Great news! Today is the be-all, end-all post where I finally talk about buying a new car, from start to finish.
And to keep you from nodding off halfway through, I’ve made sure to interject this (kinda long) article with the most important lessons learned. At the end of this post, anyone should be armed with enough information and strategy to really take it to those slimy car salesmen.
The current situation’s cliff notes: My 2003 Dodge Ram truck has been on its last legs for a while now. In a perfect world, my cheap ass would love to nurse this old thing along forever.
Unfortunately, facts are facts. My 13-year-old truck is badly hail damaged. The engine sputters and has died multiple times while idling at red lights. The heater is broken, which is more than a slight problem during Minnesota’s arctic winters, and the estimated repair bill of $1,000 doesn’t make the problem any less serious.
The passenger window no longer rolls down. The door locks went rogue and started randomly unlocking last month. One of the seatbelts stopped retracting a couple thousand miles ago, and if I’m not careful I’ll slam the side door on it.
True story: I once drove a quarter mile from home before I realized there were feet of seatbelt dangling limply out of the bottom of the door like a sad, pathetic, broken noodle.
I could deal with all of this, if it weren’t for the truck’s atrocious gas mileage, which now hovers around an appalling combined 14 MPG. Winter gas mileage is closer to 11 or worse.
Not only are the thrice-monthly $50 fuel ups killing my wallet, but I can’t handle the guilt of killing nature either.
Needless to say, as much as I loved my old car, it was time. Time to buy a new car.
That last sentence is particularly shocking to me, since I figured a used car was the only way to go.
When I ran the numbers and saw a sort of used car bubble, I realized it made more sense for me to buy a new car, enjoy the peace of mind, and still leave my wallet relatively unaffected compared to if I bought used.
Stage 1) Research, Research, then Some More Research
The most important thing you can do leading into any car purchase is become a knowledgeable customer.
If you’re not annoying all of your friends, family, and blog readers by discussing available car prices AGAIN, chances are you’re not doing enough research.
In my case, I narrowed down my preferred car type to a few important points:
- I wanted something so reliable that in 15 years I could proudly use my old beater as a shopping cart rammer in grocery store parking lots.
- A decade of 14 mpg had me bitter enough at the gas pump to refuse anything less than 30+ mpg.
- Hatchbacks are the most practical cars on the road.
From here I narrowed the choices down to: the Mazda 3, the Hyundai Elantra GT, and the Honda Fit.
After test driving the Honda Fit and being impressed with its incredible practicality, while simultaneously being bored to tears, I knew I had narrowed my search between the Mazda 3 or the Elantra GT.
Both cars are two of the cheapest on the market, which in this country means they come with more luxurious bells and whistles than any reasonable person will know what to do with.
They both sport good gas mileage, adequate storage, and are leaders in reliability. Neither come with the impracticality of a sports car, yet they’re both pretty fun to drive.
From my test drives, I much preferred the Mazda 3, but I did not prefer its nearly $3,000 higher MSRP.
For the record, MSRP means, “some bogus inflated price from the manufacturer that you should never, under any circumstances, pay more than.”
To get a better idea of the actual price, I used the TrueCar.com market pricing, which shows the average sales prices for cars in your area. According to TrueCar, the average Mazda 3 with the most basic package was selling for $19,292, which although that’s nearly half of the average vehicle price in the US, is still an absolutely insane amount of money.
So I waited. And waited…
I watched prices go up and down while deals came and went. I signed up for a few email lists and learned something interesting; dealerships run “the deal of a lifetime” pretty much around the clock.
When $1,000 cash back ended, 0% APR financing started the next week. When 0% APR ended, $1,000 bonus trade-in cash arrived.
Lesson #1 Learned: Never feel rushed to buy a car based on current promos. There’s always another deal around the corner, and it will probably amount to the exact same value as the current offer.
That said, ask anyone in the car industry, and they will admit the best time to buy a new car is towards the end of the year. Why? The next year’s models are out, so dealers are eager to get rid of the “old” models. For you, this means cheap prices.
This prediction panned out just like I expected. From April to September, I logged into Cars.com frequently, and I watched the prices hover around $19,000 for new Mazda 3s.
By November, the price was slashed down to less than $18,000. Now we’re getting closer…
Lesson #2 Learned: If you’re buying a new car, always wait for the year-end price drop.
Stage 2) To Hell’s Gates (the Car Dealership)
Feeling like I had successfully low pointed the entry level price, it was time to make things more serious by heading to the dealership.
