How To Buy A New Car

[Midpack]

I used to be pretty good at it when invoice prices were actually what a dealer paid automakers for cars. Way back then dealers made holdbacks (almost non existent now) and the difference between MSRP and invoice, and sometimes incentives. Though invoice pricing is still published, they haven't been accurate for at least 20 years, and that's no surprise at all. They're not what dealers pay, and their are many more incentives you can't see nowadays (and the dealers & automakers have every right to conceal their arrangement from consumers).

A more current read on the car negotiating landscape that I found interesting FWIW. There are five parts, just one below and the others linked at the bottom of that part.

How to beat the pricing from online car-buying sites | Clark Howard

• First, find the best price offered by dealers on your favorite car-buying website. Get both a price for the car and a detailed “out-the-door” price, including motor vehicle department fees, sales taxes and any dealer charges for documentation, etc. Then keep that number in your hip pocket.
• On the weekend before the last 3, 4 or 5 consecutive weekdays of the month, check dealer inventories online. Many stores list it there. Choose 5 or 6 stores (ideally, but not necessarily, with cars you’d buy if the price were right), even if some are 50 or more miles away. More remote dealers may see you as a sale they’d never make and sell at a better price than they’d offer their neighbors.
• Call their Internet sales managers on the 1st morning if there are 3 consecutive weekdays, the 2nd morning if there are 4, the 3rd if there are 5. Describe the car you want in detail, say you’re ready to buy by month-end, that you’re contacting a limited number of dealers to get price proposals and you’d like to get one from that store. That you need both the price of the car and an itemized out-the-door price (with the details listed above) by phone or email by 11:00 AM the next morning. (Be sure they know your location, so they can figure the sales tax correctly.)
• Say you’ll call all responders that next afternoon, tell them the best out-the-door price and give them one shot at beating it. (It’s none of their business where it came from.) You’re ready to buy, and you want someone to knock your socks off at month-end. But you won’t buy from anyone who doesn’t participate from the beginning.
• The next morning call those you haven’t heard from by 11:00 AM, tell them you have proposals from other dealers and you’re waiting for their response. If any responses have been incomplete, call and ask for the missing info. Call everyone that afternoon with the best out-the-door offer. If the initial o-t-d price from the online car-buying site is the best Round 1 offer, use that price in those calls. (When you’re eliminating the cost of the middleman, that won’t happen often. But it could happen.)
• The store offering the best o-t-d price is the winner. “There will be no third round.” Ask the winner to confirm all the numbers via email because you hate surprises, and say you’re looking forward to giving that store nothing but the highest scores in the questionnaire about how you were treated. Make an appointment to sign the papers and pick up the car. Finally, as a courtesy, call the other dealers to thank them for participating.

 

[Sojourner]

I came across that article last fall and bookmarked it as I was preparing to start shopping around for a new car. Then in Nov-Dec, I tried to follow the process quoted above, as best I could, when it came time for negotiation on the car I wanted. It worked out pretty well for me, even though I didn't hew exactly to the steps as laid out in the article. The key for me was paying attention only to the all-inclusive, out-the-door pricing and getting quotes from several competing dealerships in multiple rounds over the course of about 3 days. In the end, I got a deal that I felt was about as good as I could have reasonably hoped for, within about $500 of my target number. I closed the deal and signed the paperwork on the 29th day of the month.

 

[euro]

I agree that asking upfront about the off-the-lot bottom line price is key. Make sure to specify that this really does mean FINAL price (no, you can't add taxes or destination charge or whatever, or I will walk). It also helps if you don't need your new car immediately and can wait a few days or weeks for dealers to "reconsider" their best price or "find" a car that has been in inventory for a while and needs to be moved. I ended up gettingg such a callback several days after I was told my other offer was "crazy and that dealer is losing a ton of money". Granted, I had to accept my least favorite color but hey, for the right price, I'm living with it just fine.

 

[Bamaman]

Clark Howard knows what he's talking about, but the above instructions are just too much hard work.

When a dealer talks about selling a car at "invoice", he's talking about selling the car for what his floorplanning source paid the manufacturer for the car. Yes, some cars now have less markup *spread between MSRP and invoice cost) than in years past. And let's face it that any dealer that sells a car for what they really paid for the car, or under invoice cost will not be around very long.

Dealers have a "holdback" account that they receive periodically that usually amounts to about 2% of MSRP. Also built into the invoice price is a local/regional advertising fund that they use for local tv, radio and print advertising. The dealer also is paid a floorplanning assistance monthly which amounts to about 45 days of wholesale interest expenses. If a dealer doesn't move cars fast, he'll have substantial interest to pay on his inventories--a major expense.

