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Buying a New Car
LavaKnight
Registered User regular
Registered User regular
Hullo! I'm hoping some of you fine folks will be able to help me out.
My mom is looking to buy a new car pretty soon as hers is old and not worth fixing up anymore. She became pretty set on buying a Prius after she realized she could afford it, and is hoping to buy one by mid-May. She doesn't have oodles of extra money laying around, but will be able to save up a good few thousand for a down payment. Because of her moderately tight economic situation, I've been trying to help her by researching the new car market as best I can. She does not want to buy used.
I've learned a bit about how the industry works, but am at a lack of actual people to talk to when it comes to experience in buying new cars. I know we want to bypass the salespeople entirely. I don't have anything against them, and accept their right to make some money off of sales, but I want my mom to pay the lowest amount possible.
I've read a lot about people buying cars at "invoice price," and that dealers are often willing to sell at that price because it's not exactly the wholesale price. The Prius is also a pretty popular car, however, so I imagine that it would be like pulling teeth to get it at the lowest fixed price. She received a quote from an internet sales lady (from the dealership) over the phone that's 1k greater than Edmund's TMV cost (which is in turn about 1k over invoice).
So my questions are these:
Any other relevant information not related to the questions is appreciated as well. Remember, I just want her to buy it as inexpensively as she can. I would also ask that you refrain from critiquing the particular car etc... That's not the kind of help/advice I'm looking for.
Thanks for the consideration and advice!
My mom is looking to buy a new car pretty soon as hers is old and not worth fixing up anymore. She became pretty set on buying a Prius after she realized she could afford it, and is hoping to buy one by mid-May. She doesn't have oodles of extra money laying around, but will be able to save up a good few thousand for a down payment. Because of her moderately tight economic situation, I've been trying to help her by researching the new car market as best I can. She does not want to buy used.
I've learned a bit about how the industry works, but am at a lack of actual people to talk to when it comes to experience in buying new cars. I know we want to bypass the salespeople entirely. I don't have anything against them, and accept their right to make some money off of sales, but I want my mom to pay the lowest amount possible.
I've read a lot about people buying cars at "invoice price," and that dealers are often willing to sell at that price because it's not exactly the wholesale price. The Prius is also a pretty popular car, however, so I imagine that it would be like pulling teeth to get it at the lowest fixed price. She received a quote from an internet sales lady (from the dealership) over the phone that's 1k greater than Edmund's TMV cost (which is in turn about 1k over invoice).
So my questions are these:
- How do you get the invoice price on new cars without dealing with salespeople?
- Who should you contact at the dealership in order to check price?
- Is it best to contact the fleet manager, go through an online site like Edmunds, or some alternative?
Any other relevant information not related to the questions is appreciated as well. Remember, I just want her to buy it as inexpensively as she can. I would also ask that you refrain from critiquing the particular car etc... That's not the kind of help/advice I'm looking for.
Thanks for the consideration and advice!
LavaKnight on
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One thing I might consider is finding one that is a lease back or used but returned (people not ending up being able to handle payments and return it) or even one year old from a dealership. Cars are a lot of money that lose a huge value once driven off the lot. Finding some sort of new "used" version of the car can save quite a bit of money. These cars would usually still carry their full warranty and other 'benefits' of new cars.
But I don't know if that's an alternative that's been discounted.
By the way, invoice isn't true cost. There are sometimes dealer holdbacks they get when selling. You'll just have to badger them enough until you get the price you want.
PeekingDuck: We have a choice of two Toyota dealerships here. I take it calling around and naming prices that other dealers may or may not have given you is the best way to go? For instance, the local dealer gave a price of 2k over invoice. We are now going to tell the other dealer that they offered it to us for only 1k to see if they match it. Going back and forth like that is effective?
The whole deal is that we don't really want to have to negotiate in person at all. We want the car for as little as possible so that when she goes in to sign the papers she knows that's what she has to pay. I understand invoice isn't true cost, but dealers seem privy to keeping people from knowing that. Hence, they try to sell above it and make it seem like you're getting a good deal. How exactly do you get them to drop down to or below the invoice price? Badgering like you said?
