I recently had a pleasant and exciting experience buying a new car and I wanted to share. I shopped for my car via the internet and this process has completely turned around the horrid experience of new car buying.
If you are thinking about buying a new car, the first rule is DON’T step on the lot of a dealership. Car dealers will woo you with their car salesman magic and unless you have taken advanced Defense Against the Dark Arts, you will lose and it will cost you a lot of money. It’s better to do a little research first and that is where the internet comes into play.1. Pre-shopping exercises
I used http://edumunds.com and http://usnews.rankingsandreviews.com/cars-trucks/rankings/ to gather information about the true prices of vehicles, reviews, comparisions.
a. Pick a price range and stick to it. Rarely is Manufacturer’s Suggested Retail Price (MSRP) the fair purchase price of the car, so make sure to look up the True Market Value (TMV) for the vehicles you like - this can be found on Edumunds. Keep in mind that every additional feature added to the car will increase the amount of the car’s invoice, so think about features when you are shopping as well (we’ll get more into this later).
For me, I decided on a price range of $17,500 to $19,500. That price doesn’t include tax, title, registration or any other extras you may decide to purchase from the dealer (GAP insurance, extended warranties), so be sure to factor those amounts in (generally 10-12% extra) when considering how much you can afford. The key here is to not get sticker shock when you do show up at the dealership. If you know your numbers, then you have an advantage.
b. Pick 1-3 cars that your are interested in. Narrowing down your choice in vehicle greatly reduces the stress involved. Sometimes you like the look of one car but the features in another car are more enticing. Another comparison to make is the special offers going on for the vehicles you are interested in. In my case, I was now narrowed down to the Hyundai Elantra and the Ford Focus SE.
In the end, I abandoned the Elantra entirely and went on full prowl for the Focus mainly for these two reasons: (1) special offer of $2000 instant customer cash - you can either look at this as a $2000 instant discount on the car or a $2000 down payment on the car. Either way, it was a deal I could not afford to pass up. (2) the redesigned Focus has SYNC technology and for a tech-nerd like me, this was like the gooey frosting on my new-car cake.
c. Figure out the True Market Value and the invoice price. Knowing these figures are really key in making sure you don’t get screwed when making a deal on a new car. You don’t need to worry too much with new cars as the markup for MSRP is not nearly as severe as the markup on used cars. Typically ,the MSRP on a used car is $3000 over what the true value of what the car is really worth. On the other hand, new cars are usually marked up $1000-$1500, based on the research and quotes I was given. Your goal is to not pay MSRP - you want to pay a price as close to the dealer invoice as possible. Use the TMV from Edmunds as a target price, and if you are given a better offer than that, by all means, take it.
I wanted the 2012 Ford Focus SE Sedan in silver or charcoal with the 202A equipment package (yes, I got that detailed - equipment package prices make a difference!), so I sent out an email to all the Ford dealerships in the area soliciting quotes from their Internet sales managers. Suddenly, I became magical and the power of the deal was now in my hands.
d. Get a price you like before you go to the dealership. In my solicitation email, I specifically requested no phone calls - just emails until I was ready to buy. A couple dealers ignored my wishes and my phone started ringing immediately. I ignored them and they were smart not to leave me a message. The most helpful dealers were the ones that sent me actual window stickers and their internet price quotes. With the window sticker in my possession, it was easy to look up the exact TMV on Edmunds to match the specifications. Some of the dealers were way off by only knocking only a couple hundred dollars off the MSRP. I was a little disappointed, but then my golden ticket came in - a quote for just 190 over invoice (and over $1000 off MSRP) and almost the exact TMV on Edmunds. I sat on it for a few hours and waited...wondering if anyone had a better deal. Then I realized that this dealer was just down the street from my work, so it was time to make the move.
e. Disclaimer before you go to the dealership. If you are serious about buying a new car and you don’t want to be there for hours on end, then you better be prepared. Here is what I brought:
-Pre-approved financing with a blank check: Don’t get locked in on just your pre-approval or on just the dealer financing. It’s a huge stress relief when you have options available! Also know your credit score and be familiar with your credit report so you will be able to answer any questions they have about your report. You don’t want any surprises when it comes to credit and financing.
-Driver’s License: You will need this for the test drive and for ID purposes during document signing.
-Copy of your current insurance card: Most states require proof of insurance before you purchase a vehicle.
-Registration and/or Title for your current vehicle: If you don’t have one or the other, you won’t be able to trade in your car.
-Payoff quote for your current vehicle: If you currently have a loan, you can call your finance company and ask for a 10 day payoff quote to make sure that you are working with the correct payoff amount. You should also look up the TMV on Edmunds for your current car so you know how much to ask for in the trade. Have specific numbers in mind and be sure of yourself when you tell them what you want.
-Checkbook (or credit card): Have a minimum and maximum amount you know you can put down on your new car. Do not agree to pay more money down than you are able to afford. Also remember that dealerships will take post dated checks, so if you need to split your down payment into two $500 dollar payments two weeks apart, they will accommodate you on this. Make sure, however, that they put your check in an envelope that lists a future deposit date on it.
-Copy of a current utility bill: This is to verify your residence. Did you know that they calculate the sales tax of the car based on what zip code you live in? This is to prevent people in higher sales tax jurisdictions from trying to shop somewhere else in the hopes of saving a little money. And a little bit of a confession here: I did forget to bring this, but because I’m a tech-nerd, I knew how to retrieve copies of my utility bills off the internet. This saved me a great deal of hassle!
-Copies of 1-2 months worth of pay stubs: The dealer will need this to verify your income if you decide to go with their financing plan.