But what we're now seeing so much of are manufacturers' sales incentives and factory sponsored low APR retail financing. Both are very substantial amounts on cars/trucks today. They vary according to how many vehicles are on the ground and the biggest incentives are on the slower selling cars/trucks. This essentially lowers the real cost of the vehicle. And so many such programs periodically expire--and the dealers have no idea what programs will be until the next day--very secret. The sales incentives are published online, so it's easy for a customer to know the amounts so they can take it into consideration when offering a price for the vehicle.

What is unknown is that regional discounts may come into place on slow moving vehicles--especially toward the end of a month--or a quarter. If a region's sales incentive budgets have not been used, a dealer may get a phone call offering a bounty on specific models--to move them. Regions must use their budgeted funds or they'll not receive any incentives in the near future.

Where the dealer will pick up some profits is on "back end." So many dealers charge "documentary fees" which are pure profit and so many national chain auto stores charge huge amounts--$699 or even more. I don't like this. They'll also have profit centers with extended service plans (very profitable), Gap insurance, and credit life and A&H insurance.

After 24 years working for a major auto manufacturer, I'm on to the way dealers do business. I now prefer to do business at locally owned dealerships in medium size towns--large enough to have good inventories but not so slam and jam high pressure, high profit operations. When I call for a price, my first question is what's the doc fee (which consider.) Car dealers are very good at what they do, and I'm not naive enough to think they're not going to make a profit on me somewhere. But I just don't want to pay an excessive profit. Thankfully I still have close friends with dealerships that treat me right.

 

[W2R]

Clark Howard knows what he's talking about, but the above instructions are just too much hard work.

+1

I really like Clark Howard and I imagine that his advice on this is very good.

When I bought my Venza, I checked Edmunds dot com to see what other people in my zip code were paying. I checked what I should be getting for my Solara as a trade in and subtracted that. That gave me a ball park figure.

Then I went in to the local Toyota dealer. Negotiating was pretty fast and painless and I left with the Venza that I wanted at about the price that Edmunds said it should have been (except for me this was an out-the-door price, with no taxes or fees of any kind).

If I had done Clark Howard's method I might have got it a little cheaper. But think about it; if you keep a car for 10 years, then any excess cost is spread out over 120 months. There's a point at which the hassle isn't worth it, and I suppose that varies from person to person. For me, avoiding hassle that I regard as a huge PITA instead of just obsessing on it was really nice. Being done with the whole process, paying a price that I had confirmed was reasonable through my research, and driving home in my new Venza in just an hour or two was great.

 

[YVRRocketSurgery]

My sister just emailed a bunch of dealership fleet managers (I forget why she asked for the fleet mgr) asking them to give her the best out the door price they could offer and she'd go in on a specific day to buy. Not all responded but enough were game that it seemed like she was able to get a good price on her car.

When we bought our car, we used a site called Unhaggle (Canadian site) for invoice pricing. We used that kind of as a baseline. They seemed to provide a good number tho because it was a struggle to get below it. We were able to get our pricing by going between two dealerships and simply saying this was what the other was offering. Don't think we got the absolute best price but I was good when comparing what others had posted online what they paid.
Also, even though we said out the door pricing, we did get dinged by one BS charge: window security etching which was like $100.

 

[FireCat]

My methods are a bit more streamlined. I spend a few hours researching the discussion boards and websites where buyers actually list the OTD price that they paid for their cars listing options and their geographic location. There are a lot of them. Google is your friend there. The next step is the easiest. Simply email the dealerships within a distance that you would be happy taking a road trip home with your new car. For me in Seattle that was Idaho Oregon and California. I emailed every Audi dealership in these 3 states. My emails were very short and to the point. I told them what model with what options I wanted and told them I was wanting there best price below xxxxx. Which was the near the lowest price I found through my initial internet search. Most responded with a fair offer usually close to the price I wanted to pay. A dealer in California also offered to pay for my flight to pick up the car. I sent one more round of emails indicating my price based on the responses from my first emails then bought the car at the dealership which offered the lowest price. I purchased my last two vehicles this way one in Portland a nice train ride away and the other in Boise a cheap flight and even caught a BSU football game. All totaled I spent maybe 30 minutes composing and answering emails. Zero time on the phone or in person haggling at the dealerships over pricing. It was very satisfying just walking in signing the papers with no additional fussing then driving out in less than 30 minutes.

 

[braumeister]

My methods are a bit more streamlined.

Your streamlined method is exactly what I hope to do when I buy my next car (about six months from now).

