How to save thousands $$$ purchasing a new car using the smart buyer’s approach

How to save thousands $$$ purchasing a new car using the smart buyer’s approach

Whether it's a sporty hatch to nip around the city or the family SUV to drive the kids around and take on holidays, you want the best car for you. Yes it can be exciting, but it’s easy to get caught up in the emotion of such a purchase.

Luckily though, if you take to your next vehicle purchase using the smart buyer’s approach, with little extra effort, you can save yourself ten's of thousands of dollars.

After the family home, your car will likely be the second biggest purchase you will make. To maximise your savings and ultimately increase the amount of cash in your own pocket, the following steps must be followed to ensure you obtain the best possible deal on your car, finance and trade.

Break the mould – Be wary of the dealer

Thankfully the days of walking into a car dealership and signing up on the spot for your car, finance and insurance are long gone. From a business perspective, car dealerships are well-oiled money making machines. In the eyes of the dealership, the moment you walk into the lot you become another victim, ready to step up to the conveyor belt on a production line to empty your pockets. The first point of call is the car and the friendly person who greets you on the lot is a highly trained sales gun ready to give you a helping hand up onto that conveyor belt. Purchasing a new car is an emotional experience, it’s exciting and the salesman knows exactly how to manipulate your emotions to get you into the car whilst maintaining the highest possible profit margin for the dealership. They can be very good at their job and before you know it, you’re convinced that this car is for you. So you’re happy with the car and the salesman has done his job, time to pass you onto the aftermarket team to upsell window tint, paint protection and all of the necessary products required to ensure your vehicle doesn’t rot within the first 2 years. Then you get passed onto the “business manager” or finance salesman who will give you the best interest rate that you’re “entitled” to. This is also the perfect time to upsell insurance products to a buyer that’s riding an emotional high and chomping at the bit to drive their new car out the front door.

 

Thankfully the days of walking into a car dealership and signing up on the spot for your car, finance and insurance are long gone. From a business perspective, car dealerships are well-oiled money making machines. In the eyes of the dealership, the moment you walk into the lot you become another victim, ready to step up to the conveyor belt on a production line to empty your pockets. The first point of call is the car and the friendly person who greets you on the lot is a highly trained sales gun ready to give you a helping hand up onto that conveyor belt. Purchasing a new car is an emotional experience, it’s exciting and the salesman knows exactly how to manipulate your emotions to get you into the car whilst maintaining the highest possible profit margin for the dealership. They can be very good at their job and before you know it, you’re convinced that this car is for you. So you’re happy with the car and the salesman has done his job, time to pass you onto the aftermarket team to upsell window tint, paint protection and all of the necessary products required to ensure your vehicle doesn’t rot within the first 2 years. Then you get passed onto the “business manager” or finance salesman who will give you the best interest rate that you’re “entitled” to. This is also the perfect time to upsell insurance products to a buyer that’s riding an emotional high and chomping at the bit to drive their new car out the front door.

Now, most of you will want to test drive a vehicle before jumping into a 3 – 5 year commitment. By all means visit your local dealer and if you like, you can give them the opportunity to win your business but DON’T FALL INTO THE TRAP! If you’re reading this article then you know better. Go in with an open mind, a strong will and the knowledge that you have other options out there that can potentially save you thousands.

 

Google Search – Online brokers

Google

In this day and age we’re so lucky to have access to a plethora of information online with the simple click of a mouse. Google is an absolute necessity to any savings minded shopper looking to purchase any product from a new hair dryer to a new car. When the stakes are raised, it becomes even more crucial that you do your research before signing on the bottom line.

This is where an online broker can be very useful. Now don’t get me wrong, online brokers exist to make money, we’re under no illusions here, but it’s the playing field where online brokers ply their trade which makes them a great alternative to the savings minded shopper. Dealerships play on emotions, the excitement, the masterfully thought out branding, you can touch and smell your new car. When caught up in this environment, it can be hard to take off the blind fold and focus on the detail of your proposal. Online brokers don’t have the luxury of seeing their customers face to face which limits their ability to capitalise on these emotions. The online broker must focus on the detail, if they don’t provide superior service and a superior product, they lose your business to the dealer. They have to be extremely competitive to survive and luckily for you, they are. Online brokers generally need to write higher volumes of business to survive and in turn this allows them to source more competitive rates through a number of lenders due to their volume.

Most online brokers will have their own dealer networks around the country from which they source new cars. Generally these dealer networks will give them access to all makes and models and along with that will come competitive fleet pricing. Once again it’s due to the high sales volumes that give the online broker the buying power to gain access to much more competitive pricing than a retail customer walking into a dealership off the street. Your local dealer will sell cars to customers within a small radius of the dealership. An online broker will sell cars to customers around the whole country and their pricing will reflect that.

