Negotiate smart: Separate your transactions

Most people buying a new car never even consider this, and it ends up costing them thousands


 When you’re buying a new car, you're usually conducting three simultaneous financial transactions: Buying the new car, selling the old car and purchasing the finance. Dealers love this, because it makes them rich. You need to checkmate them on this.

First, they get to clip the ticket on each transaction – a bit of cream off the top on the new car, a bit on the trade-in and a healthy, undisclosed, commission on the finance (this is often the most profitable aspect of the deal - dealership finance is often tantamount to extortion). You, potentially, represent not just one, but three big, fat deals for them.

Second, they get to use one transaction as leverage over the other two. They might offer you an unbeatable trade-in, which then gets used as leverage over not discounting the new car, or as an inducement to purchase the dealership’s finance – both of which transactions will more than compensate them for their apparent trade-in generosity.

Alternatively, they might use a rock-bottom interest rate (like the 'zero per cent finance' scam) on the finance as leverage over the trade-in and the new-car purchase. Right after they offer you the 'unbeatable finance' the next thing that falls out of their mouths is the fact that they won't discount the car. And you can guarantee the trade-in will be lousy, too.

Dealers are very good at leveraging one transaction against the others - to their considerable profit

Dealers are very good at leveraging one transaction against the others - to their considerable profit

Either way, you lose; he wins. That’s bad for you.

So, first up, leave your trade-in at home. Tell him there’s no trade-in. Lie: say you're giving the old car to your wife/son/daughter/nephew - whomever. Next, organize your own finance. Just let the dealer sell you the new car. That’s the only part of the deal they’re exclusively required for anyway - you can get everything else elsewhere.

If you separate the three deals, you'll remove the dealer's leverage. You’ll have a far clearer picture of exactly what the deal really is. Let them offer you the finance – but don’t take it unless it beats the best deal on finance that you can secure independently. (And trust me, it won't.)

To shop get a finance quote from an independent, reputable lender with rock-solid credentials, fill out my enquiry form and I'll get back to you within one business day.

I’ve been to car dealer conferences. They actually give out an award to the dealership that sells the most in-house finance. We’re talking ‘standing ovation’, pats on the back all round. Enough Verve Cliquot to drown a dozen donkeys. It's obscene. Dealership in-house finance is that profitable – good for them; bad for you.

Get alternative finance. Alternatively, get ripped off.

Go into the dealership with your own finance locked and loaded, and be prepared to sell your old car privately if you want the best deal on that.