How do you buy a car?

[Runyan99]

I went to a dealership today with a friend. He was looking at the new Dodge Challengers. A 2008 model on the lot was $21,000 base, $27,000 with included options (sticker), and about $33,000 after all taxes and fees.

In such a situation, how do you know what to bid? How do you come up with a good offer that a dealer might accept?

[Stalins Organ]

Ask him what he'll accept for cash, what the finance rate is for terms, etc.

Have alternatives in mind - serious ones - be prepared to not buy the car if you think it's too expensive.

If you're determined to buy that particular car you won't get the best possible offer - the salesman will quickly see that you have no barganing position & "That's a sgood as I can do" will be uttered very quickly.

[hoolaman]

There must be a few dodge dealerships around. Last car I bought I took quotes from other dealers around to the next place, made it clear I was keen to buy, they will beat each other down. Some refused to make a deal, don't be afraid to walk away.

Also the end of the month/quarter/financial year is a good time to go, they will know how their profits and quotas are going for the month and may be a bit desperate.

As far as how much they will take off, free options are a good thing to try for, most of their fees are just made up, but I don't really know.

[John Kettler]

Runyan99,

Once you've figured out the make and model that'll get the job done and is in your price range (read a lot of auto reports, drove a dozen different cars of every stripe to see what was there, how well each fit me, drove and handled), you need to find several dealers all with the same car. You need to be serious, for if you're even slightly not serious, they'll catch on and you'll be toast.

You start with the first dealer. Tell the salesperson you're buying a car today (creates tremendous urgency via visions of commissions), that you want the dealership's BAFO (Best And Final Offer) on a (specify make, model, version, special features, etc), informing the saleperson that you'll be taking this offer to other competitors nearby. If one of them beats the BAFO, this dealership loses the sale. If it's a tie or the dealership you first visit wins outright, you'll be back. This completely changes the ordinary sales dynamic --by standing it on its head! Now, instead of begging for a break, you're in the driver's seat, so to speak.

This drives salespeople and their bosses crazy, but they want to eat and need to sell cars. Someone else will likely beat the BAFO, but what you did at the first, you now keep doing. I've seen people practically retch when confronting another dealership's BAFO, so expect the prospective seller to retire to the sales manger's office and for

howls to heard from both ends. Also, these people are intensely competitive, as you'll see from their walls of sales awards. Watch as figures are tweaked, edges sought, etc., after which the new, cheaper price is sent upline. Thus, after a lot of caterwauling while you wait, don't be surprised if the salesperson walks out, walks over to you, throws out a hand and congratulates you on your purchase. Of course, this assumes you have clean credit, a decent down or the funds on account in some manner. In my case, many moons ago, it was 20% down, with 80% financing through my credit union. Do NOT let them work you. Stick to your guns on every item in the deal!

If you have a trade in, do all your negotiating and seal the arrangements before discussing trade in. Too many games otherwise!

Do NOT let all your hard negotiating be undone by such nonsense as rust and dust, the ridiculous undercoating upsell. Likewise, if you want certain rims or other goodies on your beast, they form part of the negotiation from the beginning.

You need to think in terms of total price out the door, NOT price, then prep fee, then destination charges, then taxes, license, special smog fee, etc. One of my best car deals was a lovely used Fiat sedan bought out the door in the early 1980s for $2000.00. Next to cold, hard cash, there are few things more persuasive than someone holding an obviously rock solid settlement check from a major insurer. I figured out what I wanted after trying out a bunch of cars at several dealers, waltzed back in, plopped down the check and told the astonished salesperson I wanted the Fiat for $2000.00, out the door, everything included. I refused every attempt to work that number up from what I'd said I would pay, made it quite clear I would buy on the spot if my request was met, but would walk otherwise. Wasn't quite the end of the world, but it sounded that way when the salesperson took my offer to the manager. I got the car on my terms.

Thanks to the Internet, you have the ability to do research undreamed of when I did these deals. You can find out what the Kelly numbers are for any given car, in a bunch of different configurations. And you can check dealer inventories for as far afield as you wish to range. Likewise, you can play BAFO online if you so choose. And don't believe the manufacturer's sticker price, either, for there are all sorts of spiffs and ups provided to dealers. Are there manufacturer and/or dealer sponsored incentives? If so, are they what helps you? If the choice is between cash back now and a better APR, figure which one serves you, assuming either does. Always ask if there are any promotions or incentives being offered. Compare them carefully to see whether they're useful to you.