Financing Options

 

Another important thing to consider when purchasing a new car is - How are you going to pay for it? The two obvious options are to finance as a car loan or pay outright with cash. Most people will opt for a car loan because it’s easy and we understand it. You finance the vehicle price, pay a weekly, fortnightly or monthly instalment for a set period of time and the vehicle is yours at the end of the term. Easy right? Sometimes it can be too easy, especially for the emotionally charged shopper who wants to drive out of the dealership with their new car as soon as possible. Don’t fall into this trap! As previously mentioned, there are fantastic finance deals online through brokers who will compete hard for your business. If a car loan is your preferred option, pay your due diligence and look for the best deal.

If you’re lucky enough to be in a position to pay up front with cash, you can avoid paying interest on the financed amount over the term. That’s great, but keep in mind what your capital can do for you over a 3, 4 or 5 year period. Cars depreciate, so to forego a large amount of capital into a depreciating asset may not be the best option for you.

The third and not so common option is a novated lease. A novated lease can be a very tax effective way for an employee or director of their own company to finance and maintain a vehicle. It consists of a three way agreement between the employee, the employer and a finance company. The employer will make the lease payments on behalf of the employee and deduct these lease payments from the employee’s salary, primarily pre-tax. All of your running expenses such as fuel, servicing, tyres, insurance and registration can be conveniently packaged into the agreement which means that not only will you be paying for the car finance pre-tax, but your running expenses as well. On top of that you don’t pay GST on the purchase price of the vehicle, so you will finance considerably less. When comparing a novated lease to a car loan, apples with apples, the savings over the term can be monumental. It’s not unusual for the net difference in total out of pocket expense to be up around $8,000 to $10,000 on a $40,000 vehicle over a 5 year term.

Once again, you have options so take the time to consider what’s best for you and you could potentially save thousands by choosing the best financing option.

Purchasing a new car is exciting and so it should be! 

 

Car in handWhether it's a sporty hatch to nip around the city or the family SUV to drive the kids around and take on holidays, you want the best car for you. Yes it can be exciting, but it’s easy to get caught up in the emotion of such a purchase.

Luckily though, if you take to your next vehicle purchase using the smart buyer’s approach, with little extra effort, you can save yourself ten's of thousands of dollars.

After the family home, your car will likely be the second biggest purchase you will make. To maximise your savings and ultimately increase the amount of cash in your own pocket, the following steps must be followed to ensure you obtain the best possible deal on your car, finance and trade.

 

Break the mould – Be wary of the dealer

SalesmanThankfully the days of walking into a car dealership and signing up on the spot for your car, finance and insurance are long gone. From a business perspective, car dealerships are well-oiled money making machines. In the eyes of the dealership, the moment you walk into the lot you become another victim, ready to step up to the conveyor belt on a production line to empty your pockets. The first point of call is the car and the friendly person who greets you on the lot is a highly trained sales gun ready to give you a helping hand up onto that conveyor belt. Purchasing a new car is an emotional experience, it’s exciting and the salesman knows exactly how to manipulate your emotions to get you into the car whilst maintaining the highest possible profit margin for the dealership. They can be very good at their job and before you know it, you’re convinced that this car is for you. So you’re happy with the car and the salesman has done his job, time to pass you onto the aftermarket team to upsell window tint, paint protection and all of the necessary products required to ensure your vehicle doesn’t rot within the first 2 years. Then you get passed onto the “business manager” or finance salesman who will give you the best interest rate that you’re “entitled” to. This is also the perfect time to upsell insurance products to a buyer that’s riding an emotional high and chomping at the bit to drive their new car out the front door.

Thankfully the days of walking into a car dealership and signing up on the spot for your car, finance and insurance are long gone. From a business perspective, car dealerships are well-oiled money making machines. In the eyes of the dealership, the moment you walk into the lot you become another victim, ready to step up to the conveyor belt on a production line to empty your pockets. The first point of call is the car and the friendly person who greets you on the lot is a highly trained sales gun ready to give you a helping hand up onto that conveyor belt. Purchasing a new car is an emotional experience, it’s exciting and the salesman knows exactly how to manipulate your emotions to get you into the car whilst maintaining the highest possible profit margin for the dealership. They can be very good at their job and before you know it, you’re convinced that this car is for you. So you’re happy with the car and the salesman has done his job, time to pass you onto the aftermarket team to upsell window tint, paint protection and all of the necessary products required to ensure your vehicle doesn’t rot within the first 2 years. Then you get passed onto the “business manager” or finance salesman who will give you the best interest rate that you’re “entitled” to. This is also the perfect time to upsell insurance products to a buyer that’s riding an emotional high and chomping at the bit to drive their new car out the front door.

Now, most of you will want to test drive a vehicle before jumping into a 3 – 5 year commitment. By all means visit your local dealer and if you like, you can give them the opportunity to win your business but DON’T FALL INTO THE TRAP! If you’re reading this article then you know better. Go in with an open mind, a strong will and the knowledge that you have other options out there that can potentially save you thousands.

