea of the mechanical configurations and the quality of parts used. These things are really important to consider when you think about any future repairs. Some vehicles like European cars tend to be fickle, which means more things under the hood can easily break and become costly to repair. Other vehicles that may appear to be innocently affordable may have parts that are more expensive, which can rack up the service price. If you aren’t familiar with these things, consider bringing a mechanic friend or car enthusiast with you so they can offer their insight and ask the salesperson questions that you may not think of.
Tip #6: Negotiate From Home Before Going to the Dealership
Try not to be compelled to purchase immediately after your test drive. If a specific car interests you, remember to take a picture of the window sticker on the vehicle so that you can take note of the MSRP. Go home, turn on your computer, and look for the same vehicle of choice at dealerships near you. You’ll be able to compare dealer prices with the MSRP and find the exact car with the features you want at the best price.
I wanted the Kia K5 in the EX trim level with the Premium Package add-on and in the color Pacific Blue, which had an MSRP of $32,560. Because I had very specific wants for the vehicle, I had to spend quite a bit of time to find dealerships that had inventory that fit my bill to the T. The dealership that I did my test drive at (we’ll call this dealership Dealership A) was selling this vehicle for $27,999, but not the in the Pacific Blue color that I wanted, so I decided to use this information as a point for negotiation.
I found another dealership (Dealership B) that had one in Pacific Blue for $41,000, which made so sense to me as it was $9,000 above MSRP (I confirmed the MSRP on the sticker price, which some dealerships will show on their online listing). Because I knew this was overpriced, I called and asked the salespeople why the price was so high, and they couldn’t give me an honest answer. I was persistent in getting an answer, and the salesperson spoke to their manager and returned to me, asking me how much I wanted to purchase the vehicle for. I told them that unless they could sell the vehicle to me for under $30,000, I would bother coming in. I told them that I saw this same vehicle in a different color at Dealership A for $27,999, so they could do better. They offered me $29,958. In just 10 minutes, I negotiated a $41,000 car down to $29,958.
However, that was just my starting point: Dealership B gave me a quote, so I checked a 2nd dealership – Dealership C – who had the same car listed for $32,000. I told Dealership C that Dealership B quoted me $29,958 for the same car, and if they could bring the price down from $32,000 to less than $29,958, I would come to the dealership ASAP and buy the car.
Dealership C offered me $29,156, which was $2,602 below MSRP. This was a pretty great price for a brand new vehicle that was just released in 2021 (2021 is the first year for the K5 in America!). Usually, new vehicles are difficult to negotiate below MSRP, so I was finally at a price that I was happy with.
Although I wanted to try and go even lower, they were already selling the car at a loss (meaning below MSRP), so they couldn’t go any lower. I double-checked with the other dealerships and it seemed that was the lowest price I could get, so I pulled the trigger and bought the car with Dealership C.
- Check the sticker price to confirm the MSRP and make sure it’s the right car with the right features (some dealerships will have the sticker price underneath the vehicle photo on the online listing). You won’t be able to effectively negotiate if you’re basing your negotiation off a car that has different features.
- Write down the stock number on the online listing to make sure that the vehicle you see at the dealership is the right car with the right features. You don’t want to take home the wrong car that doesn’t have the features you want.
- When talking price, always say “I want to spend x ‘out the door.’” This means the price you want to pay after all the additional fees like taxes, registration, and all the other items that are often left out of the sales price of the vehicle. If they give you a quote of $29,000, you might be surprised to see the total price on the contract inflate up to $33,000 or more. Make sure that the price is clarified and that the price they’re telling you is the price you will be paying out the door.
- If it’s possible, get the salesperson to email or text you a picture of the quote, or get it in writing. If you’re negotiating with several different dealerships, they may want to see proof of the other dealership offering you a better price.
- Keep drilling the salespeople with questions and don’t allow them to deflect or leave the question unanswered. You have the right to ask why the same vehicle is being sold at a far higher price. If they can’t give you an honest answer, that’s where you can negotiate.
- You can also check the market value of the vehicle online, which will give you the average price that the car has been recently sold for. I always consider this but don’t personally use it as a key negotiation point, as not many consumers negotiate as aggressively to get the lowest price. Market value can be used as a negotiation strategy if the vehicle is in high demand and is being sold for well-over MSRP, but if it’s a vehicle that can be negotiated below MSRP, I don’t consider market value if it is higher than MSRP.
- Delay making an appointment to come in. Once they give you a quote over the phone, they will want to push you into the dealership as quickly as possible to close the deal. Tell them you need to sit and think, talk it over with your spouse, etc. in order to give you more time to negotiate with other dealerships.
Tip #7: Do Your Own Math
Once you’ve been offered a price, inquire about the financing or lease terms (that this post is more specific to financing, but leases can also apply). Again, if you have an above-average credit score, you’ll likely qualify for lower interest rates. However, pay attention to the length of the finance term, as the longer terms typically have a higher interest rate. Longer finance terms may offer an enticing lower monthly payment, but if the interest rate is higher, you’ll likely wind up paying a lot more in interest over time. However, sometimes this isn’t the case, and this is why you must do the math to compare the available financing terms and see which one will work best for you. There are several car payment calculators online which you can plug-in numbers and get an idea of the interest you’ll be paying as well as what your monthly payments will look like depending on your down payment, trade-in value, and credit score.
