Having an existing offer is a good idea, but I wouldn't totally write off dealer financing.
When you go through the dealer for financing, they get a portion of the interest that the bank takes out (finance commission). That lets them take the price of the car below what they paid for it, because they can still make a profit on the financing and trade-in.
Apart from that, there are sometimes pretty big rebates and rate incentives that OEMs offer when you take their financing.
I built a system that estimates what monthly payments a dealer can offer a customer based on what incentives they might qualify for. It's pretty common to see a difference of several hundred dollars a month between the best combinations and the worst ones (even with the same term).
Even better, email all dealers within a certain distance of you and just ask for the out the door price. Many wont respond, but a few will. Negotiate with those over email.
Also, do not use financing. Buy a car you can afford in cash.
I bought a Nissan LEAF new in 2014 and got four-squared. I knew the US inventory of LEAFs I was willing to buy and about what each was listed for, had no trade, and was willing to pay entirely cash.
As it turns out, they [NMAC] had 0% either 5 or 6 year financing and so I took that.
1. Cross out the upper left corner, the one that says "trade in". You're not trading in your old car. You're selling it private party for more money.
2. Cross out the lower right corner, the one that says "monthly payment". You're not taking out a loan. You're paying cash.
3. Cross out the lower left corner, the one that says "down payment", and write 100%. You're not taking out a loan. You're paying cash.
4. All that's left is the price of the car. That is what you negotiate.
Some dealers won't take cash, because it eliminates their ability to engage in deception. If you encounter such a dealer, walk out. If they refuse to let you walk out, call the police.
Tip: you can avoid 100% of dealer nonsense and idiocy by buying a car without going through a dealer. For new cars in the US, the only way to pull this off is to buy a Tesla or a few other boutique EV carmakers. The vast majority of carmakers have no sales channels for new cars other than dealers. You could of course always choose to buy a used car and avoid buying them from dealers.
This is pretty much my approach. I did buy a new jeep in 2017 but went through Costco car purchasing which has a fleet contract (I guess?) - because I was dealing with the fleet sale guy. We were able to get all the options we wanted, paid cash, came back two days later and picked it up. Painless.
I bought a Subaru with Costco as well a couple years ago. Super easy, walked in, was presented a price list for the vehicles I was interested in showing the total price. The price was slightly better than I thought I could negotiate for.
Dealing with fleet sales in general is one of the better strategies and if you have the hookup with someone who deals with fleet dealers it can save you time and money.
Pandemic market craziness made a lot of them not as good as they used to though.
An auto loan isn't necessarily a bad move when you can often get one that is at a lower interest rate than what your cash will yield in a high interest savings account. For instance, you can get a 48 month loan on a civic at 3.9% and a 5.0% yield on that cash.
These are stupid games. Yes, if you have the cash to buy the car, you might consider playing stupid games. (But watch out for income taxes on that "5.0% yield". You might be playing for nothing.)
If you don't have the cash, which is the case for the vast majority of people who take out auto loans, there is no possibility of playing the game anyway. Don't buy a car you can't afford.
This isn't elitism or gatekeeping. Nobody needs a new car. We are on Hacker News. Compound interest is the ultimate financial life hack. Either you use it to your advantage, or other people use it to take advantage of you.
I mean, out of college a while ago, I literally got a 0.5% APY car loan that my accountant told me I should, under no circumstances, pay down early. I bought a new car that I've essentially done nothing but do oil changes on for 10 years and I can essentially sell it for about what I paid for it 10 years ago and got compound interest on money I didn't have at the time, to buy a car that was essentially as cheap of a new car as I could get.
It's not that it's likely, but you can do the math on if the rate offered is worthwhile. It's probably not the case now that rates aren't in the 0-1% ranges and there's a chance they'll go down in the future, but "getting a loan for 1% and then investing in something that gets 4%" is essentially the underpinning of the fractional reserve banking system that's making a lot of money. You may as well see if they'll let you get it.
It's a stupid game because it's really really rare for this kind of arbitrage to exist in the system, especially if you do the computation correctly and count after-tax income rather than pre-tax income.
In the rare instances where you profit, congratulations, I guess? I haven't ever heard of a single person who got rich off of car loan arbitrage. None. But I know tons of people who got rich off of never borrowing a car loan. A $700 per month payment stream invested at 5% over 30 years is half a million dollars. I'd rather have $500000 than a permanent car loan.
I see your point, but I don’t know if people in the financial position to do this do it to get rich. I always saw it as creating small bits of edge in the game.
Also, to this point, the interest arb doesn’t work out the way most people use it because they don’t account for the principle. You’re still going negative into a depreciating liability if you only invest the value of the car. It’s just you’re not going negative with interest.
To go fully not negative requires a lot more cash to generate the interest income to cover the entire payment.
I like the idea of having enough cash to pay off the loan immediately but having the loan (and interest arbitrage, however small) to keep myself liquid + make the monthly cashflow of My Personal Self, LLC, work for me in more optimized ways.
