Wednesday 23 May 2018

Use tricks of the trade to drive a better deal on cars

Illustration - Tom Halliday.
Illustration - Tom Halliday.
Louise McBride

Louise McBride

MY husband and I bought our first family car about four years ago, shortly before our daughter was born. As we were buying in the midst of the recession, we had high hopes of getting a bargain – most car dealers were on their knees at the time and so were desperate to sell cars.

But despite our best efforts – which included bluffing and walking out of dealers – the most we could knock off the €15,000 price tag on the car we eventually bought was a few hundred euro.

Neither my husband nor I are the best of negotiators, I admit, but I am always bemused when I hear about buyers managing to get thousands knocked off a car.

With car sales ticking up this year, you might well be in the market for a new or secondhand car. Buying from a car dealer is generally safer than buying privately – as long as you buy from a reputable one. However, it can work out more expensive.

You could save yourself a few grand if you know how to drive down the price of a car though – but how exactly would you go about it?

For those buying a new car, a good tactic is to only call into a dealer at the end of the month, according to one industry insider, who did not wish to be named.

"Dealers often get bonuses from the smaller manufacturers for selling a certain number of cars a month," said the source. "If a dealer has a target of say 30 sales, he might get a bonus of about €500 a car for hitting that target. So if you walk in at the end of the month and he has only sold 28 or 29 cars, he's more likely to do you a deal.

"This won't usually happen if you're buying the car of a popular manufacturer – these bonuses are largely paid by the smaller manufacturers to try to gain market share."

Whether you're buying a new or secondhand car, it is also important to shop around and to call into individual dealers rather than trying to get a price over the phone. Most dealers won't bargain or reveal prices over the phone in case you are a competitor.

"Give the dealer the impression that you are shopping around," said Padraic Deane, editor of MotorShow Car Buyers' Guide 2014. "Let's say you fancy one car. Find two comparable cars and compare the prices. Tell the dealer that you're going to visit a couple of other dealers selling the same car brand – and that you're also looking at a couple of other different brands of car.

"This way, the dealer knows that your business has to be won."

Haggle and bluff as much as you can when buying a car from a dealer.

"If the dealer is convinced that you are buying, he will come after the sale," said Deane. "If a dealer doesn't come down in price as much as you want, just say 'I'll come back to you – is that your best offer? I'm serious about buying – are you serious about selling?'. Then leave and check out another car."

Chances are you will get a call from the dealer later – where he is chasing up your sale and open to doing a deal.

Many of us have a car to trade in when we're buying another one. But don't let a dealer know that you have a trade-in until you've negotiated him down to his rock bottom price. Otherwise, it will be impossible to know the value you're getting for your trade-in – and whether you're getting the best price for it.

"When buying a car, first establish how much the car can be bought for in a straight cash deal," advised Deane. "Then ask the dealer what price you'll pay for the car if you trade in your current one. The difference between both prices will tell you the value the dealer is placing on your trade-in."

Having a popular car to trade in will strengthen your hand when negotiating a deal.

"If you have a trade-in that's in demand, the dealer will be after the sale," said Deane. "But if you come in with some oddball car, he might not show as much interest."

Another good bargaining tool is cash. Dealers are more likely to bring down the price of a car if you have the cash to pay for it outright. Cash is also the cheapest way to buy a car – if you need to borrow money for your set of wheels, the interest will add a few thousand to the price tag of the car.

There are two main types of car finance: car loans, where you buy a car using a bank loan; and hire purchase, where you pay monthly repayments for the hire of a car and don't own it until the final payment is made. You'll typically be offered hire purchase if you go to a dealer, while a bank will usually offer a loan.

As banks are charging sky-high interest on car loans, hire purchase can often work out cheaper than a bank loan. However, make sure you understand how hire purchase works before you sign up to it – and that the interest charged on hire purchase is a lot less than on a car loan.

"Hire purchase is different from a personal loan because you don't own the car until you have made the last repayment," said a spokeswoman for the consumer watchdog, the National Consumer Agency. "Always look at the total cost of a finance agreement, not just the monthly repayments."

Shopping around for car loans will save thousands

Choose the wrong car finance and you could pay as much as €3,000 more than if you had borrowed the money elsewhere.

The Sunday Independent examined the car finance offered by AIB, Bank of Ireland, Permanent TSB and Ulster Bank as well as the hire purchase deals offered by a few dealers. We found that you'll usually pay through the nose if buying it with a car loan – the interest rate on car loans can be more than twice that charged on hire purchase.


Up to €2,829 more expensive at the bank

Let's say you're borrowing €30,000 over five years to buy that Land Rover you need for your reckless off-road driving. The most expensive way to borrow this money is through a car loan from Bank of Ireland, according to our survey. A five-year car loan of €30,000 costs €9,047 at Bank of Ireland. Ulster Bank charges €8,114 for its car loan – which made its loan the second most expensive way to raise €30,000, followed by AIB's car loan, which costs €7,998.

One of the cheapest ways to borrow €30,000 for a set of wheels is through hire purchase with BMW Financial Services. It costs €6,218 to borrow €30,000 under hire purchase with BMW Financial Services – €2,829 less than Bank of Ireland charges for its car loan.

AIB and Bank of Ireland also offer hire purchase – and this works out cheaper than the car loans offered by both lenders. It cost €6,490 to borrow €30,000 over five years under AIB's hire purchase agreement – and €6,750 with Bank of Ireland. Some dealers work out more expensive than both banks for hire purchase.

For example, Windsor Motors charges €7,470 if you're borrowing €30,000 through hire purchase over five years; while First Citizen Finance charges between €6,881.60 and €7,403 – depending on whether you are buying a new or second-hand car. Neither Permanent TSB nor Ulster Bank offer hire purchase.


Up to €1,073 more expensive at the bank

Let's say you're borrowing €10,000 over five years to buy a Fiat Panda. A car loan from Ulster Bank is the most expensive way to borrow that money, according to our survey. Ulster Bank charges €3,246 for a five-year car loan of €10,000. The second most expensive way is through AIB's car loan – which costs €3,140 – followed by Bank of Ireland, which charges €3,016 for its car loan.

The fourth most expensive way was under Windsor Motors' hire purchase plan – the dealer charges €2,870 for the finance.

One of the cheapest ways to borrow €10,000 for a car is through hire purchase with BMW Financial Services. It costs €2,173 to arrange car finance of €10,000 with them – €1,073 less than it does through an Ulster Bank car loan.

The second cheapest route was AIB's hire purchase – where it costs €2,214 to raise €10,000 over five years – followed by Bank of Ireland's hire purchase, which costs €2,258.

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