Buying a Car

Terri and I are considering buying a new car.  Since I only replace one of our two cars every 3-4 years, I use this time to remember how I go about getting the best deal.  I learned from a master - my father.

My father was brutal to the car salesman.  His strategy was to ensure the salesman became more emotionally invested in the deal than my father would be with the car.  My father would draw negotiations out for days or even weeks.  He would grind the last $50 off the price of the car, and then go for another $50 on the trade in.  By the time he agreed to a deal, the saleman had many hours of effort invested.  It would convince the salesman that any profit was better than nothing after the expended effort.  Eventually, they would give up their best price.

I don't have the patience for days of negotiations.  Instead, I have 2 tactics that I use every time, and couple of potential opportunities that I use when they present themselves.  These tactics and opportunities have worked well for me in the past.  I feel I get good prices without spending more that a couple hours with the salesman.

The first tactic is the most important.  Get smart.  Before you begin dealing seriously, you must know what the dealership paid for their vehicle.  This is now pretty easy since all the information is available over the Internet.  You do not necessarily need to know the invoice cost of the base model and every option.  A little study reveals that mark up is pretty consistent.  Last I remember (5 years ago?) the base price of a vehicle was marked up 8% and each option was marked up 14%.   Once you learn this, you can calculate the invoice cost while on the lot. 

If trading in a vehicle, an honest assessment of the vehicle's condition can be used to determine the fair trade in value.   Knowing both the dealer cost and trade in value of your car will make is simple to determine if the salesman is dealing in good faith or looking for maximum profit.  If their interest in not in your best interest, (and they never are initially) my second tactic is used. 

I have used my second tactic almost every time I have purchased a new car.  I simply thank the salesman for their time and excuse myself.  The intent is to signal to the salesman that I am not invested in the specific car under negotiation, and quite willing to go to another dealership.  This action is guaranteed to get a better price immediately.  If you are not impressed with their next offer, you probably will not reach agreement with the salesman so it is time to end it and move on. 

Many opportunities can make buying a new car very easy.  Here are these opportunities I look for:

• End of model year or end of month - Dealers will sell a car below their cost when 1) they need the room on their lot for new models, or 2) when meeting a sales goal increases their percentage of profit for all cars they sold during the month.  I once bought a $44k car for $34k for this one reason.
• Pick a green, wet-behind-the-ears salesman -  New salesman don't make much money and will sacrifice a full commission just to make something.  I once had a brand new salesman agree to a $50 commission just to make the sale.  You will never get this from a salesman with awards on their office wall, a large mortgage and a tuition payment to make.
• Network - If you know someone in the dealership, see if they can help.  I once got a good deal because my Sister In Law Lisa (SILL) was in the finance department of a local dealership.  I also once worked at the same company with the son of a salesman.  He allowed me to see the best deal already made that day, and gave me the same deal.  Both of these negotiations took less than 30 minutes.

I am just starting my new car quest, and will update the blog when a deal is made.