Have you ever felt like you didn’t get the best deal for a high priced item? Or worse – that you were ripped-off?
Never feel that way again.
Learn how to make sure you’re getting the financing you deserve – and never settle for a bad deal again.
"It Was The Best 5 Minutes I Ever Spent"
Need to buy a car? Do it online. That’s how this mom started looking for the car she needed. She knew that searching local dealerships’ websites would give her a better idea of what’s available and what the list prices were.
Large-ticket items, like cars, appliances and other things, typically have a Manufacturer Suggested Retail Price (MSRP) – the list price – and some unknown price that’s far below the MSRP.
The MSRP is set to provide a place to start negotiations from – and for people who don’t mind paying too much.
Within minutes, the perfect minivan was found. It even had leather seats.
(Did You Know? The average price for new car 2015 was $33,560.)
"How much SHOULD I pay?"
This is the $1,000 dollar question. Rockstar mom saw the total cost online but wanted to know the monthly payment. She estimated her cost by using this simple loan calculator.
The following figures were used:
- Estimated loan amount of $33,000
- 60 months (5 years) Term
- Expected interest rate: 3.3%
She entered the loan amount, time period (Term) and expected interest rate (leaving out the trade-in value in case the dealership wouldn’t give her a good deal) into the calculator – like this:.
This gives her a monthly payment of $597.38
Next she factored in her trade in.
She hopes her current vehicle is worth around $5,000.
If so, the loan amount is changed to $28,000. (33,000 price – $5,0000 trade-in = $28,000)
With this in mind, she calculates another estimate:
$506.86 for a monthly payment.
With a better idea of how much interest she’ll pay and what her monthly payment will be, she’s ready to go to the dealership.
Do you know how much interest you’re paying on your car or home? Look at your next statement to find out – you might be surprised!
Rockstar Tip: Estimating costs before going to a dealer give you a good place to start. Just remember, actual costs will vary depending on your state’s taxes, title fees, and other applicable charges.
"Thinking About Car Shopping Makes Me Anxious, So I Did It Differently"
Shopping for big-ticket items can take a lot of time and effort, and it can be exhilarating. Especially when you walk away knowing you got a great product and a great deal.
Except when it comes to finding for a new car.
No one likes it. In fact, according to a study from Autotrader, only 17 people out of 4,002 enjoyed the car buying process.
This mom was NOT one of those 17.
The Typical Buying Experience
What’s wrong with shopping for a car? Anxiety runs so high because the process can be so breathtakingly painful.
It happens something like this:
You walk on a car lot and are greeted by several sales people. One of those introduces him or herself to you and you begin your search.
You find a car, truck, SUV, or minivan that you like and take it for a test drive.
Then your sales person brings you inside and the negotiations begin.
When things get rough, the finance manager joins the discussions.
The first steps are quick and fun. The final steps can be brutal and suck-up the rest of your day.
Many dealerships deny this happens, and even ordered the following video to be removed from Edmunds.com. (Hint: it demonstrates this process – if it were used in a grocery store.)
It doesn’t have to be this way.
This mom wanted a different experience. She started with a plan. Doing this virtually ELIMINATED the pressure most people usually feel.
Her plan looked like this:
- Estimate a monthly payment
- Estimate credit score and interest rates
- Determine what I can afford
- Find a mini-van in this price range
- Drive home and celebrate!
She already has a ballpark figure of $500 per month.
The next step? She asks herself "What is my credit really like?"
Easier Than Advertised: Estimating Credit Scores
Discovering what her credit was really like was much easier than she thought!
In less than 2 minutes, she used the credit estimator and saw that her credit score should be high.
She never had any bankruptcies or foreclosures and always pays her bills on time. She also has enough savings to protect her if she ever lost her job.
With such good credit, qualifying for an interest rate in the 3 to 3.5% range should be no problem.
If the dealership offered her a higher interest rate, she knew she didn’t have to take it,
Concerned about what your credit report might have?
Our credit reports section has valuable information you can use immediately (no sign–in required)
Could she buy the minivan on her budget? She promised to take her kids to a victory celebration – even if she had to get an older vehicle to fit everyone into.
Most large ticket items have a wide range of prices, all depending on the size, features and benefits of them. Knowing what’s needed and finding the price range that’s right for you is crucial when deciding what to (and not to) buy.
This mom knew she needed a larger vehicle and knew what her monthly budget would allow.
