Memorial Day marks the unofficial beginning of the warm weather driving season, with many people planning weekend getaways and cross-country road trips. For many people, buying a car to make the journey is part of the agenda. But the joy of buying a new or a new-used car can be ruined by the realization that you got a bad deal, or by an expensive mid-trip breakdown.
Fortunately, it’s possible for consumers to protect themselves from buyer’s remorse. Here's how.
Ensure You’re Getting a Fair Price
Dealers have wide latitude in negotiating price, and savvy buyers can often score great deals. That’s because the Manufacturer’s Suggested Retail Price (MSRP) is usually about 20 percent more than the invoice cost, which is the cost of the vehicle to the dealer, relatively speaking.
The invoice cost typically does not include factors such as dealer cash incentives from manufacturers that are not required to be passed along to consumers. In other words, advertising pitches such as “just $1 over invoice cost” don’t mean that the dealer is taking a haircut in order to move vehicles from the lot.
It’s also important for consumers to understand is that MSRP is actually a suggested price. Unless the car is a hot model in great demand, there is very little reason to believe that is the price the dealer expects to receive. Buyers should also beware of “markdowns” that don’t really reflect discounts. Check the Kelley Blue Book “Fair Purchase Price,” Edmunds, or another reputable source to obtain accurate car price figures, rather than falling for prices that have been artificially jacked up before being marked down.
Dealer incentives represent a potentially great source for good car deals. However, all dealer incentives are not created equal. In fact, dealer incentives can be highly specific — applying only to certain slow-selling models. Dealer incentives may vary across the country by region. What's more, manufacturers may extend incentives to new dealerships to stimulate sales, or offer them to established dealerships as an incentive to add inventory.
Secure Up-Front Financing
If car shopping is on your Memorial Day weekend agenda, one of the best ways to get the best deal possible is to secure up-front financing, rather than waiting to choose a car and securing financing on that specific vehicle. Pre-approval involves completing a loan application, and includes a hard-credit pull for each application. However, credit scoring bureaus typically treat multiple inquiries for purchases like car loans and mortgages made during a “rate shopping window” as a single inquiry, which has minimal adverse impact on a credit score.
Going through the pre-approval process allows you to learn precisely how large a loan you qualify for, and it reveals your exact interest rate. With that information, you’ll be in a much better position to negotiate for the car you want. You’ll also avoid dealer mark-ups that are often hidden in in-house car loans.
If your credit is less than stellar, obtaining financing for a car could be a challenge. However, relying on “buy here, pay here” financing could leave you unexpectedly stranded. That’s because such cars are frequently equipped with remote starter interrupt devices and GPS trackers to facilitate repossession of cars from delinquent sub-prime buyers, or even buyers who are current on their payments.
Get an Extended Car Warranty
You may ask yourself, “Do I need an extended car warranty for my car?” In many cases, the answer is “yes.” Repair costs can make a serious financial dent, and even a top-notch car requires routine maintenance. While new cars come with a warranty, an extended car warranty provides peace of mind for used or out-of-warranty new cars.
Start the Summer Driving Season Right
Memorial Day weekend motivates many consumers to purchase new or used cars for summer weekend getaways or cross-country road trips. Just be sure to check the fine print for misleading markups — and shop around for the best possible financing. After the sale, dealer warranties protect new cars. An extended car warranty from Protect My car covers as-is used car purchases or vehicles after the dealer warranty has expired, giving you peace of mind.