The dealership with the lowest priced Mazda 3 in the color I wanted prominently advertised itself as a “No Haggle Dealership.”
These “No Haggle” or “No Negotiation” dealerships are a hot trend in the car industry. They’re also complete bullshit.
Here’s the real truth: In order to advertise as a no negotiating dealership, the dealer does actually apply and receive a license which legally forbids them from haggling on the car’s sticker price.
BUT, that license says nothing about their ability to haggle on your vehicle’s trade in price, available rebates, interest rates, etc.
In other words, they negotiate. A lot.
Lesson #3 Learned: Cars are always negotiable. Don’t let some dealership take you to the cleaners under the guise of being “the nice guys who don’t negotiate.”
Knowing this info, I knew the area we could most negotiate on was my trade in vehicle.
You know, that old thing with a Kelly Blue Book value of $3,400 in “Excellent” condition. Given the giant dent in the rear, the $4,000 of hail damage around the whole body, the looming $1,000 heater repair, and a host of other issues, I’d say that thing passed excellent condition about 100,000 miles ago.
Like hell I’ll share that opinion with the car dealer though.
Stage 3) The Negotiation, Step by Step
I stepped foot into the dealership, pretending I wasn’t sure which color I liked best. (A negotiating tactic… I had come specifically to this dealership because they had the only model in the color I wanted within 150 miles.)
I went in there proudly spouting that I received a $4,000 trade in value on my truck from multiple competing Hyundai dealerships. The truth, of course, was that the best trade in I could muster at every dealership but one was only $2,500 to $3,000 dollars.
But when I convinced one Hyundai dealership to up their offer to $4,000 after tense negotiation which revealed their car had some mechanical issues, I ran with it. $4,000 was my new benchmark for what my beater was worth.
Lesson #4 Learned: Over-inflate your competing trade in offers. The selling dealer isn’t about to get on the phone with other dealerships to make sure you’re telling the truth, and they don’t really care either way. They just want to sell a car.
I decided if they could match my inflated trade-in expectations and knock a little off of their already rock bottom, “no negotiation” price of $17,700, I would know I’d be getting a more than fair price.
So after poker-facing the test drive, we started the negotiations. I told them the above expectations, and of course at some point, the salesman goes back to check with his manager.
He comes out valuing my trade-in at $3,000, and hands me a piece of paper showing a total price, after trade-in, of $19,000! Those slimy salesman had pulled a switch, and started the negotiation at $22,000 instead of $17,700!
Of course, I sternly called them out on this nonsense, and what do you know, just an innocent mistake on their part.
“Oops, just almost accidentally charged you $4,000 too much, our bad…”
The number of people who probably get lost in the numbers, are too embarrassed to ask for clarification, and continue with the salesman’s switch-a-roo “negotiation” really breaks my heart.
Lesson 5: Double check EVERYTHING. There’s no low these guys won’t go to extract as much money as possible from you. Don’t be embarrassed to bring a calculator.
Once they re-calibrated the negotiation to the accurate sticker price, I told them $3,000 for my trade-in still wasn’t good enough.
The appraisal manager came out and talked in circles for a while, which is a common negotiating tactic they use to try to intimidate and confuse you as much as possible.
Eventually, he offered a counter of $3,500 for the trade-in.
I stood firm, and again told them no deal. “I know it’s a high trade-in value,” I said, “but it’s what it will take for me to feel comfortable with this purchase. This really comes down to how badly you guys want to make a deal today,” I said.
He then threw in an extra $500. I told him to match the lowest Mazda 3 I’d seen within 250 miles, which was still $300 cheaper.
“Are you really going to hold my feet to the fire over $300?” He asked.
“Yes,” I said, without hesitating.
He extended a handshake. Done deal.
Lesson 6: Stand firm. Sometimes a strong “Yes” or “No” answer is the most powerful answer you can give.
The final out of pocket numbers came out like this:
After triple checking there were no prepayment or early payoff penalties, I got an extra $1,000 cash back by taking out a loan I have no intention of keeping. The first payment is not due until March, at which time I will pay off the entire loan.
Could I have done better? Maybe, but I’m happy with the deal. $2,000 off the average sales price in my area, plus $500 over KBB excellent for my mess of a trade-in makes me confident I got one of the better deals possible. •
What car buying tips do you have?
I just want you to know I appreciate your insights. I have a 26 year old son who is doing well starting out. However, he believes the used car route is the way to go. I am trying to get him to see your logic. Wish me luck! Congrats by the way on negotiating a good deal.
