How To Buy A New Car

Did You Know A Ton of Pennies is $3,628.73

How To Buy A New Car

How To Save Thousands On A new Car!

Do you think buying a new car is easy? If you do you should think again. From experience I can tell you that the buying process can be one of the most stressful and truthfully the most annoying part of owning a car. Here I’m going to go over a few pointers that should save you a ton of money on your new car purchase. Just know that everything on this site is completely free, so with possible thousands of dollars to save and nothing to lose read on. I will try and keep this in a simple 3 step approach to save you time and money.

I have gone through the buying process with Ford, Dodge and Nissan, and I can say the process was very similar with all three.

Please understand that I know car dealerships are businesses and they also have to make money on selling cars. But, there are a few practices that I find borderline unethical about the process. I believe that everyone, no matter their age, sex, situation or just experience in the whole car buying process should be treated fairly.

I’ll give a quick example of why you should take the extra 4 minutes to read this page.

Example:

Two people can walk into the same dealership at the same time and day, and look at two identical pickups (I mean exact: msrp, color, model, and options). One person can literally pay over $15,000 more than the other just because they don’t know how to get a lower price. Truthfully this can get even more extreme in certain situations. So just read below and find out how.

(click here to read where I saw this)

Process outline

  • 1 – Understand patience
  • 2 – Find your car before going to the dealership
  • 3 – Find your price and The negotiations
  • 4 – Know when to go

1 – Understand Patience

Patience can be one of your biggest advantages here. Even if you need a car ASAP even a few hours or an extra day can be extremely helpful. But just because you need a car fast doesn’t mean you should over pay thousands. There are options here that you will be able to use even if you’re at the car dealership buying the car right now.

One of the best things you can do is shop around. This can literally take just a few hours in total. Unlike shopping for just about anything else. Car dealerships don’t usually advertise their “out the door pice”. This number sadly many times depends on who is asking. Understand that all dealerships are not the same. There are many dealerships out there that have business models that revolve around inflating your purchase price by massive amounts. These price inflating practices can really add up, and sometimes even be hard to spot in the buying process. These “add ons” can be just about anything and you should only pay for what you want and are getting. Theses fees really can be anything and can go by different names but usually are called addendums or just a fee only shown when signing for the loan

Common fees

(Click here to find out more about these fees)

While these usually are around $2,000, they can get well beyond $5,000. The most important thing to know is that all dealerships DO NOT CHARGE THIS. On several occasions I have been told that all car dealerships charge this, again NOT TRUE. Even after telling one I have bought cars in the past and never paid this. The salesman would go even further and say that this auto brand did (AGAIN THIS IS NOT TRUE). I usually make it a priority to avoid these dealerships because they usually want to start negotiating at the inflated price. But these are sometimes taken off without much hassle. The main giveaways these prices will be added to your purchase price is #1 Next to the monroney sticker showing the original MSRP sometimes there is a small paper with dealer added options called an addendum #2 dealerships like to add a tiny white line around your shinny new car. There is no issue liking this line but just know this $15.00 sticker usually adds $500+ to the addendum and can be gotten for free. #3 This one can be a bit tougher. After going though the process of negotiating the purchase price “fees” are thrown in at the very end, just before signing, and said to be fees charged to all auto purchases.

The Monroney Sticker is a paper required to be displayed on new cars showing information and original MSRP and factory installed options (click here for an example)

Just because these two “add ons” are added so often I will go over them briefly here. But if you would like to read more about them (Click Here). The first is Nitrogen filled tires. Dealerships and just about anyone else that sells it will say that this air will help with so much. From gas mileage to tire longevity, but Nitrogen in tires was meant to be used in race and track cars where tires can experience extreme conditions. The second are pin stripes that go around your new car (click here to see an example). If you like this pin stripe there is nothing wrong. But these are usually $15 stickers that some dealerships will charge up to $1,500 just for the stickers, not including other add ons.

(Click here to learn more about these add ons)

Back to that patience thing again. If you shop around to different dealerships (even in the same brand) you will find some don’t add these add ons, sometimes called addendums. And some will have them priced significantly different. I will go over this more under step 3 but even if you try and negotiate a few minutes you can get a sense of pricing and see who can give you a better deal.

