How To (But Not Why) Buy A New Car

 

The use of a vehicle, in most places outside of urban cores, still remains a necessity for most Americans. Uber, Lyft, and bumming off your friends are great, but in the case of the first two, they can get expensive and in the case of your friends… well, you’ll lose them if you keep bumming with nothing in return.

I’ll address when it is appropriate to buy a new car in a separate post; this post will tell you how I have found success in getting sticker price off the vehicle. Needless to say, there are times when it is appropriate to buy new, and other times when it is appropriate to buy used. Again, this post is designed for someone who is committed to buying a new vehicle. The bargaining part here only works in a “perfect market” where two sellers offer the same exact product and you have the same exact information about both of them. In the case of a used car, you don’t know who did a better inspection, what the driving history truly is, and how good the vehicle is compared to another one with similar mileage.

These steps may seem a little extreme for most of you, but usually, this is reality and you should be thinking “what’s the problem there?”

 

 

Step 1: Figure out your needs.

If you just need a car to get you to work and bring some groceries home once in a while, then don’t outprice yourself and get a huge SUV. If you have 4 kids, a wife, soccer matches, and lots of groceries, then yeah, a minivan or SUV makes better sense. Get something that makes sense for you for the majority of the time you plan on using it, not the “well, if I buy this truck, I’ll certainly save money by doing more trips to Home Depot instead of hiring contractors.” You won’t save money in the long run, and you probably won’t suddenly take up a new hobby of taking on projects.

Take note of which cars could fit your needs. Stick with an automaker that has good reliability; if you’re buying a new car, you need to make it last. If you’re not sure, take a look at one of the recent auto issues of Consumer Reports magazine to get a feel for the reliability of different makes and models.

 

Step 2: Figure out which cars that meet your needs also fit in your budget.

For this, figure out how much per month maximum you can pay for a car.

 

Step 3: That maximum amount you can pay monthly must now include gas, insurance, and other ownership costs, so subtract those from the number you came up with in Step 2.  You can figure this out by calling up your insurer and having them price out a couple of the cars that meet your needs and seeing what the premium will cost you on a monthly basis. For gas mileage, see how much you’ve driven your current car and divide that by the number of years you’ve owned it. Then divide that number by 12 to see how much per month you are driving. Take the average gas mileage number from the cars you’re looking at and see how much it will cost you monthly. For those of you who aren’t mathematically inclined, do this:

 

Step 4: Re-asses. Do the numbers for the max you can pay for the car, the insurance, and the gas add up to be at or below your maximum monthly spending you can allot for your car? If not, find a new car. If so, proceed to step 5.

 

Step 5: Test drive some of the cars on your list. Figure out what you like and what you don’t like.

Step 6: Decide exactly what car you want, with the exception of color, which you should pick out a few different colors that you like or are willing to accept. In the case of our last purchase my wife and I said: “we will take any colors except white, orange, or blue.” We ended up with “gunmetal gray” or something like that. The guy even tried to sell us on a white one for $500 less (which would have been $1,700 less than the next best dealer!), but we both couldn’t accept white for personal reasons.

 

Step 7: Find financing for your car. Shop around. Multiple credit inquiries for the same type of credit in a short period of time won’t hurt your credit score more than one inquiry would. They know you’re shopping around. Know how much you want / can put down, and re-asses based on the rate you got if you are still in the range of what you can afford.

 

Step 8: Visit every dealer and tell them: “you get one shot to make the easiest sale you ever made. I want car X, I can take in in colors a,b,c, or d, and whoever has the lowest price in the area has a check in hand at the end of the day.”

They’ll generally give you a terrible deal at first, because car salespeople work off commission and have incentive to get the highest price. They’ll be shocked when you laugh and walk away and tell you they need to speak with their manager for a “special” deal. Then the salesperson will go get a coffee and a donut and pretend to do business for about 5-10 minutes and come back with a “special” deal. If they tell you that they’ll match anyone else’s price, that means they’re willing to sell it at a lower price than they’re letting you know. Tell them “thanks, but that means it’s not your lowest price” and move onto the next dealer and repeat. Whoever has the lowest price at the end of the day, gets your business. I’ve done this twice and have gotten a $17,000 car for $13,100 and a $30,000ish car for $26,000 that had a lot of incentives thrown in as well. Inevitably, they’ll ask what place they are in. Don’t disclose them, tell them it’s just whoever has the best offer at the end of the day. In the two cars I’ve purchased in my life, I have done this method to 8 dealers. 7 of them played ball – only one refused to give an offer, saying he “doesn’t compete with other dealers.” Well, welcome to capitalism, my man – you lose! He didn’t get my business.

 

Look, cars should be like any other product. You don’t haggle for the lumber at Home Depot or Lowe’s and you don’t haggle for your groceries at your local Piggly Wiggly. Why should your car be any different? Make them compete for you.

 

[Admin note: my dad is the one who perfected this way of buying cars and he’s done it for years. The guy is awesome. I love him. All credit to him on this one.]