 

Google Search – Online brokers

Google

In this day and age we’re so lucky to have access to a plethora of information online with the simple click of a mouse. Google is an absolute necessity to any savings minded shopper looking to purchase any product from a new hair dryer to a new car. When the stakes are raised, it becomes even more crucial that you do your research before signing on the bottom line.

This is where an online broker can be very useful. Now don’t get me wrong, online brokers exist to make money, we’re under no illusions here, but it’s the playing field where online brokers ply their trade which makes them a great alternative to the savings minded shopper. Dealerships play on emotions, the excitement, the masterfully thought out branding, you can touch and smell your new car. When caught up in this environment, it can be hard to take off the blind fold and focus on the detail of your proposal. Online brokers don’t have the luxury of seeing their customers face to face which limits their ability to capitalise on these emotions. The online broker must focus on the detail, if they don’t provide superior service and a superior product, they lose your business to the dealer. They have to be extremely competitive to survive and luckily for you, they are. Online brokers generally need to write higher volumes of business to survive and in turn this allows them to source more competitive rates through a number of lenders due to their volume.

Broker

 

Most online brokers will have their own dealer networks around the country from which they source new cars. Generally these dealer networks will give them access to all makes and models and along with that will come competitive fleet pricing. Once again it’s due to the high sales volumes that give the online broker the buying power to gain access to much more competitive pricing than a retail customer walking into a dealership off the street. Your local dealer will sell cars to customers within a small radius of the dealership. An online broker will sell cars to customers around the whole country and their pricing will reflect that.

 

Financing Options

FinanceAnother important thing to consider when purchasing a new car is - How are you going to pay for it? The two obvious options are to finance as a car loan or pay outright with cash. Most people will opt for a car loan because it’s easy and we understand it. You finance the vehicle price, pay a weekly, fortnightly or monthly instalment for a set period of time and the vehicle is yours at the end of the term. Easy right? Sometimes it can be too easy, especially for the emotionally charged shopper who wants to drive out of the dealership with their new car as soon as possible. Don’t fall into this trap! As previously mentioned, there are fantastic finance deals online through brokers who will compete hard for your business. If a car loan is your preferred option, pay your due diligence and look for the best deal.

If you’re lucky enough to be in a position to pay up front with cash, you can avoid paying interest on the financed amount over the term. That’s great, but keep in mind what your capital can do for you over a 3, 4 or 5 year period. Cars depreciate, so to forego a large amount of capital into a depreciating asset may not be the best option for you.

The third and not so common option is a novated lease. A novated lease can be a very tax effective way for an employee or director of their own company to finance and maintain a vehicle. It consists of a three way agreement between the employee, the employer and a finance company. The employer will make the lease payments on behalf of the employee and deduct these lease payments from the employee’s salary, primarily pre-tax. All of your running expenses such as fuel, servicing, tyres, insurance and registration can be conveniently packaged into the agreement which means that not only will you be paying for the car finance pre-tax, but your running expenses as well. On top of that you don’t pay GST on the purchase price of the vehicle, so you will finance considerably less. When comparing a novated lease to a car loan, apples with apples, the savings over the term can be monumental. It’s not unusual for the net difference in total out of pocket expense to be up around $8,000 to $10,000 on a $40,000 vehicle over a 5 year term.

Once again, you have options so take the time to consider what’s best for you and you could potentially save thousands by choosing the best financing option.

 

Trade vs selling privately

I often ask my clients – How much time would it take you to make $4,000? For many people this can be 3 to 4 week’s wages before tax. Well this is something so many people over look when trading in their old vehicle. Take a look at the snapshot below from the industry standard pricing guide Redbook.com.au

 

Audi A3

 

Look at the difference between the private sale price-guide in comparison to the trade price-guide. To be conservative let’s compare the low end of the private ($15,400) to the low end trade ($12,100). That’s a difference of $3,300! A massive saving right? Well let’s factor in the industry standard 20% reduction that wholesalers apply to the low trade value price guide when evaluating a vehicle, this leaves the likely trade price offer to be ($9,680). Using this example we can see a difference of $5,720! I’m in no way having a go at wholesaler’s here, they need to add their margin, GST, factor in costs for floor plan finance, etc. But it is clear that the owner can save themselves thousands of dollars if they spend a little time setting up a Carsales.com.au profile and facilitate a few likely inspections. How much do you value $5,720?

 

Conclusion –

As you can see it is so important to take a step back, do your research and consider your options before diving into a new car. Luckily for you though, you’re now armed with an approach that can save you more than $10,000 just by taking on board the tips I’ve outlined above. Consider your financing options, be wary of the dealer, seek out a good broker and sell your car privately. Pretty simple really.