This biggest benefit of patience when looking for your new car, is having the ability to walk away from a deal if you aren’t getting the car or price you want.

this is like my Nissan experience (click here to read about it)

2 – Find your car before going to the dealership.

Finding the car can be much easier for some than others. But I find knowing how much you can afford is more important than just wanting a car. One of the tools I like to use that is completely free and has no effect to your credit. (I am not sponsored by and receive no compensation from Capital One but I find Capital One Auto Navigator extremely useful). Capital One Auto Navigator is a service that can tell you how much you are approved for and the interest rates you can expect to pay on an exact car. On Capital One’s Auto Navigator site you can even put the Vin number of the car you’re looking at to get accurate interest and monthly payment. Here you can configure term, down payment, and intended price. Know that different cars can have different interest amounts ie a Mercedes vs a Ford. Even if you don’t end up using Capital One as your loan issuer, you can use this service to help you look for a car and know your options. This can also drastically help you when negotiating, I’ll explain more in step 3. I will place a link to this service but make sure it specifically says this will have no impacton your credit before filling anything out. Just know if you have good credit, local credit unions can sometimes have the best rates. These are sometimes good places to check for loans.

(Click here to learn more about Capital One Navigator)

Just make sure before inserting any information that you insure that it clearly states that there will be no impact to your credit.

You have to understand that a car dealership is filled with salesmen. I am not saying that car salesmen are bad, but some are really good and getting you into a car. Sometimes if you aren’t careful these car salesmen do too good of a job of getting you into an overpriced car that you didn’t really want.

After finding how much you can afford the next step is find the car. If you know great, but it’s also great to look around if you can. I use the custom car builders on most manufacturers website to pick exactly what I want. There I can pick things such as: trim, sunroof, interior options, wheels, and color (some colors can cost over a thousand dollars more). Here you can use the MSRP (Manufacture’s Suggested Retail Price) the manufacture gives just as a guide. There are few cars that can sell at and even above MSRP but most will sell for several thousand under.

Now that you picked the car you want, it’s time to find it. Understand that the auto industry is an extremely competitive. There are 16,753 dealer franchises in the United States (enter link nada)and all these dealerships are competing for your business even Ford vs Ford or Nissan vs Nissan. In an attempt to showcase their inventories, car dealerships place their cars on sites like AutoTrader.com and Cars.com (Click here for a list of useful sites). Here you the customer can get a chance to see pictures and options of all the individual cars without going through the hassle of trying to be sold the car before knowing your options. This drastically helps in negotiating a good price which we will cover that in step 3. But, here you will be able to see that when a car dealership tells you that you should buy it because it’s the only one. You know that is truthfully the only one that is technically in front of you at that second.

(click here for a list of these sites)

3 – Find You Max Price and Negotiating.

The Money Part…

This is the most important part because its your money and you’re going to have to pay on what every you signed for. I believe knowing your max price and Negotiating belong together because they can become very lost in the buying process. If you go in without knowing your max price your actual price can become sorta of a mystery. May seem odd but it really can get lost. A way your price can become this mystery, is by working by monthly payments instead of purchase price. There are a few reasons why car salesmen like working with car payments instead of purchase price. #1 Customers are usually limited to what they can purchase due to the amount they can afford monthly. By knowing this amount this allows the salesmen to know what price range to look around and this usually lets them try a pick a car for you (see my Nissan experience)#2 When a car salesmen knows your max car payment amount they work as hard as they can to work around that number. Remember car salesmen usually work on commission. This lets them try and sell you a car that maximizes your budget for a possible longer term loan. It’s OK to let see your options, but know what you really want. This is where patience helps. If you are shown a car you were only dreaming of and you can actually afford it because of great discounts. Take your time and understand what you’re paying for. If you expected to to have a 3 or 5 year loan and offer you something “better” make sure you’re not being quietly given a 6-7-8 year loan instead. #3 Now the one that makes how much you paid a mystery. If you work with just your payment amount. Your purchase price can become very vague. You can easily lose thousands here just look at the example below.