Cars are not an investment, they are a liability. Almost every single car in existence you could ever own will go down in value. Keep this in mind when buying one.
Leasing a car is a poor value. A down payment and monthly payments, and at the end of it you have NOTHING. This is not smart.
Paying cash for a car is smart. If you can pay for a car in full up front, do it. Obviously this isn't possible for everyone, but if you can pay cash, you won't pay any interest, which means you will save money.
Almost every single used car is a much better value than buying a brand new used car. If you purchase a new car, the moment you sign the papers and drive it off the lot, you have just lost a bunch of money. Even purchasing used cars with extremely low miles that are close too new will save you lots of money.
I actually work for a automotive classified magazine, so I guess you could say I'm in the car industry. ;-) And I'm actually still at work, so I have to go. But I'd be happy to answer any other questions you have.
(I realize I didn't answer your specific questions right now, but you asked for advice, so there you go.)
Hope that helps!
Remember the trade-in value (if your mom is trading in her old car) and loan are other areas where the dealer can profit. I'd suggest arranging a loan from a bank before hand.
I hear that.
Right now, I'm driving an older car that I bought with cash for a couple grand. When it's time to replace it, I'm tempted to go cheap again. I don't worry about break-ins, theft, vandalism, door dings, bird shit, etc. At least not the way that I'd worry about a nice new automobile. And my insurance is cheap, since it basically just covers my liability, roadside assistance, and God forbid, treatment for injuries.
If you get the "True Market Value" from Edmunds.com then you have the price most people have paid, which gives you a better idea if the model you want to buy is price-negotiable or not.
Knowing the invoice is still important though because it's one indicator of the profit margin (it's the dealer's profit margin at least). There's a high profit margin on some vehicles, where theoretically you have a better chance of getting $1k taken off the top through some haggling, than you do on compact sedans where the profit margins are slimmer to start (both in absolute and relative terms). Some vehicles, like hybrids, are limited in production and the demand is such that the dealer can sell every single one at MSRP. The Prius is a prime example, I mean aren't there waiting lists for them still? You can practice haggling on these but don't expect much.
I thought I might buy a Honda Civic Hybrid in 2006 right at the end of the 2006 model year, when logic dictates that dealers would be willing to budge on the price to get rid of the 2006's before the 2007's rolled in. I ended up not buying anything, because no dealer would drop more than $500 from the MSRP. I was making my offers via Internet Sales departments, which in my experience are a joke. Most exist only to convince email nerds like ourselves to come in and "talk" with their salespeople in person, in a high pressure situation. They would refuse to discuss prices in writing, and when they failed to interest me in walking into the showroom, they would just cease returning correspondence. I got a few dealers where they would discuss offers over email, but they were the ones offering me the MSRP-$500 figures. I was prepared to "walk away" and did exactly that, and days later I might get a follow up email from a different sales person, but they wouldn't have any better offers for me.
So what I might suggest is, get your True Market Value from Edmunds. Write a check for that amount (if you don't have the cash in hand, get your financing BEFORE you talk to the dealer), and take it to the showroom. Say "I want a Prius in [name your color] with [whatever options] and I am paying this much (show the check)." No haggling, be prepared to walk away, do not accept any dealer fees beyond tax & tags. It sounds corny but in theory this will get you a fair price on the car with the least amount of suffering.
The best advice I can give for negotiating price is to call them up with a number and say "I want to pay this much, including all fees and taxes." They'll probably say "Well, we can't give you that price, but we can do (slightly larger number X)." Ask for the salesperson's name, say thank you, and that you'll call back. Call the other dealership, say you have a quote for X including taxes and fees and you want to know if they can beat that price, and if so you'll sign the papers today. Nine times out of ten the salesman will beat the price to move a car they have on the lot unless the price is absurd (which it probably isn't considering you've got a quote in hand from another dealer). If they have to order it or get it from somewhere else, they probably won't, but then you've got a fall-back. If you buy from the second dealership, call the first salesman back and let them know just to be polite.