The credit score boosting as a result is also attractive.
But I recognize this requires me to have that much liquid cash anyways. Which a lot of people don’t so they get unfortunately put on the losing side.
Even pre-tax interest arbitrage opportunities are rare, never mind after-tax arbitrage. Think about it. If you can get 5% by depositing money in a bank, so can the dealer. If the dealer can get 5% by depositing money in a bank, why would they lend to you at a lower rate? The only possible reason is if they've made enough money on the car sale (or indirect money such as future service profits) to subsidize the arbitrage loss. It's fundamentally wrong to think that you can somehow beat the system. What's really happening is that you just aren't aware of how you are ultimately the one paying for your so-called profit.
Which bank has these mythical 5% interest savings accounts? I’m pretty sure that for most middle-class people, savings interest isn’t a real thing and can be safely disregarded when making decisions.
In the US? Ally offers savings accounts with great rates (usually 50% off prime, so currently 4.25%) and in my experience is a fantastic bank. Way better than credit unions I’ve banked with.
https://www.ally.com/bank/online-savings-account/
> 2. Cross out the lower right corner, the one that says "monthly payment". You're not taking out a loan. You're paying cash.
>
> 3. Cross out the lower left corner, the one that says "down payment", and write 100%. You're not taking out a loan. You're paying cash.
Nope, if you have cash don't mention it, otherwise they will play hardball on the price since they now know they will not make money on the financing.
Tell them you are willing to go with their financing if you can get the price down. Get the financing then immediately payoff the loan in the first month.
That's called stooping to their level. Yes, you can profit that way. But there are other ways to recoup that same profit, for example by being a better negotiator, or choosing a car that isn't sold through dealers and therefore is sold at a fixed price (as I mentioned in my original comment).
I know dealers engage in deception to increase their profit. I would prefer not to do the same in my personal life. I want to live ethically and honestly.
There is no deception, I believe the dealer makes mon ney when delivering the loan, they do not partake in the interest. The lending banks acccount for this in the offered terms. Some banks may claw back from the dealer when a loan is paid off quickly but I think that is rare.
Eh, look, I think there are times when you should withhold information and can do so ethically. If you really want something desperately in a negotiation, best not to let them know how desperate you are. But I don't feel that financing is one of those situations. If I know that I won't finance but I choose to lead the dealer to believe that I might finance, then the price I get in the end isn't the true price, it's the "price assuming I finance." The dealer won't be happy, and you know what they say about car buying -- you're buying the dealer as much as you're buying the car.
Ever since Tesla has emerged as an alternative, there's just no point in going to a dealership anymore. Tesla doesn't care how I pay them.
But then you have to drive a Tesla? Limiting the available cars you’re willing to purchase strictly to adhere to a perceived moral high ground feels incredibly naive to me. And privileged, tbh. Teslas are in no way affordable.
Who buys a car for themselves based on an arbitrary criteria of what other, unrelated people can afford?
The person buying the car shouldn’t be shamed for prioritizing what they feel is important in the buying process. It’s being driven by the person buying the car, not the broader public.
A Tesla costs less than an average new car in America. If Teslas are unaffordable, then so are other new cars.
I also mentioned buying used cars. My approach in no way limits the range of cars available for me to purchase.
If you don't like it, well, it's my life, not yours, and I detest the dealership experience. I get to live my life how I want. In a nation of entitled whiners, this is the one thing we are truly entitled to do. You can be different.
An apples to apples comparison means ... you should be picking cars that are roughly equal in price. You didn't. So it isn't an apples to apples comparison. You're contradicting yourself.
Look up what the word "average" means. If you are accusing Tesla buyers of buying privileged expensive cars, then you are necessarily also accusing the vast majority of new car buyers of the same thing. There's no way around it.
Toyotas and Kias are not representative of average new cars in America. Teslas are.
Apples to apples means comparing based off of the objectively observable traits of the cars in question: seating and storage capacity, etc. The price of the cars is more or less arbitrary. Comparing cars on price alone makes no sense. A porsche 911 is multiple times the cost of a minivan, does that mean its utility is that many times higher than a minivan for a family of 4?
The point remains. If a Tesla is a privileged expensive purchase then so is the average new car. There is no possible way of refuting this statement. It is simply mathematically unavoidably true.
The point remains. If a Tesla is a privileged expensive purchase then so is the average new car. There is no possible way of refuting this statement. It is simply mathematically unavoidably true.
Tesla redefines luxury. Traditional luxury car snobs object mightily to this new definition. In a way, I can understand their view. If some new group of people comes in and redefines a word that you've been using for decades, then it's normal to be upset. For example, for me, crypto will always mean cryptography, but it seems that normal people think crypto means cryptocurrency now.
For now, let's get past this initial disagreement by using a different name. I've seen people use the phrase "techno-luxury" to describe what Tesla is doing and to distinguish it from the usual notion of luxury cars.
