Fritz wrote to share his experience buying a new car yesterday. This story illustrates a number of principles, including the ever important: “it never hurts to ask for a lower price”.

Last year, my wife was forced to get a new (used) car. Her ‘96 Caviler was on the verge of death, and she needed a reliable car to drive to her new job. Since we were in a rush, and neither of us had ever had bought a car without the guidance of our parents, we made some mistakes. After dealing with this crappy car (’02 Mazda 626) for the past year, we decided that is was time for my wife to get a new car. We agreed that a Honda Civic was right for her. Last weekend, we began our search. This time we decided to shop around, and to be smart when buying.

After test-driving a Civic at a local Honda shop (shop A), we asked for their best offer on a trade-in for her car. The blue book value for trade-in on the Mazda was only $4200 despite the fact we paid $9000 only one year earlier. The dealer said that $4000 was the best he could do. We disagreed and demanded a lower price. He went to talk to his boss (i.e. drink a cup of coffee), and came back with $5000 on her car, but only if we signed immediately. We said that we had to sleep on it, and that we wanted to talk to our bank to see what kind of loan we could get.

After leaving that Honda dealership, we drove to another Honda place (shop B) and did the same thing. Sure enough, they came out and said that they could only give us $4000 for our car. We told him that we had been elsewhere and that we have had a better offer. We wanted $7000 for her car. He left and came back and said that $6000 was his best offer, but he would be losing money on the deal (which I found hard to believe). Also, we would have to sign that night if we wanted that deal. We again said that we had to sleep on it and talk to our bank.

That night we discussed what we wanted to do. We preferred shop B, and if all things were equal we would buy there. The next day we went to the bank and were approved for a loan of $13000 at 6.75%. On the way to shop B, I called shop A and said that we had an offer from another place for $6000 on our car and asked if he could beat it. He got upset and said that we would have to come in to his place to find out a new price. I called his bluff and threatened to end the call. He said that he would be able to give us $6250 for the car and a few free oil changes. At shop B, they were ready for us to sign the papers and give us $6000 for her car. We said that we needed to talk more about the price. We mentioned that we were offered $6250 and that we would leave unless we got $6500. The salesman left and got the manager who haggled with us until we settled on $6400.

After agreeing on the price, we asked him if he could beat 6.75% for the loan. We were able to get 6.1% directly through Honda. And after signing all of the papers, we are now the proud owners of a new 2007 Honda Civic EX.

For more information on purchasing a new car, check out these previous articles:

I had the new car itch bad last spring. I was unhappy with my Ford Focus, and wanted something sleek and exciting. I knew it was a bad financial decision for me, though, and eventually was able to kill the urge. I wrote about the experience in Frugality in practice: Shaking that new car itch.