Car Coach: Strategy for a Great Deal

Strategy for a Great Deal

Your Strategy for a Good Deal
Preparation for the Dealer Visit
Arrange for Financing Before the Dealer Visit
Handle Your Trade-In First
Negotiating Vehicle Price
Unfair Practices
Dealer Add-ons
Carefully Read the Contract

Careful car buyers follow the "two visit" rule:

The first visit is for selection of the car and negotiation of the contract. This visit may take the form of visiting several dealers or visiting the same dealer multiple times. It is important to make a detailed inspection of the vehicle and conduct a critical test drive -- if the car doesn't measure up, then it's off to the next car or the next dealer. If the car is used, you will want to take it to your expert to do a thorough mechanical inspection. If you are trading your old vehicle, you will be negotiating the trade-in value. You will be negotiating the price of the new car. You will be invited to the dealer's finance and insurance office where you will be informed of additional products and programs. After all this, you should ask for a complete copy of the contract (both sides of double-sided documents) with everything filled in but the signatures. Take the copy home and check all the figures again, look for unexpected charges, and read the contract thoroughly. Be prepared to ask questions about any of the contract language or charges you don't understand.

The second visit is to finalize the paperwork and take possession of the car. This time, make sure all your questions are answered and you are getting the car and deal you expect. Sign the original of the copy of the contract that you examined thoroughly and other documents, but don't sign the document that says you have taken delivery yet. Inspect the car thoroughly to make sure that you are getting what you contracted for, and that any defects have been corrected. If necessary come back again after everything has been fixed to your satisfaction. Finally, it's time to sign that you have taken delivery, to sign the title and give up the keys for your trade-in. See Before You Take Your Car Home.

Preparation for the Dealer Visit

You will get a better deal if you control all parts of the car purchase, by making sure you have a plan and that every step gets done correctly and in the proper order. You should know at every step if you are getting a good deal:

What is the value of your trade-in and how much are you getting for it?
What did your car cost the dealer and how much profit is he making?
(New Car) What factory-to-consumer cash is available to you and what factory-to-dealer incentives are available to the dealer?

The alternative to knowledge is to keep grinding away on price, not knowing if what you are asking for is realistic or not. The key to a good deal is to watch all the costs, not just the price of the car. A dealer can sell a new car below invoice and still make money in other areas. There are 4 parts of a car deal where negotiation can take place, and you want to control them all: (1) financing, (2) trade-in price, (3) new or used car price, and (4) dealer add-ons. The dealer wants you to make decisions in all these areas during your dealer visit when you are under time pressure. You want to make decisions in as many areas as possible before you go to the dealer, and then follow your plan.

Car Coach has given you the knowledge to visit the dealer with confidence. You should take a few tools for your Do-It-Yourself inspection (used car), a good friend to keep you to your plan, and a folder containing your research:

a pad of paper, pencil, highlighter, calculator
a printout showing the researched value of your trade-in
printout of the Pocket Buyer's Toolkit containing checklists for selection, inspection, dealer add-ons, and negotiation strategies
(new car) a New Car Central printout showing the dealer invoice price for a new car with the options you want
(new car) a New Car Central list of dealer incentives and rebates
(used car) a printout showing the average retail price for the used car you want
(used car) the address of your mechanic and means to pay for a used car inspection
(used car) DIY inspection kit consisting of a flashlight, mirror, tire pressure gauge, and weak magnet
a copy of your plan including your ultimate target price for the car, taxes and fees, and the dealer add-ons you decided to buy

Arrange for Financing Before You Visit

Reasons to get a pre-approved loan before you visit the dealer.

You can usually save money by getting your loan at the credit union.
You can take time to find out your credit score and improve it if necessary. This could save you hundreds, perhaps thousands in interest payments. Here are a few suggestions to improve your credit score.
You won't have to give your social security number and sensitive financial information to strangers, and perhaps answer embarrassing questions. Your credit union already knows your financial situation and has most of the information for a loan application already.
Your best loan may not be an auto loan -- perhaps a home loan equity or second mortgage may be to your best benefit depending on your tax bracket and other financial obligations.
No surprises in the F&I office -- No need to worry that you may not qualify for a good loan or that an unexpected high interest rate or short loan term will "break the budget".
Simple declining balance loans. Dealer loans may be "Rule 78" loans where you pay almost all the loan interest the first year. If you have this type loan and "total" the car, the car is stolen and not recovered, or sell or refinance in the first year or two; you are likely to owe more than the car's worth.
You can negotiate with the confidence of a cash buyer.

