How to get a great deal on a new car – Part I

By glblguy

Car Dealership
Photo from: Morgue File

This is the first part of a multi-part series on How to get a great deal on a new car. Watch for future parts over the next two weeks!

Let me first make it very clear that in most cases I don’t advocate buying a new car, but am a strong advocate for buying a used car that is a few years old. This is primarily due to the high level of depreciation during the first 2-3 years. Based on the amount of search engine hits I get daily related to new cars, I would suspect many of you may be purchasing new cars anyway.

Having purchased far too many new cars in the past, I thought I would share with you my process for getting a great deal on a new car. Just to prove my techniques work: I purchased a new Dodge Ram truck in 2004 and ended up getting it for more than $4000 below invoice from my local dealer.

Make and Model play a key role

Before I jump in though, let me point out that the demand of the make and model car you are considering purchasing will have direct bearing on how good of a deal you can get. Dealerships for high end cars like Mercedes, Audi, Lexus, and BMW seldom negotiate and when they do you’ll be lucky to get $500 off the sticker price. In the area of more affordable cars, Honda and Toyota for the most part are difficult to get at or below invoice as well. It can be done, but it will take some effort on your point. Dealerships that sell Chevrolet, Ford, Dodge, and Nissan are more than willing to negotiate. Other factors that play in are available inventory of the model at the dealership and the volume of sales the dealership has monthly. For example, the new 2008 Dodge Challenger is coming out in the next few weeks. I would suspect that for at least a year, you would be lucky to pay sticker price for one. In fact, the first one off the production line sold for $400,000!! These types of high demand cars generally are sold at a premium above the normal sticker price.

Research

Use an online car research website like Edmunds.com to determine the various models you are interested in and to help you decide what you can afford. Narrow your choice down to a few models and decide what options you require and which ones are optional for you. Use Edmund’s pricing feature to retrieve the dealer invoice and retail cost of the car and options. Pay close attention to things like depreciation values, quality, customer satisfaction and safety features when deciding on which models you are interested in. American cars offer group option packages along with the ability to purchase individual options separately. Foreign manufacturers tend to be limited to packages only. Edmunds.com also offers something called True Market Value, which based on their research, will tell you what other buyers are paying for the same car.

Other research services include: Kelly Blue Book, MSN Autos and the NADA Guide. I haven’t used any of these very often, as I have been using edmunds.com for years and would highly recommend them.

Do an initial visit

Pick a Saturday morning and head over to your local dealerships to look at the models you’ve chosen. Bring a small notepad and pen with you. Also, note that I said “pick a Saturday morning”. I also recommend going an hour or so before lunchtime. You’ll see why in a bit.

More than likely you’ll be accosted by a sales person before you even get our of your car. Politely tell them that you just want to browse alone for a bit and ask them for their card. If you need assistance, you’ll find them. Browse around, and pick out a model or two you would like to look more at and write the model numbers down. The numbers are generally on stickers inside the front glass.

Now, go find the sales person and tell them you’d like to look at a few and give them the model numbers so they can pull the keys. Tell them to go ahead and grab a dealer plate as well in case you are interested in taking a test drive.

Once you’ve looked at the car and decide you are interested, I would recommend going ahead and driving it. Spend some time with the car, and I recommend driving it both in the city and on the highway. When you return, write down your thoughts about the car, along with the MSRP and options for later. If you have a cell-phone with a camera, even better, grab a shot of the window sticker. If you have other models you’re interested in, look and drive them as well. At this point, it should be at or past lunchtime. At this point the sales person will be heavily focused on getting you inside the dealership and “in the box“. The box is what they call the salesperson’s office. Statistics show that once in the box, you have an 80% chance of buying the car. “The Box” is where the dealership works it’s “magic”.

Under NO circumstance do you go into the dealership at this point. They will try everything like “I can get you a drink” or “Let me introduce you to my sales manager” to “Let’s go inside and get a brochure“. Do not go in, have them bring the information to you while you wait outside. This is also why I suggested going right before lunch, as you can tell them you haven’t had lunch yet and are hungry. This is a great excuse to leave the dealership without having to be untruthful. Saturday’s are great days to visit because most auto sales occur on Saturday’s. The sales people won’t want to waste too much time with you when they know you aren’t planning to buy today, so make that clear up front. Doing so is fair to them, and gets them off your back while you look.

More Research

At this point you’ve done your initial research. You’ve seen the models in person and hopefully have driven them. Now you start your price research. Using the window sticker options list, price the exact car or car(s) you want to buy using Edmunds.com. This will show you the actual invoice price for the car. Also, use Edmunds.com to look-up any dealer holdback or incentive details along with model rebates. Subtract those values from the dealer invoice along with another $500-$1000 and that should be the price you can get the vehicle for.

