Buying a car is one of my least favorite things to do.
Why won’t car dealers present a fair price in the first place? Why go through all the haggling and maneuvering?
A few potential answers: Some people will pay full market prices. Sometimes vehicles are sold at a loss. The car dealer needs to make a profit, or he’ll go out of business.
Buying an automobile–or obtaining many other things in life–requires the key skill of negotiation. By negotiating well, one stands to save hundreds, even thousands of dollars over his or her lifetime.
So, I’ve created this post to capture a few key things I do when purchasing a vehicle. Surely, we can all gain more by improving our negotiation skills. Please read along and then share your own experiences.
Do the Research
First, I figure out what criteria I will use to select a car: gas mileage, reliability, utilization, driving comfort, maintainability. I like to use Consumer Reports. They do an excellent job of comparing vehicles and testing them. My son set his sights on the Honda Accord.
Decide on a Target Price
This will depend on a person’s fiscal health. What’s in the budget? What can I pay in cash? What can I finance? As a goal, I shoot for one car payment, and I pay off the others. However, zero debt is probably the best place to be.
We were looking at used cars, so I relied heavily on the Kelley Blue book value as the bottom-line price I would pay.
I like to start with reputable car dealers. They usually sell cars in decent shape–cars they think are salable.
I stay away from the exclusively used car lots. These dealers typically have the cars with high mileage and are hard to sell.
I tend to avoid Craig’s List because of the scams. But don’t overlook buying from an individual. I have purchased vehicles from individuals I know and saved lots of dollars.
Narrow the Search
I try to narrow the search down to about 3 or 5 potential candidates. This gives me an out when I go in and test drive and kick the tires. A salesman will pressure a customer into a deal on the spot. So, I simply tell him that I have more cars to checkout, and that I don’t want to fall in love with the first one I see.
I keep my poker face on the entire time. I try not to show much emotion around the dealer. I’m honest and polite, but also assertive. I’ve decided beforehand not to get attached to the car or the salesperson. I force myself to walk away until I’ve looked at all the cars on my shortlist.
Research the Specific Car
I pull a Carfax for each vehicle on the shortlist. I know, a Carfax has its limitations, but at least I have something to go by.
Next, I whittle down my choices and pursue one car from the list.
For a used car, I usually take it to my mechanic and have him do a thorough inspection. This will run on the average about $100, but it’s well worth the cost. Most dealers will allow you to do this. If they don’t, I walk away.
Decide and Deal
Now that I’ve decided on which car, and the mechanic has given the green light, I’m ready to sit down and seriously negotiate a deal.
I simply make an offer below the Kelley Blue Book value. But I always try to meet them at the KB price. If they ask more, then I’m walking.
I specifically ask what will be the total drive-off-the-lot price and that they print out the breakdown. Once a price has been settled, one can expect to see the dealer add on sales tax, tag & title, and something called a Doc Fee. Sales tax and tag & title aren’t negotiable, but I always ask that the Doc Fee be eliminated or reduced.
It may be rare that they would waive the Doc Fee, but I try to make sure the fee is reasonable.
Of course, when buying from an individual, extra fees aren’t an issue. But be sure to get the car checked by a mechanic.
Bottom line, one never knows how the deal will go down. It really depends on how desperate the dealer or the individual owner is to sell the car.
Closing the Deal
Be careful on this final step. Purchasing the car with full cash is very straightforward. However, financing can be tricky. Most dealers will only allow you to pay so much down on a vehicle. Don’t be surprised–they want to make money from the interest.
I like to get a personal loan, pre-approved through my bank or credit union. So, I can pay more down on the car and keep my monthly payments low. I also shoot for a three-year loan.
I apologize for such a lengthy post. Many of you are already pros when it comes to car buying, but I thought this might benefit some.
Please feel free to share any of your own car-buying tips. Or any negotiating strategies, in general.