How to Improve Your Chances of Getting Approved for Car Finance
Car Finance Sunshine Coast
If you’re in the market for a new car, but don’t have the funds to buy it outright, car finance can be a great option. However, getting approved for car finance isn’t always easy. Lenders have strict criteria they use to determine whether or not you’re eligible for a loan, and if you don’t meet those criteria, you may be turned down.
Luckily, there are things you can do to improve your chances of getting approved for car finance, even if you’re in a tough financial situation. Here are some tips to help you get started:
- Improve Your Credit Score
Your credit score is one of the most important factors lenders consider when determining whether or not to approve you for a loan. If your credit score is low, you may be seen as a risky borrower, which can make it difficult to get approved for car finance.
To improve your credit score, make sure you pay all of your bills on time and in full, keep your credit utilization low, and avoid applying for too much credit at once.
- Save for a Down Payment
Lenders may be more willing to approve you for car finance if you can put down a larger down payment. This shows that you’re committed to the loan and that you have some skin in the game.
- Choose a Reliable Vehicle
Lenders may be more willing to approve you for car finance if you choose a reliable vehicle. This reduces the risk of defaulting on the loan, which makes you a more attractive borrower.
- Shop Around for the Best Deal
Don’t just accept the first car finance offer you receive. Shop around and compare rates from different lenders to find the best deal for your situation.
If you’re looking for car finance Sunshine Coast, Journey Finance can help. We offer a range of car finance options to suit your needs and budget. Contact us today to learn more and get started.
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Car Financing vs. Leasing: Which Option is Best for You?
Buying a car is one of the biggest purchases most people make in their lives, and it’s essential to choose the right financing option. Two popular options are car financing and leasing, and it’s essential to understand the pros and cons of each before making a decision. In this article, we’ll explore both options and help you determine the best option for your car financing needs.
Car Financing:
Car financing, also known as a car loan, is the traditional method of purchasing a car. It involves borrowing money from a lender, usually a bank or credit union, to purchase a car. The loan is repaid in monthly installments over a fixed period, typically three to five years.
One of the main advantages of car financing is ownership. When you finance a car, you own it once the loan is paid off. This means you can customize the car, sell it, or trade it in whenever you want. Financing also gives you more flexibility in terms of how you use the car.
However, car financing also comes with some disadvantages. The interest rate on the loan can vary depending on factors such as credit score, loan term, and the lender. Additionally, the car will depreciate over time, which can lead to negative equity, where the car is worth less than the remaining loan balance. Finally, financing a car can be more expensive in the long run, as interest and fees can add up over time.
Car Leasing:
Car leasing is an alternative to car financing that involves renting a car for a set period, typically two to four years. During this time, you make monthly payments to use the car, and at the end of the lease, you return the car to the dealer.
One of the main advantages of car leasing is lower monthly payments. Because you’re only paying for the use of the car, not the entire value, monthly payments are often lower than those for a car loan. Additionally, leasing allows you to drive a newer car, as you can lease a new car every few years.
However, leasing also has some disadvantages. You don’t own the car at the end of the lease, so you can’t sell or trade it in. Additionally, leasing often comes with mileage restrictions, and you may face penalties if you exceed them. Finally, leasing can be more expensive in the long run if you continue to lease cars, as you’ll never own one outright.
Choosing the Best Option for You:
So, which option is the best for you? It depends on your individual needs and preferences. If you value ownership and flexibility, car financing may be the best option for you. However, if you prioritize lower monthly payments and driving newer cars, car leasing may be the best option.
At Journey Finance, we can help you determine the best option for your car financing needs. Our team of experts can help you compare financing and leasing options, as well as negotiate the best deal possible. Contact us today to learn more about how we can help you make the best decision for your car financing needs.
Why use a finance broker
Benefits of using a Finance Broker
There are quite a few benefits in using a finance broker. In this fast-paced world with little time and lots of things grabbing your attention, it can be difficult to navigate finance, especially if you have no idea where to start.
Saves you time
A Brokers job is to shop around for you. Think of a broker as a personal shopper!
Imagine you are looking for a fridge to buy. You do the research and you settle on a particular make and model. The next job is to go from one retailer to another to get the best price. That takes time and effort to save you potentially a few hundred dollars. Now imagine if you had someone doing that for you! You get a good deal AND you've saved a lot of time.
