CBSN

Getting The Best Car Deal

All week, in partnership with the CBS Evening News, The Early Show has been uncovering some of the ways people get ripped off in a series called "Taking Advantage." On Friday morning, they looked at the risks consumers face when it comes to buying new cars.

As CBS News Correspondent Jim Acosta reports, the sticker price can be the least of your worries. On The Early Show, Jack Otter from Smart Money magazine offered some tips to help you get the best deal on a car.

First, he says, calm down! "Go on the Internet," he advises. "Find the price. You want to find the actual cost to the dealer. Edmunds.com is a great place, but there are plenty of other sites, too. They'll tell you, 'Here is a reasonable profit.' They're not going to give it to you at cost, of course. You have that base price without leather and sunroof. Don't worry about that now, just the base price of the car. You take it into the dealership and try to get that price."

Here are some other tips to help you get the best price:

  • Hold your cards close to the vest. Don't divulge information on how you'll pay.
  • Go to the bank and get the best financing deal you can possibly get. Right now, that's around 5 percent loans. Says Otter, "And when you go to the bank and you've got that in your pocket, you also know how much you can reasonably afford for the car. Then when the dealer tries to focus you on that monthly payment, no way. You're talking about the base price of the car, and you want to get that price from him. Only after that's established do you say, 'Well, OK, I think I'm going to finance it. The bank gave me this rate. Can you beat it?' But don't let him focus you on the monthly payments, because they try to divert you from the total cost and you end up paying more."

    What is it about being in the car dealership that makes us so nervous?

    "I think it's that, (a) we're excited and (b) they have all the information and we have so little," says Otter. "We don't know what the real cost is. They may tell you we don't have many blue ones in the Northeast and we can't get you that. And they all have a heating package. Forget about that. Decide what you want before you go in there and be ready to walk if they can't deliver it. Because I promise you, as you start to turn around, they will magically find that car."

    How much should we be willing to put down? A lot of times, they say next to no money down.

    "Be wary of those," warns Otter. "That's another reason to go to the bank first, because the bank will help you figure out what you can actually afford. Ten percent down is a good rule of thumb.

    "Another good rule of thumb," he added, "is do not borrow more than 48 months; 36 months is smarter. This is where the dealer will try to string it down to 72 months and you're only paying $200 a month but you end up with a car worth less than the value of that loan."

    For a look at how some unscrupulous car dealers operate, click here.