The Money Wizard says
Tell him about this cool site you heard about called MyMoneyWizard.com. 😉
In all seriousness, I’m not opposed to used cars. Even if I think used cars are becoming overrated on the whole, they are probably a touch easier on the wallet in exchange for a little less luxury and maybe a little more potential stress.
Hey, at least there are no $40,000 SUVs in the picture. 🙂
WOW. Well done, really well done.
You got yourself a steep 34% discount on a great car.
The Money Wizard says
Thanks! I could have maybe pushed it a little lower, but I can’t complain overall.
Hopefully you’re right about it being a great car. 200,000 miles here we come! (Hopefully!)
Julian T. says
All prices outside of your typical online or brick & mortar retail store are negotiable, and if prices aren’t specifically written out for some services, they’re negotiable too. When I tell people that I negotiated $100 off my apartment’s rent, I often get confused faces and people will ask, “you can negotiate rent?”.
I wasn’t able to negotiate the used car I last bought (now sold), but I did travel 2.5 hours to buy it to get the lowest price possible. I bought it from a dealership who got it as a trade-in so it was a different make than they were used to selling and they just wanted to get rid of it.
With the average selling price of cars increasing faster than wages, the best car buying decision is to just buy a cheap car. A sensible car purchase is less than 30-40% of your gross income depending on how much you drive and how much of a car enthusiast you are.
I’ve also leased before and if you have good credit, leases are probably the most negotiable of all car deals because it’s really just a bet on how much the car will depreciate, and who really knows. Add in free maintenance and the fact that you rid yourself of the car right before things like tires and brakes wear out, and leases can be good deals for people who like new or nice cars. For people with good credit, leasing is the “5% cash back” of car buying, and for people with terrible credit, leasing is as bad of a financial move as paying 25% interest on a credit card.
When I leased, I basically got two dealerships in a bidding war for my business, it was actually kind of hilarious. Either way, don’t lease a car you can’t afford to easily buy. If you’re leasing a car you can’t afford to finance on a 4 year term, then you’re probably making a bad financial decision.
The Money Wizard says
So true. Just about everything is negotiable! Thanks for the reminder, and way to score a deal on rent!
Gary @ DebtFreeClimb says
Nice deal! Loved the details.
This reminded me of my buying experience. I had done my research and gotten 4-5 trade in offers from other dealerbsips…. The place I bought my car tried to bs me and offered me $4k less than other dealerships. I had a quote on me and called them out. They also tried to inteminate me by bringing in a senior manager to negotiate.
It’s all a big game. I’ll be better prepared next time too (hopefully not for another 10 years or so :))
The Money Wizard says
Intimidation is definitely one of their main tactics. Reminding yourself that you’re just as smart as they are is half the battle in itself.
Good point about it being a game. Coming in with this attitude can really take some of the stress off.
Saver Steph says
Pretty good negotiating skills. I myself have just turned 25, but I’ve been the “researcher and negotiator” for my parents purchases for a good 10 years haha.
I’ve always been an avid vehicle enthusiast and will spend countless weeks/months searching dealer sites, online articles, and forums. Being a Mechanical Engineer also doesn’t hurt, and the numbers part have never scared me. I’ve used TrueCar for awhile too, and it is really good to know the local pricing. Asking a salesman a simple “brochure” question is pretty funny sometimes, you;’d be amazed at the amount of people who know little to nothing about the cars they have on their lots.
One of the best tips I have is to look into the Costco auto buying program. Even if you’re not even a member, the 1 year membership is worth it for how much you can save. The dealerships they work with, literally are not able to haggle because the prices are already negotiated (but of course always look at the fine print when it comes to add-ons etc). As far as our experience went to a local SoCal Toyota dealer, all we did was show our membership card, and they sat us down in a private booth were they brought out a binder containing every model, trim package, and pre-negotiated Costco price.Based on my own extensive research and TrueCar comparisons I was pretty blown away at the pricing, coming in ~$2,000 under the dealer invoice.
The Costco approved Toyota dealer we went to however didn’t have the exact color and trim model we wanted, and they at first tried to sell us a different color etc, but we didn’t budge so they finally found the one we wanted 97 miles away. We ended up leaving the dealership around 1pm because they said they’d notify us once it was on their lot, got a call around 8pm saying it was ready to be picked up. Besides a little waiting we ended up getting the car we wanted for an out the door (OTD-taxes etc included) price $6k under the posted sticker price, with no haggling at all (no trade-in, and outside credit union financing was already secured).
