Thursday, January 5, 2012

How to Get a Great Deal on a New Car

Everyone knows that the price of a new car can vary depending on your bargaining ability. Some people (although I hope not many) likely pay sticker price. And a the dealer sometimes even takes a loss on a few cars -- just to move them off the lot to make room for the next model year. The majority of sales fall somewhere in the middle of the bell curve.

I want to take a few minutes to give you some tools to help you get as low as possible on the price of your next new car.

One nice thing about buying new is that all new cars are the same. If you look at a 2012 Toyota Camry LE at one is exactly the same as the new 2012 Camry LE at another dealership (perhaps only differing in a few minor options). Because of this, it is very easy to get apples-to-apples prices. If you are shopping for used cars, this is impossible, because no 2 cars will be identical in milage, maintenance, and wear and tear.

So here are my steps to help you get the best deal:
1. First, decide on the make and model you want. Go to some local dealerships and do some test drives. This is not for buying -- this is just for deciding. Once you know which car you want, you are ready to begin.

2. Use to find the invoice price and the current incentives on the car. Invoice minus incentives will be our starting point. It is also important that you understand tax, tag, and title costs in your state. For my state, tax is 3% of the purchase price + about $140 for tag and title.

3. Next check for the "Zag" price in your local area. Zag is a car buying service that serves as the back end for lots of car buying services like American Express, Overstock, and I believe even Costco. If the Zag price is lower than the price from step 2, that becomes your new starting point. Also check to understand what people are actually paying for that car. (This is the price before tax and fees.) You'll want to target the price on the far left (hopefully even off of the grid).

3b. Check your banks and credit unions for the lowest car financing rate. For credit unions, this can currently be as low (as of Jan 2012) as 1.79%. Once they have approved you for a loan, they will send you a blank check valid up to a certain amount. (Sometimes dealerships will offer 0% incentives, but usually this is at the expense of giving up a rebate. It is almost always a better deal to take the cash rebate instead of the incentive offer.)

4. Use google maps or the auto manufacturer's site to find as many dealerships as you can in your local area. For my purchase, I used about 15, but you can use fewer. Remember, driving a few hours to get your car is a small price to pay to save thousands.

5. Go to each dealers website and either use their "chat now" function or email their internet department and ask for a quote on the car. Don't give your phone number. If the form asks for it, just fill in 999-9999 or something similar. When you ask for the price quote, insist on an "out the door" price. This is important to ensure that you are getting a real price, and that they can not add additional fees at the dealership.

5b. When you are at these sites, make a note of which ones have internet coupons that pop-up. Almost every dealer has these now. Sometimes they even go higher if you agree to make an appointment. These are typically anywhere from $100 to $500 off. Be sure to make a note of this, but don't register for any appointments yet.

6. These dealers will email you their starting price, which you should add to a spreadsheet or a table you draw on a piece of paper.

7. Once you have these bids, you can begin to email the dealers back, letting them know where the low bid is. This allows them to essentially bid against each other to earn your business.

8. As they say on shampoo just rinse and repeat. Continue to email back and forth with dealers getting their lowest out the door price. As a courtesy to the dealers, it is best if you not reveal which dealership is offering you what deal. Keep that to yourself.

9. Once you have a deal you are comfortable with then go to their website and print the coupon and potentially sign up for a test drive if that increases the coupon value. Email the internet manager that you have the coupon printed and ask that he/she send you a new "out the door" quote with the coupon factored in.

10. Ensure again via email (so you have it in writing) that the car comes with all the features you have specified, including floor mats.

11. Go pick up your car. (The dealer may ask you to put down a deposit on your credit card to hold the car if you are driving from out of town or need to wait a few days.) Print out all of the emails from the dealership, so you have in writing the "out the door" price. Ensure that this is the price on the bottom of the sales form when you pickup the car.

12. Write a check using your credit union auto buying check.