Top 10 Tips for Buying a New Car (and in under 3 hours door to door)

This weekend I had the luxury responsibility of helping my wife buy a new car. Her Honda was at end of lease, and we were so happy with it after four years that we returned to the same dealership where I’ve been going loyally for 7 years. After becoming infuriated by the games being played by an arrogant local Honda dealer at the onset of our negotiations, I redoubled my efforts to get a great deal and came away realizing I’ve been leaving money on the table. The good news is that after doing some deeper research, we walked away with a new Pilot on Saturday for about $9000 under sticker, and $3000 under invoice, plus a bunch of accessories effectively for free. Here are a few tips we used to get to this level of dealing:

1. Do Your Research- getting the details on manufacturer incentives and holdback are essential. The more educated you sound walking in the better. First start on Edmunds.com and ConsumerReports.com. If you know the car you want, get the CR report for the car for about $14, no subscription required. Print off Edmund’s True Market Value (TMV) based on the zip code you’re buying in AND another within a few hours’ driving distance. Get the invoice price, and be fully aware of what the Manufacturer Holdback and Marketing Incentive dollars are. These are dollars reserved for the dealer to use to close deals, or in the case of unwary customers, can take as pure profit. Look through community message boards and forums online and find what others are paying in your area, then print out the pages to bring with.

Also very important is to know the value of your trade according to at least two appraisals going in. Whether you own or are trading in a leased vehicle, If it’s in good condition, there’s money there for the dealer- and you. I’ve traded in two Honda’s at end of lease and had a few thousand dollars of money there to play with. Get the blue-book value and competitive used-car listings in your area. Print them all out and use to your advantage.

2. Get competitive quotes and deal with the right person. Always ask for the fleet manager’s name, then to speak to him/her. The Fleet Manager is a senior manager or sales associate that works on high volume, straight transactions such as corporate fleet cars. They’re more likely to be ready to work with you vs. the younger hotshot trying to win points with the boss by taking you for a ride. If a fleet manager isn’t available, talk to the Internet sales department.

If you know the vehicle you’re looking for, tell them using the exact terms of the model/package or packages you’re interested in. Ask what they have on the lot and say you’re flexible on color. Do not get into details like colors and accessories, just the inventory. Start making notes on colors and packages currently available in a spreadsheet. Those with more inventory, especially later in the model year, are more likely to give a great deal.

3. Know when to buy. Timing your purchase during the year can be very advantageous. A few tips that are mostly common sense: 1) Don’t buy a convertible in the spring/summer. 2) Go in the afternoon at the end of the month (they want to close out volume and will give great deals). Cars such as SUV’s aren’t selling as well so getting them at the end of the year closeout may mean an opportunity to get ridiculously low deals (like we did). This goes for vehicle that aren’t flying off the showroom floors. I once tried to negotiate on a Toyota Prius, but due to a 6-month waiting list, my position was eroded.

4. Be willing to travel to get a better deal. Be willing to travel a few hours to get outside a certain area to get a better deal. Then, do the math. Think about what your time and money is worth. For a $5000 price drop, many folks even in Seattle area will travel to Texas or California to close a deal and have the car shipped home. Some dealers will even buy you a plane ticket. If you’re buying an Asian import, Michigan is a great place if you’re interested in doing this due to the large # of US automakers based in the Detroit area. Don’t be afraid to get a quote from out of state in email and bring it and the airline quote for a round trip ticket into your local negotiations.

5. Eat before you go. Never negotiate on an empty stomach. We took our son and friend to a special restaurant right before the dealership so hunger wouldn’t be a factor.

6. Bring a friend… and your kids! Let’s be clear- this is business. You need to treat it as such and leave the emotions at home. That’s part of what your friend is there for. My friend who is a car enthusiast and has many years experience buying company cars and personal drivers gave us the advantage because he’s not emotionally invested. If the dealer starts to work you over with numbers and phrases you don’t know, trying to maintain control of the negotation, your friend can be the one to ask the “dumb” questions and push back. He or she is also there as your gut check. Sometimes spouses can do this, but a “friend” is more unnerving to the dealer. Is this a buyer? What’s the person’s background? Were they in the business? Make sure it’s clear though with the dealer that you’re the one doing the negotiating, and your friend is there for you to talk to, not for the dealer to talk to.

Then there are the kids. This works to your advantage as well believe it or not if you do it right. Some car salesman love couples with kids. They’re too distracted to negotiate well and as the hours progress, the child often goes into meltdown. My wife and I got into this situation once and I walked away. We realized there’s no advantage to having the two of us there with a child trying to negotiate. My wife can swoop in during the final closing while my friend thankfully watched our son for a while.

7. Game Time: Set two appointments at different dealerships – and a time limit. I had an appointment scheduled at another dealer further away with a firm offer in email. By casually “swinging” by the closer dealership on my way to see if they could beat it on my way, it was clear from the beginning that I was shopping around. This was key to maintaining control. Coupled with #1 – casually mentioning what inventory was sitting on other dealers’ lots, I made it clear I knew the local market prior and wouldn’t be easily taken. I knew what their “spiff” or holdback looked like and was using their jargon. I was respectful but clear and deliberate in what I wanted.

In our case, my friend and I agreed to 45 minutes from sit-down at the negotiating desk to base deal. We noted with the dealer we had another appointment in the afternoon and both knew exactly what time that was, saying it in tandem when asked.

