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Car Financing: Be Prepared Before You Visit the Dealer

You know what car you want and you’re ready to visit the dealer. The best way to make this work out for you is to have all of your information and game plan set before you step out the door. Shoppers should know as many of the following points as possible before visiting dealerships, starting with the price you expect to pay. For an easy-to-use reminder, check out the Auto Financing Cheat Sheet that you can take with you to the dealership.

While it’s impossible for anyone to say in advance exactly what you should pay, you can do enough research to get a pretty good idea of what an appropriate price looks like. The closest we come is the Cars.com Smart Target Price, which is based on demand, availability and just a little bit of voodoo. It also considers the MSRP and invoice pricing, and so should you.

One of the best ways to determine the retail price of a car equipped with all the features and options you want is to use the “build your own” link in the Cars.com ‘Buy’ section. It lets you select a trim level and options, automatically calculates the price and alerts you if one selection requires you to give up (or add) something else. Once you’ve built the car you want, you’ll see numbers for MSRP and invoice prices, between which the actual transaction price usually falls. Don’t forget fees like the destination charge, taxes, title and licensing.

Once you have an idea of what the car should cost based on that research, we recommend coming up with four figures:

  • A conservative price for the purpose of determining what you can afford: When estimating the sale price on which to base your affordability calculations, don’t assume you’ll get a deal closer to invoice than to sticker price. There’s always a chance that the cars on the lot will have different features or accessories to consider before the deal is done—or options and services you can add afterward—so you’re better off assuming the purchase price will be on the high side.
  • The price at which you’ll start your negotiation: Even if you suggest a price that seems high to you, it’s the salesperson’s job to try to “bump” you up, so you need to start low and reach a compromise between your starting figure and what salespeople tend to call their “best price.”
  • The absolute maximum you will pay for the car: This amount, which could be close to your figure from No. 1, should be kept to yourself.
  • The maximum you tell the dealer you will pay: The dealer may ask what you want to pay, or the most you’re willing to pay. If you give a number, he’ll almost certainly say, “Up to…” Already he’s suggesting that your high isn’t a high; it’s the low end of a range. The appropriate answer is “yes,” as in, “up to the amount I just gave you.”

Car salespeople want to talk about what you can afford in a monthly payment. Why? Because it’s easier for you to lose sight of how much you’re paying for the car and the loan overall if the payments are low enough, and because many consumers themselves focus on the impact on their monthly budget.

Finally, make sure you know all about the available incentives on the car you want. They can come in the form of low-interest financing or cash rebates, and are almost always applied as a discount to the purchase price. It’s important for you to know your credit score, because the best advertised offers are usually reserved for those consumers with the best credit ratings.

Patrick Olsen heads the Cars.com editorial team and covers a wide range of topics in the automotive industry including industry news, analysis and consumer advice.