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Old 11-01-2011, 01:37 AM   #1
MikeWaters
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Default Some things I have learned while shopping for a new car

I'm sharing this in hopes that it might be useful to others.

The first step is to decide on a car. Use criteria that fit your needs. For example, I asked around, and a car was suggested to me that I would have never thought of. And that's the car I got. The car that I thought I wanted, it turned out during the test drive that I didn't like it at all.

You've settled on a car, now you want to get the best price possible.

1. Edmunds.com can give you the invoice price. The only other time I bought a new car was back in 2001, and I thought I was hot stuff, armed with my edmunds.com research. Turns out that that level of info is not very much. But better than nothing.

2. Truecar.com will give you additional info. The invoice, what others have recently paid, and even some information about dealer holdback. In almost every case, the dealer pays LESS than invoice. The holdback is the money between what they pay and what the sticker invoice is. Knowing the holdback lets you know what the dealer paid, and that can be extremely valuable.

3. Costco auto buying service. If you are a costco member, you can use this free service to get costco pricing on a vehicle from a participating dealer. This is probably not the absolute best price you can get, but some people have reported it good/useful. I had a friend do this for me, but I didn't end up using it to buy the vehicle. Truecar does the same thing, can get you a "Truecar referral price." Again, not going to be the best deal, but can be a baseline to start from.

4. Don't forget to look at all available rebate and promotional offers. I ended up qualifying for a college graduate discount with my recent graduate degree.

5. Fightingchance.com is a website where you pay to get an information packet on the car you want as well as negotiating information. I've heard good things about it. In essence, you are using their negotiating strategy of contacting dealers via fax, and having them bid against each other, all the while armed with the most possible pricing information. A dealer may actually sell a car for less than they paid, if it helps them make a sales goal that gives them a bonus. Thus it is useful to go for your car at the end of a sales period, such as the end of a month.

6. Friends/Family purchasing programs. Hyundai has such a program, that gives discounted prices. You have to get a direct referral from a hyundai employee, and you can get something called Circle A pricing. I received such a referral, and it was a huge help. It's a non-negotiable price that is invoice minus 3% of MSRP minus rebates - about another 250. That's not a bad price. And it's an excellent place to negotiate from. I was actually able to use the circle A pricing as my starting negotating point, and was able to get a price lower than Circle A pricing from the original dealership that I presented my Circle A referral to. Win.

7. Fax machines. Very valuable. But many of us don't have them, and even if we have them, we have no landline. Faxzero.com allows you to send 2 free faxes per day. I provided my email address and phone number on the fax, along with my request for a bid, timeframe, desired color, good credit, etc.

8. Professionalism. Almost all of the people I dealt with, in person, on phone, and on email were very professional. They didn't abuse use of my phone, they didn't try to make annoying hard sales. One guy was kinda jerky, and I will talk about him in the next paragraph.

9. Backend money. So you negotiate a price you like. Now you have TTL. You get back to the finance guy, and you find out that things are now much more expensive than you thought--the titling, inspection, documentation fees. In some states these fees are regulated. In most they are not. That's why before you settle on a dealership, find out exactly what the itemized out-the-door price is. If a dealership says they cannot provide that, then tell them that the other ones you are dealing with are doing it, and that you won't do business with anyone that won't. Back with the finance guy is also where they will try to sell you on add-ons, like pin-stripes, fabric coating, all-weather coating, nitrogen in the tires, wheel insurance, gap insurance, etc. Only get these things if you want them. In most cases they are a rip-off.

So back to the jerky guy. There is a dealership in the area that prides themselves on being "honest guys" that save money by not advertising and "pass it on to you." I asked these guys to beat a price in an email, and the fleet manager called me with their lowest price, which he said was $200 over his actual dealer cost (including holdback). I think he was being honest about his price, based on the info I have. He was several hundred dollars about the best price I had been offered. I told him I would pass. He tells me that I will not get the price that I have been offered. You'll get to closing, and you won't find that price. Says he only has $50 doc fees (which is extremely cheap for the area). Starts ranting a little bit in this faux friendly way of "how about you buy THREE of them, and we go into business selling cars together because you can get them cheaper than me." The dealership I bought from did have higher doc fees, but I knew about them up front, and the price I got was many hundreds of dollars less than his even with that. That's the worst I had to deal with, which wasn't that bad.

10. Harder to get discounts on rarer vehicles. This is a duh statement. Supply and demand. The trim and color I wanted--only about six of them in the state of Texas. So hard to get a discount. If a dealer has a vehicle on hand, he is much more likely to give you a good deal, than a dealer that has to trade/obtain said vehicle. In my case, dealerships that did not have one in stock were searching statewide inventory to try and get one to sell to me. So in essence, you can actually have different dealers competing to sell you the exact same vehicle (not same model/trim, the ACTUAL same vehicle). In y case, I had two dealerships owned by the same parent company actually bidding against each other, probably for the same vehicle that one of the two dealerships had in stock (which the other would trade for).

11. It's good to have outside financing already in hand before you get to the dealership. That way you know what your bar is for the desired rate. If they beat it, great. If they don't, you go with your own financing. The best rates on loans from outside parties is normally credit unions. I actually joined a credit union in another part of Texas just for the amazing rates on their loans. The loan rate is one of the ways that car companies make their money, so don't get fleeced.

12. Trade-ins is another place where dealerships make their margins. If you can sell private party and get a good price, this can help. But make sure you know what a fair/good price is for a trade-in vehicle. Or you will get fleeced and because of the "great" deal you got on the new-car price, walk away thinking you are champ, but you are actually a chump.

13. So you read Dave Ramsey and you are going to pay all-cash (does he recommend buying new cars? Probably not). This may not be the greatest idea. If you can float your new car at 2%, it may make sense to use that set-aside cash to pay off another debt that is at a higher rate. Like put it in a bond fund that pays 4-6%. Or pay off student loans. Or credit cards (if heaven forbid you carry a balance).

14. Why new, when you lose money quick after driving off the lot? Warranty for one. Hyundai has a 5 year bumper-to-bumper and 10 year powertrain for the original owner. In some cases, the vehicle you want may not be readily available used (as was my case). Some people may not have cash on hand for a used vehicle, or may not qualify for used financing. But in my mind that is not such a great case to get a new (expensive) car.

Lastly, having bought a Hyundai, I can't help but chuckle about the line from Glengarry Glen Ross, brought to life in Alec Baldwin's famed performance:

Quote:
Blake: You know why, mister? 'Cause you drove a Hyundai to get here tonight, I drove an eighty thousand dollar BMW. *That's* my name.
Yes, I drove a Hyundai here tonight, and I'll be darned. I kinda like it.
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