Cars – How to buy?

Easy, hand the seller money, and you will buy their car.

Of course, that’s how people end up with 10% interest rates and pile up car upon car to an ever expanding bank note that if they’re lucky they may live to pay off.

First I will tell you, like my father told me, that 99% of the time repairs cost less than payments. Unless your car just blew up in a parking lot, do you actually NEED a new car? If this is a WANT and not a NEED, that is to your advantage.

For sake of transparency, I paid MSRP for my current car. I also made a down payment equal to 1/4 of the sale, and did most of my negotiating on the value of my trade-in and fending off accessories, offers, and add-ons. I didn’t need my current car. I walked out of the dealership the first time I sat in it, and was ready to walk out again if my exact requirements were not met.

Here are my 7 steps for buying a car, it’s worked for me every time I’ve stuck to it.

  1. Before you even walk into the dealership you need to do two things. First? Make sure you can afford it. You may have cash on hand, you may be able to swing the payments, but you will also be cutting into your monthly net income for several years. Can you afford to be without that payment cash? There are dozens of good online calculators to work the numbers. Don’t forget an accurate interest rate, tax, tags, etc… when calculating.
  2. Get an out the door quote from the dealership. If they won’t provide one, walk. An out the door quote is the total price of the car you plan to buy including taxes, tags, registration, etc… and get it itemized. You’d be amazed what dealers can try to throw into the pot to sweeten the deal (for them). Don’t be afraid to say NO to add-ons at this point, if they’re smart they will save those for later.
  3. If when you see that car for the first time, the endorphines, dopamine, etc… will flood your brain. If you get that overwhelming desire to buy it right then and now, do yourself a a favor and LEAVE. It’s like when you go grocery shopping while hungry and buy a ton of food you don’t need… only this is a car and instead of a feeling of regret as you hit the bottom of that pint of Phish Food, you’ll have that regret every time you look in your driveway… for up to 72 months.
  4. Know exactly what you want when you walk into that dealership, and be fully prepared to get up and leave if you don’t get precisely what you want. With my most recent purchase, they tried to offer me about $180 worth of oil changes (3 years) in lieu of increasing the trade-in offer on my car by $1000. I didn’t bend, and I would have walked. I got my $1000. It might seem petty but the secret to any good negotiation is a fair redistribution of getting screwed between both parties. If they want to sell you that car, they’ll negotiate. If they don’t, they’ll kick you out.
  5. Keep the trade in and new car negotiations separate. Many dealerships still break out that 4 square sheet to illustrate costs, payments, etc… 99% of the time that is a tool to distract you from what you’re going to pay for your new car, and what they plan on giving you for your old car. Once you’re at a satisfactory price for the new car? Negotiate your trade in. The dealer may just give you book value, or more than you planned on getting (it happens). If they low-ball you, don’t be afraid to get what you want within reason. For my Civic Si, in its condition with its mileage, every single estimate I got was for $19,000 on the trade in. Dealer offered $17,000. This is when being reasonable comes into play. Could I get $19K? Sure. Did I honestly feel like investing myself into the process that much? No. I asked for $18k and after 3 back and forths, got my $18k.
  6. Addons and accessories. Just. Say. No. Don’t buy a 7 year, 80k mile service contract when you haven’t even put a mile on the car yet. Shop around. Regardless of what the finance manager tells you, most of these at point of sale will have at minimum 100% markup. See if there’s an enthusiast site for your car with forums, chances are they know who has the best deal on a manufacturer service contract and trust me – that business will be happy to sell you one at a very steep discount.
  7. Lastly, financing. I’ve always heard that the best thing to do is get quotes from your bank before walking in the door. That’s fine, but I prefer to make the dealership work for me. Usually they can get a few offers, or even the manufacturer might have some great deals. The key is to get the lowest interest rate possible. If you’re struggling to make payments, rethink your options here. In my case, I’ll happily sign up for 60 months with a much lower rate than 48, and I’ll likely pay it off in 48 or fewer months, and I’ll be paying less for that loan than had I gone for the shorter term I could afford but had a higher rate.

With my Civic Type-R, I was dealing with two dealerships. One wanted a $5000 markup, the other wanted a $1000 markup. Had either kept that markup, someone else would be driving my car right now. Both dropped the markup the sell the car (likely to help make room for the new models, but I digress). With both dealers offering to sell me at MSRP, I got OTD quotes from both, and I ended up buying from the dealer with lower fees (that I’d worked with previously) and also had the car in the color I wanted.

Previously – as was the case with my Golf R, they wanted $2k in markups. I got up and walked. What played out was so stereotypical it could have been scripted. I thanked the salesman for his time when he wouldn’t budge on the markeup, went out to my car (walking slower than normal, but not so slow it was obvious) and a mere second before my key touched the door lock… “Wait! No markup! Will you come back?” Yup. They also gave me KBB value for my trade in, which until that point in time was something I never thought possible.

With my GMC Sierra, I failed to take my own advice. I’d visited the dealer a few times before and decided on a specific truck. That truck came with $10k of discounts on it. The salesman walked me past a nearly identical truck that happened to be the color I wanted, other options I wanted, plus certain accessories which were great to have on a truck. Endorphins. Dopamine. “Hey, what about this silver one?” $10k in discounts out the window, but I drove that truck home an hour later… on a lease. I paid gap insurance… on a truck. I agreed to paying a $450 fee on the contract should the lease end and I not get another truck or pay it off. I made silly concessions because my own hormones betrayed me.

Don’t get me wrong, that was a great truck, I loved that truck, but had I walked away the second I felt that rush of hormones and emotions… I might have bartered a much better deal in the end.

When my job changed, and my commute changed, my truck wasn’t the greatest commuter option so I started with step 1. I researched every car that had the options I wanted. I went to multiple dealerships to compare OTD pricing. In the end, I took my own advice, got 1.9% financing for 48 months and well, that’s a story for another post.

Good luck in your quest, my friends.

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