Brokers do that same thing, but with finance. The primary role of a Broker is to shop around for you. A broker has regular contact with the banking and finance industry and has knowledge of offers and great terms not offered to the general public. Because a broker does all the legwork for you, it saves you time and energy!
Saves you money
As discussed, a Brokers role is to find you the best deal along with the right product that suits your personal circumstance. If you go to a bank direct, you are locked into their products. It doesn't mean it's not fit for purpose, it's just that you have only looked at one shop, with one product. No comparison!
- Loan A may have a good rate with Big Bank Mutual, but it has restrictive terms and conditions such as termination fees or a lack of ability to pay extra.
- Loan B may have all the good terms you want, but the rate isn’t as sharp.
A Broker will ask you what you need in a loan. Or if you haven't got a clue they will tell you the things to look for in a loan, tell you what is in the marketplace and guide you to the best fit overall to your needs.
The goal is to keep your repayments as low as possible as well as having flexible terms and policies. A broker will do that for you with access to potentially dozens of lenders all competing for your business.
Fees, charges and policies are part and parcel of a loan, and a good broker will outline the fees so you know what you are signing up for with no surprises.
Makes you smarter
Have you ever been involved in a conversation about finance and didn't understand what they were talking about? Amortisation, equity, defaults, credit scores, loan portability, fixed rates etc etc. You may have just nodded your head not understanding a word!
A good Broker in interaction with clients will give the ‘inside secrets’ and even provide you with education about how loans work, the tricks, the traps, and the best way to secure the best deal. They will answer questions you may have had for years. Brokers LOVE talking finance. Remember, they aren't selling a product, they are providing a service!
Good Brokers also have developed lots of information tools (like this one!) that can help you navigate the world of finance.
A good Broker won't talk AT you, they will put things in ways that are easily understood and are relatable to you. This is important as finance can be complex, so having a person in your corner helping you 'join the dots' is great. This will also help you in the future when you are making other financial decisions.
As a result at your next family get-together or Friday afternoon drinks, you can be the expert, or at least keep up with the conversation!
Saves you confusion, heartache and regret
We see it all the time. People who shop around for finance not understanding that the lender is putting a hit on their credit file, negatively affecting the most precious commodity when it comes to financing, the credit score.
A good Broker will never put a hit on your file until you are ready to apply. A good Broker will find out all about you and your circumstances and complete a ‘soft enquiry’ that doesn’t touch your file but just looks at your credit score to know which lender will be best suited.
Once the shine comes off the purchase, the loan is there for the long-term. Avoiding regret and buyers remorse because you didn't understand or were sold a product is so important to your long term happiness!
You get an expert
Brokers are finance specialists, they access finance for everyday people - 365 days a year.
A good Broker should know the intricacies of lenders, their nuances, policies, fees and charges and how to best approach an application. Having an expert in your corner who assists hundreds of clients every year with a specialist skillset will give you an advantage in your next finance decision.
It can also prevent mistakes and make the overall buying process of a new or second-hand car, boat, caravan or motorbike far more enjoyable.
You are getting impartial advice
Brokers are governed by legislation that dictates their behaviours. A good Broker (notwithstanding the law) will have your best interests as their North Star. They work for you.
The difference between a Broker and banks is bank staff are simply selling you their product. They can’t then go and provide you a comparison to a competitor because they work for Big Bank Mutual. A good Broker will not be impartial to one lender, they will hunt the best deal from the multiple lenders they have access to. Again, good Brokers do not sell ‘products’, they sell service.
You get a real person
Brokers are usually not huge corporations. Most good Brokers are small business owners and are driven by good customer service and creating long term relationships with their customers.
Everyone has heard the adage banks tend to treat customers like numbers. People don't like being treated like a number. They want to be treated like a person. A good Broker will be the person you deal with all the way through the process and into the future and actually care about your financial well being.
Final thoughts
We’ve come up with this list, and there are many more reasons to use a good Broker like Journey Finance. To truly understand how a good Broker can benefit you, contact us today.
Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.
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Car finance pre approval
What is a car finance pre-approval?
A pre-approval is a lender giving you ‘in principal’ agreement to lend you a certain amount of money for a car. It is finance that is put in place prior to purchase, rather than choosing the car, then seeking the finance
Shopping (research) vs buying
When buying a car, most people will research the car first, test drive. A high proportion of people decide on a car (or at least narrow to the brand and model), test drive, decide, then look at finance. Is it the right way to do it?
