New cars are worth almost 20% less as soon as they leave the showroom. Why not buy a second hand car only 1 - 2 years old? In many cases the warranty is still in place and you can save thousands. That $5,000 could be paid off your home loan instead and save you even more!

There are many options available for purchasing excellent second hand cars. Our second hand car guide provides some suggestions.  

If you simply must have a new car, at least consider the following to ensure you get the best deal. It is crucial you don't lose concentration after bargaining on the price of the car. Dealers can make just as much on the add ons, as on the car itself! These include finance, insurance and extras. Be aware and say no to give yourself some time to consider your options on these items away from the pressure of the dealer. These points are the same when purchasing a second hand car from a dealer. 

High pressure are the key words that would sum up the sales methods at most car dealers. It is also worth remembering that not all dealers are like this. Car salesmen are predominantly paid on a commission basis only, and dealers can be ruthless in removing non performers. The pressure is certainly on.

Their aim is to negotiate the biggest profit margin they can and do this by negotiating on the net figure (their car less trade in). Commission paid is calculated on a sliding scale with more commission for a bigger profit. Most people are uncomfortable with the negotiation process dealing with experienced sales staff.

The best method is to take a note pad and a calculator with you. Use these to work out some figures before sitting down in the sales office. Start off by knowing what your trade in is worth and then taking this off the sales price of their vehicle (values are discussed later). You can then work out what you should discount the original sales price as part of the negotiation. Sometimes the quote will be given in odd numbers just to confuse you. They might say the changeover is $21,475. Take this back to $21,500 and use your calculator and paper. Don't rush.

Often at this time the salesman will ask for your keys so they can assess the value of your car (trade in). This can add to the pressure as they may be reluctant to hand back your keys if you decide to exit the negotiation process early. Excuses will be made to keep you there and provide further opportunity to recommence negotiations.

A simple self defence strategy to use when buying a car is as follows:

Use the internet to know values of your current car and the car to be purchased.

Don't be in a hurry.

Walk away from salespeople you don't like.

Know the numbers (paper & calculator).

Shop around.

Don't relax until you are driving off in the new car. The profit margins on the extras can be high!

It's your money.  

We have mentioned the importance of knowing values of your existing and the proposed car. These days the internet provides the information needed to provide a reasonable estimate. There are numerous car sites around that are helpful. One that we like is http://carsales.com.au/ .  

To find  others just key in words like "car sales" or "cars" into search engines like google.

To assist in deciding what car you want ask yourself these questions?

1.     How often is the car to be used?

2.     Do you regularly go on long trips?

3.     Would it be more realistic to buy a smaller car with tow bar and trailer rather than a larger car if the purpose of the larger car was for that once a year holiday?

4.     How far are you prepared to travel to have the car serviced?

5.     Do you need to carry passengers frequently or occasionally?

6.     Do you know the extra cost of that bigger car to purchase and operate as compared to that smaller one which would meet your needs most of the time?

Again, have a look at the car sites for information on different models.

Another good option is car magazines at your local newsagent.

Don't walk into a car dealer until you have narrowed down the choice of cars to about 3.

Go for a test drive and then go home to think about what your reasons for buying that particular car were. Have you swayed from the original plan?

Once you have made the choice start negotiating. The beauty about new cars is you can ring many dealerships to get the best price. Just remember you will get better service if there is a problem with the car, by the dealer that sold you the car. The manufacturers will disagree however it's commonsense that a dealer looks after their best customers. They are those who buy the car and have it serviced at the same dealership.

If you walk into a dealer without knowing what you want, it is possible you will end up with a car and deal that suits the salesperson. The manufacturers at various times have drives to clear off surplus stock of a particular model. This of course is filtered down to the dealers with incentives. Do your homework.

Also work out what level of options you want and how much extra you will pay for them. When going through different types of cars go with the head not the heart.

This last point is particularly relevant if you live in country areas, however the main point doesn't change. We live in a small town in country Victoria that has dealers covering sales & service for (Holden, Ford, Toyota & Nissan) The next major regional centre large enough to have dealers for most makes is 1 1/2 hours away. The excitement of that new car wears off pretty quickly when you need a day off work to take your car for a service or if there is a fault. Even if you are in a city, how far is it to the dealer of your preferred car and will you be still happy in 3 years time travelling that distance?   

Visit the manufacturers web site to find out more about the car you are looking for. There is the usual stuff that only car enthusiasts understand however there is also information on variations of a different model as well as colours, recommended prices, equipment lists and accessories.

If you aren't happy paying new car prices, consider buying a demo model. It is still a new car with less than 5000 km's on the clock. You can expect to save a few thousand dollars. If you are keen on a particular model try ringing up different dealers and see if they have one for sale or may have one for sale in the future.

If you aren't comfortable negotiating with salesman or haven't the time, consider using a car broker. They should ensure you pay less for a car and that includes their fee. It also removes the stress from the transaction. Car brokers are becoming more widespread and accepted. To find one have a look in the yellow pages under broker general, or car broker.

The confirmation of a price for a vehicle is a relief for many car buyers and they relax. Don't! The salesman has only completed half his job. As previously outlined the other sell is just starting. This can include finance, insurance and many extras such as window tinting, scotch guarding seats, under car waterproofing and special warranty deals. The best thing to do here is have a think about what they are offering and sleep on it. Perhaps you could ask for the prices of extras individually. Once known you can then shop around.

Look out for sales at end of calendar and financial years where dealers are more interested in numbers of cars sold and amount of cars sold. Their margins are reduced.

Dealers are often offered bonuses if they sell a particular number of vehicles per month. Therefore they may be more willing to negotiate a better price for you to ensure they receive the bonus.

Look out for end of model run out sales. The manufacturers and dealers are keen to promote their new model. If you are more than happy to purchase the previous model still available, get on the phone to as many dealers to see who will play ball. This is one of the few times when you can purchase a new car and won't lose 20% as you drive out of the dealers yard. The % is probably closer to 10%.

Good luck and Happy Driving