How Smart People Buy New Cars

Posted on December 31, 2007
Filed Under Business & Entrepreneurship, Finance & Economics |

New Vehicles are a commodity and should be bought and sold as such.  Dealers will try to convince you otherwise and will use lots of sales tricks to get you to buy from them.  Don’t let them fool you.  You should make the dealers compete with each other to give you the best price possible, just as you would with any other commodity.

Most manufactures offer incentives to dealers for reaching specific sales targets.  These are in addition to the customer incentives that you and I know about (rebates and low interest rates) and are undetectable by us.  This is why some dealers are able to sell a car at a much lower price than others.  They might be more concerned with reaching a certain sales quota in order to receive their big incentives from the manufacture.  The only way to weed out these dealers from the rest is to get price proposals from a handful of dealers in your area.  This can be easily accomplished by sending out a few emails or making a few phone calls.

Here is a process for buying a new car using this method, along with other useful advice about trade-ins, financing and negotiating.  I have spent hours and hours researching all of this over the past few weeks, and this is what I have learned.

• Figure out exactly what you want.  Go to the manufacture’s website and configure the exact vehicle you want with desired options.

• Find the real invoice price for your exact vehicle.  Go to fightingchance.com and get the reports for your vehicle.  This gives you all of the latest industry and market data for your particular vehicle as well as detailed invoice pricing.  This is a very valuable service and well worth the price (fewer than $50).  I just bought a report from them last week on a Nissan Pathfinder, and it was very informative in my negotiations.

• Contact 10-15 dealers in your area using phone or email and get them to compete with eachother.  Get online and find a handful of dealers located near you and email or call the sales or fleet managers directly.  Alternatively you can use free online services to get in touch with dealers in one simple step.  Some of the better services are Yahoo!Autos, InvoiceDealers, CarsDirect, and Edmunds.com.  Note that by using these services you will most likely be routed directly to an internet sales manager, and will not be dealing with the sales or fleet manager (who has the authority to cut better deals).  However, even when calling or emailing these managers directly, you will often handed off to the internet guys anyway.

• Let the dealers know you are a serious buyer and that they are competing against other dealers for your business.  When you call or email them, tell them that you are a serious customer who will buy a vehicle in the next few days.  Explain that you are contacting a select number of dealers (10-15) for price quotes and that you would like to receive a quote from him too.  Say that in order to respect everyone’s time, only the first price proposal will be considered and that you would also like an itemized ‘out the door’ price as well, including everything.  At this point you are only concerned about the price of the vehicle, so do not mention financing or a trade-in.  If the sales manager doesn’t want to participate (not likely), don’t worry, you will still have a number of quotes to choose from.  Thank the sales/internet manager for his time and give him a few good ways to contact you.

• Line up your financing before you step foot in the dealership.  If you are going to finance your new car, apply online for auto financing at Capital One Auto Finance and HSBC Auto Finance.  You will be pre-approved in minutes and will be able to use this money for your new car.  Or you will be able to use the rate and terms to negotiate with the dealer when they offer you financing.  I used Capital One Auto Finance last week and was approved in less than 10 minutes.  The nice thing about Capital One is that they send you a blank check to use at the dealer.  You can fill it out for any amount up to what you were approved for, and when you sign it you automatically agree to the terms and conditions of the loan, which are on the back of the check.  Also, be sure to check the rates at your credit union or personal bank.

• Get quotes on your trade-in before you step foot in the dealership.  If you have a trade in, look up the value on Kelly Blue Book and find the trade in value.  Then, call up a couple of used car lots near you and ask to speak with the person in charge of buying cars.  Tell him about yours and ask if he would like to see it.  Go in and see one or two of theses people and get quotes on your trade in.  Take these with you to the new car dealer when you purchase your vehicle as a negotiating tool.

• If you want to haggle, do it on the phone or by email on your terms.  Once you get the bids back from all of the new car dealers, call them all back, starting with the highest bid and thank them for giving you a proposal and let them know you will be buying from another dealer who provided you with a lower price.  Sometimes they will want to match or beat this price and sometimes not.  Often difference in price will only be a few hundred dollars at most, so it may not be worth your time to try and get all of the dealers to bid against each other one last time. 

• Go test drive and buy the car.  Call the dealer you are going to buy from and ask them to get all the paperwork ready and ask them to have the car ready for you to test drive when you show up.  If you get there and the car or paperwork isn’t ready leave and tell them to call you when it is ready.  After a satisfactory test drive, buy the car.  If you have a trade in, show it to them (clean it up first) and see what they will offer you.  If it is less than the other bids from the used car lots, let them know (have your quotes with you).  They will most likely match it and if they don’t then sell it to the other lot.  Also, if you are going to finance you vehicle, see what the dealer will offer you.  If it isn’t better than what you got online, then let them know (have these quotes with you too).  If they can’t give you a better deal then use your loan from Capital One Auto or HSBC Auto Finance.

Remember, at the end of the day, a new car is just like any other commodity and should be bought and sold as such.

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