I normally keep a car for five years, because I put a lot of miles on them (average about 24K a year). So I know there will be a big depreciation hit and I'm OK with that. I do my research and I know exactly what I want beforehand, which is a big help -- I can't be swayed by special offers.

For my next purchase, I've narrowed my short list down to three, and I think I would be very happy with any of them. So I'll probably just go with the best deal.

 

[Jeffman52]

My methods are a bit more streamlined. I spend a few hours researching the discussion boards and websites where buyers actually list the OTD price that they paid for their cars listing options and their geographic location. There are a lot of them. Google is your friend there. The next step is the easiest. Simply email the dealerships within a distance that you would be happy taking a road trip home with your new car. For me in Seattle that was Idaho Oregon and California. I emailed every Audi dealership in these 3 states. My emails were very short and to the point. I told them what model with what options I wanted and told them I was wanting there best price below xxxxx. Which was the near the lowest price I found through my initial internet search. Most responded with a fair offer usually close to the price I wanted to pay. A dealer in California also offered to pay for my flight to pick up the car. I sent one more round of emails indicating my price based on the responses from my first emails then bought the car at the dealership which offered the lowest price. I purchased my last two vehicles this way one in Portland a nice train ride away and the other in Boise a cheap flight and even caught a BSU football game. All totaled I spent maybe 30 minutes composing and answering emails. Zero time on the phone or in person haggling at the dealerships over pricing. It was very satisfying just walking in signing the papers with no additional fussing then driving out in less than 30 minutes.

That was very close to how I bought my last car (2015 Honda CRV AWD)

I got online and looked at what others were paying, then I contacted via email, the dealers in my State and asked them to give me a quote of their BEST price for the vehicle with these features. I got several and they were all over the place as far as price goes. I took the lowest of them into my local dealer and said, if you can beat this price I will walk out with a car today. I'm paying cash so don't worry your financial guy. They beat the price, although they had to bring a car from a different state that matched the color I wanted. No extra cost. When I checked the price I walked out with vs what others did, I made out on the very lowest end of the spectrum on vehicle cost.

 

[aaronc879]

That's a lot of calls to make during the work week. Only works if you are retired or "work" at a job that would allow you to make so many personal calls during the work day.

 

[Meadbh]

My sister just emailed a bunch of dealership fleet managers (I forget why she asked for the fleet mgr) asking them to give her the best out the door price they could offer and she'd go in on a specific day to buy. Not all responded but enough were game that it seemed like she was able to get a good price on her car.

When we bought our car, we used a site called Unhaggle (Canadian site) for invoice pricing. We used that kind of as a baseline. They seemed to provide a good number tho because it was a struggle to get below it. We were able to get our pricing by going between two dealerships and simply saying this was what the other was offering. Don't think we got the absolute best price but I was good when comparing what others had posted online what they paid.
Also, even though we said out the door pricing, we did get dinged by one BS charge: window security etching which was like $100.

I used Unhaggle when searching for my last new car five years ago. Unfortunately Honda dealers wouldn't participate in Unhaggle's bidding process. But by being very specific about my requirements, naming my all-in price, and getting bids from four dealerships, I was able to get the car I wanted at a price that seemed fair. In the end I bought it from the local dealership, and they brought in a car in the colour I wanted, at no extra cost. I went for 0.99% financing for 36 months with no downpayment. That turned out to be a good decision.

 

[foxfirev5]

By far the best approach is to minimize the number of transactions you have with a dealership over your lifetime. My DW insisted on a new Lexus 13 years ago. After a brief discussion she bought the car. To date she has spent $443 on repairs (timing belt we folded into a front pulley recall, and they filled up the gas when it was $4 / gal ). In 5-10years we plan to buy another. Not a big transaction in the big picture.

Me, on the other hand worked the local GM dealerships to score a new 2015 Equinox for under 20k. They came to the table when I produced my Fiat Chrysler employee discount. Again, I don't plan to see them for over 12 years.

 

[omni550]

By far the best approach is to minimize the number of transactions you have with a dealership over your lifetime. My DW insisted on a new Lexus 13 years ago. After a brief discussion she bought the car. To date she has spent $443 on repairs (timing belt we folded into a front pulley recall, and they filled up the gas when it was $4 / gal ). In 5-10years we plan to buy another. Not a big transaction in the big picture.

Me, on the other hand worked the local GM dealerships to score a new 2015 Equinox for under 20k. They came to the table when I produced my Fiat Chrysler employee discount. Again, I don't plan to see them for over 12 years.

foxfirev5,

I'm unclear on what you meant by "They came to the table when I produced my Fiat Chrysler employee discount."

