Comments on: How to Buy a New Car Without Getting Screwed

By: Dave Black

Dave Black — Tue, 26 Aug 2008 02:59:02 +0000

I sell cars and enjoy reading sites like this believe me there are lots of opportunities for a car dealership to make money. Front of the house profit, is derived from the MSRP less the invoice price, or the price the dealer actually pays for the car. Each deal has a “pack charge or lot fee” of $200-600 or more that goes in as part of the dealer cost, so when a dealer tells you for example, our invoice is $22145, you can subtract $200 to $600 for the lot fee, and there are dealer rebates and consumer rebates to factor in. On the sales contract there is always a Doc fee of again several hundred and a fee for title processing and sales tax, all but the sales tax can be negotiated. Never trade your car in, unless it has major problems,and you just need to dump it. You don’t really know how much you are getting off the new car for the value of your trade, most dealers I have worked for use “rough black book” which is a number that they can start with before they do an appraisal on your car.
The back of the house profit comes from the finance office, lets say you have great credit, they could qualify you for 5.5% loan or less, the finance manager may hit you at 7.5% and tell you that’s the best he could get, this can be negotiated too, there is a lot of money being made on raising your interest a couple of points, and do not buy any add on service contracts and warranties, the profit on those is 50-100% and the finance manager is a commissioned salesman remember that. Do not try to bluff or BS anyone in the dealership, they are a lot better at it than you are, they do it more often.
One thing that I like to see is a customer came in and told me he and his wife would like to check out a couple of cars and he would give me $20 to work with them for a while if they did not buy. Now the salesman is motivated to work for the customer as well as the dealer, he can’t lose either way. Most salespeople do not make a lot of money, I have made as little as $300 a week and as much as $3500 in a week, my average is around $40000 a year working 5 days and 55 hours a week, so it is a difficult job. The salesman is trying to negotiate between you and his sales manager, he is more on your side than you might think, he wants referrals and he will work you hard after the sale so he wants you to understand that he is going to get you the best deal he can and still make a profit.
Most deals on new cars pay minimum commission, $100 to $150, because the profit margin on new cars is lower and the competition is higher, you can easily compare prices on new cars because every dealer sells the same car. Used cars have more profit built in and there is no simple way to price shop because condition and mileage on each car varies so much.
Do not lowball and offer a price that is way too low, be realistic, we are there to make a profit and we must not sell cars at a lose, give us a break and don’t lie or steal from us and we will treat you right.
The best time to buy a car is end of the month and before the new model year comes out. Monthly bonuses for volume can be very good so they might be more willing to do a loser sometimes and make up for it on bonus.
Most dealers and salespeople are good honest, hard working people with families and lives like yours, treat them with respect, they deserve it.
Driving thru a lot drives us crazy, if you are really interested in looking at cars, stop and get out and let one of us open the car up and give you a demonstration, if you aren’t really ready to buy go to the lot after hours so you are not wasting anyone’s time but your own.

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By: JC

JC — Fri, 12 Oct 2007 18:34:29 +0000

Rob rocks. He saved me tons of money. Probably $1,500+.

By: Jeanette

Jeanette — Wed, 03 Oct 2007 14:11:00 +0000

I just purchased a new car and it had 49 miles on it. I didn’t question it and now I have after thoughts. What mileage should be allowed for a new car before being concerned? Can anyone give me some advice….Thank You

By: Jeanette

Jeanette — Wed, 03 Oct 2007 14:07:35 +0000

I just purchased a new car and it had 49 miles on it. I didn’t question it and now I have after thoughts. What mileage should be allowable for a new car? Can anyone give me some advice. Thank You

By: Markus

Markus — Thu, 27 Sep 2007 15:37:12 +0000

I’d like to echo the sentiment that CarBuyingTips.com is a fantastic resource.

The bottom line up front: I save thousands of dollars on my custom ordered Porsche Boxster S, at a time when most dealers would not come more than $1,000 off of sticker price.

For me, the real moneymaker was filling out a spreadhseet showing, line by line, the price for your base model car and all the options you desire AT THE PRICE THE DEALER ACTUALLY PAYS (Not Blue Book and not MSRP). Then, add a reasonable mark-up (in my case 3%) and emailing the spreadsheet and offer to dealers all over the COUNTRY.

The trick here is to determine the actual dealer cost by using the BLACK BOOK. The loan officer at my credit union had a copy and allowed me to peruse it and take notes.

I sent the offer to dealers from North Carlonia to California. Bear in mind, it only costs about $600 to ship a car and the dealer may agree to pay for it, mine did. I got a LOT of “Nos” but I only needed one “Yes”. If you get multiple “yes” responses then can play the dealers against each other and take the best offer.

Imagine a a salesman walks into work to find some guy in Kalamazoo emailed him and offered to order a car from him at a small mark-up. It may not be a great profit but it would be easiest money he made all week, all he has to do is the paperwork!

A final tip… I don’t understand the incentive system that dealers operate under but it does seem like the bigger dealers in distribution “regions”, metro areas where lot of dealers selling the same-brand (ie. Miami, Atlanta), are more willing to cut you a deal. Apparently, they benefit from incentives tied to sales volume and are in a better position to reduce their mark-up.

