Ask Dr. Don by Don Taylor, Ph.D., CFA, CFP
Bankrate.com
QUESTION: My husband and I are planning on buying a car next summer. We should have about $15,000 to devote toward the purchase, and we plan to buy without financing. Knowing that we plan to pay cash, and that we also do not have a trade-in, what advice would you give us in dealing with car salesmen, in terms of getting the best deal? I know they will hold back special offers if we divulge the above information too soon. Thank you!
ANSWER: It's a nice change of pace to hear from a reader who is saving up to buy a car versus planning to finance the purchase through a loan or lease agreement. I'm assuming you're buying new, but most of what's written in my reply will also work if you're considering a used vehicle.
In one sense, you're right to be concerned about getting a good deal as a cash customer. The typical car buyer is negotiating three items: the price paid for the new car, the price received for the trade-in, and the financing package. That gives the salesperson and the dealership three different ways to profit on your business -- as well as giving them a little flexibility on any one of the transactions.
Your cash-on-the-barrelhead, one-transaction deal keeps the dealer from making any additional profit on financing or a trade-in. You could try stringing that salesperson along about whether you'll be financing the vehicle, but if you go into the dealership as a well-informed consumer, you don't really need to play games to get a good price on your new car.
What's a well-informed consumer? Well, at a minimum, you should know the dealer invoice price on the vehicle, the amount of holdbacks paid to the dealer by the car manufacturer, and any special promotions being offered by the car manufacturer.
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