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