Luxury cars, as I understand it, are characterized by some or all of the following things: physical comfort, richness of sensory experiences, quality of materials and build, noise reduction, and at the very high end of the market, "quirks and features" such as automatically opening and closing car doors, refrigerators in the back seat, umbrellas inside the door jambs, and so on. There is a category of luxury such as Ferrari or Bugatti that emphasizes performance to a certain extent, but I really really doubt that many people will take their Bugatti out to the track for a day.
Techno-luxury, on the other hand, emphasizes entirely different quirks and features: app access, long-term climate control (4 hours+) for when you're sitting in the car a long time, in-car youtube, in-car netflix, in-car video games, autonomous driving capability, built-in dashcam viewable from the app, location tracking, valet mode and other security features, and so on. There is some overlap between luxury and techno-luxury, in that some traditional luxury cars have some of these features, but Tesla still does it better than anyone else if you are specifically looking for techno-luxury, which I am.
Luxury is build quality: not just a list of features, but the care and effort taken in assembling all the parts into a car: tolerances, alignments, finish quality.
Tesla fails all, with frequent misaligned panels, paint bubbling, ill-fitting parts, etc. It has software bells and whistels, but shitty build quality for the hardware.
20+ years ago, we did a trade-off in the datacenter, replacing single piece of expensive hardware with multiple copies of cheap hardware, with software to patch over the deficiencies. That doesn't work as well when the product is a single piece of hardware.
With some smart software, I can run 3 servers at 50% uptime each, and get 100% uptime. I can't get one nicely assembled car from two shitty ones.
I've not heard of build quality described as luxury. I think for most people functionality and bodily integrity is a basic requirement of a car, not a luxury item.
You're not buying a new car every day. As long as you have one good car, it doesn't matter very much to you how badly the other ones of the same model are built.
See my other comment above. If they sell you a car based on the assumption of financing profits, and you don't produce those financing profits for them, then yes, in my view, that is deceptive.
Ten years ago, there was no real alternative. Now there is, so I just figuratively tell dealers to fuck off and take my business to a competitor that doesn't play deceptive pricing games.
meh it's an axiom from caveat emptor. I'll pay off a loan as quickly as I like as long as I stick to the text of the agreement, it's not dishonest in anyway.
first of all, if a loan allows early payoff without a penalty, then it's your prerogative to take that option anytime you feel like it with absolutely no moral qualm. that's the point of written down contracts. you are under no obligation to discuss your future financial plans with the sales staff, nor what strategy you plan to take. they in turn are free to make any deal they wish, and if they offer a deal whereby you have an option, they have offered you a deal whereby you have an option. you don't need to lie, but it's really irrelevant because the only thing that matters is the contract - if either side actually cared about something that isn't written down, then shame on them. "assumptions" is no part of it.
secondly, it factually just doesn't work that way. you could straight up tell them you want to pay it off tomorrow. they won't give a shit. if they "make money on the financing" via some incentive, they get paid when they close the loan regardless of when you pay it off. if you pay it off early they don't even know about it and could care less. and if the finance company cared, it wouldn't be an option or it would have a penalty.
you don't need to, nor should you, "stoop to their level". simply go in, pick a car you like, tell them what you want to pay. if they say "there's a better price if you finance" then either take that deal, or counter-offer the same in cash, or don't and leave. if they say, sorry i can only do that if you finance, then either take the financed deal (sometimes the rates really are quite good) or ask if it has a prepayment penalty: "so, if i pay that off in full next month, there's no penalty and you still give me this price?". then make them show you in the paperwork where it says that.
it's fine to not want to play games with deceptive dealers, but you are certainly under no moral or ethical obligation other than to hold up your end of whatever deal that is made.
I'm with you except the part where you say to "simply go in." I see no reason why I should go in. The aggravation of interacting with a dealer is not worth the pennies I might potentially save (but only potentially, and only if I do everything perfectly, and at the risk of losing my shirt if I mess up even slightly).
I want fixed price transactions. Dealers do not give this to me. Tesla does. Therefore, I go with Tesla. You don't have to. But you can't, and you shouldn't, advise me to do something that I plainly dislike doing. I have already made it clear that the money is not the issue, it is the principle behind the thing. Lack of fixed pricing is the precise thing that I find objectionable.
If a dealer, or anyone else, gives me a different price depending on my method of payment, then I am not going to be your customer. Full stop. I'm not going to try to game your pricing. I want to know that you are engaging in this practice, not so that I can exploit it, but so that I can avoid it.
We then fundamentally disagree on the principles that comprise honesty and integrity. I do not agree that just because something is in a contract it is automatically honest and ethical.
Contract or not, almost anything you to do a car dealership is moral IMHO. Just as it is the first duty of a prisoner to escape, it is a consumer's duty to rip off all businesses (as distinct from real people) that you interact with, and dealerships are among the most reprehensible.
