By Keith Griffin, Used Cars Expert
Excerpt Taken from About.com’s About Autos Section
In the midst of the used car sales increase, one type of seller
will have deals on used cars - the independent dealer.
That
finding is based on the fact that used car sales are increasing, by up to 5.5%
overall, while independent dealers are seeing a drop in year-to-date sales of
12.1% when compared to the previous year. Their year-over-year sales are down
6.3%.
Those facts come courtesy
of CNW Research, which points to
the strongest sales segment for used cars: the private seller. Their
year-to-year sales are up 20.4% while their year-to-date sales are up 24.1%
compared to the first five months previously.
Just to give a quick refresher - there are three types of
used car sellers. Franchised dealers are new car dealers that have used car
lots. Independent dealers are dealers not affiliated with a new-car
manufacturer. Private sellers are individuals who are not in the business of
selling used cars.
As
I have said in the past, I'm a big fan of the independent dealer. Those are the
folks who own one or two, maybe a few, used car dealerships. As a group,
they're hard working, create local jobs and support local charities. Sure,
places like CarMax, Auto Nation, which are technically considered independent
dealers, and franchised dealerships do those things, but I like the
entrepreneurial spirit of the independent dealership that aren't multi-state
corporations.
But,
and there is always a but, my first responsibility is to the consumer. I want
to see the consumer get the best deal possible when it comes time to buy a used
car. I think the best deals are going to come at the independent dealer for
most consumers.
What's the best way to take advantage of the
independent seller's precarious condition? It's going to sound
counter-intuitive to advice I gave recently for buying a used car with bad credit. You can get the best price by arranging your
financing through the independent dealer.
After
all, to get the best price you have to give a little, but only a little.
Actually, you're not giving anything but you are helping the dealer. How so?
The independent dealer makes money by acting as a middle man for banks and
other financial institutions.
Before
you go into the independent dealer, apply for used car financing online. (My
wife and I did something similar when we bought our 2008 Mazda5.) Get your best
interest rate and then tell the independent dealer that you will allow him or
her to match the rate through one of their lenders. It works, and you are
helping the dealer make a little extra money without costing you anything.
However,
make sure you are prepared before going in. Don't let the dealer talk you into
financing unless they can match or beat your best interest rate. There is
absolutely no reason to pay a higher interest rate.
Be cautious, too, if the
dealer opts to drop the price of the used car in exchange for a higher interest
rate. Make sure you have an app on your phone that will help you figure out
interest rates on loans.
Let’s assume you need to borrow $10,000 to buy a used car. If
you arranged 6.25% financing, the used car would cost you $12,744.29 after four
years with compound interest.
But
say the dealer offers to get you 7% but sell you the car for $9500.
"Hey," he might say, "your monthly payment will be lower."
That's true. It will be lower at $222.07 a month for the 60-month loan vs.
$265.50 on the four-year loan. However, the interest on the five-year loan is
$3824.44 while on the four-year loan its $2744.29.
Lets
look at it this way. You would pay $12,744.29 for the $10,000 car but
$13,324.44 for the $9500 car. The independent dealer and the financial
institution make almost $900 more off the less expensive used car price if they
convince you to look at it from a monthly payment standpoint.
You're in a position to
bargain with an independent used car dealer. Give a little back, be realistic, and
your used car price might be a lot lower.
