Frequently Asked Questions When Buying A Car

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Q: If a car dealership sells a car close to its invoice price, how can they make a profit?

Answer: The manufacturer gives a rebate directly to the dealer. A car dealer makes profit from car financing in addition to selling the car. The dealership makes money from their parts and service departments. They receive a “holdback” or “kickback” from the manufacturer for selling a number of cars.

Car dealers, for instance a Buick dealer have various means of earning so that selling cars close to their invoice price is not an issue for them.

Q: A number of car makers have zero percent APR financing, how is this possible?

Answer: You may think there are hidden tricks beneath these amazing rates, surprisingly, there is none. It is their strategy to release car models that are low in sales. There are some things however, that you should know. You must have a high credit score. That said, not all car buyers can avail of this very low financing rate. You can choose between a low financing rate and a rebate. If you need cash for your down payment, then choose a rebate. These low-rates are generally applicable for short term loan only, usually between 2-3 years.

Q: How much discount can I get if I pay in cash?

Answer: There are times when paying cash will work against you because you will be paying more compared to applying for financing. Car dealerships earn money from financing so if you should pay in cash, in many cases, the dealer is actually making less profit. Be straightforward and tell them you are paying cash and will drive the car home now or today if they give you their best price. State clearly that you are giving them the opportunity for an easy sale.

Q: I leased my new car and I can’t afford to pay the loan any longer. How do I end it without losing a lot of money.

Answer: A couple of ways to get out of leases are: First, try to sell your car by yourself. You can do this by calling the bank or financing company managing your lease. Inquire about the “pay out” amount this is the amount of money you need to pay to buy your car. Look for an individual who is willing to buy you out of your lease or at least offer you an amount close to it.

Second, find someone to take over your lease. You can do this by placing ad online or at sites for swapping car leases. Remember that it can be difficult to get out of a car lease, especially when the amount becomes higher that what you car actually costs. This is quite a common problem, but many people have managed to get out of it successfully.

Q: What if I opt to buy a popular car model, what kind car negotiation can I expect?

Answer: The car’s price is determined by the law of supply and demand. Usually, when there are more car models the prices go down. Conversely, when there is a limited supply of a specific car model, as is sometimes true with a Pontiac dealer, the higher its price will be. When visiting a car dealership, know the inventory of the specific car that you want.

If you see a lot of that car models in the dealership, chances are you can buy it at a few hundred dollars above its invoice price. However, if the particular car model you want is high in demand and is quite rare, then you can be sure that it is an expensive car.

A piece of advice: the famous saying, patience is a virtue applies to car buying also. Wait until the buying frenzy dies down and inventory increase, because by this time you can buy the car at a lower price.

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