The 2016 Ultimate Car Buying Savings Guide!

Car Buying Article Image

The car buying process can be a daunting experience even for a seasoned shopper. Car dealerships have countless avenues in which they can funnel buyers through to maximize their profits. In the following 14 steps I will layout a blueprint you can utilize to secure the best deal from almost any dealership on almost any vehicle potentially saving thousands!

1. Research and select the brand(s) and model(s) that suit your car buying needs

Types of cars

While there is an abundance of car makers in the market, thankfully, they all make vehicles that fall into specific categories. What you need determine is who makes the vehicle that checks the most boxes on your list:

  •        Newest technology integration
  •        Best collision and safety ratings
  •        Top fuel economy
  •        Desired passenger and storage capacities
  •        Preferred drive-train and performance capabilities
  •        Highest resale values
  •        Lowest maintenance costs
  •        Most affordable insurance plans

To read up on the newest vehicles releases and their ratings you can visit one of the many car buying websites like Edmunds.com or KBB.com (Kelly Blue Book).

2. Search car listing websites for available inventory

Line up of cars

After selecting the brands and subsequent models, your next step is to determine where they are sold. All reputable car dealerships will have their own website listing all available inventory. There are also a few national sites that specialize in aggregating vehicle listings from all your local dealers like Cars.com, AutoTrader.com, and even Carfax.com. At this point I will I create a new spreadsheet and start making a car buying profile for each vehicle I am considering. Click here for a sample starter file (you can import this into Google Sheets if you do not have Excel). These profiles will consist of the different models, their pricing, a pros and cons list, dealership contact information, and the price you are willing to spend, which you will divide into the three tiers, low, middle and maximum.  As you progress through the rest of the steps you will continue to build upon each profile.

3. Set aside a few hours for initial dealership visits to check out your profiled cars in person

In step 3 you will further your research and development of each car buying profile you have created. By visiting local dealerships in person, you can evaluate each vehicle’s their features and appearance which tremendously helps when narrowing options. During this time, you can take a test drive if you feel you are ready. One final thing you need to discover is the size of the dealership in terms of total brand inventory and additional locations. Much like the “Wal-Mart effect” in which a company purchases goods in larger quantities than their competitors to achieve discounted rates and in-turn able sell those goods at lower prices, dealerships who use this practice can also (at the expense of the smaller establishments) provide lower and more competitive pricing. Smaller dealerships unfortunately end up having to sell their inventories at slightly higher rates compared to the larger ones.

4. Take a business card and leave!

escape car dealership

Step 4 was created to ensure you do not get caught up in the emotions of an impulse purchase. Your first visit to the dealership is to set the stage for future negotiations. This visit allows you the opportunity to forge an initial relationship with the sales associate whom you will be working with during future negotiations. While there are other goals that can be achieved in this visit I normally keep to the plan.

5. Narrow down your car buying choices away from the dealership

Cars lined up

Part of the benefit in leaving the dealership is the ability to properly reflect on your visit. It is important to review the profiles you have created for each vehicle to continue narrowing your options. Trying to make these decisions while at the dealership will only cloud your judgement, especially if a sales associate is hovering over you.

6. Plan the time frame and price range for your purchase

Step six is one of the most crucial steps in the car buying process. In this step you set the initial terms for the future deal. The time-frame is very important as dealerships are normally motivated to make customer-friendly deals during soft volume periods, end of month, quarters or years, or after a newly redesigned model has been released. After you determine the best time (your vehicle needs will generally steer this decision) you can then move onto establishing the price you are willing to pay. I again break the price into three points, a lucky low-ball price, a more realistic middle of the road price and finally the least acceptable price. I will try to only accept the highest price point as a last-ditch option, for when the details of negotiations are stacked against me like low inventory or the vehicle just arriving off the delivery truck. Either of these scenarios enables the dealership to become more stringent in their negotiations and you will need to prepare for a tough negotiation.

Occasionally, I will find myself in cross-roads when buying a new car as I always try to find a previous model year vehicle (same design) as late into the new year as possible (ex. a previous year model when new current year models are also on the lot) because the dealership will go to extra mile to clear this older inventory. One of the challenges with this tactic is if the car has been at the dealership for too long and the auto manufacturer may have stopped issuing special sales incentives. This ultimately results in the older model being more expensive than the newer one (for some crazy reason). Finding a previous year model that has been on the lot for more then 6 months and is still covered by manufacture incentives is cream of the crop in my book.