Car buyers when looking to upgrade their wheels spend around 59% of the total time of the process researching the car. (Autotrader). On average shoppers take around 108 days from start to finish, so 63 days is spent thinking about the car itself, prior to even setting foot in a dealership.
Usually, the next step is to head into the dealership and test drive. The moment you step into a dealership, you begin to match wits with car salespeople and their finance department. Unless you are a cash buyer, the only barrier to the sale in the mind of the car salesperson is how you are paying for the car. (it's usually one of the first questions they ask!)
They want you to buy even though you may still be researching. After all, that's their job. There is a saying in the car industry. "Getting the customer behind the wheel, sells the steel". They hope that you fall in love with the car and gain emotional attachment. They get you in front of the finance and insurance person to then help close the deal. I mean, why not do it all in one place? It is convenient, and you feel great when you are approved, even though it may not be the best deal you can get.
Apart from not getting the best deal you could get if you spent more time researching the finance, when you engage dealership finance, the only restriction usually placed on the contract of sale is ‘subject to finance’. This means if you are approved, you are going to have to buy that car or potentially face a cancellation fee. You have just moved from shopping to buying in one fell swoop.
The finance and insurance department
A lot of people go into a dealership with a loose budget in mind. It could be a repayment budget or a car spend budget. What tends to happen is the dealership finance person focuses solely on the repayments and whether you can afford just that, rather than the total cost of ownership (everything it costs to run a car) They are skilled at it. It allows emotion to creep in and the budget head you may have brought into the process quickly goes out the window. It is not your fault, it is the way humans work.
Data shows that when buying a car, customers thinking about the finance only takes place in the last 14 days of the process. The finance (or the way you are going to pay for the car you love) is as important as the car you are choosing.
Why is the finance research so important?
Remember that finance involves interest. That is, you borrow the amount you are paying for the car at a certain rate, then there is interest to be paid on top. This can be thousands or 10’s of thousands of dollars depending on the finance deal you get. Doing your research on finance is important to the overall cost of the car you want.
How do you research finance?
It can seem daunting but there are basically a few types pathways in the automotive marketplace*.
- Dealer finance companies - these have direct relationship with car dealers, offering personal loans to customers to finance a vehicle purchase from the car dealership.
- Lenders - these provide the funds for the car loan. Banks, building societies, credit unions etc along with money market corporations and finance companies.
- Finance brokers - these act as an intermediary by matching borrowers to lenders and their loan products, assisting and advising borrowers on the loan application process and negotiating interest rates on loans.
(*Royal Commission - Some features of car financing in Australia)
Hard and fast: If you go through a dealer, you will most likely end up through the dealer finance company. Usually only one or two lenders so your choices are limited.
Do it yourself: If you go through the lenders directly, you will encounter having to do a lot of research yourself, comparing and speaking to lenders to find the right deal for yourself
Compare and save: A broker does this job for you. Their primary role is to match the right lender, not just to your budget, but also to your financial circumstances.
Paying cash gets a better deal?
Generally, this is true. If a dealer has a car in stock they want to move and you have cash, they are likely to wheel and deal with you.
If you finance through the dealership, or use advertised finance offers that promote low rates, you most likely will not get as good a deal.
Pre-approved finance is like cash. Walking into a dealership and being pre-approved means that you are in the drivers seat (pardon the pun).
Low interest or no interest car loans?
See those deals on TV or Facebook offering low rates? 1.99% or even 0%.
It seems too good to be true. Well, most times it is. Check the fine print!
Those deals are usually only available on specific models or variants and the dealer will not budge on the price no matter how hardnosed a negotiator you are. Looking a different model to the ones on offer? You will end up paying the standard or higher interest rate on offer in the dealership.
There also may be a honeymoon period on the rate that will expire mid-way through the loan and you will revert back to a high interest rate.
You may not be able to make additional repayments without penalty or there may be additional fees and charges or higher delivery costs.
At the end of the day, the dealership or manufacturer offering this deal is losing money on 0% as they make a lot of money from finance. Car companies will look to recoup the losses they make on the finance, one way or another.
In a lot of cases, customers found that they were worse off using these deals than they would have been if they had spent the time researching the finance.