Example:

Sometimes details about your loan can be pretty vague so know them!

For this example we are going to say you want to borrow $30,000 for 5 years and know your interest rate is 5%. This is where Capital One’s Auto Navigator can help (click here to find out more).

$30,000 at 5% interest for 5 years has a payment around $566.14

But lets say they can’t do $30,000

If they can’t meet your offer and tell you that they can stay at or lower your payment understand the money still has to come out of somewhere.

Here your loan term will most likely be extended, and know this can change your loan amount significantly. Lets say they extend your loan just one year and kept the same payment. your original offer just turned into $35,153

Note this is just a one year extension and $30,000. Loans can very from 3,5,6 and even over 7 years. So know your numbers!

Find Your Price

Finally, you found the car you want. Now to find out how much you should pay for this car. This can have a few answers. #1 A max price this is the number you consider the car is just not worth and willing to walk away and not look back. #2 A “OK” price. At this price you would be willing to come back for, in hopes that you will get a call back from the dealer with a lower price. #3 This number can sometimes be below what you expect to pay in attempts to get a great deal. #4 Warranty Price. Many people don’t know this, but the extended warranties that you can get at the dealer are usually negotiable. If you should get the warranty is really up to you and a different topic all together. One that you can read about here (Are car Warranties Worth It?). One way to negotiate your extended warranty is call around before going to the dealer. There are many other companies around that offer extended warranties. These many times are less expensive than the ones offered at the dealer. By knowing the prices, the dealership will sometimes discount there’s in an attempt to sell you theirs. (under negotiating I’ll explain about this.)

Now to find those numbers

Personally this is how I get my numbers and it has worked pretty well.

#1 The max price is the price listed on TrueCar’s website. TrueCar has done a great job at getting people really good deals. Just with a TrueCar print out dealerships usually just fold and tell you that if you purchase the car now they will match it. This can almost feel fake that it changes the deal so quickly. Many dealers will honor the TrueCar price usually with out haggling back and fourth. (remember to watch or for those add ons) Read my Nissan experience here.

Know that if you put your number on TrueCar you will receive a TON of calls from dealerships all over the place!

(Click Here to learn more about TrueCar)

#2 Finding Target price. This is where some research comes into effect. I usually start looking around car selling websites like AutoTrader.com and Car.com(Click here for a list of them). On these sites you can find the dealers with the car you want. Theres usually several dealers that have an exact car you’re looking for so you will have some options. When just starting you can start your search even 500 miles away this way you can start getting some pricing. Because you aren’t sitting in their showroom, dealerships sometimes try much harder to sell you a car and price is usually a really good motivator. The prices you see on sites like Auto trader usually state that they include all offers and incentives which are nearly impossible to qualify for all of them. They usually require you to be currently enrolled in college, in the military, active member in the farm bureau, and a first responder. But if this price is still lower than TrueCar I aim for this one. Dealerships sometimes match these prices to make the sale, even though they seemed too low.

Negotiating your target price

Target Price Step 1 – Here you extend your search pretty far on sites like AutoTrader to 250-500 miles. Find a few dealers that have the car that you are looking for.

Target Price Step 2 – Once you have your list of dealers, look at their sites and check out the discounts they have listed there. Most dealers websites will show the picture of the car and have a “Best Price” listed. Next to their “Best Price” there is usually a box, button, or phone number to get the “Internet Price”. You will most likely have to put in your email and phone number and you will most likely receive a call very quickly. You can make a new email for the buying process that you can delete later because dealers will send you updates constantly for years.

Target Price Step 3 – This “Internet Price” will many times be even better than most people that walk into the dealership get. But, probably still higher than the TrueCar price. Here is where the first negotiations come into effect. You should receive a call from the dealership asking you if you would like to come in and buy the car or test drive it. In the unlikely event you don’t receive that phone call. You can call the dealership and ask to speak to the internet sales department. Here you can simply say you were expecting a lower price. Because the price you saw on AutoTrader or TrueCar (which ever is lower) was x amount of dollars. Here the dealership will do one of four things. #1 They will tell you that they can do anything better than the internet price. #2 They will match the price. Ask if they can send the details/price through email, this way you have it in writing. #3 They may beat the price saying they can offer the price for a very short time. Again ask for an email. #4 They will ask you to come in and “we can talk numbers”. Here you can say you were wanted to narrow down the price and car before driving around. Usually 1 or 2 days after the first time you talk to a dealer you will get a follow up call from the dealer first asking if you were still interested, then after telling them “we are still just a bit off on price” they then give you their new offer.