Additionally, you’ll want to compare each option and see if the lower interest rate will truly result in you paying less. Sometimes, you may wind up paying more, especially in situations where they’re offering a rebate on the higher interest rate but not on the lower one. Always consider all of your options and see which one is most compatible with your financial situation.
Tip #8: Shop Around For Better Car Loans
If you’re a member of a credit union, you might want to consider asking them about auto loans and see if they can get you a better interest rate or loan term than what the dealership is offering. Depending on your credit score, financial snapshot, and credit union, you may very well find something better; however, during the holiday season when vehicle manufacturers are offering holiday rebates and special financing, that may be the better option (and most convenient one too). Again, this all depends on the time of year as well as your financial situation that may determine what banks have to offer you, but it’s worth looking into.
Tip #9: Consider the Extra Expenses
Remember that the other expenses surrounding your car are all things to factor in. If you commute far on a daily basis, think about how much you will be spending on gas each month and consider a more gas-efficient vehicle. Also, call your car insurance company and get a quote for how much insurance will be for your new vehicle. Additionally, you may also want to consider asking the dealership’s finance department if they offer any additional warranties. Kia offers 10 year/100,000 mile warranty coverage on the drive train and power train for free with every vehicle, but they also offered me an additional electrical warranty at 10 years/100,000 miles. Since my car has a lot of interior and driver’s assist features, it made sense to ensure that those things would all be covered under warranty as well. This warranty add-on came at an additional cost, but in doing so they were able to lower my interest rate as part of a special deal, so it actually lowered the price. And my car has wrap coverage now, which means that basically everything is covered by warranty for 10 years/100,000 miles!
On average, which car companies are the most expensive for parts and labor on repairs? BMW ranks the highest, while Toyota ranks the lowest. You may want to consider the cost of potential repairs, as once your car gets older it will require more repairs, and those things can quickly add up (towards the end of my BMW’s life I was facing problem after problem and was spending anywhere between $500-$1,000 each month on parts alone, not including labor!).
You’ll also want to think about preventing cosmetic damage or wear-and-tear on your vehicle. Getting your windows tinted with a high-quality nano-ceramic tint can cost you a few hundred dollars upfront, but extends the longevity of leather interiors by cutting down heat and UV exposure. And if you want to protect your paint from scratches, swirls, and sun damage, getting a clear bra paint protection film on your car can range anywhere between a couple hundred to a thousand or more. These things are entirely optional and you can get them done later down the line, but many car owners get them to take extra care of their new car, so it’s something to think about saving up for.
Tip #10: Determine Your Car’s Trade-In Value
If you’re looking to get rid of your old vehicle, consider getting multiple quotes for its value and see if other places will offer you a better price. CarMax often takes any vehicle, but can be a major hit or miss: I’ve read many forums online where they were given an amazing price for a really old vehicle in poor condition, while sometimes they may also offer you as little as a couple hundred. I, unfortunately, fell into the latter group – they quoted me $710 for my 2006 BMW 330i.
Granted, my vehicle was in pretty bad shape with lots of cosmetic damage to the paint and broken interior features as well as a blown head gasket, so I knew I wouldn’t be getting much for it. Still, I went on Kelly Blue Book and got a quote for my vehicle in “good” condition and was given a ballpark estimate between $1,200 – $3,000, depending on the final assessment. I printed this out and brought it with me to the dealer, but prior to this over the phone, I told them that my car was valued at $2,000 (this was the median between both the high and low estimate). They agreed to my price and even offered an extra $200 on top of the $2,000!
Something important to note is that if your vehicle’s mileage is over 100,000, most car dealerships won’t try to flip the car to resell and will instead send it off to auction. The goal of the dealership is to offset losses by selling cars above MSRP, so they tend to be more flexible on price when it comes to your trade-in, especially if you’re using it towards buying one of their vehicles. It may not always matter to them if the vehicle has significant issues as mine did – however, it’s not always the case, so always consider other outcomes.
Some people advise you to avoid mentioning your trade-in vehicle too early on in negotiations as some dealers may try to move numbers around and make the contract much more confusing to understand, but I did not experience this. In fact, for me, mentioning my trade-in vehicle early-on was beneficial because I was able to name my price and was given far more for my vehicle than what it was actually worth for its condition. This piece of advice depends on your situation, so definitely use your instincts!
If you found any of these tips useful, be sure to bookmark or pin this post for future reference! What were your key takeaways from this post? Tag me on Instagram with your insights and subscribe to my newsletter below so you’re the first to be notified of new blog posts. And if you liked the podcast episode, share it with someone you know and leave us a review on iTunes so new listeners can find this podcast too.
If you’re looking at buying a car with cash through a private sale, check out my other guide How I Bought a BMW with $7300 Cash.
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