Even if you adopt that point of view, I still argue that not buying from a dealer at all is the best way to stick it to dealers, far better than becoming their customer and attempting to win at their game.
I would say costing them money is better than not giving them money, if you goal is to rip them off. This is what happens if you get the "we'll finance you" price but pay it off on month 1 with cash.
That may be strictly speaking true, but it conflicts with another equally important priority: I want to minimize interaction with dealers as much as possible, precisely because I find them reprehensible.
The terms of the loan would allow you pay off at any time. That's fine. Ethically, it's exactly like paying off your credit card at the end of the month instead of making the minimum payment. Or paying off your mortgage when you have the cash.
This is a straw man. We all agree that legally, one is allowed to pay the loan off early. The question is: do you lie to the dealer and say that you're going to finance, when you're not really going to finance?
I once got a long-term mortgage and paid it off in full within two months. The contract of course allowed me to do this without penalty. But in this case I told the underwriter that I would be doing exactly this. They were still happy to underwrite my loan.
Personally, I would rather tell the lender the truth in this instance. If they don't want my business as a result, then I want to know this information, because it affects my purchasing decision.
I agree with your last paragraph generally, but I absolutely do not agree that it applies to this situation - there’s nothing unethical about getting financing for a big purchase, then paying it off early with cash. You don’t have any responsibility to explain why you’re seeking financing when you could technically afford to buy it outright - that’s none of their business.
Edit - nevermind, you explain your reasoning in other comments, though I still can’t empathize with it.
Autobytel used to be a great option to go directly to a fleet sales guy. I'd check them out, although you should definitely do your own research on this. used to work for them a long time ago.
No way am I selling my own car. Dealing with someone else’s financing paying off my financing. Letting people drive it around. Potentially sitting on it for months, losing money ever second it sits there. No thank you.
The first problem is automatically avoided if you didn't finance your car in the first place, as I am suggesting. For the rest, if you drive your car until it has lost all value, which is what I do, and typically takes 20 years, then there's no further loss of value no matter how long it sits, and the risk from people driving it around is also lowered. If you really don't want to go through any hassle, then just sell the car to a junkyard as the dealer won't offer any meaningful trade in on a junk car anyway.
I've never bought cars in the UK, but as I understand it, the standard way to "buy" a car in the UK is not actually to buy one, but to lease it. Leasing is its own category of hustle, entirely different from purchasing.
We bought an EV with cash, and the range have almost halved since we bought it. With lease, I guess I get a fresh car (and battery) every few years. And insurance is included.
What kind of hustle can I expect with leasing? (I'll do some research when the time comes for the next car, as we're currently a 4-person 1-car family.)
1. Leasing is like a car purchase but with mandatory financing where the true underlying interest rate can legally be obfuscated behind cryptic language that you can't understand. Quick -- is a "money factor" of 0.0074 an attractive interest rate?
2. Leasing is like a car purchase but with a mandatory trade-in (you are going to be trading back the car that you are leasing, at some point in the future when you return your lease). Unlike a normal trade-in, where you have your car as-is and you can ask around for its value, in a leasing situation you have to predict what the value of your car will be in five years. The dealers do this professionally. You do not. Guess who wins?
3. In places like the US, where leasing and purchasing are both possible, this enables a unique type of scam: a "sale" where the buyer thinks he's getting a purchase but the paperwork actually says it's a lease. So you're paying full price for the car and you don't get to keep the car in the end.
It's a 2020 model, but I bought second-hand from an authorised dealer, and it was actually owned by the sales person. I'll ask about a warranty, thanks!
Only the higher elevations in the PNW get snow, and I don't know how much salt the highway departments use.
My wife said that when she moved from upstate New York to San Francisco, the first mechanic she took her car to asked whether she drove it to the beach a lot. He was not used to seeing the effects of road salt.
It's not about wet, it's about salt. You're on the wrong coast to have to think about rustproofing.
Rustproofing is less necessary on modern cars than it used to be, and dealer rustproofing is pretty much universally worse than third-party (RustCheck, Krown, Corrosion-Free, etc.) but if you drive on salty winter roads for 1/3 of the year it definitely helps things not rust out on you as soon as they would otherwise.
This is incorrect. Rust is a reaction of iron and oxygen. Salt accelerates the process because it is ionized, but not necessary. You can flash rust pure iron in seconds with distilled water.
Furthermore, ice alone is basically inert at the timescales that we experience. It would take eons for pure ice to react enough for visible rust to form. Even if it was cold enough for salt water to freeze, the difference would be negligible because salt and water separate from each other as the water crystallizes into ice.
Also, we salt the roads here. Our freeze/thaw cycle is more frequent allowing for rust reactions to occur throughout the season, whereas a colder climate will only see reactions in the spring. There is no shortage of rust here.
I will give you the best tip to not get ripped off when buying a car: do not buy from a dealership.