-Notes from Edmunds and printouts of the quotes you were given online: Just to make sure they don’t pull a switcheroo on you when you get there. A valid quote will give you the specifications of the car, the MSRP, the internet quote and the number of days in which the quote is valid.
2. Be Cool and Speak Car at the Dealership
No doubt, car dealerships are frightening places. Shiny new cars, sales people with sharp talons, bright lights and a lot of people just sitting around and waiting - it’s not Starbucks, that’s for sure. This next section details how I handled the dealership and how I ultimately closed the deal on my new car.
a. Bypass the regular salesmen: You’ll inevitably be met at the door by one of the slimy vulture salesmen when you arrive at the dealership. Don’t worry though, you already have a contact with the internet sales person. Tell them you have an appointment with him and they’ll scurry off to get him. Don’t follow the troll into the building though - walk out onto the lot and try to find the car that was quoted to you. The sales manager will find you - they want to find you.
b. Test drive the car you were quoted: Here is where you don’t want to deviate: sneaky salespeople will make an excuse as to why you can’t test drive the exact car you were thinking about purchasing. If you even so much as sit in a car that is above your price range or is one that you did not research, I will not feel sorry for you when you meet your doom. You have been warned and I beseech you to stay true to this adage. If you end up not liking the car, just say thanks and leave. Go back to the internet and research some more.
I luckily found the car I was quoted right there on the lot, just waiting for me. When the Internet Sales Manager came out, he greeted me by name, shook my hand and thanked me for coming down to the dealership. I then put on my poker face: this is important. Don’t let them think you are in any way emotionally attached to any car. I told him I’d done extensive research on the Focus, but that I hadn’t yet test driven one. He said - of course! Let me get the keys...in that time I pulled out my drivers license and slipped it into my pocket. “I’ll need your dri...” he began to say but then stopped as soon as he saw I had already produced it and was handing to to him. “Ahh you know the drill,” he said and ran back in to make a copy. In the meantime I adjusted the mirrors and the seat and made sure the radio was off. When he returned and we drove off, I made a wise crack, “I feel like I’m on my driver’s license test - you won’t fail me, right?” He laughed and replied that they don’t give grades at the dealership.
The drivers license and the joke were both done deliberately. By showing him off the bat that I was prepared, it meant that I was a sale worth making. By making a joke, I was building rapport so that we could make a smooth deal. When you’re working with car salesmen (even internet sales) you are going to be talking to these people for a couple hours at the very least, so it is good to establish a good working relationship with them right off the bat.
On the test drive I listened carefully to the sound of the car and tried to get a feel for the steering and braking. Try not to get distracted by the salesperson talking to you - they are trying to get you emotionally involved in the car. Your job while you are test driving is to see if it is compatible with your expectations. Do I feel cramped? Is the visibility acceptable? Are the controls conveniently located? Etc. Zone out on the salesperson a bit and just try to get a good feel for the vehicle.
c. Ask to see the dealer invoice: Try to walk on a dealer lot cold turkey and ask to see the invoice on a vehicle and you’ll get the runaround. Luckily when you deal with the internet manager, they also double as the fleet manager, which means they sell cars at wholesale (aka the invoice price!) so you have a bit of an advantage when choosing to work with these guys instead. If when you look at the invoice, the price they quoted you is no more than $200 over invoice, I would say you’re getting a pretty good deal. Sure you could haggle and try to get at invoice or less than invoice, but at this point a couple hundred bucks isn’t going to make a hell of a lot of difference in the end.
d. Make an offer. When you make an offer you need to be flexible, but not a pushover. I told the salesman that I would buy the car today if he could sell it to me for the price of the invoice. He said, well yes he could “probably” do that. I knew when he said that, “probably” usually means no, but at this point the quote he gave me was a mere $100 over invoice, so I was ready to say YES, I will buy it at this price.
Notice now that until a price was settled I never talked about trade-ins or monthly payments or financing. Luckily this person did not question those things, and I have a feeling the reason why is because I came in with a certain air of confidence - I wanted to know about the car - not how much it would cost monthly and I certainly didn’t show any worries about my trade-in. This is an important rule though: DO NOT TALK FINANCING OR TRADE-INS until you get a price on the car! You should already know the monthly payments on a car that is $20,000 based on the numbers you worked during your research time. There are many calculators online to help you with this - you need to factor in your credit score and your down payments and what you expect to get for your trade.
e. Close the deal. When the dealer finally asked, “So how will you be paying today?” it felt so good to pull out my ace and say, “I have pre-arranged financing, so I can write a check for the amount.” I did not want to hinder my options, however, because even with my pre-arranged financing I still needed a down-payment, so I told him that I would be open to see what sort of financing the dealership could offer, especially if they could beat the rate.
Ultimately, I did end up going with the dealer financing. They gave me a better rate than my pre-arranged financing and required much less of a down payment. The vehicle I bought had a $2000 instant factory rebate tied to it and so that was also used to augment my down payment. Factory rebates are essentially like cash in your hand when negotiating your payments, so look carefully for these kinds of offers when you are buying a new car.
3. After buying the car
Hopefully if you’ve done your research, picked the car you wanted and got the price you wanted, you should be driving away from the dealership as a happy camper. The last thing you want to do is feel regret after buying a car. If you are regretting your decision, in most states it is already too late, so make sure that if you get any bad gut feelings when signing documents - you can still walk away until you sign off that long dealer contract at the end. Don’t be afraid to walk out if you don’t think a deal is fair.
a. Update your Insurance. Preferably after you have shopped around for different quotes.
b. Yelp Review the Dealership.
c. Drive, show off your new car, and be awesomer than everyone all around (until someone buys a newer car than yours).
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