Buying a New Car

Factual Questions
1

I have never bought a new car before, and I really don’t want to get screwed. I know the exact model I want, the MSRP, the Destination Charge, and the prices of the options I want. From these figures, how much would be a fair price for this car? Do I really have to go through all sorts of negotiations, or should I just tell the salesperson the final figure that I expect to pay?

Also, I’m planning to pay cash. Should I be given a better price because of this? And should I tell the salesperson at the beginning that I’m paying cash?

And what about extended warrantees?

2

I can’t address all your questions, but I will tell you not to show any cards during the process.

For example, the dealership (not sure about the salesman)probably gets a bonus of some amount for landing the loan, same as a bank officer would, since they are in the money-lending business and it counts as a “sale” of a loan.

So hold that until the end.

Extended warrantees, like any insurance are priced to make money for the seller. Therefore, on average, they are a bad investment for the buyer. So, the decision here, like on all insurance is “Would the maximum loss be a true hardship?” If the answer is no, you are wasting your money to buy the insurance. To prove this to yourself, calculate the amount the insurance would cost before it kicks in. I drive 10k miles/ year, so the regular warranty runs out far before I would have sold the car. The “added value” when I sell is far less than the amount it would have cost me. You can check the Kelly Blue Book site to find out how little an extended warranty adds to used car value.

3

I drive 10k miles/ year, so the regular warranty runs far beyond when I would have sold the car. If I get a 50k miles warranty on all main components, and I sell the car in 4 years, the extended warranty would never kick in at all.

4

Panache45, I just went through the same thing after having spent the previous decade outside the country, and without a car. I hate all the BS one has to go through with dealers, so I researched like hell before making my decision.

First, before going to a dealer, find out the manufacturer’s invoice price for the model you want, and for each of the options, then total them up. You can get these values from several different major web sites that specialize in auto pricing. Generally, a fair dealer profit is 3-5% above the invoice figure.

There may be an additional item of dealer profit, known as “holdback”, that is paid by the manufacturer to the dealer to compensate for holding inventory. This may be up to to 3% and should be deducted from your final price if applicable.

Know the total invoice figure before you set foot in the dealership. The values on the web sites are generally correct. If the dealer claims otherwise, well, they would, wouldn’t they?

Of course, if the car you want is in great demand, (say, a Honda S2000), this above will not apply; you will likely pay MSRP, or even more.

Several automotive web sites also offer a free quote service, where dealers will E-mail or fax you their best offer. Even if you don’t buy the car this way, it’s useful to get a feel for the range of prices, and allows you to hone your negotiating skills over the phone, before the dealers have you in their clutches.

I sent out a call for quotes for the specific model I was interested in, and received five from various Eastern PA dealers within 30 miles of my address. There was a difference of about $1,000 between high and low quote. The first one I received was the lowest, and I accepted it after reveiwing the others. The price quoted was $40 over the verified invoice figure; in this case, there apparently was holdback involved, so dealer profit still ended up at about 4%.

Of the others, 2 bids were higher but reasonable; 2 involved some typical dealer BS, where they claimed that they were offering “$200 over invoice”, but actually had inflated the true invoice value by $300-$600.

You will get no better deal offering cash than would if you financed. Don’t discuss financial terms until after you’ve settled on a price.

Good luck.

5

I don’t have time to give you all the ins and outs of buying a new car, but as a fromer plaidcoat, I can make an excellent book reccomendation to you:

“Don’t Get Taken Every Time” by Remar Sutton.

If you have the time, read it. Read it backwards. memorize it.

Then go out there and give em hell!

6

What kind of car do you want to buy? This is very important- if you are buying a Saturn- relax- all will be fine.

If you are buying a Toyota- having Ralph Nader in person with you will not prevent you from being screwed. (great cars tho- but dealers are crooks).

Take someone with you. You won’t be as “outnumbered”.
And, NEVER, never get the aftermarket extras- ie undercoatins or special polymer coats, or extended warrenties (last applies to new cars only).

7

Go to consumerreports.org and buy a new car price service. It tells you exactly how much the dealership paid for the car and every item on the car plus the holdback and any promotions that they can offer you. I took this in to dealership when I bought my car and instead of price of the car we negotiated what his commission is going to be.

8

You’re going to bring $14,000 in cash to them?

9

I found this link to be pretty informative:

http://www.carbuyingtips.com/carintro.html

One of the things it mentions is that the latter part of December is an excellent time to cut a deal on remaining inventory. That’s what I did a couple of years ago at our local Chevy dealer, and got a loaded Lumina at below dealer’s cost. The one caveat of course is that you need to be flexible in terms of what you’re looking for, as selection may be quite limited.

10

Since you know what options you want, stick by them and make them order the car you want. They’ll probably offer you an on-lot car. Look at it and see if it has most if not all the things you want. If you can live with what it doesn’t have, don’t tell them that you’ll take it, but make them negotiate down.

Don’t get the undercoating and extended warranties.

Like what’s been said before, wait until they mention “going to the finance guy” before you whip out your checkbook and buy it outright. (I’d love to see that!) :slight_smile:

11

AFAIK, only the Big Three let you order specific options. Every other brand you either can buy off the lot or from incoming inventory (i.e. cars that the dealers are expecting, but do not yet have in their posession). Some dealers will also arrange trades with other dealers, if a different dealer has the car you want.

This doesn’t make sense to me, since many “foreign” cars are actually made in the US, and the lead time could still be reasonable. However, my experience has been (granted, I last bought a car 7 years ago) that if you want something made to order, it’s got to be GM, Ford, or Chrysler. Actually, if the manufacturer offers an overseas purchase program (like BMW does) you may be able to get one to order. However, that’s outside the scope of this discussion.

WiredGuy, what information does Consumerreports.org offer that you can’t get from Edmunds for free?