7. Get pre-approved financing to determine your credit score and estimated monthly payments

Before scheduling your return visit to the dealership you will need to do some preliminary work. With experience I can confidently say that getting pre-approved for an auto-loan through your bank, credit union or other financial institution is 100% necessary. On several accounts I have beaten the dealer financing department’s rates by at least 1% or more. Most people without their own financing at this step tend to rely on the figures given by the finance representative without knowing any better. Magically, after presenting my own financing they are able to match or beat the rate (imagine that). While I am definitely not opposed to using dealer financing just ensure it is as good or better than your option.

Important Tip:
During this portion of the car buying process once you have achieved an equal loan rate you can make small requests to the finance representative that they can try and push through for you. These requests (if within reason) can range from extended payment terms while maintaining the lower interest rate to even lower rates from what was originally quoted. Dealerships do a lot of volume with lenders and these requests get approved almost immediately. Finally, these requests are dependent on your finance amount and credit history.

After you have completed the pre-approval process it would be a good idea to plug-in your three price points and finance rate into an automotive loan calculator to estimate monthly payment terms, you can use our car buying profile spreadsheet.

8. Set up and schedule the 2nd visit to dealership with previous sales associate

Car Dealership Associate

After you have received pre-approval for a vehicle loan and estimated monthly payments, you can schedule your second visit to the dealership with the previous sales associate (that is of course if you enjoyed your first encounter). This trip will be the beginning of your negotiations and allow you to test the water to determine how anxious the dealership is to make a deal. Remember to have your car profiles with you to help stay organized and focused. Before moving onto the next step you will want to document whether or not the dealership has a “dealer fee”. These fees can range from $250 up to over $1,000! Almost all dealerships will tell you that they “cannot remove the fee” which may be true but, my counter to this statement is to them to “take it off the price of the vehicle”. When there is a dealer fee present it will always provide an additional challenge during the negotiations.

9. Remove your trade-in from the car buying equation during the early vehicle negotiations

If you do not have a trade-in, then you can skip this step.

Step nine is essential to the plan as all dealerships will almost immediately attempt to work your trade-in value into with negotiations. While your trade is ultimately important to the deal we do not want it to affect the new vehicle price. Always get your lowest price on the new vehicle first before offering the trade-in, I personally tell the dealership I will not discuss the trade-in or flat-out say that I am not going to be trading in a vehicle. Dealerships use the trade-in value as their own negotiation tactic to help keep the numbers in their favor. Just remember at this point you are already pre-approved with a loan and while you most likely do not want to keep your current car (unless paid-off) it is a good idea to remove it from the equation entirely. Sometimes it is best to get a buy-out offer from another dealership like CarMax (if any of those are around you) to avoid impacting the deal. If and only if the negotiations have stalled and the dealer will not under any circumstance lower the vehicle price to any of your price points you can begin working the trade-in value levers. When faced with this situation I have been able to push the trade-in value substantially over Blue Book valuations to close the deal inside one of my price points.  Keep in mind unless your car is in pristine condition, now-a-days the dealership will send it to auction as it can be liquidated much faster compared to keeping it on their used lot for an extended period of time. Time is money.

10. Take a test drive and request vehicle invoice before beginning negotiations

After you have executed this step the sales associate will quickly become aware that you are not a novice shopper, you are prepared and know what you are doing. For step ten you will undoubtedly be asked to test-drive the new vehicle in order for you to begin your infatuation (or so they hope). You will obviously need to take at least one test-drive if you have not already to get a feel for all the features and capabilities of the vehicle but, be aware of the game.

After the test-drive you will deliver the first negotiation tactic by requesting an invoice of the car(s). While this request may be met with some hesitation or stubbornness, continually insist on the need for the documentation to progress the sale. I’ve scanned in some example portions of an invoice that I have received during a previous vehicle purchase for review:

 

Car Invoice Highlights

Depending on the manufacture, the information laid out in the invoice may differ in labeling but, the numbers will mean the same thing. Here are a few important items you will want to focus on, first the invoice date the car was processed on (when the car was prepared for sale). The age of this statistic will give a clear indicator of how enthusiastic the dealer is to make the sale. If the car has been on the lot for longer than six months, chances are you can squeeze out nice volume deal (by volume I mean where the dealership makes a minimal profit but, gains perks for selling an increased number of vehicles). Cars that have been on the lot for thirty days or less will have a newness effect which will warrant less compromising on the dealer’s part. The next number you will want to locate is the “hold back” figure. The hold back number is one of those items that could have a variety of labels but, ultimately means the funds available to dealership to market and sell the car through advertisements and maximize profits.