8. Don’t sign anything or give up your edge until you have a firm base-price offer. Some dealerships employ tactics such as taking your driver’s license, a credit card, or a signature as “a show of good faith” at the beginning of the negotiation. While many states now require that you give a driver’s license for a photocopy to be made before taking a test drive, once they have the photocopy, you keep everything you walked in with. The reason they ask for this is to take away your control. If they won’t take the deal back to their manager without these items, walk out. I once had a dealer start to yell back at me when I turned the question around on him as to why he needed a signature before going back to his manager the first time. Sitting in the seat at the dealership is proof enough of your intent. So negotiate well, be professional and amiable but don’t talk about personal details. Once you have your agreed-upon base price, normally your friend will step away as you’re about 2/3 of the way through the deal.

9. Remember: Always be ready to walk out. In our negotiation, the owner of the dealership personally came out and very frankly said he can’t beat the offer and doesn’t believe we’ll get it at the other dealership. So, we got up and started walking out after thanking him and his team for their time. The salesman worked extra hard to try and save the deal. They offered to pay for half of the only accessory I wanted (running boards) and I agreed. It’s improtant you’re ready to walk out at any point. Take multiple copies of your car keys with you too. Just in case they’re going to appraise your trade-in and need your keys, it’s your right to keep tabs on where your car is, get up and walk out at any point if you’re not happy with the way things are going. You can always pick up the keys later. If you walk out, there’s still a high likelihood that you’ll get a call back if you weren’t too much of a pain in the ass to deal with.

10. Have financing options and be wary of the Finance “Closer”. I don’t recommend discussing financing options before you have the base price offer closed. Discussing financing can devolve into an offer based on payment price vs. actual base price and this is how some people get taken (myself included, before I knew better). Once you have the offer page, write down the exact amount. Now you’re ready to discuss financing. My thoughts here will be based on purchase financing, not leasing. There are other sites and details you can get for the Lease vs. Buy question and differences too numerous to discuss here. The important things are: 1) Know your credit score. Go to www.freecreditreport.com www.annualcreditreport.com and get your report. By law, you’re allowed one per year. 2) Secure an auto loan separate from the dealership. Capital One or your local bank. Shop around for the best deal.

The financing guy is often a senior salesperson who has “graduated” to finance. He or she’s been in the game long enough and is smooth enough to try and extract a few more dollars out of you. Your guard is normally down because you’ve haggled your price down and you just want to be done. My recommendation – unless you’ve done the research, don’t buy any of the “extras” they offer you in finance. They’ll use a “payment based” calculator again to keep your eye off the actual cost. Most of the items – paint protection, leather protectant, Lo-Jack etc. can ALL be bought for cheaper aftermarket without any difference in quality or negative effect on your warranty. (This was a point brought up on a nightly news magazine show in the US just recently.) Speaking of warranties, there’s the Extended Warranty offer. Spend some time looking over the reports in message boards before signing up for this. In almost all cases, it’s cheaper to get an extended warranty near the end of the included warranty.

Final Thoughts
I want to make a note here that the dealers in most cases are genuine and honest people who should be treated with respect- just as you should. They just know their business and generally what levers to pull to get you to buy their product, just the same as someone in any sales or marketing position. This is a business transaction for both parties and as long as both is treated fairly, I believe the above will work in most cases. I’ve never worked as a car salesman but I’ve done probably 120+ hours of research over the years to understand what works and how to do it quickly. I hope you find this useful.

7 comments

  1. Tark says:

    I’m not in the market for a car right now, but I thought this was a nice follow-up to this article that I read a week ago – http://automotivecontent.com/blog/?p=96

    Thanks for sharing your experience and advice.

  2. Seeing as how I am going to be doing this very same thing in a few months thank you!

  3. Glad you guys liked it 🙂

  4. DLF says:

    This reminds me of the arrogant Honda dealers I dealt with in my 20s back in North Carolina, in the mid- to late-’80s when it was often said that owning a regional Honda auto dealership wass "a license to print money." It’s all about supply and demand; I’d be willing to bet you didn’t get $9K off retail and $3K below invoice on a 2007 S2000, now did you? 😉

  5. Sandeep says:

    Great post!
    A quick note – you can get free credit report from all 3 credit reporting agencies at http://www.annualcreditreport.com

    I would suggest spacing them out by 4 months e.g get one in January, then in May and then in September.

  6. brad77 says:

    These are great tips, Sean. I used a lot of the tips from edmunds.com and had an easy enough time getting my truck at invoice. I’ll try the rest of these when I’m ready to shop again.

    One thing, though: I recommend that you avoid http://www.freecreditreport.com, which requires that you get a trial membership to "Triple Advantage," which is a server you’ll have to pay for after 30 days. It’s $12.95 a month.

    According to the Federal Trade Commission, you should get your credit report from http://www.annualcreditreport.com. From the FTC’s website (http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm):

    Only one website is authorized to fill orders for the free annual credit report you are entitled to under law – annualcreditreport.com. Other websites that claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” are not part of the legally mandated free annual credit report program. In some cases, the “free” product comes with strings attached. For example, some sites sign you up for a supposedly “free” service that converts to one you have to pay for after a trial period. If you don’t cancel during the trial period, you may be unwittingly agreeing to let the company start charging fees to your credit card.

  7. Sean says:

    Thanks- I updated the links 🙂

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