Embedded Files
July 2022
Buying a new car is a daunting process during this pandemic due to computer chip shortage [1]. Car dealers have excessively marked-up the price, whereas manufacturers did not increase Manufacturer's Suggested Retail Price (MSRP).
Some careful considerations may save thousands of bucks while buying a new car. Recently, I purchased a new car (May 2022). Here I am sharing a guideline based on my experience.
Step#00: Do not hurry to make a decision.
Step#01: Select a car (model/make/style/year/color) you want to buy. For example, I bought a Toyota RAV4 LE 2022.
To accomplish this step you should use your own preference, discuss with friends and family and also study vehicle reviews online.
Do this step before you start visiting car dealerships. Because if you go undecided they will allure you with unnecessary expensive models.
Step#02: Visit a vehicle dealer. Call 2-3 dealers about the vehicle you are interested in and schedule a visit. Tell them exactly what you want (from step#01). Ask for an out-the-door (OTD) price for the car. OTD price includes MSRP, additional accessories added by the dealer, transportation cost, doc fee, taxes, interest amount if you’re financing [2]. In this phase they may ask for your credit score and how much you want to put as a down payment.
Do not make the purchasing decision yet.
If you want to make the purchase interest free (Islamic way), also ask them whether they allow buying down the APR to 0% [3]. Please see the image below.
Step#03: Call a few more dealers in 1-2 hrs drive from your location, and ask for the OTD price of the car. Usually they will ask you to visit, if you have time then you can go, but it is okay to get the OTD price through email.
Reach out to as many dealers as possible, this is really a key step. More dealers increase your chance to get a better price.
Step#04: Dealer selection. There will definitely be some winning OTD quotes. Because most of the dealers mark-up additional prices due to pandemic and chip shortage. Pick those good quotes and prepare for negotiation.
In regular time, cars are sold on MSRP (or below as well). Vehicle dealers add a few accessories (like, window tinting, cargo net, floor mat, and so on) to make more profit. You will be able to negotiate for accessory options and prices. However, during this pandemic customers do not have much room for negotiation.
Step#05: Close the deal. Once you finalize a dealer, visit them to close the deal. As a current trend they ask you to sign a contract and put a non-refundable deposit ($500), this amount will be deducted from your final price. You need to share your documents like SSN, and drivers license.
Step#06: Pick up the vehicle. The dealer will keep you posted when the vehicle is manufactured, when shipped and when ready to pick it up. They will also share a VIN number to get vehicle insurance. While you shop for insurance, make sure you get "Gap insurance". Gap insurance is optional auto insurance coverage that helps drivers whose car loan balance is more than what their vehicle is worth if it’s totaled [4]. Dealers also sell gap insurance, but usually pricier than traditional insurance companies. On the scheduled day, you visit the dealer, finish remaining paperwork and pick up the car.
Drive safe!
References:
[1] https://www.nytimes.com/2021/07/15/business/car-sales-chip-shortage.html
[2] https://www.edmunds.com/car-buying/know-all-the-costs-before-saying-yes.html
[3] https://youtu.be/ceoR4MKrJPU
[4] https://www.usnews.com/insurance/auto/gap-insurance
Google Sites
Report abuse