The dealer has a staff of people who rip people off all day every day and have experience doing so for years. They have an established process. They have money and time. They have perfected the art of extracting all of the value out of a deal.
You likely buy a car once every N years. You may be okay at negotiating. You may even be good. I guarantee with 99.999% certainty that you are not as good as the dealership by the simple fact that you do it hundreds of times less frequently than they do.
Instead, buy a car on Craiglist. Figure out a car that you want - there are approximately 1000 video reviews for each make and model of car released in the past 20 years on Youtube. Use that to narrow down what you want. Then check the price benchmarking sites like Truecar and KBB for a rough estimate of what you'll expect to pay. Then start to scan FB marketplace and Craigslist for listings. Look for private party (e.g. random people selling their cars), ignore the dealer listings. Be prepared to look at a few cars. Go schedule test drives. If you seriously are interested in a car and think the price is right, pay for a Carfax report. If that is clean (no accidents, not repeatedly registered in different states[sign of concealing accidents]), call around to a few local mechanics and ask them to do a PPI. Should be about $150. They will do a basic inspection to ensure the car doesn't have any obvious issues. If that's clean, make an offer on the car.
By doing this you will pay ~10-15% less than a comparable car from a dealer. Literally nothing in this process requires any special technical or automotive expertise. If you want to be a bit more sophisticated you can buy an OBDII scanner from amazon for $20 and check the codes yourself to further suss out issues. It does take a reasonably more amount of time (call it a month for a motivated buyer) than the dealer. If your time is so valuable, you need a car today or you can't be bothered to do the legwork, then going to a dealer is okay - you'll just pay more.
I'm sure a bunch of people will rush in and talk about how you can get screaming deals at the end of the month, with certain incentives, asking for quotes from a bunch of dealers, blah blah blah. This is true, however it's risky because it's complicated (way more complicated than buying private party) and error prone on your part. You will have to understand the (reasonably) complex incentive structure for dealers, which of course varies by manufacturer. Shopping around is theoretically very good but post COVID my experience with dealer salespeople is that the moment they get the sense you have any sophistication, your emails or calls go straight to the memory hole. There are more than enough people that are easier to deal with than you, so they don't need to talk to you.
In summary, when dealing with car salesmen, the original LLM has some sage wisdom "A strange game. The only winning move is not to play."
Yeah with Tesla you don't need to play that deceptive game with the dealership BUT you are buying a very overpriced car that is constantly lying on its range.
They were, at one point, overpriced, but in fairness at that point in time all other new cars were also overpriced.
The current price is very, very attractive for what you get. The car lies on range only in one particular indicator, the "main" indicator, which is actually in a pretty small font on the screen, and you can get rid of the range indicator by tapping it once. The range estimate given in the trip navigation system is very accurate.
Actually, yes, I have a Tesla and use it as my only car. I am intimately familiar with the repair costs. An ICE car is about three times more expensive to maintain and repair.
Tesla's service centers are on average overwhelmed with work, the vast majority of which is warranty work (therefore unpaid) simply because there is almost no required routine maintenance, and most Teslas on the road are newer than the four years that it takes for the warranty to expire. They are incentivized to build good cars in order to reduce the service burden on their service centers.
Most ICE cars these days have very little routine maintanence. Oil changes every 10,000 miles, everything else lasts longer too.
I’m not sure there is a vehicle on the road that costs 3x a Tesla S to maintain and repair. Maybe a Mercedes S class or some exotic car. Definitely not a Toyota or a Honda.
I’ve bought a number of used cars. Few sellers have the patience to wait for you to coordinate an inspection unless. Some don’t even wait on you to test drive other vehicles first.
Fair point. I agree that many sellers are looking to make a quick sale without much additional hassle. I wouldn't buy a private party car without an inspection and I know that will cause me to lose out on some (good) opportunities. However, it's much more important to me to avoid type 1 error vs type 2. Of course, if you need a car quickly, this can be a problem. But my strong advice is not to be in a position where you urgently need a car in the first place (generally good advice for any negotiation actually). I admit that it's easier said than done in some situations but it's still a good principle.
That is terrible advice. My time has value. I'm not willing to get jerked around by random Craigslist sellers, many of whom are scammers or have unrealistic ideas of their car's value or are actively trying to conceal problems (a pre-purchase inspection by a mechanic won't necessarily catch a lot of serious issues). For those of us with a modicum of business sense and good credit scores it's just a lot faster and easier to buy a new car from a regular dealer (or a manufacturer that sells direct). Sure, they'll try to maximize their profit margin but the negotiation process is pretty simple (unless you're buying something special with limited supply). And you get a proper new car warranty, with "lemon law" recourse if something goes badly wrong.
I always walk in saying "let's assume no trade-in, no down payment, just talk raw car price with me, assume I can pay in cash, then we'll talk about the rest"
This lets me actually have 1 number to focus on and negotiate on, and walk out on. I always say "I'll be back in an hour" and really use that hour to think it over and come to approximately what the price will be.
