buying a new car

If you're planning to buy a new car then you're planning to be taken advantage of. It's as simple as that. "Certified pre-owned" or whatever term local used car dealers use is definitely the way to go. And don't even bother looking at a car from someone who won't give you the Car Fax report for free. Last car I bought was a three-year-old Chrysler Sebring. It's nothing fancy, but it was owned by the daughter of the dealership's service manager: in pristine condition and excellent shape. I love it. Buying new I wouldn't have been able to get anything remotely as nice unless I was willing to cough up many more thousands of dollars for a car that would depreciate by 60% in the first four years.

Thanks for the response. I am definitely going certified pre-owned. I should have stated that. I was considering getting my own carfax reports but thats good info to have.

Anyone else?

Sorry--I should have inferred that from your name. Re: Car Fax reports, they used to be affordable for individuals to access when planning to buy a car--I think a fairly low fee gave you access to unlimited searches for a specific period, maybe c.$30 for a month? But there was so much online trading/sharing of access information that they raised their fees to ludicrous levels. Most dealers we spoke to when shopping around spring 2010 would give us a copy for free. The reports are not perfect, obviously, but they certainly steered us away from some cars that had been written off by insurance companies then rebuilt and put up for sale.

I suck at negotiating. Ever online site will tell you that you absolutely have to be willing to walk away from the table if you don't like their offer. The last two cars we bought we were able to bring the dealer down by about $1k from what they were advertising--not a huge deal but they have to make money too. There's a lot to be said for believing the people you're dealing with are trustworthy. We did walk out of a lot of places because we just didn't feel comfortable dealing with the people based on nothing more than vibes. Ask around to see who's reputable in your area.

Certified used is a good option. As Er said, if you're not comfortable, walk away. You don't owe the dealership or the salesman anything - if you feel like ending the negotiations, just thank them for their time and move on. Don't negotiate based on monthly payment if you can....purchase price is the key.

Do not finance at the dealership. They "mark-up" the interest rates to make more money. For example, you may qualify for a 4.5% loan from a bank. The dealership would, in turn, mark up the interest rate up to 7.5% taking the additional 3.0% as profit. They tried this with me and I called them on it. I pre qualified for a 4.5% and they offered something between 7-8%. In some states, marking up the loan i illegal, but not where I live.

Car sales is the one of the few businesses where they make money by treating their customers like crap.

It's a bit long, but an interesting read. It shows how some dealerships and salesmen operate.

You should still at least consider buying new if you are looking at certified pre-owned cars.

Any car, new or used that you buy from a retailer will instantly lose value when you drive it off the lot.

Try buying a used car from a dealer and then try to trade it in anywhere the next day and see how much you get for it. Or try selling it on your own. No one will pay you the same amount that they can buy it at a dealership for.

With a used car you are closer to the manufacturer's waranty expiring. And a car fax report won't tell you exactly how a previous owner drove it.

You also get better interest rates and terms on a new car.

And since you are starting at zero, the new car will last longer than the used car and go further before you start getting into higher cost scheduled maintence like spark plugs and belts. Will the tires on the used car be brand new?

There is also the intangible value of driving something nice and new and feeling it will be more reliable for longer.

In any event, new or used, go to your bank first to get a pre-approved interest rate. If the dealer beats it then great. At least you eliminate one unknown when you go to the table.

Good advice. We needed to buy in a hurry and when we decided on the car we wanted, we asked if we could pay with a credit card (then we worked out a better loan with our bank to pay off the charge on the card but kept our cash-back rewards). The salesman say no way--he'd let us put MAYBE 20% on the card but no more. He went to check with the owner, who wandered over. As we talked it turned out he was an alum of the college where my wife and I teach, and he let us put the charge on plastic. Car dealers today don't make money by selling cars:they make it by financing loans. Walk into a dealer waving a huge wad of cash saying you want to buy a car RIGHT NOW at sticker price, and you'll have to wait behind all the barely-qualified for a high interest loan folks who are the dealers bread and butter.

loan shark wrote:

Do not finance at the dealership. They "mark-up" the interest rates to make more money. For example, you may qualify for a 4.5% loan from a bank. The dealership would, in turn, mark up the interest rate up to 7.5% taking the additional 3.0% as profit. They tried this with me and I called them on it. I pre qualified for a 4.5% and they offered something between 7-8%. In some states, marking up the loan i illegal, but not where I live.