It's easy to fill out the online loan application forms: just click on the image in the upper right of the screen. You may need data from recent salary stubs, the outstanding balance from your other loans, and a copy of your income tax return. After you fill out the application, an email will be sent to you that confirms the amount and terms of your pre-approved loan. Alternatively, you can speak to a loan specialist by telephone or visit any branch office.

When you are pre-approved, you have the assurance that you may borrow the money to buy the car you want and will know the term of the loan, the interest rate, and the payment.. Remember, it's much easier and less stressful to get your loan pre-approved now, and you will save money with your low interest rate credit union loan.

Handle your Used Car Trade-In First

Handle the trade-in negotiation first when you visit the dealer. Tell the dealer that the most important thing is that you get a good price for your used car. Remember that some used cars are in demand and will bring more than wholesale, and other bring less -- maybe a lot less. Tell the salesperson that the sale of a new car will be contingent on the amount you get for the trade-in. Be sure to tell him that you are visiting several dealerships. Don't begin to discuss the price of a new car or anything else until you have received a good price for your trade-in.

Make the salesperson believe that you are a real buyer and that once the trade-in price is settled to your satisfaction that the rest of the transaction will go more smoothly. A good price for your trade-in needs to be evaluated by comparison with the wholesale price for your car that you found with Car Coach. The dealer may fix up and sell your car on their used car lot (to get the highest price), sell to another dealer (getting a lower price), or sell to a wholesaler who will then auction the car. The dealer will probably offer a trade-in figure that will permit him to make money at the auction price, even if he intends to sell the car off his lot.

If the dealership agrees to a good price and then tries to take it back later, get mad and be prepared to walk out. If you get a firm price for your used car, the dealer should stick with it -- emphasize the importance by writing the price down and have the salesperson put his/her initials by it. Do not accept an allowance toward the purchase of the new car -- get a hard price.

Negotiating Vehicle Price

It is possible to buy a new car with no face-to-face negotiation if you pay with cash and no trade-in is involved. This is possible because new cars of the same year, make, and model have identical warranties, mileage (none), and condition (new). The strategy is to decide exactly what you want, then request quotes using either AutoMall to contact dealers that list similar cars or using New Car Central to "build" a custom car and use it's automatic referral system. The dealers will contact you with their best price and you choose between them. See New Car Purchase Pointers.

If you have a trade-in, want to explore dealer financing, have time for dealership visits, and/or are looking for a pre-owned vehicle then you will probably end up negotiating with the dealer. See New Car Purchase Pointers or Used Car Negotiation Tips.

Your Advantages
A well-informed consumer can generally do rather well buying a car. Here are some of the buyer's advantages:

You can pick the time and place
You can go to any dealer when the time is right for you. Maybe the best time is near the end of the month or the end of the quarter, when the dealer needs just one more sale.

You can walk out -- the seller can't.
What's more, the seller can't make you stay. You have the power to initiate selling and terminate it -- the salesperson can't do either.

It's your money.
You have the right to spend your money how and when you wish. The salespeople have to defer to you if they want you to spend your money with them.

Your power grows with time spent -- the dealer's power weakens.
As salespeople put in time and effort and negotiations progress, they become more concerned about losing the sale -- they don't want to fail after investing so much time. Your power increases right up to the point where you sign the contract -- and then it immediately decreases. As you agree on early items like the trade-in price, you become a probable sale and are even more valuable. The salesperson will do almost anything to avoid a deadlock, while you can allow the deadlock and walk out. You should get enough power and respect to make sure that what was promised to you is delivered.

