How to Get the Best Deal When Buying a Car: A Comprehensive Guide by Avnish Singh

Hi, I’m Avnish. After 43 years in the car sales industry, I’ve learned a thing or two about getting the best deal on your next car or truck. Along with my son, Zach, I started Carage five years ago, and we’ve created Deal School to help you navigate the car buying process.

Overview of Deal School

Deal School is structured into 20 lessons designed to teach you everything you need to know about buying a car in today’s market. Let’s get started with some crucial insights.

Lesson 1: The Changing New Car Market

Buying a car today is different than it was two years ago when we filmed Deal School. Interest rates are finally starting to decline, as the Federal Reserve has lowered its rate, which will lead to reduced retail rates for consumers. Moreover, inventory levels are building back up, approaching pre-pandemic numbers. Currently, we have just under 3 million new vehicles available or in transit monthly, compared to around 35 million in the past.

During the pandemic, inventory levels dropped to 800,000–900,000 vehicles. But today, with the help of Cox Automotive, we can confidently say that the seller’s market is coming to an end. Increased inventory levels mean that we can expect more incentives for buyers who may have been priced out of the market.

Lesson 2: Understanding the Used Car Market

The used car market has also experienced significant changes. Prices for used cars have come down dramatically from their all-time highs. However, they aren’t dropping as quickly or consistently as we would like. Interest rates for used cars are currently around 14%, which can make financing challenging.

Another crucial point to note is the decrease in lease returns, which are down by about 1 million vehicles a year. This shortage is likely to maintain high values for two- and three-year-old used cars, meaning dealerships may expect customers to pay a premium.

Lesson 3: Determine Your Budget

Before you even think about purchasing a car, you need to assess what you can afford. I follow the 10% rule, which suggests that you should not spend more than 10% of your gross monthly income on all car-related expenses, including your car payment, insurance, gas, and maintenance.

For example, if your gross monthly income is $5,000, then your total car budget should not exceed $500 per month. If your insurance is $100, you effectively have $400 available for your car payment.

To find out what you can afford, visit your local credit union or bank to determine how much they would lend you for that payment amount. Let’s say they say you could finance $20,000. If you also have $5,000 in cash or trade equity, you can look for vehicles costing no more than $25,000, including all fees and taxes.

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Lesson 4: Assess Your Needs

Next, it’s essential to conduct a needs assessment. Think about how you plan to use the vehicle: will it be for business or personal use? Will you need to carry multiple passengers?

Remember, don’t base your decision solely on want; focus on need. Dealership personnel are trained to perform needs assessments, so be prepared to articulate your requirements clearly.

Lesson 5: Exploring Electric Vehicles (EVs)

Electric vehicles (EVs) are gaining traction in the car market. If you’re considering an EV, ask yourself:

• Is it easy to charge?
• Are there charging stations near you?
• Can you install a charger at home?

These questions will help you decide if an EV is suitable for you. If you choose an EV, I recommend leasing rather than purchasing, as they depreciate faster than traditional vehicles.

Lesson 6: Building Your Vehicle

Once you know what vehicle you want, go to the manufacturer’s website and build your car. Input your zip code to see available inventory in your area. After finding the desired vehicle, head over to the CarEdge car search to gather insights, which will aid you in negotiations later.

Lesson 7: Finding the Right Used Car

To locate the perfect used car, utilize various search tools available online. After narrowing down your options, consult CarEdge to discover fair prices and the target discounts.

Lesson 8: Contacting the Dealer

When you’re ready to contact the dealer, focus on obtaining the out-the-door price. This figure should include all fees and accessories. Avoid discussing down payments or monthly payments initially, as these can distract from the actual cost of the vehicle.

You can either call or email the dealer. When emailing, use our free CarEdge email templates to streamline the process. Contact the new or used car manager for the best results, and if necessary, ask the receptionist for a recommendation on a good salesperson.

Lesson 9: Competitive Bidding

If you’re contacting multiple dealers, email all of them with your request for the out-the-door price. This way, you can create competition among dealers, driving down your final price. If you receive generic replies, remind them that you’re looking for specific pricing information.

Lesson 10: Negotiating Your Price

When negotiating, expect the dealer to make three attempts to sell you the vehicle. Your first counter-offer should be around 5-10% below their asking price. Always provide clear information about what you want, including your specific vehicle and ZIP code.

Lesson 11: Timing Your Purchase

You have the most leverage at the end of the month when dealers are trying to meet their sales goals. Therefore, it’s beneficial to begin your shopping around the middle of the month.

Lesson 12: Researching Local Market Conditions

To negotiate effectively, you need to understand local market conditions. Use resources like Blackbook on CarEdge to check the vehicle’s worth and see what local dealers are paying for it.

Lesson 13: Assessing Vehicle Age and Price History

Pay attention to how long the vehicle has been on the dealer’s lot. Most dealerships have an aging policy for used cars; if a vehicle has been sitting for over 60-90 days, you have leverage to negotiate a lower price.

Lesson 14: Pre-Purchase Inspections

Never skip the pre-purchase inspection. Just like you wouldn’t buy a house without a home inspection, don’t buy a car without one. If any issues arise during the inspection, use this information to negotiate a better price.

Lesson 15: Understanding Trade-Ins

When it comes to your trade-in, remember that it’s a separate transaction from the new car purchase. Negotiate the price of the new vehicle first before discussing the value of your trade-in. Use the CarEdge sell feature to get competitive offers from other dealers.

Lesson 16: Tax Benefits for Trade-Ins

In many states, trading in your vehicle can save you on taxes, as you only pay tax on the net price of the new vehicle after accounting for your trade-in.

Lesson 17: Finalizing Your Purchase

After you’ve negotiated your deal, it’s crucial to take the car for a second test drive. This drive should be longer and cover different types of roads to ensure the vehicle meets your expectations.

Lesson 18: Completing the Sale

When you’re ready to complete the purchase, your presence at the dealership gives you leverage. You can negotiate a final discount, perhaps suggesting another $500 off the deal to seal the agreement.

Lesson 19: Know Your Rights

Be aware of your consumer rights when purchasing a vehicle. If something feels off during the transaction, don’t hesitate to speak up. Knowledge is power!

Lesson 20: Utilize CarEdge Resources

Utilize the resources available on CarEdge for ongoing support. Whether it’s checking the latest deals or accessing buying services, we are here to help you make informed decisions.

Conclusion

With these tips from Deal School, you are now equipped to approach your next car buying experience with confidence. Remember, knowledge is power, and preparation is key. Don’t forget to download our free ebook at CarEdge.com to get even more insights.

FAQs

What is the 10% rule?

• The 10% rule states that you should not spend more than 10% of your gross monthly income on all car-related expenses, including payments, insurance, gas, and maintenance.

How do I determine my budget for a car?

• Calculate your monthly income, apply the 10% rule, and consult your bank or credit union to find out how much they would lend you.

Should I buy or lease an electric vehicle?

• It’s generally recommended to lease an EV due to their faster depreciation rates.

How do I find the best car deal?

• Research local inventory, compare prices from multiple dealers, and negotiate based on the out-the-door price.

What is a pre-purchase inspection?

• A pre-purchase inspection is an examination of a used vehicle by a mechanic to ensure it is in good condition before buying.

What should I do if I’m not satisfied with the deal?

• Be assertive and don’t hesitate to walk away if you feel uncomfortable. There are always other options.

How can CarEdge help me?

• CarEdge provides valuable resources, including price comparisons