Good luck and have fun!

By: jerichohill

jerichohill — Wed, 19 Sep 2007 17:26:49 +0000

CarBuyingTips.com is indeed a great resource

By: dave

dave — Wed, 19 Sep 2007 17:11:08 +0000

Consider the cost of insurance. A used car will be much less.

By: Kirk Kinder

Kirk Kinder — Wed, 19 Sep 2007 14:56:37 +0000

I agree with poundwise and Keith W. Twombley. The best route is to never buy new. Even if you are buying a high end, luxury car, you are better off buying used. Let the original owner lose 1/3 or more of the value to depreciation. Plus, you can avoid any manufacturing flaws by buying used.

If you do decide to buy new, then Keith W. Twombley is solid when he says you MUST know what the car costs - MSRP, invoice, dealer holdback. If you don’t understand this information, you can still get hog-tied by employing the method described in the video. If all the dealers offer a high bid, you could end up paying more even if you do accept the lowest offer. These numbers give you a good idea what the dealer makes on the car.

Another subtle point about this method is to ask for tax, tag and title when requesting bids. Some will include this while others won’t. Dealers will avoid disclosing this fee in hopes that once you get to the dealership you will just go with their bid, rather than walk out.

As far as when to buy, end of the month and during the beginning of the work week are good times, but the best time is when the new model years roll in. You can get a 2007 at a nice price right now since the dealers want to make room for the 2008 autos.

By: Keith W. Twombley

Keith W. Twombley — Wed, 19 Sep 2007 14:41:10 +0000

A few more tips to add to this great list:

1. Never offer an amount on a car. Let the dealer tell you how much they want to sell it for. Why? A couple things. If the dealer accepts your bid, then you have, frankly, bid too much. If the dealer doesn’t accept your bid, you’re now in the process of haggling. Dealers are great at haggling and you aren’t. You will lose that game. Never offer.

2. Obtain information about the car’s MSRP, Invoice cost, and dealer holdback. You should know EXACTLY how much the car costs BEFORE you go in there. Dealers can spot a sucker a mile away. A site I used was http://www.fightingchance.com/. Fighting Chance will send you an info packet that costs $40, but it’s worth it. Lots of websites list the MSRP and Invoice price for a car, but this packet will let you know the dealer holdback, quality ratings for the car, and what real-life other people have been actually paying for that car. I used that information to save me about $4000. That’s worth $40.

3. DO YOUR RESEARCH! Do you know what MSRP means? Invoice? Dealer Holdback? Do you know what your credit score is? Do you know how much adding a sunroof adds to the price of the car you want? No? Well, then you haven’t done enough research!

4. Never talk about monthly payments. Always talk about the final purchase price. Dealers can hide all sorts of charges, fees, and price hikes by just talking about your monthly payment.

5. When in doubt, wait.

By: poundwise

poundwise — Wed, 19 Sep 2007 11:43:24 +0000

I don’t think that it is really possible to buy a new car without getting screwed; seeing as how most new cars lose between 25% to 40% of their value in the first two years. Even those cars that are known for holding their value still lose, on average, 12.5% in the first year alone. I think people who rave about getting a good deal and financing at a low or even 0% interest are just under the illusion that they have done well.

A secondary consideration for buying a car with a couple of years and a few miles on it is that you also are less likely to get screwed by a car with a lot of inherent problems. For instance, the 2002 Camry (when they changed the body style) had both safety and mechanical issues. If you bought it in 2001 or 2002, you would not have had a way to know this. If you waited until 2003 or 2004, you would be able to read about recalls and TSBs for the vehicle.

If I were a cash millionaire, I still would not buy a new car.

By: Faculties

Faculties — Wed, 19 Sep 2007 02:54:29 +0000

I think the great tip about buying before it’s absolutely necessary applies to used cars too. At my local university, every spring the noticeboards are plastered with advertisements of students selling their cars before they graduate and go back to their home countries. Some great deals there! I got a 7-year-old Toyota in great shape with 24,000 miles on it for $1200. I paid in cash, and now I have $23,800 left over from what I would have spent on a new MINI. Six years later, the car has never had a problem.

By: Emily H.

Emily H. — Wed, 19 Sep 2007 01:40:06 +0000

I seriously need an article on buying a used car. I was in the market recently on a very tight budget and things were dismal–I picked out about 9 or 10 cars on various web sites and all of them had “just been sold” (hah) when I went in to the dealership. (Would I like to look at a more expensive one?) I think that I have finally found the car I want for a fair price… but it has been a very unpleasant experience, unpleasant enough to make me understand why people buy new cars despite the depreciation.

By: Joe

Joe — Wed, 19 Sep 2007 01:20:19 +0000

When you have decided on a make and model of the car you’d like to purchase, see if there is a forum devoted to it. When my wife and I decided we wanted an Acura, we found a thread in the forum that was totally devoted to what prices people were paying and where.

