More research = less time and money wasted
Gone are the days when the car salesman had all the information and you, the customer, walked blindly into the dealership. Now you have just as much access to information as the dealer, and even the dealers themselves will tell you to start your initial research online.
“You really want to look online because everything is on the internet right now,” says Richie Xu, new car sales manager at Honda Downtown in Toronto. “People just don’t have the inclination to walk into the dealership and trust a salesperson unless that salesperson is someone they already know and have built a rapport with.”
Cut down on time (and money) spent going from one dealership to the next by reading online reviews for the make and model you have in mind, and create a backup list of similar options that might be more affordable.
How long should you spend in the research phase? About two months according to James Matthews, president and CEO of Armada Data Corporation, parent company of Car Cost Canada—a free service that reports on hidden auto costs and available dealership incentives.
“You need a minimum of 60 days to really do thorough research when you’re deciding the kind of car you want to buy, because before you even buy a car, you need to decide what make and model is for you. And you don’t just want to choose a car on a whim because your neighbour has the car or something,” says Matthews.
Once you’ve narrowed down your list, you’ll want to get a feel for the cars in person. Before my wife and I purchased our 2018 Honda HRV, we went to the annual Canadian International Autoshow at the Metro Toronto Convention Centre. This allowed us to see almost every car available in Canada, all at once, without having to visit individual dealerships.
Find the real car cost
After finalizing the make and model of the car you want, go to a site like Car Cost Canada, or one of its competitors like Unhaggle, to make a potentially intimidating negotiation process much smoother.
Whatever online platform you choose to work with (I recommend trying more than one), they usually start the same way: You enter the make and model of the car you’re seriously considering and you’ll be given a list of various class types of that car with all-wheel or two-wheel drive. Choose the class you’d like and, after signing up for free with an email, name and password, you’ll be taken to a dealer report for your chosen car.
Both Car Cost Canada and Unhaggle dealer reports present the dealer invoice price—what the dealer pays the manufacturer for the car—as well as the Manufacturer’s Suggested Retail Price (MSRP).
Xu says that most dealerships add an average mark-up of seven to eight percent on the dealer invoice price when retailing to consumers, but sometimes you can find deals for less. For example if you look on Car Cost Canada for a Honda HRV LX with all-wheel drive (my car), you’ll see that the MSRP base price is $25,400 while the dealer invoice base price is $24,003, a markup of $1,397, or 5.8%.
Get ready to negotiate
In addition to providing the dealer invoice price and the MSRP, good auto search platforms should also provide a list of cash incentives, financing incentives, leasing incentives and rebates available for the cars they catalogue. This allows you to see all the possible discounts you might be able to get when you go into a dealership.
“What we recommend is getting the free dealer’s report on the car you want and then doing it again with the same make and model in a different class. Print all that off and take both reports to the dealership and negotiate based on that,” says Matthews.
Once you have your reports, Car Cost will match you with a dealer in your area who knows you’re coming with a Car Cost report and is ready to help you out.
“We make our money from the dealership on these referrals, and it benefits you because they know you are a hot buyer who is serious,” says Matthews.
“A lot of people don’t realize the best way to get a deal is to let the salesperson know that you are buying a car today, instead of giving them the impression that you’re just shopping around. No one wants to waste their time,” adds Xu.
On Unhaggle, you can pay $99 for up to ten dealers in your area to send you their lowest offers on your car configuration, in a kind of reverse auction for the best deal.
Seasonal selection and other tips
Dealers like Xu concede that there are certain times of the year when a manufacturer’s incentives are most plentiful and offers may be at their lowest.
“It always depends on the manufacturer, but normally a good time to buy a car is March, April, or September because we’re in Canada and retail business is slow from the end of October to the end of February,” says Xu.
“Spring is when everything resumes, so you’ll see more aggressive pricing and in September they’re going towards that slow season, so they want to make a final push to clear inventory,” he adds.
But Xu also recommends not taking those incentives too literally.
“Those commercials usually say up to 0% financing and that “up to” is pretty important. Cars are like any other product; if they are popular, there’s not going to be any incentives. The incentives are usually on the least popular models. The trend is to only buy the car you want, not a lot of people buy a car just based on getting a cheaper price.”
Consider the cheaper option
Putting in the two months of recommended research and utilizing the specialized pricing platforms mentioned above may lead you to realize that there are more affordable options out there than the car you originally intended to buy. If you see a chance to buy a cheaper vehicle that still meets your needs, jump on it. But don’t choose the cheaper option just based on its price. Make sure the car is in good shape and that it won’t fall apart on you the second you leave the driveway.
It may be more affordable in the long run to take out a car loan to purchase a slightly more expensive, but better quality, car. You could consider one of our favourites, Car Loans Canada, and quickly get quotes from top lenders in the country instead of calling one by one.
If you do opt for this route, keep in mind that your credit score will come into play, so it’s best to make sure you’re in good standing beforehand. Pay off any lingering debt if you can, research the best car loans, and consider your options if you have bad credit. Our car loan calculator can help you determine how much car you can comfortably afford.