You can come armed with information, really know what you want, and have your financing in order.
Through use of Car Coach, you go in knowing what a good deal is, and know there are other places to buy your car if this dealer doesn't please you. If you know what a good deal is and convince the dealer that you're a real buyer with money, the sales force should just try to settle.

Leave if a Dealer uses Unfair or Annoying Practices

Misleading Advertising - bait and switch, misstating lease payments to be monthly payments, etc.
Large Deposit - requiring a deposit when presenting an offer or a large deposit to seal the deal
Four Square System - statement of desired payment, desired trade, desire new car price, and your signature. Then the salesperson starts to work on each square separately, starting with a figure far apart from yours and scratching through successive figures. When through, the paper is illegible and the buyer is frazzled and confused.
Excessive Turnover - new people are constantly introduced into the deal asking for more money, each free from the verbal commitments made by other salespeople.
Nickle and Dime - after negotiations are over, the salesperson leaves and returns with note after note, each asking for a little more money.
Yo-Yo contracts - contracts that allow the dealer to change the deal after delivery. This may result in a dealer call informing you that "Your contract wasn't approved at the figures you wanted". Many times you can't do anything except pay the higher amount, since the dealer has sold your trade-in before they call.
Lost Keys - salesperson can't "find" the keys you gave her to get your trade-in appraised, making you a captive customer and giving more time to convince you to buy a car.
Disrespect - as a potential buyer, you deserve to be taken seriously and treated respectfully. If your salesperson makes you feel uncomfortable, tell them flat out what is bothering you -- salespeople have bad days sometimes too. If the behavior doesn't improve, just leave.

Negotiating Dealer Add-ons

Discussion of the add-on items usually happens in the dealership's finance and insurance (F&I) area. You visit the F&I office after you sign a contract to buy a vehicle. Part of the task is to fill out paperwork and sign documents; and almost always there will be discussions about leasing the vehicle, financing through dealer lenders, and the features of various add-on items that make money for the dealer. Don't feel pressured to accept dealer installed options you don't want just because they have already been applied to the car. Ask that they be removed or that they provide a car without them. If they really want to sell the car, they will drop the price or remove the options from the contract.

Follow the strategy you set for yourself before you walked into the dealer. You should have a budget that includes a "not to exceed" figure as a part of your strategy. It's easy to spend hundreds or thousands of dollars in F&I if you don't hold to your budget. You should have a pre-approved loan or other arrangements so you can pay cash. If you finance through the dealer, the F&I salesman can play with the monthly payments to make it sound like you are not paying much more for the extras. You keep things much simpler and make yourself much harder to manipulate if you already have arranged your financing.

Ask the F&I officer to explain the appearance of any last-minute fees. If they seem redundant or unjustified, protest them! The negotiated price is already providing the dealer with a fair profit, so additional fees should not be paid. Necessary Fees that should be paid:

Destination Charge (new car)
Sales Tax (if applicable)
License and registration fees (vary from state to state).
Documentation Fee -- this should reasonably be lower than $200 or so.

Extended Warranty
If you are almost sure you will keep your new car for 5 years or more, you might consider an extended warranty. If you think you will switch cars within 4 years or less, extended warranties may not make sense since the factory warranty usually covers the first 3 years. Remember, while extended warranties are expensive, they are negotiable and are also offered by companies not affiliated with the dealer. Do your research so you can negotiate for a reasonable price. If you have the misfortune to need an expensive repair after your factory warranty expires, they are well worth it.

Credit Life Insurance
This specialized term insurance pays off the auto loan balance if the insured is disabled or killed. The price may be higher than similar term insurance from an insurance agent, and term insurance is more flexible since the proceeds can be used to pay off the car loan, mortgage, and other bills.

Auto Insurance
You probably already have auto insurance on your current vehicle and have already talked with your insurance agent about insurance for your new car. Bring an insurance card, since you need to show proof of insurance before you leave the dealership with your car. If this is your first vehicle, research insurance companies in your area and get a price quote before you sign papers for a car. Auto insurance fees are often significant and need to be included in your budget.

