1. Don’t use one!
At least until you finish your homework. Many people go straight to a car insurance calculator because it provides instant answers about how much a car insurance might cost you.
The problem is that this number can be quite misleading, since there are a number of factors that you should check first before using any calculator to tell you how much you will be paying.
These are listed below and although they may require a little research, you will most likely end up saving a significant amount of money.
2. The price of the car
Most new cars come with what’s known as the MSRP, which is the manufacturer’s suggested retail price, otherwise known as the sticker price. This is the recommended price for the vehicle set by the manufacturer, also referred to as the list price.
This price is always negotiable, sometimes in very large quantities. This means that you could end up paying a lot less in terms of the actual price than you might think. What is important to bear in mind is that there are other factors that affect the cost of a vehicle which must be taken into consideration.
The MSRP can also be quite negotiable if you are considering renting a car, which not many people appreciate or realize.
3. Down payment
The down payment is actually the deposit you will agree to pay for the vehicle. This obviously reduces the amount you need to borrow and your subsequent repayment costs.
People usually think that the size of your down payment is determined by your credit score, in fact you can determine any down payment size yourself. If you have significant savings, this could be a way to cut costs. Likewise, if you are able to take advantage of a zero interest rate or a low interest rate, it may make sense to have a smaller down payment and take advantage of the savings through a lower interest rate.
4. Trade in value
This many people will have an existing car that they would like to sell or exchange for a newer one. If you trade one vehicle for another with a car dealer, you will likely get a lot less cash than if you were to sell it privately. The car is traded for a new model primarily because it’s easier. Keep in mind that it can also blur the line as to what kind of discount you get on the new model.
5. Sales tax
Whether you buy a car lease, some type of sales tax will likely apply. It is worth knowing the cost of this when deciding what type of car to buy.
Some vehicles may have a lower tax if you choose a hybrid version, an electric car, or a car with certain types of lower emissions.
6 – interest rate
Most people understand what interest rates are and how they work in relation to car insurances. What people may not realize is that they can negotiate the interest rate, in the same way that they can negotiate the price of a car. When a financing company or credit broker makes an offer for financing, in many ways it is their opening offer.
They will want your business, especially if you have good credit. This means that they are likely to be more flexible or negotiate in many ways than their original offer would have meant.
In any case, it is worth trying to negotiate a lower interest rate, either through direct negotiation or by offering a higher down payment or a longer valid insurance term.
7. Insurance Term
The term of the insurance is simply the number of months the insurance was completed for the business.
Many people go for a longer insurance period because it reduces monthly repayment costs.
Other people go for a shorter insurance term because even though the monthly repayment costs are higher, the overall cost is lower in terms of interest charges.
In general, it really depends on which is more important to the individual, to get lower monthly repayment costs or a cheaper total insurance.
8. Merchant Offers
Almost all dealerships of all manufacturers will offer offers on their cars. It’s a standard sales practice, and it can have huge benefits for customers, but it can be very confusing at times.
Selling offers can be made on a national or local basis or both. Offers can relate to specific vehicles, low or no interest rates, pre-approved customers, and customer categories such as military and students and can apply at certain times of the year as well.
Deselecting these offers can be tricky, especially if they’re based on the vehicle’s MSRP. However, it is worth understanding the intent behind them, and using that to your advantage when negotiating the insurance rate and terms.
9. Online purchase
Most car dealers have an online sales department. This may be a specific department or integrated as part of the overall sales team. In any case, they expect a large number of clients to do a lot of negotiations effectively online, as well as over the phone before they actually visit the showroom.
This is a very simple reason for that.
It is possible nowadays for most customers to get a fair idea of what they should pay for a car by researching in areas like price, trade in values, credit scores etc.
What this actually means is that the customer has a very strong negotiating position in the way they never had an internet connection before. The ability to negotiate online and on the phone puts the customer in a much stronger position where they can either help out on the phone or click through to get to another website.
The automaker and dealer will realize the power of this, and they should be open to being more flexible about all areas of price and terms and conditions, or else they would be otherwise.
10. Credit score
Most people are likely to realize what a credit score is.
They may not realize that they should be entitled to a free copy of their credit report at least once a year, which gives a breakdown of how their credit score is accessed. They may also all be to get a copy of their credit score already, although there is usually a fee for this.
Understanding how your credit score is formed by the information on your credit report is critical before approaching any insurance or financing company.
Anyone who gives you a insurance will base it on a credit score that is determined by the information on your credit report.
If this information is incorrect or out of date, it will have a detrimental effect on any insurance offer made to you.
For this reason, it is necessary to check the information and ensure its accuracy. If the credit bureau is under no obligation to correct it, they are usually fairly good at doing so.
11. Now use the calculator
Using a car insurance calculator can give you a realistic idea of what you should be paying for a car insurance. He can only do this when you include information that is likely to be factual.
This information relates to the price of the vehicle, the size of the down payment, the vehicle trade-in value, any sales tax that may apply, whether local or national, any dealer discount or offer, and the length or term of the vehicle insurance.