The best possible situation for you is if two dealerships have nearly identical cars; same options, different colors or something. Also, consider the financing as part of the cost of the car; if you can afford a $25k car on a 5 year loan, buy a $22k car.
Basically, salespeople like easy sales. If you come in with great credit or financing already lined up from your bank and willing to drive a car they have parked on their lot home that day, you're a lot more likely to get a good deal. Salespeople hate customers with bad credit who are obviously overextending themselves, people who test drive a bunch of cars, or people who are just plain rude. Don't be the worst customer they've talked to that day and you'll do fine.
Above all, be polite and sunny; if the salesperson gives you a bad vibe or is an asshole (many are), ask to talk to a manager and have the manager give you to a different salesperson.
I disagree with this oft-repeated advice. I think it's a myth, I think cars depreciate much more linearly. Maybe not all cars, but the ones that are worth buying in the first place. The dealer might give you 20% less than you bought it for, if you turn around and take it back 3 months after purchase ...but they'll wash it, wax it, and put it on the lot again for very close to MSRP. As a person wanting a new car, I just don't see these mythical "slightly used" deals. I see the slightly used vehicles are being sold for *drumroll* slightly less. If that's what the market is supporting, then that's what the value of the car is. No offense to zilo's dad, but the dealer will always fuck you on a trade-in -- that doesn't mean your new car loses 20% the minute you drive it off the lot, it just means if you are buying a new car don't expect a fair market value return policy. Make sure you can afford what you're buying so you don't have to ditch an almost-new car.
The financing might be an issue. Her credit isn't the greatest which limits her options as far as outside financing is concerned. She's already checked on this, and will need to go through the dealer. I have heard from bankers that dealers can usually beat their rates, however.
Thanks for the information about demand, Fristle. Priuses aren't in as high of demand anymore due to more domestic factories being opened up, but it certainly will affect how far down we can get. I guess we got lucky with an internet facilitator whose job isn't to get us to come down into a high pressure situation.
Also, thanks for the information, Zilo. We're trying to avoid salespeople at all costs, but it's good to know that some sort of common ground can be found between buyer-salesperson.
Well the car market around Reno is a little shady "$88 Down, $188 a Month!" But I would suggest looking in on Carson City before making any choices. Have you seen the amount of dealerships out there? I hear they sell cheaper due to some Washoe County ordinance.
The way I understood it, the dealer just calls up a bank, gets a rate quote, then tacks on their own percentage, and quotes that to the buyer. If this is true I don't see how a dealer could ever give a buyer a competitive rate on an auto-loan.
I have a limited amount of experience with this, but I financed my last vehicle purchase at 4.25% with my credit union, after arguing with a dealer salesperson who said I was ridiculous for asking for anything under 5%. A friend of mine bought a used vehicle and took the dealer financing...I almost choked when I heard his rate was 11%. Or maybe it was 11.9%. In any case he got fucked; I could have bought his car for him on my VISA card and financed it for less than that.
I suppose my viewpoint might be a bit tainted as the old man deals entirely in luxury cars, Porsches and Ferraris and whatnot, in which case it is absolutely true. It may not be as steep a drop in value for a more reasonable car but it still holds- people (like Lava's mom) will pay a premium for newness. The difference in price between a car with 12 miles on it and a car with 1000 miles on it is a lot more than between a car with 1000 and a car with 2000. From the perspective of value per dollar, slightly used is king.
That said, it's moot in this situation. Lava, I would recommend at least calling and talking to a salesperson- as others have suggested, interweb quotes are always going to be higher to weed out tirekickers. Not all of 'em are sharks looking to cornhole their customers; the best ones realize that the good money is in volume. If you can make it clear that your transaction will be speedy and hassle-free for them, odds are they'll be good to you.
I do suggest that you at least come to the table with a number in mind instead of "getting a deal" in mind; Edmund's TMV isn't a bad place to start.
edit: a lot of the "dealers give the best rates" talk comes from 0% financing deals, which are (duh) rock awesome and not all that common on non-American brands. A buddy of mine bought a GTO at 0% for 5 years; after working out the math he actually saved a good chunk of money by doing it that way instead of paying up front. Credit limits your options, naturally, but you might want to try asking your banker what a reasonable rate would be, even if they won't offer it to you. There's a lot of room for flimflam in financing a car so be sure to read the fine print.
