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Reader Submission: Fritz Buys a New Car Print
Tuesday, 17th October 2006 (by J.D.)This article is about Cars, Real-Life
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:
- The best way to buy a new car
- What is a reasonable offer for a new car?
- Confessions of a car salesman
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.
October 17th, 2006 at 1:04 pm
Good stuff. I spent some time as a car salesman after being laid off from a previous job - I can vouch that there is almost always a significant amount of room for negotiation.
October 17th, 2006 at 4:52 pm
You know, I’ve been meaning to write a story of how I purchased my last two cars. Basically, I got to do all the things described in this post, but I did it over email/phone instead of in person.
The short version is this: find a web forum dedicated to the car/brand you are buying and look for a “Test driving and buying” section. In there you will find people from all over the country talking about the best possible prices they’ve found and current incentives. I took that info to three nearby dealers (over email, using edmunds.com for the “request a price” thing) and when a local one matched a best price offer, I took it. I did end up talking to dealers on the phone, but I never set foot on a dealership floor until I was buying one.
Another benefit of the armchair shopping method I used: I completed the sale of my new truck and trade in less than 90 minutes from start to finish, since we worked everything out over email/phone.
I’ve never had a better experience and looking back, it was like an Adam Smith’s dream come true to have thousands of shoppers from all over the country sharing information online like that. I knew what the dealer invoice price was, what the dealership was actually paying below invoice, and what my best offer could be.
October 17th, 2006 at 7:01 pm
I hope that the poster had already negotiated on the base price of the car first and had equal deals at both places. The total amount you pay is what is important, not just what they give you for your current car.
It’s also worth selling used cars yourself in many cases. When we got a new car for my wife, they valued her 1995 Dodge Neon at $750 after we had fought down on the price of the new car. We said no thanks, bought the car for the agreed price, and sold the Neon the next weekend for $3700 in cash to the first person that responded to the ad.
October 17th, 2006 at 8:20 pm
Nice job, I did the exact same thing in May, for a 2006 Honda Civic EX Hybrid. I got the awesome tax credit that came with it as well which was, $2400 tax credit for as long as we own the vehicle. So, my taxes will be based on (my salary - $2400) A nice edition, and the car will return $12,500 over 5 years. The program ended June 30th (as all gov’t funded programs do) I was lucky enough to get in while the tax credit was available, and I have to say 510 Miles to a tank of gas is AWESOME.
October 18th, 2006 at 5:34 am
The thing I found amazing about my first experience buying a car from a dealer was how the sales rep could sit across from you and blatently tell lies, and provide misinformation. How the hell do they sleep at night?
I had a similar experience buying a new bed last night. The stories that come out of those guys… he actually had the gall to say “uhh.. I sound like a salesman” not once, but twice. Buddy, that might be because you ARE a salesman.
/[end rant]
October 19th, 2006 at 12:40 am
I don’t know if this is common, but when buying my first car I went to the dealership all ready to bargain the salesman down from the 7500 listed price. He totally threw me off by telling me he’d sell it for 6500. I still asked for another 250 less (and got it, after he “went to see his boss”), but I’m sure now he would have gone lower. I’d been so surprised by the 6500 offer that I’d pretty much accepted there and then, so I lost any bargaining power I might have had.
October 19th, 2006 at 7:02 am
JW,
I’ve never read anything to suggest the tax credit applies for every year you own the car. My understanding is that the credit can only be taken in the year you bought the car.
October 19th, 2006 at 8:07 am
Dicker and Dicker…
This sort of thing is why I hate buying cars. On the way to shop B, I called shop A and said that we had an offer from another place……
October 25th, 2006 at 10:45 am
While that’s nice that you got the price down and got a decent amount on the trade-in of your car, you still placed yourself in debt and took a huge loan for a car you didn’t need. You could have sold your car for $6000 and bought a perfectly good, couple year old Honda Civic for cash and not have $13,000 in debt (17,479 roughly if it’s a 5 year loan). So, add in the $6500 you didn’t get in cash for your car and you paid $23,979 (roughly) for a Honda Civic which is just sad and not really something to brag about.
Invest in peace…
October 25th, 2006 at 11:09 am
You are all stupid. Why would you buy a new car anyway? 1) I need something reliable . Nope a 3 year old car is the same car with 30% of the value dropped out. In other words you can get the same car for less and the money you save would more then pay for any repairs. 2) I need a bigger car because we are goingt to have a baby? My mom and dad never needed a SUV and there was me and my brother and we went camping every summer. You will never get the better of a car salesman. You think you got away with something because you negotiated an extra $500 off? Please you over estimate yourself.
Buy used, dont finance, pay cash.
October 31st, 2006 at 12:52 pm
I got a loan from my credit union. I have had an account for over 20 years. They wanted to give me the same rate they would give to anybody that just walked in. I asked why a 20 year member couldn’t get a better rate. They dropped the rate a half point. I pointed out that my credit rating was in the upper fourth. They said it didn’t matter. It did. I told them I could get a rate of 4.25 as opposed to their 6.75 offer and that if they wanted my business they would have to give me an incentive. The agent kept saying she could do no better, so I said no deal and got up to go. At that point her supervisor came over and agreed to match the 4.25 rate. Be persistant, don’t believe them when they say they never negotiate.
February 28th, 2007 at 1:35 pm
Breaking News!!! Car Dealerships are in business to MAKE MONEY. Nobody goes to work for free. Your job as a consumer is to get the best deal and the salesman’s job is to make the most money…as long as this is done honestly there is no problem. You talk about ripping people off, what about selling a $750 Neon for $3700.00
April 9th, 2007 at 7:32 pm
You should never trade in
When you do the dealer can play games both ways: inflate the price of the new car but make you feel better by upping the value of your trade-in, and vice-versa.
Sell your old car yourself.
August 31st, 2007 at 11:16 am
[...] Fritz buys a new car [...]
May 14th, 2008 at 9:38 am
I am in fact a new and used car salesperson. I dont seem to have to lie,and cheat my customers to sell a car. People have this notion that we are non-profits. Profit is not in fact a dirty word, we are in buisness to make money. No one questions all of these companies who are making over 100% margin on the products you buy everyday, but when we try to make 3-5% then we are bad people, and how can we sleep at night. I focus on making my customers happy and if they are they will come back, the more they come back the more I sell. They will send me more customers and I sell more, By the way most car salespeople only make 30-35 thousand a year. We are not rich people, and we are doing what we can to make it just like everyone else.
January 17th, 2009 at 9:54 am
Not all carsales people are bad you know. I sleep at night perfectly well. The public need to WAKE UP. We make no money in new cars. It’s not like that anymore. If it weren’t for the used cars the lights would go off and we’d all go home. I think people are entitled to a deal but some people just don’t know where to get off. The public are rude and only get away with it as us ’sales people’s’ hands are tied because we can’t tell you to stick your offer up your rear because you’d whine about it. So next time you complain about your trade in price… just remember. You bought the car in the first place. NOT US! Stop complaining and get off your self-rituous high horses!!!