Target Price Step 4 – Here you can work your way towards your local dealerships and follow steps 2 and 3. But, now you have a price from an other dealership for X amount of dollars. Here you can tell the next dealer if they can beat the other dealer. It is best to take your time here because dealerships usually do follow up calls 1 or 2 days later.

#3Now this number can really depend on how much you want and need the car. I usually put this number well below my target. I personally make this number something I’m willing to purchase the car nearly on the spot and not look back.

The Negotiations

(Click here to read about my Nissan experience)

This can sometimes be pretty simple and then sometimes be pretty annoying. Theres just a few steps to stick to and you can usually get a good deal. I will first give a few things to keep in mind then list how to put them into affect.

This I have learned from experience. Be very cautious about filling out ANY paperwork or signatures. I have been to a dealership that I believe wrongfully tried to mislead me and my mother. I walked into the dealership and told them I was looking for a car for my mother and wanted to look at a specific car. The salesman asked us to sit at his desk so he can pull up some information. The salesman then handed a paper to my mother to fill out. He said this way he can have our contact information. When I saw what was on the paper I Was a bit shocked. It was asking for all of our contact information and social security number. At the bottom of the page it asked for a signature and would authorized them to pull our credit. When I told him I secured my own financing and didn’t want them to pull my credit. The salesman continued to say that this paper explained they will not sell or share my information, not what I asked. The salesman was really persistent telling me everyone fills it out, it’s just their procedure. It took a while but he gave up and continued with the rest of the process (Click here to read about this experience). I also make it clear throughout the entire process for them not to run my credit. The first time I bought a car the dealership ran my credit 24 times and it doesn’t help your credit.

A couple things to keep in mind

  • #1 – Don’t Be Discouraged When Told NO
  • #2 – Know Your Numbers
  • #3 -Take Your Time
  • #4 – Know Your Expected Payments and interest
  • #5 -Know Your Warranty Options (if you want it)
  • #6 -Know the Financing Side

#1 – Don’t be discouraged if you are quite rudely told no. Just see how good of a deal you can still get and then move on to the next dealer. There’s tons out there. I like to start with a dealership I’m pretty sure I didn’t want to deal with anyways. (Click here to read about my experience)

I don’t encourage wasting peoples time but shopping around isn’t wasting peoples time

(Click here to read more on this)

#2 – Know Your Numbers. Not all fees are wrong. Car dealerships usually charge a “dealer fee”. This is pretty standard and you can expect to pay this almost anywhere. But know that this can also very significantly from one dealership to the next. There are some dealers that don’t charge one at all and others can charge over $1,000. This usually isn’t negotiable but if you have a dealership around that doesn’t charge one. It’s good to start at a dealer that is $500 or less. I have been able to get this taken off as a discount. So its worth a try at the end of negotiating. Know the price of the car you are looking at. The MSRP without the addendums if the dealer has them.

#3 – Take your time. After going for a test drive and sitting down at your salesman’s desk. The salesman will most likely have a paper with generic information of estimated payments and a breakdown of the price. When ever you ask for a discount above the advertised price. The salesman will probably bring out a paper showing the invoice price. This is the price the dealer usually pays for the car not including incentives they receive from the manufacture for selling a number of cars. (The more cars a dealer sells the more and better incentives they usually receive from the manufacture) Dealers will often tell you they are losing money to sell you a car but they count on these incentives to make up discounts. It will be rare a dealer will truly lose money to sell someone a car. In these instances Dealerships are attempting to meet quotas for the month, year, or just move older inventory. When ever you want a moment to think it over or if you are with someone, DON’T be afraid to ask the salesman to give you a few minutes. Remember when ever asking anything about pricing the salesman will constantly go back and fourth to the sales manager. So you do the same it’s your money and spend it wisely. I am not saying make anyone upset, but if someone looks offended that you are asking for discounts don’t take it personal. Again it’s your money and if you offered full sticker price with addendum, the process would be very fast and any dealership would gladly sell you a car.