That's what you're going to run into with a Prius. There's no waiting list but demand is still high, AND it's a toyota. Toyota and Hondapretty much never has deals, and they rarely discount their cars. They have no reason to, as people want Toyotas and Hondas.
You're also stuck as Priuses are pretty much only sold at Toyota dealerships, as they're still quite new. So you have an option of two places. You might as well go in and ask what the price is on the one you're looking at for one, and then go to the other one the same day and ask for the same options. If one's cheaper, then they're probably going to remain cheaper. The other one will simply say "ok, have fun buying it at that dealer, we'll sell this Prius to someone else tomorrow." If they come back with the same price, then you know you're not going to get it any cheaper.
If you were looking at Corollas or Matrixes or Camrys it'd be a different story, as there's a used market you'd be able to explore. Priuses are too new.
Also, cars do depreciate linearly. It's just that they have the most value when they're new and are less likely to need any work during their first 3-4 years. AKA the warranty period. If you buy new, your car is essentially "new" until the warranty is up, as the dealer handles all of the basics and any problems. As soon as that warranty is up (and the car is starting to be worth less), you run the likelihood of paying for more expensive repairs.
Think about it -- all of those things you have to do when your car hits 50k, 70k, 100k miles, aren't an issue with new cars. You save money up front buying a car with 30k miles on it, but you hit those expensive landmarks and have to look to replace belts, brakes, tires, and more much sooner. So it's pretty much a wash either way.
It seems like the other dealer was pretty willing to come down to the TMV price, but we think we can get the other dealer down there too. Since ya'll have mentioned that the Prius is a hot car, that's probably the lowest we'll shoot for.
Now we're trying to figure out how to deal with their extra prices that are tacked on at the end. Basically, out of the destination and handling fees, paperwork fees, etc... what are required by law? For instance, the local dealer tries to get everyone to get the VIN inscribed on all the glass in the car, but the other dealer says that's not specifically required. We want it as free from closing costs as possible, and so want to know what's avoidable and what isn't.
Thanks again for the help from everyone. It may not seem like that big of a deal, but I care about my mom and want to help her out as best I can.
That being said, Honda and Toyota are harder to get below invoice. I don't think you should have a problem getting near invoice though. With crappy American cars, yes you can go below invoice pretty damn easily.
Also, since your mother will be going through the dealership, see if there is any way she can get pre-certified for a certain amount of loan. I know you said it was unlikely, but anything will help so you aren't at the dealers call with regards to interest rates. They'll back load the price and make up the negotiated price in interest.
Just pay attention to the going rates for new car loans at banks and make sure they don't exceed it in the dealership. I ended up using dealer financing because it came out lower than the banks around here.
Don't get a loan in excess of 60 months. The shorter the better.
There are dealerships that will blow you off, but it sure as hell isn't Honda or Toyota. Especially on common models like the Camry/Accord/Civic.
Now if you try and get an M5 for invoice, well... they might laugh at you.
At some point, some dealerships will not negotiate any further. Sometimes certain dealerships just value their cars and service more. I told a dealership in San Antonio that I had the 14.5 offer in Katy and they said I should take it, since they couldn't match it. So don't go slamming your head against a wall if you've already got a very good price.
For reference, my car is a SE-R Spec V /w Sunroof. Not terribly expensive, but 14.5 was a hell of a price. I don't remember the prices of the Accords, but they were an EX and a Special Edition (in that hot Graphite color that everyone wanted)... so I think most of my advice will be sound for most models 15-25k. If you get too cheap a car, they are less likely to negotiate. Btw... Scion Xa is a very solidly built economy car and they do not negotiate. You might get your mother to test drive one. Honda fit has had good reviews too, though they may be more difficult to knock down than a pricier Honda. Alternatively, the Hertz Mustangs were going for far above MSRP, so what someone said about demand is true.