Sometimes, accessory packages will be thrown in to sweeten the pot. Take two identical cars, say, convertibles in a balmy climate. If price is the same on the identical models from the two dealers, and you've already determined that AC isn't a must, but one dealer will throw it in for free (several hundred bucks more otherwise), and you'd like to have it, then it makes it easier to decide, doesn't it?

Don't know whether it's as big an issue with so much robotic assembly, but the rule used to be not to buy a car built on a Monday (recovering from the weekend), a Friday (thinking about the weekend) and most particularly one built following a major holiday.

This isn't comprehensive, and there are doubtless sites that explain things much better than I did, but this is from direct experience.

Good luck!

Regards,

John Kettler

[Hakko Ichiu]

Runyan99,

Next to cold, hard cash, there are few things more persuasive than someone holding an obviously rock solid settlement check from a major insurer.

I'm not so sure about the cold, hard cash thing. I've always been a cash buyer, and 20 years ago it definitely made a difference. Now, the dealers are happy to get the financing business because it means a steadier revenue stream for them. The last three cars I've bought (since 2001), being cash in hand hasn't generated any bargains.

Being prepared to walk away, now that's a way to get a deal. When I bought my most recent car, I called the salesman of the other car to make the short list to tell him "thanks, but no thanks." He put me on to his manager, who was ready to drop some big numbers. Too little too late, though.

[mike_the_wino]

If you are a CostCo member you can dial up what you want with all your options and then just go pick up your car. No need to muck around with salesmen at all....unless you want to test drive.

[RMC]

If you know exactly what you want, you can check dealer online inventories and request a quote. Many dealerships will give you a very good price through their internet department because they know internet shoppers want to avoid all the gamesmanship. Others use the internet as just another lead generator and will try to get you into the store so they can play the normal parlor games.

Check out edmunds.com. They have tools to determine the invoice prices of vehicles you're interested in (with options and dealer incentives too) and they also offer something they call their TMV, True Market Value. It reportedly will let you know what the vehicle is going for in your market because the market price will vary by region. They also have forums where folks report on their buying experiences.

An example: The 2009 Challenger SE. Base Sticker $21,320 Invoice $19,968

Configured with $5k in options it's MSRP $ 27,045 Invoice $25,594.

Edmunds reports these are going for about $300 over MSRP or on this one $27,350.

New cars like the challenger can be hot items and deals may be impossible to find. From browsing the edmunds forum, some dealers are taking $5k deposits for them and charging $5k over sticker. You'll probably want to wait 6 months or a year to get a better deal.

People paid over sticker when the little PT Cruiser came out too.

Other random points.

Cash is no longer king. Most deals on new cars are rather skinny in terms of the sales price. Dealers make their money on the back end with the financing and the mop and glo packages they sell (paint sealant, undercoating, fabric protection, extended warranties). They want you to finance. You may find that trying to pay cash will cause the dealer to hold the line on the sales price as they won't get anything from you on the back end.

The dealer run around, grinding and the low ball. When you march into a dealership and demand their lowest price, they consider you a stroke and will give you a price good for that day only that they know can't be done. This is the low ball. They know you'll shop it all over town looking for someone to beat it by $50 and that you're likely not coming back. When you do come back to them you'll find that deal is no longer available. At that point they are hoping you are tired of running around and are more amenable to actually making a deal.

Look for deals near the end of the month when volume bonuses may be in play. A dealer may take an individual loss on one car to make a monthly target that means a big bonus.

Know your credit score and secure your own financing before going shopping. Some dealers will pad their back end by giving you a higher rate than what you actually qualify for. The dealer finance guy can get you a good rate from a bank. This is the buy rate. If he offers you a higher rate than that it, that new rate is the sell rate. The dealer gets the difference between them. So if you know you qualify for 5% through your bank, credit union, or something like capital one auto financing, and the dealer offers you 7% you can be confident that he's padding. Ask "What's the buy rate?" and watch his reaction. Often it's helpful to let them know you've got financing already arranged, but if they can beat the other rate then you'll finance through them. This won't net you a big savings, but 4.95% is better than 5%.

[Runyan99]

If invoice = dealer cost in the above example, then I see that profit margins on the sticker price are already pretty thin for the dealer on a car, only about $1500 on the above example. Thus I suppose that if you are paying cash, paying sticker+taxes would be a pretty fair buy.

[RMC]

Invoice isn't dealer cost. There is this thing called hold back. It's typically 3% of the invoice. Rest assured that buying a car at invoice is not going to make the dealer go hungry.

