New cars in a row on the pavement

Buying a new car can be an intimidating experience.

Deciding which car you want is actually the easy bit; most buyers will agree that running the gauntlet of car sales executives and haggling over the price is considerably less enjoyable. But think about the process and play the system like a car dealer would and you could drive down the cost of your next car. Here’s how…

Everyone’s talking about finance.

Approximately 80% of new cars are bought using finance rather than a lump sum payment. Car makers like it because it means a lot of drivers are essentially renting their cars and swapping into new models every three or four years, which helps maintain rising sales.

And there are advantages for buyers. They’re not tying up large sums of money in a depreciating asset, and it helps make cars affordable. But to get a better deal on finance, you’ll need to follow these steps…

1. Line up your discounts

It’s worth remembering that the profit margin for the seller of a new car is split into two: the dealer’s and the car maker’s. If you say you’re buying the car with cash, you’ll find out what kind of discount the dealer can offer. When you buy a car using finance, the car maker’s discount – usually couched as a ‘deposit contribution’ – comes into play.

However, it’s important to remember that just because you’re entitled to a deposit contribution doesn’t mean you shouldn’t haggle for the dealer’s discount too. Just remember that you’ll need to agree on the price of the car before brokering the finance deal.

2. Check the maker’s website

‘Time spent in reconnaissance is seldom wasted’ might be an old saying but it still rings true.

Remember when you go into a car dealership, you’re up against someone who is immersed in the products they’re selling five or six days a week. The more you know the better. And by checking the manufacturer’s website, you’ll find their latest deals.

For example, deposit contributions might increase as we near the end of each of the year’s quarters. And consider what rival companies are offering, as it can be a helpful haggling tool; a good salesman will be aware of rivals’ deals and won’t want to lose your business.

Remember, finance doesn’t have to be provided by the car dealer

3. What finance do you want?

Assuming you do want to buy the car on finance, and most of us do, research the best package for your needs. Most car dealers will nudge you towards the Personal Contract Purchase (PCP). Monthly payments are generally lower on these because they’re only based on part of the car’s value. But if you want to own the car eventually, hire purchase may prove the cheaper option in the long term.

You may also find interest rates differ between finance packages: some will attract zero per cent APR, others five or six per cent. And remember: finance doesn’t have to be provided by the dealer. There is no shortage of products from independent lenders that buyers should weigh up or use to drive down a dealer’s APR offer.

4. Don’t fall for over-inflated extras

The sales person’s job is to play on your insecurities. They’ll point out how regular comprehensive insurance won’t enable you to buy a replacement new car if yours is written off. To do that, you’ll need GAP (Guaranteed Asset Protection) insurance. But the GAP policies they offer will be expensive and may not be as comprehensive as you’d hope, or as good as cheaper online policies.

Do you need paintwork protection? Again, it’s tempting to think your pride and joy needs it, but will you get the best value buying it from the dealer?

5. Get it in writing

Ensure that you get your offer in writing and that it details the cost of the car including any extras you might have chosen, the deposit, number of monthly payments, how much any charges are, discounts (if there are any) and what the APR is on the loan.

Finally, you need the total cost of the deal and compare it to buying with cash.

The dealer may be reluctant to do this but insist. It’s the only way you can compare like for like when you visit another showroom and see if they can match or beat the deal on the same car, or a rival model.