Also, research any other price saving options. For example, do you get extra incentives based on where you work or do your friends, family or neighbors? When I bought my truck, Dodge had a deal going with the local Farm Bureau. If you were a member, you received a $500.00 off coupon. So I paid the $20.00 to join and got a $500.00 coupon. Another $480.00 off!

Now, here’s is my secret weapon for getting a good deal: Do some googling, and find some car or truck forums. More than likely there will be dealer sales people in these forums from dealerships around the country. Some dealerships will offer internet exclusive deals for $500 – $1000.00 below invoice. Contact them, send them to the specs on the model you want and get them to send you a quote. The majority of the time, these are factory order only deals meaning they will have to order the car for you, and you have to come get it within a week or so. This cuts the dealerships overhead. The downside to this is that you may have to travel or have the car shipped. Depending on the savings, it may be worth it. On my truck, I got a quote for $1000.00 below invoice from an internet dealership in Kansas City. I was going to fly out, and drive the truck back.

Go ahead and get your financing

I always recommend paying cash, but am realistic enough to know that many of you will finance anyway. Assuming you are, go ahead and get your financing now. Many people make the mistake of financing at the time of purchase. Don’t do this. Look online at places like Bankrate.com for find the best rates. I’ve used CapitalOne in the past with great success. They offer a “blank check” option where they send you a blank check approved up to your requested amount (assuming of course you’re approved). Your loan will be for whatever you make the check out for. The check can be written directly to the dealership.

Having your financing completed before buy the car gives you the upper hand. You already have a “best deal” that you’ve found so you know what a competitive rate is. You can use this as a bargaining tool with the dealership to give you even better financing. If they can’t, you already have the financing taken care of.

Part II of this series discusses determining how much you can afford, setting a spending limit and making a few phone calls to various dealerships to get some quotes. Part III takes you to the dealership, provides insight into making the deal, avoiding dealer add-ons, working through the finance office and driving your new car home.
What online research sites have you used with success? How about financing, how do you find the best deals? Add a comment!

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29 Responses (including trackbacks) to “How to get a great deal on a new car – Part I”

  1. Laura Says:

    I love the tips, especially the sites you referenced. While I have no plans to get a car soon, I like to have a game plan ahead of time.

  2. Sean Says:

    Very informative. I am looking to purchase a vehicle within the next 12 months or so, but we refuse to buy new for the reasons you stated. Have you posted about buying used cars? We have went through dealerships in the past (both new and those whom only deal with used cars), do you think this is the best route, or should we decide on what type of vehicle we are looking for and focus on the public sales? I have heard of crazy deals people have made by dealing with individuals, as well as the horror stories for the same situation. The dealer we used last time had an inspection that they showed the report on, and we also took it to a competent mechanic. I just wonder if individuals would be willing to let a stranger take their car for half a day while an inspection is completed.

  3. glblguy Says:

    @Sean – Thanks Sean. I haven’t posted about buying them yet, only that I recommend buying them over new. I have that topic on my ideas list though and definitely plan to write about it.

    I’ve done both and had good and bad experiences both ways. Personally, without having a mechanic I trust inspect the car, I won’t buy it, dealer or not. If the seller won’t let you take it to a mechanic for the day, than in my opinion they are hiding something. Of course they probably would want a down payment or some type of collateral. Another option would be to let them take it over there.

  4. Kristen G. Says:

    When I bought my new car two years ago, I did a ton of research. I had to finance my car, but got a good deal through the credit union where I worked at the time. The interest rate was lower than what I found anywhere else. Another benefit was that my employer automatically deducted my car payment from my pay. No muss, no fuss. I would recommend people check with their local credit unions in addition to other lending institutions.

  5. Dan Says:

    Kelly Blue Book has a search feature which allows you to browse online for listed prices on cars. Even if you don’t go to that dealership, it’s handy to threaten that you can. The lowest list price should be the maximum you would consider paying.

    One key point is that you are in control of the situation, not the salesman (or woman). You have the money, not them. You have no obligation to buy anything then or at any other time. Don’t let the salesman tell you what to do, you tell them what to do. If they start to give you directions and get upset or offended if you don’t listen, there are plenty of other dealerships you can visit.

    Also, as far as your state of mind, always assume the salesman is lying to you. Most people don’t have this mindset and so tend to trust their own experience, which usually says that people are generally honest. Car salesman aren’t. Just accept it. They aren’t your friends and they won’t hang out with you later and they won’t date you even if they are flirting with you.