[Runyan99]

Okay well you bandied the word invoice around but you didn't define it. To me an invoice is just a piece of paper.

So what about bidding invoice plus tax?

Also, if buying a used or pre-owned car, I don't suppose the buyer has an invoice to look up. Then all you have to go by are comparable listings.

[RMC]

Well, invoice prices on new cars used to represent dealer cost. They just haven't for some time.

Offering invoice for a car can be a successful strategy, but it depends on the vehicle. The hardest thing for a car buyer is to know the actual market price of the vehicle. Lots of vehicles can be had around invoice, but many, like that challenger can't. It all depends on the market. If you offer invoice, the dealer will try to bump you. The only way to know if your offer was really rejected as too high is to walk. If they let you leave then your price was lower than they are willing to sell it for.

Used cars a whole different ball game. Where new cars are practically commodities anymore, every used car is unique. Model year, options, mileage, condition. Used cars become unique items that are hard to compare. You have no invoice information, only general guides from the likes of Kelly Blue Book. Because of this dealer margins on used cars are a lot better than on new cars.

[cabal23]

Runyan99,

Once you've figured out the make and model that'll get the job done and is in your price range (read a lot of auto reports, drove a dozen different cars of every stripe to see what was there, how well each fit me, drove and handled), you need to find several dealers all with the same car. You need to be serious, for if you're even slightly not serious, they'll catch on and you'll be toast.

You start with the first dealer. Tell the salesperson you're buying a car today (creates tremendous urgency via visions of commissions), that you want the dealership's BAFO (Best And Final Offer) on a (specify make, model, version, special features, etc), informing the saleperson that you'll be taking this offer to other competitors nearby. If one of them beats the BAFO, this dealership loses the sale. If it's a tie or the dealership you first visit wins outright, you'll be back. This completely changes the ordinary sales dynamic --by standing it on its head! Now, instead of begging for a break, you're in the driver's seat, so to speak.

This drives salespeople and their bosses crazy, but they want to eat and need to sell cars. Someone else will likely beat the BAFO, but what you did at the first, you now keep doing. I've seen people practically retch when confronting another dealership's BAFO, so expect the prospective seller to retire to the sales manger's office and for

howls to heard from both ends. Also, these people are intensely competitive, as you'll see from their walls of sales awards. Watch as figures are tweaked, edges sought, etc., after which the new, cheaper price is sent upline. Thus, after a lot of caterwauling while you wait, don't be surprised if the salesperson walks out, walks over to you, throws out a hand and congratulates you on your purchase. Of course, this assumes you have clean credit, a decent down or the funds on account in some manner. In my case, many moons ago, it was 20% down, with 80% financing through my credit union. Do NOT let them work you. Stick to your guns on every item in the deal!

If you have a trade in, do all your negotiating and seal the arrangements before discussing trade in. Too many games otherwise!

Do NOT let all your hard negotiating be undone by such nonsense as rust and dust, the ridiculous undercoating upsell. Likewise, if you want certain rims or other goodies on your beast, they form part of the negotiation from the beginning.

You need to think in terms of total price out the door, NOT price, then prep fee, then destination charges, then taxes, license, special smog fee, etc. One of my best car deals was a lovely used Fiat sedan bought out the door in the early 1980s for $2000.00. Next to cold, hard cash, there are few things more persuasive than someone holding an obviously rock solid settlement check from a major insurer. I figured out what I wanted after trying out a bunch of cars at several dealers, waltzed back in, plopped down the check and told the astonished salesperson I wanted the Fiat for $2000.00, out the door, everything included. I refused every attempt to work that number up from what I'd said I would pay, made it quite clear I would buy on the spot if my request was met, but would walk otherwise. Wasn't quite the end of the world, but it sounded that way when the salesperson took my offer to the manager. I got the car on my terms.

Thanks to the Internet, you have the ability to do research undreamed of when I did these deals. You can find out what the Kelly numbers are for any given car, in a bunch of different configurations. And you can check dealer inventories for as far afield as you wish to range. Likewise, you can play BAFO online if you so choose. And don't believe the manufacturer's sticker price, either, for there are all sorts of spiffs and ups provided to dealers. Are there manufacturer and/or dealer sponsored incentives? If so, are they what helps you? If the choice is between cash back now and a better APR, figure which one serves you, assuming either does. Always ask if there are any promotions or incentives being offered. Compare them carefully to see whether they're useful to you.

