Outside of a purchasing a home, purchasing a car is one of the largest single item expenditures most consumers will make over the course of their life. Despite this fact, many people still overpay, or fail to maximize their savings potential when making a purchase. Following a few basic guidelines can ensure maximum savings.

Cash is King

via Flickr

As soon as a new vehicle leaves the dealership parking lot it is instantly worth less money. Vehicles are depreciating assets; when it comes to financing, they are often losing value at a greater rate than owners are paying off their car note. While most people do not have the ability to buy cars with cash, any amount of cash that can be applied to the principle during the financing process saves money over time.

If you are able to pay for your car with cash or check, know that for new cars it doesn’t work like it used to. Since financing is so easy car dealers don’t have the same kind of incentives to reduce payment for a car. However, if you have cash they’ll sometimes throw in something that costs a couple hundred dollars for free if you’re smart enough to negotiate for it. However, you’ll have to fill out paperwork if you actually use cash so the government can find out if you’re laundering money so it’s best to pay by check.

Alternative Financing Options

In most instances, dealerships will often offer consumers the option of financing their vehicle purchase through a dealer advocated financing company. Though this is often the most convenient option, it is also not the most cost efficient. Financing companies associated with individual dealerships are suggested by the dealership because they are often paying a referral fee to the dealership for each loan secured, and not because they are an objectively evaluated financial option.

Trade in Options

When trading in a existing vehicle, consumers should wait until after a best possible price has been negotiated with the dealership before broaching the subject of a potential trade-in. If a vehicle trade-in is discussed prior to the finalization of a price, it allows the dealership to minimize the value of the vehicle by factoring in its cost in the price of the new vehicle. Consumers should also have an idea of the fair market value of their trade-in, and an understanding of the relative mechanical soundness of their vehicle.


While a great deal has changed about the attitude regarding business practices and acceptable sales techniques when it comes to car dealerships, at the end of the day, no matter what manufacturers or dealership owners may tell consumers, individual sales people are attempting to maximize their personal profit margins. This includes the use of high pressures sales tactics, exaggerating, or even out-right lying about the terms of the sale, and many more “shady” techniques. Consumers should not feel shy about questioning sales people, or, if they do not feel comfortable with the way that conversation is proceeding, simply walking away from the dealership.

George is extremely knowledgeable regarding cars. He also works for a company that purchases cars.

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