Buying a car can be a tricky and confusing process for those new to the game. The more you know, the more likely you are to get a decent deal.
Wesley Procter, Sales Manager of quality used car company, getWorth, exposes some common car-buying myths and gives advice on how to think about your next car transaction.
- “Cash is king”
One would expect to be able to negotiate a better price on a car if you are buying with cash. Sadly, that’s not necessarily the case.
Dealers earn commission from the banks when they raise finance on your behalf. A typical cash deal earns less for the dealer, so it’s not something they will necessarily be hungry for.
However, Procter explains that cash does have its benefits: “The banks decline many finance applications. For getWorth, there is about a 30% unsuccessful application rate, but that can go much higher for many dealers – up to 80%. Having cash does signal to a dealer that you are more likely to be able to complete the purchase, and it gives you more freedom by making deals less complicated.”
The one place cash remains the undisputed king is with older cars. “The banks seldom finance cars older than ten years,” Procter explains. “In that segment, cash is necessary – there might be no alternative.”
- “The lowest price means you got the best deal”
You should certainly shop around for good value, but there’s more to many deals than just the raw price of the car.
Firstly, for used cars you need to factor in age, mileage, specification and condition. Older or higher-mileage cars should be priced lower, extra features might carry some value, and there is a huge variance in condition. Procter illustrates the point: “For example, getWorth spends an average of R8,000 to recondition a car to showroom condition. Cars that are in need of work should be priced lower.”
But even if two cars are almost identical, the asking price of the car is only part of the picture. You should consider how much trust you can place in the dealer selling the car – what commitments to quality or reliability are they willing to give. The terms of the finance deal are also extremely important – a lower interest rate or better-structured deal can make a significant financial difference over the next few years.
- “The new car list price, or the book value, is the market price”
For new cars, a manufacturer will suggest a recommended retail price. For used cars, one can obtain a “book value”.
Relying on either of these, as an indication you are getting a fair deal, can result in nasty surprises, Procter added. “Many new car models can be bought at discounts to the manufacturer suggested retail price. It varies by brand and model, and it is possible to get discounts as high as 25% off that price.
Do some research before you commit, he suggested. Search for promotions, and take a look at the price of demo cars and one-year-olds of that model before you pay full sticker price.”
“For used cars, the book value is just an indication. The actual current market can be well above or well below the book value. It is also based on an assumed average mileage – if the car you are considering has higher or lower mileage than the norm, you would expect the price to be different.”
Being aware of the truth behind these common myths, can prepare you better in your next car-buying journey.