If you get a 6 year loan, you can do the math dividing it up yourself and then worry about interest later. It's not thaaaat much.
Now. Once you settled on a price, start talking trade-in. The reality is if you know the value of your car on other sites, you generally know what they'll offer. Even with removal of taxes, you can easily calculate how much it is worth. Basically if you get more than $500 more for your car elsewhere, it is worth it.
And now the down payment and interest rate are kinda irrelevant. Their goal is to mess with those but not budge on the value of the car. But since you already did that... Now when you talk interest rates, always reject theirs, then take the next number and basically lower it by a percent. Get them REALLY CLOSE and just force that. The reality is that they ABSOLUTELY have wiggle room within the %. They'll usually try to make cash on you via an extra % or 2. So if they offer you 7% they can easily offer you 4.5%.
The down payment doesn't matter. It is just whatever you put in takes off from the remaining price.
Haha, I think I read this article when it came out almost 20 years ago. This doesn't actually tell you any useful advice other than to get a loan in advance from the credit union before setting foot in the dealer.
Negotiation tactics aside, some useful items are:
- Find out what tax and title should be, assume a $500 "documenting fee" do a notional write up in advance, bring a calculator
- Decide if you are going to get the maintenence plan or entertain it in advance, it can be leverage in the overall deal
- Figure out if you are going to pay for any of their $800 special coatings that are "already on the car" that they will only tell you about at the very end
- Even if you have a good rate from the credit union you may be able to get better or equal from the dealer (manufacturer subsidies). Taking financing from the dealer makes more money for them, so it becomes a lever for you to get the overall price down.
- Take your checkbook (or Amex!) but be ready to bail if they are too stubborn. Leave your contact info and final offer, but the manager already knows you brought your checkbook with you so they will generally come around
I was able to do a large portion for the last 2 i have bought. It wasn't their first choice but they didn't push back too hard either. Amex even has a program for it.
this is best tip that I've personally used. the first time, I wasn't even trying. i dropped my car off for service for the 3rd time for the exact same defect, and was killing time on the show floor. jokingly, i told a sales person if they could make the "lemon" car I could be talked into a new car. I did this on the way to work and did not consider how long the process had taken. My boss called with a "where are you" that I turned into a crisis that required me to leave. The price suddenly started dropping to keep me from leaving. Left anyways as i wasn't really looking to buy.
I ask for an "out the door price" and negotiate on that. If I'm buying a fairly common car, like a Toyota Camry, then this is very easy to do across dealerships. I make it clear that I'm paying cash.
That's money they can flip immediately towards the purchase of another car.
* This won't work well for cars with limited stock. If a model/trim is leaving as fast as it's coming in they will prefer to give it to someone with dealership financing.
* If buying new make sure to be very clear to a dealership if you are calling from out of state.
I'm sure it's different for different dealers. I wasn't talking about anything too limited edition but mass market models that dealerships cannot seem to keep in stock. The thing were supply is just a little behind demand. We've seen a lot of that in the last 3 years, and it's still around for some make/models.
Read it as well. It was eye opening to me that the dealers have this all worked out, have a strategy. Me wandering in like the mark I am.
The article changed me though. I had a guy try the four-square when I showed up and I almost laughed. "Go to your manager and get me the best price he can give me. I've got like 5 minutes and then I'm headed to another dealership."
Another time I played one dealership off another trying to get each to go lower than the other. One soon told me to fuck off so I bought the car from the other dealership. Oh well.
It's not like I was able to screw over the dealers or anything (there is an absolute bottom they will not sell below) but I think when you finally realize you have agency, have the money they want, can walk away, it made the process much less anxiety-inducing.
> One soon told me to fuck off so I bought the car from the other dealership. Oh well.
My proudest moment in my development as a car-buyer was having a one of the managers invite me and my wife into his office, after I guess we weren’t playing along with their bullshit enough (Jesus, I wasn’t even playing hardball yet) for him to try some totally bizarre “look, you don’t seem to know how this works” plus “we don’t need your business” routine on us. It was clearly a tactic because he spent way too much time on it, if all he actually wanted was for us to fuck off.
Utterly weird interaction, and hilarious. We bought elsewhere.
Car buying’s risky and hellish unless you come in armed with knowledge and ready to treat it as a game—a game you’re free to stop playing the very second you perceive you’re not winning. Then it’s kinda fun.
Agreed! I just make sure to buy cheaper vehicles so I don’t worry about spending an extra 5% or 10% if I “get scammed” by the dealer. So they made some extra money? Who cares. I don’t negotiate for my pint and burger either.
> Find out what tax and title should be, assume a $500 "documenting fee" do a notional write up in advance, bring a calculator
A few states have capped or fixed document fees. In New York State, it's currently up to $175 for the dealer, plus any fees you owe to the state for title and registration (should match what the state charges for you to do it yourself).