But she didn’t stop there.
She determined the total amount she was willing to spend by looking beyond the monthly amount. Her monthly budget would change in the years ahead, hopefully increasing. Therefore it’s not the best way to see if something is affordable.
$33,000 is the number she came up with – which is just in the right price range for a new minivan.
Rockstar Tip: Compare the total cost of an item – and not monthly costs. This is the total amount you’ll pay, including the interest.
Remembering The Down Payment
What else did she do? Part of finding out how much you can afford to spend is considering the value of a trade-in or down payment.
She wanted to know how much her car would be worth if she traded it.
This Kelly Blue Book Trade-in Estimator was a big help. And it took her less than 2 minutes!
Knowing this ahead of time helped her stand her ground when negotiating the price.
If the dealership doesn’t give her a reasonable amount, (her car runs fine, its just too small) she’s going to donate it.
Have you considered donating your vehicle? Donate a Car can help you find a local non–profit that could use your vehicle.
Rockstar Tip: Many sales people will put the value of a used product toward the down payment, including major appliances, (good) furniture and even air conditioning and heating systems. Just Ask!
Kelly says her trade-in should be worth around $5,000.
Now that she has her price range and trade-in value, she can take this next step. Without it, she’ll wouldn’t have saved anything.
"Now I Became Excited About Getting A Deal"
Ever wonder my so many people would rather do almost anything other than going to a car dealership and negotiating for a car?
Edmunds.com asked people if they had a choice between car buying or giving up something, 21% said they would rather give up sex for a month than haggle for a car!
44% would give up Facebook. Another 29% would give away their smartphones for the weekend.
However, because of good planning – car shopping wasn’t so bad.
Excited about getting a minivan and keeping her commitment.
When she arrived at the dealership, she immediately found the minivan she saw online thanks to her sales person Michael.
It was just what she wanted. There was even one in her favorite color, Barcelona Red.
She took it for a test drive and then started the buying process.
Rockstar Tip: Make the most of your test drive. Check out How To Test Drive A Car from Car and Driver
Of course, the Mike asked her thousands of questions, including how much she wanted to pay every month.
After all, if she could afford around $500 a month, why WOULDN’T she want the upgraded version (with a 7-year loan)?
Here’s how to get the best deal when shopping at a dealership.
That’s when she put her foot down.
She quickly calculated numbers Mike gave.
This is what they looked like:
The extra interest alone would cost her almost $5,000!
And financing for 7 years? No Way!
Rockstar Tip: When purchasing a big ticket item, base your purchase decision on the total cost of the item, not the amount of the monthly payment
It also helps when you know what your interest rate should be.
Car dealerships, once they receive the approval information back from the banks, are allowed to charge a higher rate – and keep the extra for themselves!?
Read more about dealers taking advantage of people here:
"Let’s Make A Deal"
Now it’s deal time.
Mike was ready, and so was Rockstar mom.
She knew how much she was willing to pay and started from there.
She filled out the paperwork, gave it to Mike, and waited.
When he came back with the offers, she was ready.
Understanding her credit score meant she knew the interest rate she was entitled too.
No More Dealer Advantage
Mike presented her an offer with a 4% interest rate and 72-month term. And he wouldn’t take her trade in.
Nope. She was not going to settle for a 6-year loan at that rate.
Next, he came back with the same interest rate at 60 months.
You don’t have to settle for an interest rate higher than you should qualify for.
She got up to walk out, but Mike told her to wait.
Mike returned with his finance manager.
He knew right away she was not a push-over.
"I Refused To Settle For A Bad Deal"
The finance manager returned with the deal she wanted – actually a little better.
She was able to get a 2.9% interest rate and the full $5,000 for her trade in.
Here’s the recap:
- Original offer: $40,000 and no trade-in
- APR: 4%
- Total interest paid: $5,058.13
- Total payments: $45,058.13
- Final offer: $35,000 ($5,000 for trade in)
- APR: 2.9%
- Total interest paid: $2,640.99
- Total payments: $37,640.99
- TOTAL SAVINGS: $7,417.14
She saved over $7,000 just by spending a few minutes online with a free loan calculator.
"I Kept My Promises"
How did she save more that $7,000?
Planning helped her set her budget. Simple calculations exposed real savings. Saying "no way" convinced others she was serious.
Don’t take our word for it. Next time you have a major purchase, try this strategy for yourself and let us know how it went.