And I'll stop rambling after I say this, the Prius gets its most impressive mpg if it is used in a city setting. The more highway driving you do, the closer it will get in mpg to a small 4 banger. So you might also take into account how your mother commutes. It is a bit expensive for what you get.
Good luck!
Test models have a bunch of dollars shaved off and the dealership still treats them as new cars.
End of the month is the best time to buy a car as the seller people are more desperate to make their end of month figures look more attractive. End of Finacial year is even better if you can wait.
If I could be bothered liming it I'd find the post that said he bought outside his city. That could result in you saving 1 or two grand and all it would mean is you and your mother pay for a bus to said city then a tank of fuel to get back.
Ask them whether or not each thing they want you to buy is legally required for it to be the road and ask for it to be reflected on the contract, they should then start shitting themselves about screwing you over and be upfront, though a visit to your DMV or something should be able to clear everything up if you get a list.
Satans..... hints.....
Regardless of what you decide, negotiate over email. You can check your facts, and you have a record to use against that dealer or against a competitor. Also, some smaller dealerships I've seen don't have normal sales people answer the email quote requests. This means that you might get someone who works for less or no commission. That never hurts.
Finally, consider looking in the California area. I guess the fact that they are no longer issuing carpool passes to new hybrids has screwed up the market, and used ones with a bumper sticker are selling for more than the new ones. I don't know how true that is or if it helps you, but there you go.
QFT! That site is fantastic. Read it, and bask in it's wisdom.
Extended warranties - personal choice of course, but depending on what you purchase you should consider your options here.
Window ETCH - Opt out of this. There's no etching involved (in my experience). When I sold cars I watched a detailer put this on a car. It was literally a decal, and with your thumbnail and some patience you can scratch it right off. I've already scratched it off of my Impala.
Gap insurance - Get a quote from your insurance provider on this first. In this day if you're making payments on a car this is a MUST. It pays off the full balance of the loan in the case that the vehicle is totaled. You want this but chances are your insurance agent can provide a better price.
Car care plan - Weak. You pay them an obscene amount of money to wax your car each 6 months. Don't do it.
I'm sure there are others but I've been out of the game for a few years. Just use common sense and don't buy into the finance officer's bunk.
Yeah, I'm sure you guys will take a test drive. It was a different experience then my Corolla. Amazingly quiet. Also quite tiny.
I'd recomend looking at the Camery Hybrid.
I was about to come in here and say that. Right now the Prius is a luxury car. It is being marketed to rich folks who want to save the environment, not poor folks who want to save on gas. Obviously its your moms choice, but it seems like she'd be better off with a yaris.
At the end of a lease, depending on your lease you have basically three options. You can make a baloon payment - a single payment for the rest of the value of the vehicle (can't remember if it's initial value or residual though), you can finance the rest of the value if you want to keep the vehicle, or you can turn the car in and lease (or purchase) another one.
You can also simply have a lease where the item/car is depreciated normally based on the lease payments, and it is available for purchase at the end of the lease for the then-market value. There are even some leases where you cannot purchase whatever it is you're leasing, and other leases that allow for extensions (although those are detailed with a new lease contract).
A "real lease" is essentially the same as renting, only it's for a set period of time and the interest is amortized. Similar to a "rent loan," really. They can be worthwhile if the lease rate is a good chunk less than the rate offered for a straight-up loan, and they can also be worthwhile if you're cool with "renting" a car perpetually. As mentioned earlier in the thread, cars are pretty much ONLY a liability, in that they're a lot of work to maintain for the life of the car and there's a lot of peripheral crap you also need to own and maintain. There was a reason why leasing was popular in the early 90s when interest rates were high.
And yeah, I'll echo the sentiment that the Prius is mostly a novelty/luxury car currently. You don't really save that much gas, especially compared to the upfront cost. However, as they're a unique body design (compared to other hatchbacks) they stand out as a "unique" car that has some special feature, which leads to a lot of attraction on people who like driving but don't really care about cars overall. It's got enough space to hold people and some stuff and the fancy monitor makes drivers/owners think they're in a much nicer car than they are.
That's not to say they're not good cars. But I've found that people who get it in their heads to buy one are basically only going to want to buy a Prius