Many states have no cap and it's no uncommon to find $500-$1000 doc fees. Check your state's law.
1. Email fleet@<dealer domain> with the precise spec of the car you want and request a quote assuming cash price. Do this to the 3-4 nearest dealers. (Fleet departments are usually compensated on number of cars moved, not on commission, so they are easier to deal with.)
2. Summarize prices offered by all in an email to all of them and offer them a chance to beat the lowest. State that there will only be one such chance.
3. Go to the new lowest bidder and sign. Walk out in 30 min or less.
Some of this advice isn’t necessarily right. The dealer makes money if you finance with them, so if they offer a similar rate as your bank, know that you can use that to your benefits in negotiations. A dealer would rather get 20k from you in cash plus a 1k fee from the lender than 20.5k from you in cash.
>GET YOUR FINANCING THROUGH THE CREDIT UNION BEFORE YOU EVEN STEP ON THE LOT.
There is poor advice going on here, once you tell them you have financing they will have less flexibiltiy on the price of the car because the dealerships makes money on the financing.
Better advice is to play dumb and keep your financing in your back pocket for when you meet with the finance guy. Even initially indicate a willingness to use their financing. When with the finance guy ask them to beat your financing terms or offer to go with their financing if they kickback some if the benefit. Even if their terms are lousy, you can immediatly refinance, but still capture the lower cost if the car.
This might work for used cars, but probably won't for new cars. Dealers frequently lose money on the sale price of new vehicles, but make up for it on finance/insurance and profit from selling any trade-ins.
Certified pre-owned vehicles will often have a better warranty than a new car anyway and you don’t lose half the value driving it off the lot. Win-win.
I always do this (and have always done), but then again, I don’t take out loans of any kind; I rather have no car. I play dumb until we have a price and then pay cash; some want to renegotiate at that point, and so I walk away; there are enough dealers.
How about all the extra fees that the dealer will add? ("Destination charge", "Doc fee", "Total fees", etc, etc, I can't remember.) Is that included in the price that we are haggling with the dealer?
Try to look up online what amount these fees should be for your particular state. Some dealers will just inflate one of these fees arbitrarily by $500 if they feel that you aren't paying them enough, and try to get away with it.
Another tip, don't discuss with your partner about the deal when the sales person goes to talk to the manager, you will notice a big phone on the desk that can act as a listening device.
Even better discuss how lousy the dea isl and how you are ready to walk.
The manager routine’s bullshit anyway. Give them a damn time limit if they want to start that crap. They’re just wasting your time so you’ll be worn down and not balk when they try to throw on some fees later, trying to pretend that they “really fought for you” so you’ll feel social obligation to the salesman and be more likely to sign a less-than-optimal deal, and overall getting you more invested in the process so you’re more resistant to walking away. It’s a goddamn prank at your expense with money on the line, treat it as such.
It's articles like this that make me love the Internet. I purchased a car several years ago, and asked if they would allow me to finance through my credit union. They said that they don't negotiate with credit unions. I then stormed out of the dealership, and found a used car in their lot that I could afford to buy with cash. It may have been a dick move, but I think it was the right decision.
My best advice when haggling over a new car is to simply haggle over text/email. Never set foot on a stealership without a done deal.
Contact all the dealership of the make you want to buy in a 2 or 3 hour radius and make them play against each other. This works better if you have a couple of weeks/days ahead of you.
Make them believe you will finance (as it allows you to get a better overall price sometimes). Whenever one guy makes an offer, forward it to all the other guys.
It helps if you know what is the lowest realistic number they are able to go to. There are a ton of forums and online communities where people share the numbers they were able to get.
Before getting to the dealership, get your financing in order (so you have an alternative to their financing).
One last trick: Once you get there, try to negotiate the price even lower by accepting to get some extended warranty. The trick is that by law, you can return the extended warranty before it kicks in and recover 100% of that cost!
None of this discusses the condition of the car itself. What if it has issues? Don't you have to worry about that dimension too? How does it affect negotiation?
This is about new cars, so the condition is expected to be "unused". Of course there's always the possibility of a lemon.
But in terms of how lemons affect negotiation on the used market, there is a classic economics paper, "The Market for Lemons" (summarized here[1]) which you would probably enjoy tracking down.
I recently purchased a new vehicle and found a lot of value from a site called CarEdge.
Not affiliated in any way save for I subscribed to their vehicle listing service for a few months while conducting my search.
It’s run by a father who sold cars for a living and now wants to help people save money and better understand the car buying process. He runs it with his son who handles the tech side.
They’ve got a “deal school” that walks you through the whole car buying process. What to expect from the sales and finance people, how to respond to common sales techniques, and how to negotiate for the best deal. Believe it’s free after signup.
They’ve also got a large amount of YouTube videos gaming through common car buying scenarios.