I'm not aware that GM honors FCA employee discounts. Would you be willing to explain further? Thx.

omni

 

[foxfirev5]

foxfirev5,

I'm unclear on what you meant by "They came to the table when I produced my Fiat Chrysler employee discount."

I'm not aware that GM honors FCA employee discounts. Would you be willing to explain further? Thx.

omni

Simple, meet the competition. I have no idea how they did it or what costs they ate. Plus those discounts aren't all that great. My point is that you should minimize any transactions with dealerships. Thanks

 

[97guns]

Car I'm driving now I bought used, 2014 Passat bought last year with 14k on the odometer for $12k. I don't think I'll ever buy a new car again, the same car New would have been around 22k and at 14k on the odometer the thing was barely broken in

 

[brucethebroker]

Jim Collins offered similar advice as Clark Howard, awhile back.

Glad for this post. Am wanting to buy a new vehicle in the next 30-45 days, timed to get a great deal on a 2017 model.

Thanks for the great info, guys/gals.

 

[dirt_dobber]

Costco made it very easy for wife and I last fall - new Honda CRV. All I had to do was show up and sign the papers.

 

[donheff]

I bought a new Lexus SUV in 2010 and researched prices online for local and some distant dealers. I ended up with a fairly range of what would be reasonably good prices. I then contacted Costco and tried their no hassle referral process. The price I got from their selected local dealer was in the bottom half of the good range I had calculated. I took that and saved the hassle involved in shaving a couple of hundred more off by haggling or traveling. I initially planned to drop my old car off at CarMax since the dealership wasn't offering an acceptable trade but when I went in to sign the papers they reconsidered and gave me the same deal.

 

[Independent]

By far the best approach is to minimize the number of transactions you have with a dealership over your lifetime.

This is my approach. In the 47 years we've been married, we've purchased 7 cars.

I turned 70 this year. I'm thinking about replacing my 12 year old car, and realized that this will probably be my last car purchase.

Dealers are going to make money. I can use strategies like those posted here to minimize the price of a new car, but maximizing the price of my old car is more of a problem.

Maybe people can comment on how they do that.

 

[Bamaman]

foxfirev5,

I'm unclear on what you meant by "They came to the table when I produced my Fiat Chrysler employee discount."

I'm not aware that GM honors FCA employee discounts. Would you be willing to explain further? Thx.

omni

I used to work for a Fiat company and we were eligible for a GM.employee/supplier discount because Fiat's Teksid plant in Dickson, TN casts a bunch of aluminum parts for GM--like engine parts.

 

[calmloki]

So how do you decide on the car before all this cunning wheely-dealing? Do you just read reviews and then buy over the phone or internet? At various times I thought the Fiat 500 and the Honda CRV were serious contenders for our garage - a couple minutes drive time changed my mind. Do you just go in and brave the sales staff at the dealership and test drive car after car? It took us hours just to drive a few different cars, and dealing with the upbeat, hopeful and eager salesmen wore me out during that time.

 

[braumeister]

Do you just go in and brave the sales staff at the dealership and test drive car after car?

Online research lets me get to a shortlist of no more than three. Then I absolutely want to test drive each of them to arrive at a final selection. There is even IMHO a small side benefit in the opportunity to see which dealerships treat you more like a human being.

 

[Midpack]

Costco made it very easy for wife and I last fall - new Honda CRV. All I had to do was show up and sign the papers.

We expect to buy DW a new car in the next 6 months plus or minus. I'm planning to follow the Clark Howard's guidance AND the Costco approach, and take whichever is best.

 

[Midpack]

Online research lets me get to a shortlist of no more than three. Then I absolutely want to test drive each of them to arrive at a final selection. There is even IMHO a small side benefit in the opportunity to see which dealerships treat you more like a human being.

+1. Same here, we can narrow the candidates easily based on price, size, mpg, features, reliability, last grand experience and looks. Then we go drive the remaining 2-3 cars.

I enjoy negotiating to get the best deal though I know many people would have have a root canal.

And I don't cave to pressure from dealers, but if that's a concern - you just say this is car X, I need to go drive Y and Z before we're ready to buy (even if you're a car Z's dealer). And of course they'll want to know the other cars so they can run them down, just move on and insist you're going to drive the others and listen to their dealers story. It's your money, and you have to live with the car for years to come. It's not hard...

 

[braumeister]

And of course they'll want to know the other cars so they can run them down, just move on

Agree. I always just say "After I've bought the car, I'll tell you who your competition was." Otherwise I'd be there all day listening to them whine.