    Your tone should be courteous but keep your distance from them. Don’t tell them about your children. Don’t let them know what team you root for. Don’t discuss politics with them. Keep the conversation under your control, only discussing what you came prepared to discuss.

    Above all, know yourself. If you are not 100% comfortable in dealing with people who will lie, direct, bully, or otherwise try to control you, bring someone you trust along with you. Talk to this person before you go about what you want to do while you are there, what cars you want to drive and how much you want to spend. At the very least, this will distract the salesman and prevent him from turning all his charm and persuasion onto you.

    Good luck!

  6. Miss Mota Mouth Says:

    There are some really solid tips in this article- very comprehensive! As for the question about the inspection, people get suspicious of someone taking their car for all sorts of reason so on alternative is to use a service that will come to the car on behalf of the buyer. A good one that we recommend a lot at Mota is http://www.inspectmyride.com

  7. Lauren Says:

    I bought a car about a year ago and managed pretty well with negotiating. I was looking at a Honda Civic and got down a little bit in the dealership, but not enough. At their last offer I walked out, telling them to call me if they could come down any more. They called me later that day with a price 500 lower than what I got at the dealership.

    Ultimately I didn’t buy it, because I was pretty successful in my initial negotiations for a Mazda3….which is a better car that I love love love.

  8. glblguy Says:

    @Lauren – Yep, you’ll see walking out as a strategy in Part II…sorry, shameless teaser…:-)

    I really like the 3Speed!

  9. Sean Says:

    @Mota-thanks for the info!! Have a great day!!

  10. Ron@TheWisdomJournal Says:

    Hey great tips here. I wish I had them a few years back when I bought my wife a brand new Honda Odyssey minivan. Live and learn I guess . . .

  11. Four Pillars Says:

    Excellent article – I love the part about buying before lunch.

    Mike

  12. Chief Family Officer Says:

    Thanks for the tips. I have no confidence in my or my husband’s ability to buy a reliable, trustworthy used car (we talked about it a lot too), so we will be buying a new car later this year. I’ll be referring back to your post when we narrow down the field!

  13. RobY Says:

    You say to get your financing done in advance… however the dealer makes money on financing too. I wonder if being open to the idea of financing with them (assuming they can match your best rate) will give you more negotiating power? I think the margins on the vechicle itself are much lower than they used to be so the dealers look at the lifetime value of the customer (i.e. financing and service) as part of the big picture.

  14. glblguy Says:

    @RobY – I did say get your financing in advance along with “You can use this as a bargaining tool with the dealership to give you even better financing. If they canÂ’t, you already have the financing taken care of.”

    So I agree, come in already financed, but give the dealership an opportunity to match or beat the deal. In any case, you’re in good shape either way.

  15. RobY Says:

    @Chief Family Officer

    For years my wife wasn’t open to buying a (slightly) used car and we always bought new. Then about 5 years ago when I replaced my car we decided to give CarMax a try. We figured that since used cars are the primary business model for them that they would need to offer good cars overall to stay in business. Also we overcame our primary objection of not having a warranty by buying one from them. Even if they charge more than a private party and we bought a pricy warranty… we still saved a lot of money compared with buying new. It was a transition purchase and it broke our old habit. Since then we bought a 2 year old truck from them too ($35,000 vs $55,000 new).

    Now my wifes first thought when considering cars is that a 2 year old car is just fine with her. I would even buy from a private party in the future if I had the car checked out by a mechanic.

    BTW, we didn’t buy the extended warranty on the truck … I can afford that risk now with the money we’ve saved compared to buying new.

    P.S. – This is not a CarMax ad or endorsement although they are a good experience for us. Instead this post is about how we changed our mindset and how it has benefited us financially.

  16. RobY Says:

    @glblguy – I’m just saying that financing might be a negotiating tool to get a better price.

    You seems to be highlighting that by prearrangine your financing that you will be able to make a smart rate choice when they offer financing and they may even be able to beat the rate. I agree with you.

    I’m also mentioning that since they make money on financing that they might give you a better deal on the car if they know you will finance it with them. Even if you have cash in the bank, you might be better off at the table by saying if you can get me X price then I’m willing to finance with you. Then you can pay off the loan right away if you desire.

    You used to be able to get the best deal as a cash buyer (and that should still hold true when buying from a private party). However, now I wonder if you might get the best deal by being a preapproved buyer that is open to financing with the dealer. Just something to consider.

  17. The Auto Insider Says:

    I agree that you always need a plan before attempting to buy a car!

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