So, long story short, it’s really worth it to look into the Costco Auto buying program, and with any purchase they give you a parts/maintenance discount for 15% off, good for 6 months.
The Money Wizard says
Very cool tip about Costco. I’ve heard it mentioned in passing but wasn’t very familiar with it.
I too was the “research and negotiator” for my parents. And by negotiator, I mean I watched them negotiate! haha… But seriously… any parents out there, bring your kids along for the car buying process! I learned an unbelievable amount from the process after going through it several times with my parents.
Thanks for the detailed post! Looks like I’ll have to wait until the end of 2017 to buy a car. ? Actually, with my truck, also on its last legs, this gives me motivation to try and stick it out one more year. If I can wait until December, I’ll have more saved and I’ll be able to get a nice year-end deal.
It’s kinda fun getting to the end of a car’s lifespan. It becomes a game to see how long you can keep it running. Every month it keeps running buys me time. I’m just dreading the day where something breaks, and the repair bill is more than the car is worth.
The Money Wizard says
Couldn’t agree more about the game of making a vehicle last. There’s something satisfying about beating the system. Good luck on sticking it out!
I have always bought new. I could never see the benefit of buying used because used car prices were only $5-6k less than the MSRP of the new car. I know I could negotiate at least to dealer invoice (about $2-3k less) but I would also know how well it was taken care of and that preventative maintenance was done properly instead of relying on some stranger to have done it correctly.
The first year or two of the cars life, I feel, is pretty important as to how long the vehicle will last. I keep them until they are not worth repairing anymore usually about the time you are describing above. If you average out the cost over the 14 years for new and 11 or 12 for the used, it comes out to about the same.
My best tactic is to walk away when they don’t meet the price you are asking for, it is always funny to see how quick they are to call or text you back to offer you the price. The last vehicle we purchased, we had barely left the parking lot and had gotten to the first traffic light when we got the call 🙂
The Money Wizard says
So true Ed. As they say, the person who is willing to walk away is the person who has the advantage.
I was laughing as I read because you were doing basically the same thing you were critical of the salesmen for doing lol.
Gotta do what you gotta do I suppose. But I absolutely respect your hustle and holding your ground.
The Money Wizard says
Haha, no doubt, but you really do have to stoop down to their level, or else they’ll take you to the cleaners.
At the end of the day, they’re the ones who know what they can sell the car for, and it’s the buyer’s job to get their bottom price. The car industry are the ones who set up this ridiculous haggling price structure. They would never do it this way if they didn’t count on getting the vast majority to grossly overpay.
They started this battle. We’re left no choice but to play their game and protect ourselves from their tactics.
Just found this great website!
Another tactic the sales force will use is the “monthly payment” focus. It is always best to figure out how much you are comfortable spending on any car purchase out-the-door at home and keeping that number in the back of your head. (Think price, tax, and applicable fees) They will offer an attractively low monthly payment attached to a ridiculously long term auto loan, say 72 months. Never a good idea to take on a car loan longer than 3 years if you can avoid it. The interest alone will ruin your day! Also, check your local credit union for a good rate!
The Money Wizard says
Great point Chris, they always try to get you to focus on the small monthly payment to lose track of the huge total payment.
I was surprised that when I told them flat out at the beginning, “I don’t care about monthly payment at all, I’m only interested in total price,” they actually listened! I think they might have brought up the monthly payment one more time before I shot it down, and from there they stuck to the total payment. Definitely made it easier to avoid all the nonsense and games.
Hope to see you around!
David Houston says
Your so right about the focus on the monthly payments. All the car ads only have the monthly payment in the big lettering. Only the very small print mentions the total cost of the car and even then it’s before taxes. A new car is a nasty financial hit but if you are making decent money and don’t like to work on your own car it’s still works for many. In Canada leases are also an option but I don’t like those. You own nothing in the end and the buy out is usually too high.
Loved this post. I lived the same life with an 02 Durango V8 5.9, it was cool until 2008 hit and gas went through the roof. Because of the V8 5.9 my gas mpg was actually 7 mpg in city. Terrible. I paid $8,500 for it in 2007. Sold it for $750 in 2014. I am sure I could have done a trade in but at the time I didn’t want to let it go. (I didn’t trade it in because I had purchased another used beater car to go through school, I believed I could keep my beloved dodge and my newly purchased used beater Honda Civic running.) I literally dumped the Durango for $750. Its sad tale. (I paid cash for the Honda)
Anyways – in 2016 I bought a new Ford 4 Door F150 XL. 4×4 drive. Ford Dealerships usually only keep a few of these models on their lots. They would rather sell you the XLT 4 door. Its actually the same engine specs as the heavier priced XLT F-150 4 Door 4×4 drive. Same engine. Just without all of the comforts and backup cam and extra accessories that they charge you for when you buy an XLT. I am happy with my purchase and I know I did good. After the cost of the loan and my trade in; I got down $4,000 below where they wanted me to pay and I had to do the sale through the manager. Went through 2 sales associates during the sale.