#4 – Know Your Payment. When you know your payment you wont have to count on anyone estimating things for you. Read our Auto Navigator article to learn how to get your interest rate and payment information IT’S FREE (Click Here to learn more)It helps a lot when financing!

#5 – The Warranties. I have had experience with both Manufacture and third party extended warranties and I personally prefer the manufactures. The time this comes up is usually at the very end of negotiating the finally price and right before signing for the loan. This is usually done with the finance mangers, and usually in back away from the showroom. This $1,000-$5,000+ addition is usually done really fast. It is good to know your options here because there are many. There are several lengths of years and number of miles the warranty will last. Example: If you expect to dive the car 12,000 miles a year a 120,000 mile / 3 year warranty will probably not serve you well because it expires at which ever comes first. Most cars have at least 3 year 36,000 mile bumper to bumper (covers most things but has exclusions) with longer powertrain warranties (the motor and transmission components). There are also different levels in regards to deductibles, again this is up to you and you can read more about it here (Extended Warranties). When the finance manger goes over pricing with you this is where you can say that company X has it for this price, could you match it? Your answer maybe that the manufactures is better and you can explain that you did a bit of research on company X and it seemed pretty good. Hopefully you get a discount or close to the third party price. You can decide which warranty you prefer. When you get through this step you want to make sure you know what warranty you’re getting. Some dealerships sell third party warranties that may not be what you were looking for. Some of these warranties may force you to only work with this dealer and may not be accepted at many places. Also there are warranties that can actually expire with the free factory warranty. This usually is the powertrain or for people that drive very few and stay within the 3 year 36,000 mile bumper to bumper. Extended warranties can usually be purchased even after the purchase with in a certain time frame, usually with in the bumper to bumper time frame. But if purchased later you may not be able to finance the warranty.

#5 – The Financing. Here is another spot that it is easy to lose track of numbers because everything here moves really quick. The great thing about using a services such as Capital One’s Auto Navigator you know exactly where to start. Dealerships also have multiple methods to make money with financing. Knowing these can maximize your savings even more. Dealerships make money by referring you over to certain banks, and they can also make money on the interest side. The dealership will be sent interest rates and offer you what they can sell you. I have been told dealerships don’t prefer to go through Capital One’s Auto Navigator because Capital One pays the dealership less. This has worked in my favor well. When I sit with the finance manger I tell them “I currently have finance secured with bank X (in my case I used Capital One). I currently have a loan with them and wouldn’t mind staying with them. But, if you can beat it significantly I wouldn’t mind trying a different bank.” Do know that the finance manger can see your complete credit. This includes credit cards and loans, past and present. So you can say a family member had that bank if you never had it. At the time Capital One was giving my a rate of about 4% and in an attempt to beat my rate the dealership was able to lower this to 3% and saved me another 1%. So win-win, I got to save another $16.26 a month. Thats $195.12 a year or about $1,170 on your loan of 6 years.

I know I will receive some angry comments on this post. So, I would like to make a few things clear. I know that all car dealerships are not the same, some are great businesses. I believe this to be true with salesman and saleswomen as well. I have worked with some salesmen and saleswomen that were great to work with and wouldn’t mind doing so again. I started this blog to help people with some practices I personally find very unethical. If the process of buying a car was used in any other setting it would show just how wrong it is. Imagine your mother walking into an Apple store and being sold an Apple watch significantly more expensive than you. All just because she didn’t know she could negotiate with the cashier or apple representative. I’m pretty sure Apple would be in the news for over charging people that didn’t know better. I don’t argue the fact car dealerships should make money, even a lot is completely ok. But just because a person may be an “easy target” or just not know how to negotiate a lower price doesn’t mean they should pay so much more for the exact same product.

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