Want to buy a new car? Save by learning what your dealer is buying first
There’s no shortage of quality car-buying advice online, from the famous Consumer Reports Cars Report to Kelley Blue Book’s 10 Steps to Buying a New Car. And for such a major purchase – probably the second-largest you’ll make after a house – you should study every free resource you can find.
But don’t forget to eavesdrop on the car dealers talking to each other.
For instance, a new survey by JP Morgan Chase reveals what more than 260 car dealerships are thinking and doing in 2014. The big conclusion: “Two-thirds believe the U.S. economy has already ‘bottomed out’ and is getting better, and nearly 8 in 10 dealers believe the auto industry as a whole is getting better.”
That’s good news for them, but it’s not necessarily good news for you. For useful information, you need to drill down a little further…
“Dealers believe that pre-owned sales will be the most likely category to drive growth in 2014, surpassing new sales.”
This is news dealers don’t want you to know. Think about it: How many used car commercials do you see on TV? While dealers will sell lots of used cars, they’ll try hard to steer you into a new vehicle, where their profits are greater.
The cold, hard truth is buying used has always been the best way to stretch your car dollars. Don’t want to believe that buying used is the smartest move? Think it means buying boring vehicles? One of the web’s loudest proponents of buying used is a syndicated TV business reporter named Stacy Johnson – who has never bought a new car in his life but drives older-model luxury cars, some costing as little as $5,000. He says car loans are for suckers.
“Paying interest to finance a depreciating asset is not how you get rich,” he writes in Why I Don’t Buy New Cars. “In fact, with the possible exception of gambling, it’s one of the fastest ways to get poor.”
Here’s another study whose audience are dealers themselves: An “incentives and engagement” sales company called Parago is telling dealers…
“Shoppers would rather receive $750 on a prepaid card at the time of purchase than $1,000 off the price of the car.”
In other words, Parago’s recent poll of 1,300 car shoppers shows that dealers can lure more customers with a gift card than by lowering the price of the vehicle – and boost profits by a quarter.
“Interestingly, our research showed that consumers are more motivated by cash in hand than money off the total price of the car, likely because they see a stronger value in immediate rewards versus an unnoticeable difference in financed payments,” says Rodney Mason, Parago’s CMO. “Auto dealers and manufacturers should take this as a directive to shape their 2014 promotions: rebates and prepaid cards will get shoppers in the door and behind the wheel.”
So obviously, you need to resist this marketing scheme and ask for more off the sticker price.
But if you insist on buying new, just make sure to take heed. The price on the windshield of a new car is not really what you’ll pay. The annual percentage rate (APR) and other fees will balloon the price over the period that you have decided to take the loan. Just taking out a 48-month care loan will add thousands to the original price.”
Whatever you’re driving now, you can save with Consolidated Credit’s Cutting Car Costs section. And if your car and other big-ticket items have driven you into debt, you can get a free debt analysis from a certified credit counselor – who can get you back on the road to you financial goals.