Anti-theft Devices
The dealer will likely offer alarm systems and vehicle recovery devices such as LoJack, window etching with the VIN, etc. Alarm systems installed at the factory often work better than aftermarket versions, but may not have all the newest functions. Recovery devices such as LoJack aren't really alarms, but send location information so that police can find the car if it's stolen. Ask your insurance agent if having one installed would provide a lower premium.

Rust proofing
Most late-model cars and trucks are effectively rust-proofed at the factory and come with relatively long rust-through warranties. Many automakers recommend against additional rust proofing, and in some cases additional rustproofing will void the rust-through warranty. Rust may occur as a result of deep parking lot chips. Buy a tube of touch-up paint along with the car and fill in minor chips quickly to prevent rust.

Paint Sealant
Generally no longer needed because of clear coat paint used on today's cars.

Fabric Protection
The manufacturer's interior materials are usually treated at the factory. To keep it looking new, Scotchguard (available at most hardware stores) is often used.

Appearance and protection packages
Factory floor mats may be of interest because they give a perfect match to the shape and color of your car's interior.

Administrative Costs
The dealer should not charge separately for this cost of doing business.

Dealer flooring charge
The dealer should not charge separately for this cost of doing business. The manufacturer already covers the cost of dealer inventory for new cars.

Delivery and Handling (D&H)
New car delivery is paid for with the "destination charge" and does not need to be paid for again.

Advertising Fees
If the dealer has inserted an ad fee into the contract that was not shown on the invoice, ask that it be removed. Advertising is a normal cost of doing business.

Carefully Read the Contract

It is your responsibility to read and understand everything on a contract or agreement form before you sign it. If a sentence or paragraph doesn't make sense, stop and read it again -- it could save you thousands of dollars. If you find terms or phrases you don't understand, don't sign. Have someone you trust review it and explain the parts that are unclear to you. Be sure to read every part of the contract -- the back pages often contain important information.

Never sign anything with blank spaces where words or numbers could go -- unused spaces should be filled in with "N/A." Make sure that every number is filled in -- price of the car, trade-in allowance, and loan terms if the dealer is handling the financing. Loan terms include amount borrowed, date of the loan, interest, and when and where to make payments. Use a calculator to make sure the numbers add up -- remember, it's your money!

If you don't understand the numbers or you can't make them add up, ask for an explanation. If you don't understand the explanation, take the contract to someone unconnected to the seller who will help you. If a salesperson is rude, condescending or abrupt when reviewing the numbers with you, remember that sometimes the salespeople themselves may not understand the numbers, since the computer generates the figures and fills in the spaces based on data entered by several people. Find someone who does understand.

Many contracts include a paperwork processing or conveyance fee -- like the "shipping and handling" charge for mail order. This fee covers the cost of doing the paperwork associated with the sale: filling out the forms and contracts and sometimes sending an employee with the paperwork to the DMV to register the vehicle. Even if this fee is printed on the form (not filled in like the other numbers), the fee is negotiable just like every other aspect of the sale.

If you trade-in a car, dealers reserve the right to reappraise the vehicle when it comes time to complete the deal. Some customers may damage the vehicle in an accident or even remove audio components or change tires. On the other hand, some dealers may try to downgrade the trade-in's value when it's time to complete the deal. If there has not been a material change in your car or the market, you should have the right to back out of the deal -- check the contract language.

Always get a copy of what you sign, including the front and back pages. Make sure that all the numbers and terms unique to your contract are legible on all the copies. Get a copy of the contract with all the terms filled in before you sign the original. If the copier is broken or doesn't copy legibly, don't sign.

If there is a need for a replacement contract, make sure that everything from the initial contract is included. All the promises you've gotten in writing should be carried over. If they aren't, don't sign. All the options should be spelled out in descriptive terms as well as manufacturing order codes. When contracts are revised, the newest contract date and time governs. This means that all the extras you obtained and spelled out in the previous contract are gone if you sign a new contract without them.

Until an authorized member of the dealership staff signs the contract, all you've done by signing is to tender an offer. Only a manager or an owner is authorized to sign a binding agreement. Make sure a manager signs the copy of the contract you have in your possession before you take your final leave of the dealership.

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