Tips to getting the best deal
Do know your limits.. and stick to it
Pre-approvals can be up to a certain amount that you have determined suits your budget. For example, a $30,000 car may have a repayment of $400 per month, you have already added in costs like insurance, registration, CTP and maintenance and know what you can afford. If you have not done this, you may be led down a path that makes you solely focus on the repayment. When it comes time to servicing or replacing the tyres, you end up putting it on a credit card, exploding the cost of ownership of your car.
Do know your credit score
There is a direct link to your credit score and the interest rate you can get. This is your bargaining tool. If you are asset backed (own a home or a mortgage) you can also achieve a good rate with certain lenders.
Credit scores are affected by your conduct on loans.
That is; if you have a job that pays regularly, pay on-time, have no defaults and don't make too many enquiries (shopping around with lenders) you probably have a good score. It doesn't mean if your score is lower that you can't get a loan, it just means your rate may be a little higher. Lenders look at risk factors and your score plays heavily into their calculations. If you have a lower score, they are taking a risk, so their 'reward' or the money they make from your loan is higher.
We can help you get your credit score. Contact us for more information.
Don't confuse what you are doing
There is a difference between shopping and buying. Shopping is the research component. This is where you spend time 'shopping around'. This could be for the car itself or the finance. When shopping around for finance, it is really important that you aren't applying. A good broker will be able to give you a quote on a car without you having to apply. The moment you apply, you have put an enquiry on your credit file. If you do this numerous times, it can negatively affect your credit score for the future.
Don't reveal your intentions
Buying a car is similar to a game of poker. The first person to fold will be the person that loses in most cases. Walking into a dealership announcing you are ready to buy or revealing exactly what your budget is to a dealer is allowing them to take control and to put you into something that you may not be able to afford or even a loan term or package that is unsuitable.
Don't gamble on dealership finance
As mentioned, dealerships make money through their financing departments. Shopping around (making soft enquiries without applying) should form part of your research. Brokers have a duty to ensure that your circumstances and needs are met in the product they are offering. Brokers also make money from the finance, but the laws governing brokers are designed to ensure they are acting in your best interest.
Do get pre-approved
Going into negotiations with a dealer with a pre-approval puts you in the drivers seat. It is then up to the dealer to match or beat the finance deal you already have or to substantially discount the car to offset their potential higher finance cost. If there is no alternative plan and you walk into a dealership to both look at the car and finance, they are completely in control.
Final thoughts
Having a pre-approval in place can mean the process is quicker. In a market with low stock or limited availability, you can snap up the car you want quickly and be on the road in your new wheels sooner rather than spending a few days getting your finance sorted. It also removes the pressure and allows you to make informed decisions about the finance.
Getting pre-approved
Getting pre-approved is simple. You may know the car you want but haven’t ventured into the dealership as yet. We will work within your budget and you will know what limit you have to spend. Once you have found your car, it’s simply a matter of providing us the contract of sale and we resubmit for final approval.
Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.
Get In Touch
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Locations
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Brisbane
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Why Test driving a car before buying is important
Buying a car is an expensive decision. You can research online, you can read reviews or talk to current owners, but there is no better way to understand if a car is right for you and your loved ones than to test drive.
Annoying car salesman riding shotgun
Test drive vehicles are known in the industry as demonstrators. The car is usually registered, and the dealer does not get the car for free, they have purchased it, and eventually, before 5,000km has been put on the odometer they will have to sell it.
In most cases you won’t be able to test drive by yourself – the dealer will cite insurance clauses or they plain just don’t trust you not to throw the handbrake on or to flog the car they’ll eventually have to sell.
For a car you are unfamiliar with, a good salesperson will point out all the features and benefits, usually ALL the positives – this can be helpful but also distracting. If you go into a test drive with these key points in mind, no matter what the salesperson does to continue his pitch from the passenger seat, you will have a good idea if the car is suitable.
Is the test drive car the same?
You may be looking at a particular variant, but the salesperson has put you in the model up, or even the top of the range. There is obviously a tactic to this (showing you the best!) but also economics at play for the dealership. They cannot have every models variant as test-drive vehicles, so they usually will purchase a top-spec car for test drives. If you are going to demo, you are going to show the best! Of course, they hope that you will fall in love with the features of the top model and go for it.