Changed the entire car buying experience. I knew what to expect every step of the way and ended up with a vehicle I enjoy at a price I’m very happy with.
Appears that they’ve started to pivot offering more car buying services for people who don’t want to go through the whole process, but their do-it-yourself materials were golden.
2. Make a list of, say, 20-30 dealerships which have that car listed at a reasonable price. (Well, relatively reasonable for 2024, let's say.)
3. For each dealership, inquire through text/email about the "out-the-door" price of the vehicle.
4. Only consider dealerships that text you back with a price sheet that shows your actual out-the-door price. Ignore any that have charges for nitrogen in tires, paint protection charge, door guard charge, market adjustment, etc. Ignore any that string you along without giving an out-the-door price. Ignore any that require you to talk fine details about financing before giving you an out-the-door price. (You can let them know you're open to financing, but leave it at that.)
5. Ask the one or two dealer(s) that passed through the filter above to let you take the car to an auto shop that is nearby to the dealer (within, say, 10 or 20 miles), so that you can get an expert opinion. Any dealer that made it past step 4 is likely to also honor this request.
6. If the feedback from the auto-mechanic you chose is satisfactory, buy the car.
In all likelihood, only a single dealership will pass through the filter. You'll be able to negotiate the price (within reason) over email/text. When you show up to the dealership, they'll honor said price and give you a no-hassle car-buying experience.
In my few experiences with this, nearly all dealers fail very early and very obviously in step 4. So it's an optimal filter. :)
I used one method for every car I've purchased since 2005 (three). Most of the time I spent was obtaining emails for 10+ car dealers. I then sent the same email to each of them, essentially worded as follows:
"Dear ___
I will be purchasing a black model ___ (with the following details) ___ for cash this Saturday. No trade-in. I am sending this email to 10 dealerships. I will reply to one and only one responding email. Your email must expressly state that your quoted price "includes 100% of the money I will have to pay including taxes, registration, plate costs and every other fee".
I will not consider any email that arrives after 6:00PM Friday.
Thank you,
_______
I have never received fewer than 6 offers. Most were very close in price. I did not always accept the lowest offer due to issues such as distance, out-of-state, and spirit of the emailed response. This has been so successful that I will never buy a car again without following this scenario.
I do about the same thing, although not as methodical as this.
Even more effective if you send this email on the 26th or the 27th of the month. They have quotas to make for the month and your sales lead will suddenly get a lot of attention in the last day or two of that month.
Is the “call/email/fax 3 nearby fleet managers directly and ask them to match your flat purchase offer” still a feasible approach? I did this when I bought my 2012 car.
Used to be called “fax-blasting” back when faxes were still a thing.
The #1 tip can work against you. I bought a car for my wife in 2016 and was planning to pay cash, but I did not disclose this. After we came to terms, they pushed very hard to try to get me to finance the vehicle because they were getting incentives from the manufacturer. I held firm and got a very good deal.
The most important negotiating advice in all circumstances (including this one) is to do some specific prep.
Firstly work on what negotiators call your "BATNA" (best alternative to a negotiated agreement). Figure out what it is and see what you can do to improve it. In this case, it's another dealership with a better offer or figuring out you can stick it out with your beat-up car a bit longer or whatever. But think through what happens if you can't agree. Then your decision is very simple. If what they offer you (when all's said and done) is not better than your BATNA you walk away. Don't allow yourself to be put under pressure to do a deal you don't like.
The second piece is to be super-clear specifically what your payoff is (in this case price) and maximise that. People often try to confuse the picture by getting you to negotiate on stuff that isn't to do with your payoff (eg throwing in a higher spec or free servicing or high-lifting doorhandles or whatever stuff you don't actually care about). Getting finance before you walk in to a dealership is part of this strategy - what you're doing is taking away levers that they could otherwise use to get you away from negotiating about your payoff or get you to compromise on your payoff itself. If you consider you have a finite number of negotiating bullets you want to spend those maximising your payoff and they are trying to get you to fire off-target.
Next-level thinking on the payoff question is to think about what their payoff might be and try to use that to your advantage. You can often "conceed" things you don't actually care about that increase their payoff but don't really cost you anything in return for an improved payoff. Not super-applicable here but an extremely important and overlooked concept in negotiations in general. You can also use knowledge of their payoff to strengthen your hand. Like say you knew when the sales quotas for the dealership came due or that a new model of this particular car was about to come out - the sales person might be under extra pressure to sell which would improve your bargaining power.
Final point is check your ego at the door. You are trying to maximise payoff not "beat" the other side in the negotiations. Not everything is a zero sum game and if you get too concerned about an ego victory you are probably sacrificing some payoff you could otherwise have had. It's fine for the other side to think they absolutely took you to town if you get everything you want from the negotiation.
I think it's always good to walk out of the dealership at least once. Just say "thanks, we're considering it" and come back another time after shopping around.
This entirely defeats the four-square method, particularly if you are not using seller's financing.
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