Raise your hand if you love the car buying process?! Isn’t it funny how often we are exposed to car commercials that drive excitement and happiness about what our lives would be like with that vehicle? To then transitioning to the dread of going through the buying process at your local dealership. I think the current process is ripe for modification, but until then, I’m going to help you navigate our current world.
What’s Your Car?
What are you looking for in a vehicle? Do you want to take it camping? Do you need it for a long commute? Is this just for random things here and there? Take some time to figure out what this vehicle will be purposed for. Make a list a must-haves and nice-to-haves to help guide your process, because the more focus you can get, the easier the rest of the process will be.
What Do You Want to Spend?
There are a couple of different ways to think about how much you want to spend on a car: monthly cost or full cost. When you talk to a dealer, all they want to talk about is the monthly cost, because that allows them to inflate your buying price. They ask you what you can spend a month, give you the longest possible loan, to get you in the most expensive vehicle all for the benefit of whom? You guessed it, them.
I like to think about the total cost of buying the car. Cars depreciate and this will give more perspective on the value you will be getting out of your purchase. This also tells you how much money total will be coming out of your bank accounts. The monthly payment will be manipulated by the dealership to make it seem more affordable, but money is still money. Even if you’re looking at the total cost, you will still want to assess the monthly cost as it pertains to your budget.
Old vs. New
I could be the old man who tells you how tough I had it as a kid and you shouldn’t buy those new and shiny things. I’m not here to lecture you. That being said, you should consider what is most important to you.
Buying new is likely going to give you quality and bells and whistles that you might not get with an older car. If you buy a newer (more expensive) vehicle, you can expect to lose more on depreciation over the course of its life. You should also have fewer issues with the maintenance of a newer vehicle.
Older vehicles have the benefit of less overall depreciation over time which adds to your net worth over time. You can expect to have a little more maintenance over the life of the vehicle, but the savings in total cost may very well be worth it.
Moral of the story – Pick out a vehicle based on what’s important to you. If having a nicer vehicle is something you want to prioritize, then great! Just don’t do it because of what others have or trying to impress anyone. No one cares what car you drive. Find your fit and you’ll be much happier long term.
Pair Down
After determining how much you want to spend, do some searching around in your budget to look at what fits your criteria using Autotrader, Cars.com, or whichever site you prefer. Narrow your choices down to the vehicles you think fit your taste the best. Find a day or two and go wild. Find all the different makes and models you’re considering and rip through them. Walk into the dealership and tell them exactly what you’re there to drive. Explain to them where you’re at in your process (determining the type of vehicle) and that you’d like to drive the car they have. You have zero obligation to get sucked into their process. Be efficient on these days. Your goal at that end of the test driving days is to know which 1-2 vehicles you want.
Talk to a Mechanic
Once you have those vehicles narrowed down, chat with your local mechanic – one that works on that model of vehicles. They’re going to have a great idea of how well the car holds up over time and any issues you might encounter. If you don’t have a great local mechanic, this is a great time to start building a relationship with one. Do some research and start that endeavor – it’s well worth your time.
Insurance
Another step along the way is to talk to your insurance agent to get an estimate of the insurance cost per month. That shit doesn’t come free and many overlook this. Although we all like to feel special and unique, you’re just a number to your insurance carrier. If you don’t like the quote you got, talk to a couple of others or use services like The Zebra to get a better price. Also, pay attention to the details of how much insurance you need. It’s possible there are benefits in there that are unnecessary for you.
Get Pre-Approved
As with insurance, the same thing applies to financing. Do some shopping around – talk to your bank, a local credit union, Google can also help here. Get 2-3 pre-approvals from different sources. This will come in handy during the car buying process. You walk in with your pre-approval and it’s now their job to beat what you already got.
Negotiating
You’ve done the work. You’ve test drove the vehicles, figured out what you want, and got your financing started – you’re in great shape. This is where I’m going to challenge the conventional view of buying. Once you find the car you want online, don’t go to the dealership.
If you’re intent on seeing it right away, go look (or drive), but don’t negotiate there. The dealer wants to negotiate on their territory where they use a variety of tactics to pressure you into making the deal they want. Negotiating from afar gives you leverage to shop around and put yourself in the driver’s seat (no pun).
Patience is Your Best Friend
I’ll tell you your best negotiation tool is – patience. Detaching yourself from specific vehicles and taking emotion out of the process (not always easy) will fundamentally change the way your negotiation goes.
Do your research based on the car that you’ve found that you want to put an offer on. Find similar cars (make/model, mileage, condition) in the area that match yours. Reference sites like TrueCar and KBB. This will give you the leverage to make the most competitive offer.
During this negotiation, be clear that you want to negotiate the “Out the Door” price. Dealerships will, at times, negotiate and then add on a “dealership fee” or other fees that are unrecognizable.
Note – It may also be helpful to negotiate with dealerships at the end of the month. This will be heavily dependent on whether the salesperson or dealership has hit their goals. If they haven’t, it’s one more piece of leverage for you.
Are You Trading In?
I also recommend taking the stance of “undecided” on trading in your current vehicle until you get towards the end of the negotiation. Negotiating both of these at the same time can be confusing to the consumer and allows the salesperson to manipulate the negotiation in a way that may seem confusing. Negotiate the price of the car you’re buying, then proceed onto your trade-in.
Warranties & Loans (The Finance Manager)
You agreed on the price, the negotiation is finished. Now you get to deal with one of the finance managers. Be very wary of these guys. You know how dealerships get a bad rap for being shitty to deal with. These guys win that award in my book. I’ve bought two cars in the last 5 years and both times the finance managers were a real treat. Those individuals tend to be real slick talkers.
Pay Attention
In one experience, the finance manager tried sneakily rolling the extra warranties into my monthly payment without telling me (which is illegal). That shit needs to stop.
In a second experience, the finance manager tried giving me an interest rate a full percentage point worse than what I qualified for; you should’ve seen his face when he got called out.
Keys to the Conversation
Dealerships make a lot of money on financing and extended warranties. Tips for this conversation:
- Don’t buy the extended or additional warranties – seriously, just don’t. They will try to convince you of 6 different ways this is a good idea. It’s a great idea for them, not for you.
- This is where getting pre-approved comes in handy. Explain to them what you’ve been approved for and tell them to beat it; plain and simple.
When this industry changes the way it handles its consumers, I’ll change my tune. Until then, I don’t think they deserve much time until they prove themselves differently and stop manipulating their customers.
Conclusion
Have a plan for your process. You can use what I described here as a template or tailor it to your liking. Having a plan puts you in charge of the buying process, which will fundamentally change your car-buying experience and put you in control.