Some things to ensure you find out is whether the car you are driving have the same
- Engine
- Transmission
- Body style
- Wheel size and type
- Technology
- Specifications
If your test drive car is not the same spec, make sure you find out the exact differences and see if you can live without them.
Try out the tech
In this modern age, cars have become computers/entertainment hubs/navigation/voice activated assistants on wheels.
Whilst these generally are great additions to a car and a ‘nice to have’, do you need them?
A lot of people now will want Android Auto or Apple Car Play as standard – it makes long hours of driving much better and integrates your phone into the car. Like the prior tip, make sure the model you are looking at rather than the car you are testing has the tech you are looking for.
- Is the audio crisp and loud enough? Does it have enough bass?
- What driving technology is included? (Lane departure, cruise control, adaptive cruise, driving assistance, parking sensors, reverse camera etc) These technical marvels can make your ownership of the car that much better if you will use them.
- Is the Bluetooth easy to connect and setup?
- Is the satellite navigation intuitive and easy to use and understand?
- Where are the USB ports for charging? (if any) Do they make sense, or will they be inconvenient?
Ask a lot of questions about the buttons and tech, if you are not going to use them in the future, what is the point of spending the money if you do not want or need it?
Power trip
We are not talking about a drag race machine here, but if you needed power to get out of trouble is it there? Check how the car accelerates from a standstill and whilst cruising. Many things can contribute to a car feeling underpowered including the type of transmission. If you do not put it through it is paces in the test drive, then you really will have no one to blame if you find issues later.
Give me a brake
Most modern cars come with some amazing technology when it comes to brakes. Testing the brakes is still important. Do they feel powerful? Is there lock up? Do you feel like the brakes are adequate? You probably will not be taking the car for a blast around a racetrack, but brakes are probably the most important system in any car.
Peace and quiet
Wind the windows up, turn the air conditioner and radio off and listen for noises. Tyre, wind, and engine noises can be a deal breaker for some. For others, not enough engine noise! If you can get on a highway and do 100km/h legally, that would be an ideal test for wind noise and ‘drone’ from the exhaust system. Whilst you are up at that speed, how does it feel? Solid on the road? Try different road surfaces to see how well the suspension works over speed bumps or contoured roads.
Carry on
Some people forget about things they will have to carry. Is there enough luggage or boot space? Test it out. Put the seats down if necessary and visualise the things you normally cart around. Shopping bags, golf clubs, surfboard, kids’ bikes, prams, camping gear, fishing rods. Think about the things you carry before getting carried away with signing on the dotted line.
Have a look at the cockpit storage. This is a big deal. Handbags, wallets, phones, tablets, people carry a lot in a car. Is there adequate and logical storage?
Cram the pram
If you have kids, take your child seats, prams, and baby bags. Do the child seats fit? If you have one child seat, does it still allow for 2 adults in the back? Imagine fitting your shopping or other items you normally carry around along with the necessary items that you store.
If you have 3 child seats, will they all fit?
Where are the anchor points and if you must take seats in and out, how easy are the buckles to access? These little things checked now will mean a more positive ownership experience in the future.
Final approach
Parking, reverse parallel, 3-point turns. All incredibly stressful at the best of times. Do them all in a test drive. See how the car handles, see how easy or hard it is to park. Consider that you potentially have a salesperson sitting beside you and try not to choke, but if you do, it is ok. The idea here is to see how manoeuvrable the car is. Some cars will have a very wide u-turn footprint or be horrendously difficult to reverse parallel park. It is good to know before time and to know you can live with it.
To tow or not to tow?
If you are going to be towing a boat, caravan, trailer, or anything on wheels behind your car, make sure you check the towing capacity. There are two measurements. Load on the tow ball (how much weight the suspension will handle) and towing capacity (how much weight the car can pull).
Backseat driver
It sounds weird, but a lot of car owners have never sat in all seats in the car except the driver’s seat. Testing out all seating positions is important to make sure there is enough room for all intended or potential passengers. Are the seats comfortable? Is there good visibility out the windows? Are there air-conditioning vents in the back or does the AC system have a way of cooling the back of the car if they do not?
ICU
Sit in the driver’s seat and really feel it. Adjust your mirrors and check visibility. While you are there, see if the location of the hazard lights, indicator stalks and other switches and knobs are in a logical place that you can get used to. A lot of cars in Australia now have the indicator on the opposite side to what most drivers are used to. This is not a hard no situation, but you must ask yourself if you can live with it.
