car buying

I love cars. I bought my first car (1968 Camaro) when I was 15, before I had my license. (I also drove it home, even though I never drove a stick shift before.)

I have owned lots of cars. I used to buy a car for $600, drive it for a year, fix it up, and sell it for $1200 or $2000.

I used to consume the Want Ad every week. Once when I bought a new issue, I told my girlfriend I could price any car. She would read out a car description, and I would guess the price. I got as good as the carnival guys who read your weight.

I didn't buy my first new car until I was 27 years old. (And once when I was out on errands with my Dad, and had another car since mine was in the shop, he said "oh, so you're too good to do your own brakes now?")

In addition to buying lots of cars for me, I have also helped lots of other people buy cars, just for the fun of it.

Here are some ideas on strategy.

First, go to Edmunds and spend an hour or so there, reading everything about the car you want, including their "True Market Value" (TMV) calculation, and current info about dealer kickbacks and rebates (which are different things).

I read recently that over 60% of new car buyers research price on the Internet. To respond to this, manufacturers have changed pricing and dealer incentives such that a dealer can sell you a car at invoice and still make decent money.

Directing the dealer

When you are ready to go to the dealer, pick your second favorite dealer, not the closest one, but the next closest. Go to them, test drive, ask them how close to invoice they can get. Bring a printout from Edmunds and tell them you researched the dealer kickbacks etc.

I'm always very nice, I try to make them laugh, but I also let them know I'm serious and in a rush.

Tell him you are going to pay cash, with no trade-in. (Do not confuse negotiations with loans or trade-ins yet. They do this all day long, and they will definitely rip you off big-time if you allow them to use loan or trade-in discussions during negotiations, since it adds another item of confusion.)

If he offers a price close to what Edmunds suggests as TMV, ask if he'd do it for $400 less if you were to sign right now. If he says no, walk away. I'm not kidding. Do it. Be brave. Don't let him talk you back. You can do that at the next dealer.

Then go to the dealer closest to you, and use the confidence of the other dealer experience to help you bargain better with this one.

Here is how my Subaru bargaining went...

I went in, said I wanted to buy a WRX, which ones do they have in stock. (You will always get a better deal for one in stock, so find a dealer that has the one you want in stock.)

He had one I wanted. I told him I only had 10 minutes max as I had to go pick up my kid, but that I was ready to sign a deposit right now if I could get the car for the right price.

I said I'd pay $21,000 for it and not a penny more. He said I'm crazy. After a minute, I got him down to $21,900 and he said that was his final offer.

I told him I'd pay $21,900, and he said "You will?" and I said "Yes, tomorrow. But if you want to sell that car to me today, it will be $21,000".

Guess what price I paid...

Friend of the dealer

If a close friend tells you they are friends with or related to a dealer and will get you a good deal, don't take them up on it. I can get a cheaper price on my own without the complexities of also negotiating relationships, and you probably can too if you follow the suggestions here.

Leasing

Don't ever lease a car. You are a sucker if you lease a car. You are buying more car than you can afford, and letting your emotions cover the fact that you are getting ripped off.

Trade-ins

In general, don't ever trade-in. You will save $1000 or more if you sell the car yourself. Again, go to Edmunds to get a TMV for your car, including printing out a window sticker.

Financing

Don't ever do dealer financing. Instead, pay cash and negotiate the best possible price you can. If you really need to take out a loan, do it at a local bank, or your credit union. Combined with getting a lower price on the car, in the end run you'll pay less.