Sometimes, accessory packages will be thrown in to sweeten the pot. Take two identical cars, say, convertibles in a balmy climate. If price is the same on the identical models from the two dealers, and you've already determined that AC isn't a must, but one dealer will throw it in for free (several hundred bucks more otherwise), and you'd like to have it, then it makes it easier to decide, doesn't it?

Don't know whether it's as big an issue with so much robotic assembly, but the rule used to be not to buy a car built on a Monday (recovering from the weekend), a Friday (thinking about the weekend) and most particularly one built following a major holiday.

This isn't comprehensive, and there are doubtless sites that explain things much better than I did, but this is from direct experience.

Good luck!

Regards,

John Kettler

Brilliant, also something else that drives sales people crazy is just walking out after the offer you a crap price. I have had the salesperson and the manager chasing me to my car. It worked like a charm and they really did give me their BFO after that.

[Vomitmeister]

I think I used Edmunds to buy my last car. I went in with their TMV value and said I wanted to pay that and they agreed without any argument. Easiest car purchase I ever made.

[Lars]

Also, if buying a used or pre-owned car, I don't suppose the buyer has an invoice to look up. Then all you have to go by are comparable listings.

True, but right off the bat you save depreciation.

A stabilized rate of depreciation (7% - 12% per year) makes used cars a better value than new ones. New vehicles lose an average of 20% of their value the instant they are driven away from the dealership. When coupled to the average yearly depreciation of 7% to 12%, your first year's loss is anywhere from 25% to 35%. That translates to a first year $6,000 to $8,000 loss on a $22,500 new vehicle, or a $10,000 to $15,000 loss on a $40,000 one. And that's for a vehicle only driven the average 13,500 miles. If you drive more than that, your depreciation will be greater (35% to 50% for the first year). Don't forget to factor in your financing, which will add another $1000 to $3000. From the investment point of view, this is a lot of loss.

Always buy used.

Last new truck I bought was in '87. But then, trucks were only $8,000 back in the day...

[thewood]

Invoice is what Dodge(Chrysler) sends a bill to the dealer for the car. Dealers get all kinds of incentives and subsidies that add to the profit margin. They may on make $300 selling at invoice, but then CX gives them $1000 for carrying the car for longer, for financing threw CX finance, for getting you to buy genuine CX accessories, etc. On average, a dealer makes about $3000 on a mid-range car. They make even more money by having you bring it to them for service. They make even more if you have a warranty issue that CX pays them to fix.

The best way to buy a car is get a few quotes on line directly through dealerships, get the Kelly Blue Book value of your used car, and go to a dealership and just pay the price. My recommendation for anyone buying a car is buy a used higher end car that still has 3 or 4 years left on warranty. Do it through a dealer for that brand make sure its a certified used car of the appropriate brand.

Where you want to really shop around is in the financing. Make you feel comfortable with the rate and the company. You won't generally have a problem with a finance company recommended by the dealer, but keep them honest.

[easy-v]

I just traded in my '07 Ranger XLT/2.3L/manual 5spd (which I bought in 2006) for a F150 SLX 4x4/4.6L today. I've been thinking about all the obscene rebates and incentives Ford has on the F series and I was thinking it would be a crime not to get one.

MSRP was ~$33000

After discounts and rebates, my new F150 went home with me for $19500 (exclusive of trade-in)

I blame this thread and forum for planting the idea in my head to do so...

[Dirtweasle]

If you are a CostCo member you can dial up what you want with all your options and then just go pick up your car. No need to muck around with salesmen at all....unless you want to test drive.

Really? I've been toying with getting rid of my Jeep again but the whole car dealer hassle is one factor in why I just have not acted yet. Might have to just give that a whirl.

[John Kettler]

Runyan99,

If the advice I gave has been overtaken by changes in the market place, then I apologize. I could say, though, that because I bought very well the last time out, I haven't been in need of a car for many many years now. My used '91 Ford Festiva (bought with 66,000 miles on it) is now just over 181,000 miles and is going strong. Not fancy, but I had someone in a big older pickup try to buy it on the spot while we were stuck in a traffic jam on Pacific Coast Highway. As someone I knew who drove a 2000 Dodge Ram pickup observed ruefully well before gas prices went through the roof: "costs five bucks just to turn the key!"

Good luck with the hunt, and let us know how it went and what you bagged.

easy-v,

Happen to have mpg comparison figures handy? Unless I miss my guess, you're about to take a big hit on the gas bill, not to mention insurance. OTOH, you may be cryin' inside, but you'll be smilin' when seen by those mere mortals below you!

Regards,

John Kettler