Warp speed
Does the car have any driving selection modes? A lot of cars come with intelligent computer driven adjustments to save on fuel or to provide more power when needed. Test all the modes out if the car does have them and ask any questions about them you need to.
Use sparingly
Most modern cars only come with a space saver spare tyre. Although this is common, for some people who may do a lot of highway driving, this could be a deal breaker. Space savers do offer the names intended purpose – to save space, but it also means in the event of requiring to use it, you will be restricted to 80km/h until you get the main tyre fixed.
Baby sitting
If you can, leave the kids at home. Children as wonderful as they are and probably the main reason you are wanting to buy a car will become a distraction. Telling Johnny to get his feet off the back seat or to stop poking the nice salesperson will inevitably cause you to miss something or not to get the experience you need to decide.
Stocktake
Before the salesperson leads you back into his or her office and starts their process of getting you to sign up, take some time. Unless you need a car yesterday, emotional decisions can be costly ones. Do not just test drive one car, find other cars in the same class and test drive those, preferably on the same day so you can do a like for like comparison.
Accentuate the negatives
Even if the car is perfect, it is a good idea to talk about what you do not like about the car with the salesperson. The more positive emotions you show, the more likely you are to fall prey to a good salesperson. It is not their fault nor are they bad people for doing this. Their job is to understand your needs, match you to something they have and ultimately sell you a car. If you only show positive 'buying signals' then you will likely drive out in that car. Some easy things to say are comments such as "I'm not sure if I like the seats" or "I don't like the layout of the instrument panel". If you actually spend the time looking for things you don't like, you won't notice them 3 months down the track and regret not taking the time to do this.
Insurance and maintenance costs
Always get a quote on insurance before signing anything. Some cars in some location have astronomical premiums. It is always good to be forewarned on costs including insurance and even servicing prior to ensure the total cost of ownership fits in your budget.
Put the pen away
Again, unless you are desperate to buy, do not sign anything on the day. We always encourage buyers to have their finance in place first. It will put you in the driver’s seat when it comes time to negotiate.
Final word
Hopefully, this has helped you create your own mental checklist of what to look for.
If you would like help in setting up a hassle-free test drive, please complete the form below and Journey Finance will help you.
Get In Touch
1800 861 009
Locations
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Hours
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Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed
Getting a great deal with a new car purchase
Most people when buying a car will do some research online and then head into a dealership to test drive a car.
It is at that point that the sales machine of a dealership takes over.
A dealership employs salespeople and those salespeople have targets and a sales system they are trained in to get you into the car.
Car Dealership tactics
Not all car salespeople are sharks, there are some excellent professional car salespeople in Australia - but there are those who don't really care about you or what you want and are driven by commission.
From pressure tactics to plain badgering through constant follow up calls, going to a dealership can be a stressful experience.
How can you get a good deal when the dealership is in control?
Below we discuss the methods you can use.
Pay cash
In the old days, paying cash was king. Dealerships loved cash because it meant that they were paid straight away, and they were able to move stock quickly. Discounts flowed.
In modern times, dealership models have changed. They have their own finance department and a big part of a dealership’s revenue comes from the finance. Cash is no longer king, in fact, you may expect to receive LESS of a discount if you pay cash, no matter how good a negotiator you think you are.
The other issue with paying cash is you are purchasing a fast depreciating asset. The average depreciation (lessening in value) of a car is 19% in the first year and 15% in the second and third year.
If you were to use the cash you have for something else, like an investment or paying down your mortgage to make money from your cash, that may be a smarter move.
The walk out
Other tactics customers employ include the walk out. In the salespersons office the customer will be presented with a price and they will counter that with an offer. If the offer is not accepted, they walk out. The hope is the dealer will come running after them to concede defeat.
This can be a good method; however, you are reliant on the salesperson being desperate to achieve their targets and for their Sales Manager to approve any deal that you put forward. Dealers are also very savvy and understand this tactic. They employ counter-tactics to deal with this.
Bottom line, a dealership has a price they will not drop below as it costs a lot of money to have a car in stock at a dealership. The overheads in a dealership are huge!
The time of the month will also dictate whether this method works. Towards the end of the month usually the pencil is sharpened a lot more than at the start, this is due to targets.