1. Get an appraisal from CarMax or similar for your trade in. A proposal that you can stand on if need be. I carried a CarMax appraisal into the Ford Dealership. When the dealership lowballed me, I showed them the CarMax proposal and they actually went a $1,000 over it. It turned some heads at the dealership.
2. Have financing before you enter the dealership. I opened accounts with about 4 different local banks and lenders in town just to get a good loan for the truck. They were waiting for my call when I went in to the dealership. I arrived with better financing than the dealership offered on the website. However – in the end, the dealership actually found another bank with a better financing offer than I knew of. The dealership helped me in this regard. I actually like the bank they gave me. It started an unexpected good business relationship.
3. Calculators- I used Calculator Soup. https://www.calculatorsoup.com/calculators/financial/car-loan-payment-calculator.php A. Know the value of your trade in. B. The term of the loan. C. The monthly payment. D The cost of the loan. E. The Down Payment. -Plug these into the calculator. Keep it updated.
The dealership see’s each of these items of information as opportunities that they can play with and manipulate. The trick is to keep the calculator rolling as you go through the negotiations. The dealership will always make money, but you should control where and how much.
4. Bring an accountability person. For me it was my wife. Dealerships make a lot of money on the aftermarket / warranties / special stuff that you may or may not need. The sales team will show you amazing things that you never knew you needed and you need someone to keep you in reality.
5. Don’t hang the deal on misc. items. – I wanted a bed liner. They attempted to tack on $1,000 for a Line-X bed liner. I bought the truck without the bed liner. 2 months later I got my bed liner sprayed in from Line-X for $450.
6. Stick to your Calculator.
7. Pay if off early by putting down more each month. Start immediately.
8. Find a reliable mechanic to keep your vehicle running. Take care of it.
9. Know the value of your vehicle, get free appraisals from CarMax or others.
10- CarMax- My dad with financing bought a new truck in 2012 from a Toyota Dealership. In 2013 he had to dump it quickly and downsize. He believed in cutting all expenses. Anyways- after exploring all sales options; he went to CarMax. By 2013 his truck had accumulated 15,000 miles. CarMax bought his USED truck and my dad made $100 in profit!!! He walked out with $100 and back to his 2000 Camry. Took a job a few months later where they gave him a new truck.
First off, I usually enjoy your website and tips. Today, I’m flippin’ irritated. By using hardball negotiating tactics at a dealership, you’re only screwing the salesman – who has a family to help support and feed. Due to unfortunate life twists and physical limitations, my husband has ended up in a new career last year as a new car salesman. It’s not very often he comes home and says that the deal was fair for all – meaning he got paid a couple hundred dollars from the deal and the person buying the car got a fair price. Typically, the customer gets an amazing deal and he gets nothing. There have been a couple of months where he’s sold 14 cars and barely made draw. And for all who love to go to one dealership and spend time with a salesperson, test driving cars and getting a price, just to go to another dealership to get a better price of a $100-$1,000 less – you suck, IMHO. So while you feel good about the savings you received, keep in mind the poor guy making commission who’s making zero on your accomplishments. In this particuar case, you suck too. Sincerely, L
The Money Wizard says
Maybe my experience would have been different had I dealt with your husband.
But in my experience, based on the salesmen I interacted with, nobody was approaching these discussions as a mutually respectful business deal. From the get-go, I was told lie after obvious lie which framed how they wanted to play the game.
They lied about being unable to negotiate, when in fact they negotiate daily. Then they “accidentally” started the negotiations at a price $4,000 over the real price? And throughout it all they used constant intimidation tactics which are explicitly designed to take advantage of the people who can least afford to get taken advantage of.
Max N says
Curious how satisfied you are with the Mazda3 now, ~5 years later? I am in the market for one as my first car.
Also a follow-up post for the current market would be super helpful for others in my situation — no trade-in and everywhere else you turn online is”seller’s market” this and “microchip shortage” that.