At the time, we found out that the Acura RDX didn’t have their marketing in full gear and that they were also far behind their sales numbers. This allowed us to use the techniques that you described while also being able to call their bluffs when the dealers were trying to tell me they were flying off the lot.

Another trick is to check dealers’ websites. Many of them list their inventories. If they have a lot of models in stock, they’re much willing to negotiate than on the models that they can’t keep in their lots.

By: Peter

Peter — Wed, 19 Sep 2007 01:19:27 +0000

I have found the single biggest thing you can do to improve your bargaining power is to buy the car before you absolutely have to. Knowing you can drive home in the car you came in gives you infinately more power than if you have no way to get to work on Monday. If you don’t have to buy a car that day, you can just sit there and wait until they give you the deal you want. And if they won’t, you go home.

This is one case where squeezing every last drop of value out of the car you currently own could backfire on you. If you’ve driven the old one until it dies and isn’t worth repairing, you’re stuck and you’ve lost all your advantage.

By: Steve W

Steve W — Wed, 19 Sep 2007 00:52:40 +0000

I did most of the usual techniques (pre-financed, market-priced, etc), plus I travel to Atlanta every month, so I got quotes from the big ATL Honda dealers, then used the lowest one to drive down the price on my local dealer. If my local dealer wouldn’t come down, then I would have flown to ATL, bought the car, and driven it home. (Expensing the trip home too!) My local dealer unhappily (I guess unhappily since they’re pros and they always act like you won) dropped $1500 on a Honda Odyssey.

By: Jeff

Jeff — Tue, 18 Sep 2007 23:55:09 +0000

Great advice, very similar to what I did what our last car.

I emailed every Honday dealership in town…only 2 got back to me.

I demanded to pay invoice and not a penny more. Go the deal on exactly what I wanted. Better yet, they had to get the car from the Honda dealership just down the road from my house that refused to sell me the car at the price I wanted.

Also, try taking a calculator with you.

Finally, if you don’t get financing first. NEVER negotiate on monthly payments.

By: Tim

Tim — Tue, 18 Sep 2007 23:51:10 +0000

Also worth repeating: read everything you sign and carefully!
That’s obvious I know but even when you know it, the person in front of you will make you feel bad about it (because it takes a looonng time to read everything) so you might go quickly over it and miss something important.
Maybe you want to go there with the spirit that the car dealership will make money off your back by tricking you any way they can. Since you’re paying, you might as well use as much of their time as possible.
They see the paperwork everyday, you see it every 5 years at best. You might to take your time.

By: Tim

Tim — Tue, 18 Sep 2007 23:25:26 +0000

As you and Kyle already said, but it’s worth repeating: you can walk away at any time!
I bought a new car for the first time last year and I don’t think I did a very good job, because I felt pressured by the dealership, by the time (I had a rental car and wanted to get the car this very week-end)…
So, I would add that it’s a good idea to go to the dealership without thinking you *need* to come home with a car.
And of course, get all the sales guy’s promises in writing before going to the finance department. And if the finance department tries to change the terms, walk away.

They do what they do all day long, but they can’t do anything if you leave

By: waves

waves — Tue, 18 Sep 2007 22:37:25 +0000

sorry I should have been a little more descriptive. At carsdirect.com you can configure a vehicle and pick up at a dealer for a specific price, no negotiations. Seems like a pretty sweet deal, though I haven’t tried it.

By: Kyle

Kyle — Tue, 18 Sep 2007 22:35:26 +0000

Most important advice that you talked about was not being afraid to walk out, like your commenter mentioned they WILL call you back. Stay in the driver seat. Man it is such a pain in the a$$.

By: waves

waves — Tue, 18 Sep 2007 22:25:16 +0000

If you don’t want to do that, but still get all the current incentives and a fairly competitive price, check out http://www.carsdirect.com . I use it to ball park what prices for new cars should be.

By: ClickerTrainer

ClickerTrainer — Tue, 18 Sep 2007 22:16:21 +0000

three more ideas:

1) Go during a football playoff game on the last weekend of the month. Go on Saturday, stay a huge chunk of the day, then….
2) Walk out, go home, let them call you. They will.
3) Negotiate each part of the deal separately. When they agree to one part (say, price) pull out a notepad and a Sharpie and write it down in big letters.

By: Cap

Cap — Tue, 18 Sep 2007 21:59:51 +0000

CarBuyingTips.com is a pretty decent site on car buying tips. Big emphasis on not getting scammed.

The site looks spammy and shady, but it’s one of those “old” web 1.0 site with plenty of content. Probably one of the first (in-depth) how-to on online car buying.

Jeff’s top 10 car dealer scam is pretty dead on.

By: G. Williams

G. Williams — Tue, 18 Sep 2007 21:51:17 +0000

The only thing I’d add to this is if you’re buying a vehicle where you’re pretty sure you’re going to be getting it serviced at the dealership (which was the case for me when I bought my Prius), check out their service department. One Seattle dealership wound up out of the running because their service department got poor marks from people who’d bought cars there.

(Ordinarily I prefer indie mechanics, but hybrids are just weird enough that relatively few places are certified to work on them.)