Towing a Budget When Buying: How to Get the Best Price When Purchasing a New Truck

If you’re looking into truck prices, whether your interest is in a lease or in purchasing, it is wise to research how to get the be price. Dealers work on commission and therefore want to get you to pay the highest amount they reasonably can.

It doesn’t matter if you’re looking at Fords, Chevrolets, Toyotas, or Ram trucks—get your budget in place and go in with at least some basic knowledge to get the best deal on a truck for your money.

1. Establish Your Budget and Compare Online

The general rule for purchasing or leasing a car or truck is not to allow your total vehicle expenses (including insurance) to exceed more than 10 percent of your gross income. For example, if you earn $50,000 a year, and 10 percent is $5,000, you will have about $416 to spend per month on your truck. If you can find a way to spend less, even better.

If you want to be prepared, try out setting that money aside for a month or two (or more) and check how comfortable you are spending that on a car payment or lease. The money you set aside will be an excellent buffer to have for unexpected maintenance issues that arise or to put as part of your down payment.

Once you get a general idea of your budget, check around on websites to compare typical rates in your area and compare truck costs with a comparison calculator to establish a baseline for prices in your region. Comparing online is a fantastic way to get an idea of how much both used and new car prices are for the vehicles you have your eye on.

2. Check for Discounts

A few terms that are good to be familiar with are MSRP, invoice price, average transaction price. The MSRP is generally quite close to the suggested retail price. The invoice price is what a dealership pays for a car or truck. Your average transaction price is as it says, it’s the average cost other customers are paying. You can look these up online to have an idea before heading to a dealership.

Never go to a dealership to buy or lease a truck without at least first checking on rebates or financing options. If you have to pick between the two, obviously go with a discount that will take off the most money for you. Use a calculator if you’re debating between a rebate or a low-cost loan option. If you know someone who works for an automaker, see if they have extra numbers for “friends and family” discounts. Many employees get a set number of these to be used every year.

3. Decide on Whether to Lease or Purchase

With some of the lease deals running in current years, it can often be more affordable every month to lease a new car. You need to factor in that with a lease, you will never pay that truck off and will continue to have a monthly payment until you purchase one and pay off a loan.

However, for some people, buying a truck in excellent condition just will not work with their monthly budget, and sometimes will exceed it by a significant amount. If your situation is such, it can be an excellent idea to lease for a few years, put some money aside during that lease, and buy a truck later on when you have more wiggle room in your vehicle budget.

Financing experts suggest that you do not finance a car for more than four years, and the rule of recommendation is to put at least 20 percent down. If you don’t have anything near 20 percent for your truck, check on leasing deals. You might have to go with a cheaper model truck, but the safety net of a lease is that maintenance is taken care of through the dealership and you don’t necessarily have to worry about long-term reliability for 10 years or more.

4. The Money Factor on a Lease

With a lease, the money factor (MF) is also known as the buy rate. With a vehicle lease, the money factor is what will determine the interest rate that you pay as a portion of the lease rate. This can be a significant portion of the monthly payment. If you see this in the decimal form, it will usually have 4 to 5 decimals.

The dealer will utilize this money factor to figure out what interest rate will be applied to the agreed-upon price of the truck. You can ask the dealer straightforward with the money factor is. Not many people know to ask about it, but it’s acceptable to find out what it is.

If you multiply it by 2,400, this will give you the APR. If the number is higher than the APR for the vehicle you are interested in, this is an excellent way to find out if the dealer is jacking up the price. You can tell them another dealership offered you a truck lease “at the buy rate” and see if they are willing to give you the same rate. If not, consider a different dealership.

5. Get a Loan if Purchasing

The first part of looking into loans for a truck is to check your credit score. Many websites allow you to keep an eye on your score for free, and having good credit is a significant help in securing a loan. If there is a way for you to pay down or pay off some credit cards before applying for a truck loan, this can help your credit score a lot. Credit scores are updated roughly every month to 45 days, so paying down some debt two months earlier can help you get the loan you want.

Most loans for cars or truck will be available in three-year, four-year, five-year, and even six-year options. If you absolutely need a lower monthly payment, you can opt for a longer term. However, with a longer loan term, you are more likely to be considered what is called “upside down” for a while. Being upside down, or underwater is when you owe more on the loan than the vehicle is currently worth.

Once you get an idea of your credit score and the length of the loan you want, get a pre-approval. You don’t have to use your current bank or credit union, so shop around for pre-approvals. You can spend less on a truck once you are approved, but not more. These pre-approvals have an expiration on them, so plan to get your approval no more than 14 days before you want to seal the deal. Keep in mind that each inquiry for a loan will affect your credit score, so only attempt pre-approvals if you are serious about taking them.

6. Offer and Negotiate if Possible

Don’t be afraid to negotiate at a dealership. If you begin with manufacture’s discounts, these cost a vehicle dealership nothing at all. When you go in to shop for a truck, you can start with these discounts and then tell the dealer you are willing to pay a price that is if you thousand lower than the listing price. Give a specific number instead of asking what exactly they can offer you.

There will eventually be a number a dealer just cannot go below because they do need to earn a living, and the truck needs to be profitable for a dealership to stay in business. Even so, if you can get a discount, rebate, employee “friends and family” rate, or negotiate the cost of the vehicle or the money factor on a lease, you are much more likely to walk away with a fair price on a truck than if you go in blindly and take whatever they offer you.

7. Finalize the Deal and Your Loan

If you missed the step of getting a pre-approval, do so now. You don’t have to go with the financing from a dealership. Check interest rates and figure out what will work best for you and your budget over the next three to five years.

Likewise, just because you have a pre-approval does not mean you can’t take a financing offer if the dealership has a competitive one that is even better than the bank or credit union. You can show them your pre-approval and see if they can beat it.

Having a competitive loan lined up can protect you from “finance charge markups,” which can add up to three percentage points—sometimes more—onto your financing. Even worse, lenders do not have to disclose this additional charge.

Educate Yourself

Before shopping for a new or used truck, learn the process as much as possible before you begin seriously shopping. If you buy or lease a truck without having an awareness of some practices, you can end up spending thousands of dollars more than necessary.

Compare your loans, compare interest rates, check the money factor on a lease, and be willing to negotiate. If a dealer doesn't budge, remember there are other dealerships out there.