As a fast-talking car salesman rattles off a flurry of numbers, it can be hard to make sense of whether it's a "good" offer. Fortunately, there's a simple way to make sure you get the best deal on your new car.
The trick is to break the car-buying process into four parts:
Dealers combine some of these elements into one offer, which can be hard to evaluate.
They may offer you a great price on your new car but lowball you on the trade-in, for example. Comparing your options and sticking to price targets for each component of a car deal will ensure that you're getting a fair shake.
To be able to judge a dealer's offer — and later to negotiate on the price — look up the fair price range for the car you want. Check online pricing guides like Edmunds, Kelley Blue Book and the National Automobile Dealers Association, which show average prices people have paid for that car in your area. ZIP code and certain options, such as color, can significantly alter pricing, so be as specific as possible.
To get the best offer for the car you want, shop multiple dealerships in your area by emailing them for quotes.
To get the best offer for the car you want, shop multiple dealerships in your area. This doesn't have to take up your whole weekend; email the dealerships' internet departments and have them send you quotes.
Extra-mile shoppers: Consider shopping different areas with lower average prices. This can be as simple as driving to the next town over or as involved as buying a plane ticket. It may save $500 if you fly to a cheaper spot and drive the new car home, though it could also take all day and a lot of extra effort.
If you're trading in an old car, the various prices can quickly become jumbled. But getting a good price on your trade-in helps keep your total purchase costs down, so it's smart to decide on a minimum value to accept before you negotiate.
To price your trade-in, check online pricing guides and compare quotes from local dealerships.
To price your trade-in, start with the same basics as pricing a car you want to buy:
Don't let this step slip through the cracks. Dealerships get higher markups on used cars than on new ones, so they may be very focused on making money on your trade-in.
Extra-mile shoppers: Getting your car detailed, which costs around $150, can give it "curb appeal" and bring you a higher trade-in price. And if you really want to impress, vehicle reconditioning services can fix significant dents. Just make sure they advertise paintless dent removal because repainting a car lowers its resale value.
The dealer can offer you an interest rate to finance your purchase, but it's not your only option. To make sure you get the best deal on financing, it's wise to get preapproved for an auto loan before you go to the dealership. This is especially important if you have bad credit, because the lower your credit score is, the higher your interest rate will be.
To make sure you get the best deal on financing, it's wise to get preapproved for an auto loan before you go to the dealership.
With a preapproved offer in hand, you become a "cash buyer" at the dealership and you can focus just on negotiating the best price. You get to skip over the dealer's monthly payment offers, which could extend the loan term or mark up the interest rate. Plus, the dealer may try to beat your rate. If he or she offers you a better deal, you can choose dealership financing.
Apply with at least three lenders. Use an auto loan calculator to compare offers and test different financing combinations. You can input the new car's price, your trade-in price and different loan lengths to see what your monthly payment would be. Also, check how different rates affect the total interest paid. This will give you an idea of your desired terms.
Extra-mile shoppers: Car manufacturers sometimes offer car-buying incentives in the form of rebates and low-interest financing to generate car sales. You may even get a 0% interest rate, although this may require stellar credit. Search the manufacturer's website for current offers on the car you want to buy.
Even if you've already arranged financing, you'll want to prepare for a few last things in the dealer's finance and insurance office, where you'll finalize the deal.
First, know which fees are legitimate and which are bogus. Common fees in a sales contract include:
Common add-ons, such as 'dealer fees,' 'vehicle acquisition fees' or 'advertising fees,' can be negotiated.
Any other fees, such as "dealer fees," "vehicle acquisition fees" or "advertising fees," are common add-ons that you can negotiate.
Second, you may be pushed to buy an extended warranty. New cars come with a factory-included bumper-to-bumper warranty, usually for three years and 36,000 miles, and possibly a powertrain warranty for up to 60,000 miles. Extended warranties provide coverage past the basic warranties and come in varying lengths and mileages.
Most likely, the factory-included warranty will serve you just fine. Plus, you can always buy an extended warranty at the end of your standard coverage, so why rush?
If you follow the steps above, you should have:
Armed with this information, you'll be in excellent shape to get a great deal on your new ride when you head to the dealership.
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