Car sales is the one of the few businesses where they make money by treating their customers like crap.

use the internet. most if not all car dealerships have an internet sales person. look online to find the car you want. email multiple dealerships requesting internet pricing. car dealerships know that people can go anywhere to buy a car today so they are willing to offer prices by email that you would spend hours getting to inhouse. the last couple of cars i purchased i did not go to the dealership before being ready to sign the papers. (of course i drove the make and model beforehand)

New/used Purchaser,

ALWAYS do CURRENT research before you state that you will NOT buy a NEW car. I JUST bought a NEW 2011 Honda CRV two weeks ago for right on $20,000, and all the Certified Pre-Owned ones around here were for MORE than that, with 40,000+ miles on them. No thanks. Of course some of them have leather and moon roofs and are AWD instead of my 2WD, but I didn't want any of that.

Don't ASSUME the used cars are better deals. In many cases TODAY, then are not. 3 years ago? Yes. TODAY? Not necessarily.

If you can find a promotional apr (0-2.9%), you may be better off buying new than financing a cert pre-owned. The savings on buying a certified pre-owned are not that great over buying new. Also, most good cars these days are vitrually repair free for the first 3-4 years. After that, things like brakes, tires, etc. start to wear out. So, if you combine the savings on the interest rate with repair costs, new vehicles aren't such a bad deal.

Also, if you are looking at a domestic vehicle (Ford, GM, etc.), expect to pay WAY under the sticker. US manufacturers have a big mark up, but give out big rebates and "customer cash" and still have room to negotiate down while leaving the dealership with a profit. Foregin manufacturers are more price disciplined. You can still save a few hundred with some good haggling, but not nearly as much as you can expect with a US manuf.

Whatever you do, get approved for a bank loan first. Then, go to dealership 1; negotiate like crazy for the price (not the payment) and then negotiate like crazy for the APR. Don't sign anything. Ask the dealership to give you a copy of the retail installment contract with the APR and sale price. They are actually required under Regulation Z to present you with the terms of the loan prior to requiring you to sign so that you can shop credit. If you can convince the dealership to let you leave with the retail installment contract, go to the next dealership and ask them to beat that deal. Repeat until you get the best deal.

Great information everyone. Thank you.

Precious Roy wrote:

Then, go to dealership 1; negotiate like crazy for the price (not the payment) and then negotiate like crazy for the APR. Don't sign anything.

You can't really negotiate unless you are willing and prepared to sign something.

You can say I want $5,000 off the sticker price and the dealer may say OK if you sign today.

Walk out the door and you are not guaranteed to get that price when you come back. You may but you can't be sure.

You have more leverage to negotiate if you are actually ready to do something.

asdffsad wrote:

http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html

It's a bit long, but an interesting read. It shows how some dealerships and salesmen operate.

Fascinating article. Thank you for taking the time to find and link to it.

Jeep or SAAB are the way to go on certified pre-owned.

Fascinating article. Thank you for taking the time to find and link to it.

Agreed!

Hoser, eh wrote:

As we talked it turned out he was an alum of the college where my wife and I teach, and he let us put the charge on plastic.

loan shark wrote:

Do not finance at the dealership. They "mark-up" the interest rates to make more money. For example, you may qualify for a 4.5% loan from a bank. The dealership would, in turn, mark up the interest rate up to 7.5% taking the additional 3.0% as profit. They tried this with me and I called them on it. I pre qualified for a 4.5% and they offered something between 7-8%. In some states, marking up the loan i illegal, but not where I live.

Car sales is the one of the few businesses where they make money by treating their customers like crap.

If the dealer let you charge the car that means he made enough profit on the deal that he can eat the 2 or 3% that he will get charged and still make plenty of $ selling you that car. Favor? I doubt it.

Dealers sometimes do mark up the finance rate, but they won't do so to a savy buyer who will walk away if the rate is not competitive. The dealers captive finance arm will pay the dealer a small fee (around $500) if they write the contract at the "buy rate" (don't mark it up), for many deals that is more than they would make then if they bumped it up a point or 2. Banks will usually also give the dealer a flat fee for buy rate deals. Frequently the dealer can get you the best rates around.

Do your homework.

I want to emphasize something a couple of posters above already mentioned. Negotiate on the sale price of the vehicle and NOT THE MONTHLY PAYMENT. That pisses me off to no end when a salesman repeatedly asks me what I am willing to spend a month.

I have a good friend who buys absolutely everything based on what he can afford to spend on a month to month basis. He's in debt up to his ears and no long term savings whatsoever. I'm no financial wizard by any means but that is about the worst way to handle your finances.