Buying a New Vehicle the Right Way
Ready to match wits with the dealership? Good! You can match wits and win. Just keep reading.
Simple Rules to Remember
- Narrow your choice to one or two models or makes before setting foot on a car lot.
Why? Trying to think about a big list will do nothing but confuse you.
Cautions for your first dealership visit: You are under the microscope at a dealership. Many dealerships already have you in a database. Most are anxious to pull a current credit report on you. All want to use information about you to maximize their chances to make a big profit. Don’t let that happen! Unless you definitely plan to finance at the car dealership, don’t allow any dealership to pull a credit report on you at this stage.
For instance, many dealerships will ask for a copy of your driver’s license before they will let you test-drive a vehicle. A dealership has a right to know if you have a valid license. But you don’t have to allow them to request a credit report at this stage. How to stop this? Say up front, “I do not authorize you to pull a credit report on me.”
- Now, choose two nearby dealerships that stock the vehicle you like.
If you've done your homework, where you buy isn't important as long as the dealership is reputable.
- Find only one car at each dealership.
You can’t buy three cars. Keep it simple: Find the one you like the best.
- Take control of the transaction.
Tell the salesperson you are not buying a car today under any circumstances, but you will buy soon. Today you are just shopping and fact-finding. Check the car out. Take a test drive. But be firm and don't let the salesperson lead you into any discussion of buying today. If you start to feel pressure or confusion leave immediately.
- Copy all the information from the Manufacturer's Suggested Retail Price sticker before leaving the dealership (MSRP, not the dealer’s sticker).
The MSRP is the sticker with the lowest price on the vehicle’s window. Copy all the dollar information from that sticker. For instance, the vehicle’s base price, then the name and price of options. (Use our “Auto Shopping Worksheet.”) For now, ignore the dealer's sticker, which is always higher than the Manufacturer’s sticker. The dealer sticker contains hugely inflated profits.
- Compute the dealer’s invoice cost.
A very important step. Call us and we’ll help you do this or use one of the online price guides below to calculate this amount. Why? Dealers want you to negotiate down from their inflated asking price, a very expensive way to negotiate. The Information Edge approach negotiates up from what a dealer paid for the one car you like. Don't ever think percentage discounts from dealer asking prices; don't ever think "sale" price. Know what the dealer paid for the car you like and negotiate up from that. You may use a good online service such as Edmunds.com or nadaguides.com to determine the dealer’s cost. Just remember that these are third-party, commercial sites that have a number of ads and links with a primary interest in selling you something.
- Check to see if the car will fit your “Available Cash”: Here’s the moment of truth.
After you pay for the car, and give the dealer a profit, and pay tax and other charges, will you still be in budget? We have a simple Information Edge Vehicle Buyer’s Fact Sheet to help you compare your figures and determine this. But first decide how much profit you want to pay a dealer, the last variable in the transaction.
What's a fair profit? You have a perfect right to pay all the profit you want. But if your objective is to pay the least profit a dealer will take for the car, you'll need to start negotiating up from what the dealer paid the manufacturer for the car. That figure usually already has "hidden" profits in it. And at times, a dealership will be happy to accept "cost" rather than lose a sale. The only way to know whether a dealer will do so is to offer that figure and stick to it for a while. But if starting at "zero" bothers you, add any figure you'd like as a profit figure.
Information Edge links to sites provided by a variety of sources. We review sites for credibility and reliability, but Information Edge, of course, can't control advertising and other links on these sites. We advise ignoring pop-up ads, links to sales of products or services, and the like.