Car Invoice Breakdown

Another important set of figures are the invoice versus MSRP prices (Manufacture Suggested Retail Price) which will show you to see what the dealership actually paid for the car (that is if they have received it directly from the manufacture). If the “Sold to” information on the invoice references another dealer than you can assume one of two few things, either they purchased excess stock from a struggling dealer at a discount or they are selling their own inventory too fast for the manufacture to replace in a timely manner. These determinations can be either good or bad for your car buying negotiations respectively (the dealer will generally not tip their hand that much to either scenario). One benefit of the invoice versus MSRP price listing is seeing the amount paid for vehicle upgrades. If you are contemplating two trims of a particular model (ex. one has leather or a technology features while the other does not) than you can request to have specific upgrades added at or below invoice pricing. Dealerships will almost always work you on these upgrades to close a deal. Keep in mind there may be some upgrades that the dealer may not able to provide.

11. Provide the initial offer (your lowest price point)

After you have received and compared the invoice(s) against your own price points you should be ready to make an initial offer. Normally by this time the sales associate may have already brought over a sales offer sheet on the vehicle(s) assuming you would take it at face value. This sheet will be normally contain vehicle pricing and estimated payments and probably some “suggested” package add-ons which drive the price up substantially, so be prepared. Your initial offer or first counter offer if the above has occurred will be the lowest price in your price plan. I will generally revise my lowest price point slightly from the profile to match the invoice price minus the holdback amount and dealer fees (if applicable). There is a slight chance the dealer will accept this offer and you will have secured a hell of a deal but, be ready for disappointment.

 

window sticker car price

The market for car buying in today’s age has changed significantly over the past five years as dealerships are beginning to wise up to consumer intent. The prices you encounter online now have all of the manufacture incentives applied (whether you are eligible for them or not) giving the illusion of an easy no-hassle low price. These same prices when you investigate further tend to require special manufacture financing plans to get the advertised rate.

Profit boosting dealer fees are now also a constant staple at most locations and normally will not be included in the advertised price making negotiations that much tougher. Even with these revelations I still make my initial low offer as above, granted the timing is right (end of a quarter/year and extended duration of the car on the lot). You have to play the game properly to avoid paying too much. I have known people that have walked in and bought car at the sticker price on the window, naïve as it was, it happens when people are unfamiliar with the process. 

12. Asses any counter offers provided, provide new offers and be prepared.

Chances are good that the dealership will not accept your lowest offer simply because it is part of the negotiating process, both sides always want to feel as though the other has conceded terms. What you need to do is remain calm and collected during this part of the process. If they come back with a revised offer lower then where the advertised price started you are in business! What this means is they are ready to play ball and you can begin working on your middle price point, assuming of course it is within range of it. You need to be prepared if negotiations have stalled to get up and leave. Leaving during negotiations is something the sales associate will always want to avoid if at all possible and can sometimes be the final push for finalizing the deal. Chances are if they let you leave with still no change then, they are dug in on their price and not currently motivated to make any concessions. In these circumstances I will either find another dealership with the same inventory or wait until the car has sat unsold long enough for them to be ready to sell it. Each month a vehicle sits on a lot means the dealer has to pay their bank another loan payment in order to hold the inventory.  During these times it is easy to get upset but, just remember, being calm and collected is the best approach to winning the car buying negotiation.

13. Continue negotiations you have an offer within your 3 price point plan

During this stage of the process I will have sometimes visited the dealership three or more times (six times once for a car I was willing to play the long game on). Eventually, if your price point plan is realistic enough you will reach an agreeable offer that makes you happy. Sometimes at this stage your trade-in may help push the deal to where you want it. After a few past purchases the sales associate has admitted that the deal was whittled down to a volume-only sale.

14. Stand strong during dealer finance processing stage

While the prior steps may have been daunting and tiresome especially if you have been at it for the better part of a day you need to remain strong and focused during your final step with the finance department. Having your outside financing  already secured makes the process a little easier however, be prepared for up-sells. Extended warranties, appearance and theft-deterrent packages as well as other miscellaneous coverage plans are just some of the add-ons the finance associate will attempt to sell you. While accepting any these offers is entirely up to you I almost always pass on everything (only if there was previously negotiated discounts agreed upon will I entertain anything).  Towards the end of the car buying process they may also even hit you with a bi-weekly payment offer “to help pay down the loan faster”. You do not need to have a special plan setup to take advantage of this practice and ultimately they will charge you a monthly convenience or processing fee to do so.

Car Finance Associate

In my experiences the finance representative can be the most influential person you will encounter during the car buying process. If you have remained strong during this stage then, chances are you have successfully secured a great deal within your price point plan! Now you can enjoy the benefits of both owning a new car and available tax incentives. I hope these steps are helpful in your future car buying outings and would love to hear from anyone with additional tips or experiences. Good luck!

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  1. Ashley says:

    Very helpful!

    Reply