Buying a new or used car? You know it can be a stressful process, but it doesn’t have to be.
Former car salesman turned Houston attorney Mehdi Cherkaoui explains what you need to know before you start negotiating.
1. Avoid buying a car from a small mom-and-pop lot
Cherkaoui says smaller dealerships are not going to have the reputation that they want to protect. But it’s also about what they can do for you if something goes south.
“If you have an issue with them, they’re unlikely to come in to help and try to resolve the situation. And third, if you end up in a lawsuit against them, they may not even have enough solvency of assets to recover against,” said Cherkaoui.
Often people think going to a smaller car lot means you will get a cheaper rate.
“That’s just a misconception. And even some people are concerned about their credit. They go, ‘Well, I’m not going to go to a franchise dealer because my credit is low.’ I might as well go to a small dealership. That’s a bad calculation. Those dealerships have the same lenders. They have access to the same lenders with the same programs if a small dealership can finance you, rest assured, the bigger dealership can finance you.”
“Even if you have to pay a little bit more, think of that as insurance in case there is an issue and you have a big dealership to go after,” Cherkaoui adds.
2. Never buy the add-ons and warranties they try to sell you in financing
“Ninety-nine percent of those warranties in the add-ons, a finance office are absolutely useless. And even if you want to buy them, you can go outside of the finance office and buy them for pennies on the dollar,” said Cherkaoui.
3. Bring your own financing
One big piece of advice from Cherkaoui is to work out your financing ahead of time.
This is also the same advice Amy heard from Mike Rumple with Your Car Buying Advocate.
Rumple said before you even go to the dealership, you should already know what the interest rate is and get pre-approved for a loan. Credit unions typically give the lowest rates. Then you can use that to negotiate what the dealership might offer for financing.
“They’re going to be able to give you a good rate. You just have to make them aware that you know what a good rate is,” said Rumple.
Rumple said the dealership is going to try and lump the entire process together. The best way to do it is to negotiate the interest rate and how you’re going to pay for the vehicle at the end, separately. Learn more from Rumple about how to do this.
4. Never sign a blank document
Amy says she had a viewer who emailed and said they signed all the paperwork there at the dealership and two pages were blank. The salesperson told them for out-of-town customers they always do this in case something changes last minute. This is a huge “no-no!”
“Practice and a common mistake that the consumer makes in any circumstance. Look, the dealership wants to sell you that car just as bad as you want to buy it, sometimes even worse. So, you have to be consistent. You have to be cautious. Do not sign any document that is not filled in,” Cherkaoui said.
5. Get copies of everything you sign
After you buy a new or used car, you should make sure to get copies of every document you signed.
These documents should include:
- buyer’s order
- retail installment contract or the lease installment contract
“A lot of times people will call me with a problem and, you know, maybe changes in terms of their financing. They get a call back a week or two weeks later. And I say, ‘Well, what did your retail installment contract say?’ And they say, ‘My what?’”
The buyer’s order will have information like the agreed-upon price, sales tax, etc. The retail installment will have the price you are financing, the amount of downpayment, the terms of the loan, and any kind of penalties.
This is all good evidence to have in case the salesperson calls back the next day and tries to change the terms of the deal.