If your offer is realistic, you may get the deal, but in most cases, you will settle somewhere in the middle depending on the popularity and availability of the car.
Buy ‘old’ and in stock
Car dealers will generally be sharper on price for cars in stock over cars they have to swap with other dealers or order from the factory.
Dealers have a system that measures ‘ageing stock’. The longer the car sits on the lot, the more it has cost the dealer and the more motivated the dealer is to sell that car.
If you are prepared to compromise on colour or variant and settle for what the dealer has in stock, you may find yourself with a very sharp deal. This of course is dependent on the popularity of the car. If a dealer knows they can sell it to another person for more because it is popular, then they will likely reject your offer.
Shop around
In the old days, dealerships were owned by families or individuals and you could shop around if you had multiple dealers in the city you reside in. Now, dealerships are mostly owned by large corporations or dealer groups. The dealer on one side of town is likely owned by the same company that owns the dealership on the other side of town. Shopping around is also time-consuming and somewhat exhausting.
You cannot generally just call up and get a deal, you must go in and spend time. Or you must look at buying outside of your local area which means the car will be trucked in and dropped off to a depot or your home. You miss out on the car handover – which is the feel-good part, with a nice smelling clean shiny car instead of receiving a truck soiled vehicle from a nameless truck driver.
There are other methods customers employ, however, these are the most common. Some work and some do not. When going up against car salespeople, you need as much help as you can get.
Use a car buying broker
There are car buying brokers who can do the negotiating on your behalf. These services aren't free, but a quick Google could save you hundreds if not thousands off the purchase price of your new car.
Timing is everything
Dealers have targets, both from a business perspective and also the manufacturers they represent. As the end of the month approaches dealers to become far more negotiable than at the start of the month, especially if they haven't hit their target. Individual salespeople are more likely to bat harder for you if they aren't hitting their targets that month individually.
Some tips for this. You need to be ready to go now. Have your finance in place and be ready to sign on the dotted line. Most of the deals you'll be offered in the last 10 days of the month will expire at the start of the next month. You can usually tell if the dealership is busy on a Saturday and don't be afraid to ask "how's business? Are you guys busy?". Looking around the dealership will tell you if they are or not. The quieter it is, hopefully, the more likely they will be to wheel and deal.
Pitch a price that's low, but not ridiculous
Doing your research prior will assist with this. It should be understood that a base model vehicle will have less margin (profit) for the dealer, so asking for thousands of dollars off a car that sells for $19,990 probably won't fly. If you start high, you have nowhere to go, but if you start low, you can always come up from that point.
This is my limit
You can also set a maximum limit of what you can spend. Use the husband or wife as the backstop "My partner said I can't spend more than..." even if there is no partner! Just make sure if there is a partner, they aren't sitting there with you when you use this - and also are really hard to contact if the salesperson asks you to get them on the line.
Don't trade unless you absolutely have to
Having your finance in place first and if you can sell your current car elsewhere, do it. What you see your 2003 Commodore being worth, the dealer sees probably 25% of that value. They may give you a discount on the car you're buying, but they'll make this up by low-balling the trade.
Accessorise, but don't go overboard
Accessories personalise the car and make it yours. You just have to ask yourself whether branded floor mats are important to you and if you are willing to pay full price for them. Contrary to popular belief, new cars don't come with a full tank of fuel or carpet mats, these are all options. Only get the accessories that you need!
Dealer delivery charges... what on earth?
It comes up on every quote you'll get from a dealer. Most people say "But I'm picking the car up??!!". Dealer delivery is the money dealers charge to 'prepare' the car for you. Detailing and covering their costs. But $2,000+ is just ridiculous. Try to negotiate this to under a grand. If they don't budge, ask them what's included in the charge to justify it. Walk out if necessary!
If it's popular, good luck
If a particular car is popular, you are going to find it more difficult to get a great deal. New models are usually hard to discount unless they aren't selling well, then you have to ask if it's the right car for you! Usually after a few months the demand will die off and you will find yourself in a good position to negotiate. If you line up for every new iPhone, then you may have to pay the full price.
The smart choice
Journey Finance takes all this hassle out of the process and negotiates the best deal we can get for you. In 99% of cases, the deal is local which means you get the support of the dealer if things go wrong and ongoing personal service.
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