How To Buy A New Car

This page should be titled, How To Buy A New Car Below Dealer Invoice, because that is the goal of the smart car shopper. If you have never done this before, you might not believe this is really possible, but it is. Under normal conditions, smart car shoppers are buying new cars and trucks below dealer invoice all the time, in every state. The only times that this is not possible is 1) the new car is a Saturn, which is only sold at full sticker/MSRP, 2) the shopper lives in an area with no competing dealers, or 3) the shopper is trying to buy a brand new model that just came out and there is a huge demand with limited supply. The limited supply situation is almost always temporary, which means that prices for that model will usually drop within 3-6 months when production increases, and the "no competing dealers" problem can be solved by traveling to the nearest big city to pick up your new car. So keep reading, as we reveal the secret to buying a new car below dealer invoice. Just be sure to read and follow all of these steps in the order they are listed. Skip one section and it could cost you $1000 or more!

Should You Finance Your New Car? If you are able to pay cash for that new car or truck, by all means do it. Your family budget will breath a sigh of relief and you'll be able to start saving towards your next new car, which you will also be able to buy without a loan. Don't listen to car dealers or salespeople claiming that you're better off financing the car and investing the money -- they're just saying that because they make lots of money off the financing. (If everyone followed their advice, they would have lost half of their "savings" in the recent stock market crash.) No one can guarantee an investment yield higher than 3% or 4%, and the interest rate you will pay on a car loan will certainly be higher than that, so pay cash if you can.

Your Credit Score. For all other normal people who need financing, be sure to get a copy of your credit report and credit score at least 60 days before you plan on buying. Why? Because you might need time to correct errors in your credit file that could lower your credit score. Errors are very common, and the best loan rates go to the people with the highest credit scores. Warning: Do not start negotiating for a new car without pulling your credit first, because unscrupulous dealers will claim that your credit score isn't good enough for a decent interest rate on a loan. You can get your credit report and your credit score online by using FreeCreditReport.com or Equifax. If you find any errors in your credit file, send a certified letter to all three credit bureaus (TransUnion, Experian and Equifax), identify the errors and demand that they be removed from your credit file immediately. Tell them you will sue if they don't. In most cases, the errors will be gone within 30 days because the law allows you to sue the pants off a credit reporting agency that fails to remove errors within 30 days. (Be sure to use certified mail as it puts them on notice that you know your legal rights.) While you're waiting for the errors to be fixed, you can work on the next four or five sections.

Which Car Should You Buy? This is the "shop around, research and test drive" stage where you figure out which car to buy, whether you can afford the car you want, and what the new car will cost. (You can use this online car loan calculator to calculate monthly payments. Use the invoice price plus sales tax for the purchase price, then subtract your down payment to get the amount financed. Your down payment should be at least 20% and the length of the loan should be 48 months or less. If you can't do that, you should find a cheaper car or wait until you have saved more money.) Do you need a car, truck or SUV? Sedan, coupe or minivan? Consider how much time you spend in your car, how many miles you drive per month, and how many people you might need to carry at one time. Research the fuel economy, the costs of maintenance and repairs (see Consumer Reports), plus the costs of registration and licensing. Finally, decide what to do with your old car: keep it, sell it yourself, or trade it in (look up trade-in values using Kelley Blue Book). If you're thinking about trading it in, remember that dealers will be offering you the wholesale value (or less), while you may be able to sell it yourself for a lot more. Either way, be sure to detail it first, change the oil, replace that bald tire, etc. so your car makes a good first impression on the dealer or the retail buyer.

Should You Buy or Lease? Leasing is simply a long-term rental agreement with no ownership or equity at the end of the lease. Leasing usually costs a lot more than buying long term, and many people get stuck with a bill at the end for excess mileage and/or wear and tear. Warning: If you're thinking about leasing, be sure to read our Auto Leasing Secrets page first. Lots of car shoppers have been fleeced by lease deals that sounded good, but were really bad deals. In fact, auto leasing is the easiest way for unscrupulous dealers to get away with thousands of dollars of overcharges in one transaction. Be smart, learn their dirty tricks, don't be a victim.

Insurance. The cost of insurance for some new models can be a lot more expensive than other models, so be sure to call your insurance agent for rate quotes on the models that make it to the semi-finalist stage. Don't let your new car experience be ruined by a really high insurance bill after you've already bought the car. You can shop around for the best insurance rates online by using Esurance and NetQuote. One application at each site will usually get you quotes from multiple insurance companies. You could receive quotes from as many as four different companies, depending on which state you live in.

Auto Loans. Be sure to shop around for auto loans before you start getting new car quotes and negotiating with dealers. Too many car shoppers fail to do this, trusting dealers to give them a fair deal. This is a huge mistake! Many dealers will take advantage of these people by telling them their credit is bad so they have to pay 10%, 12% or even 18% on a car loan when they were really qualified for loans at 8% or less. (This is why you need to pull your credit report and shop around for car loans first, or you won't know the dealer is trying to overcharge you.) We've found several online lenders that can finance new cars, refinance existing loans to lower your interest rate, make loans on used cars and private party car sales, and provide financing for a lease buyout. Apply online during normal business hours and get a decision within 1-2 hours. Car shoppers with all types of credit (good or bad) can get quotes from CarsDirectAutoLoans and myAutoloan. Shoppers with good credit can also apply at up2drive (a division of BMW Bank of North America). All three sites have free, no-obligation quotes and online applications, so apply at two of them to make sure you're getting the best deal.

Learn Common Dealer Tricks. Before negotiating with dealers, take some time to learn the most common dirty tricks that are used to overcharge people on new cars. If you don't learn their tricks, your negotiated discount may be completely canceled out by phony charges, secret price hikes, inflated loan rates, stolen rebates and/or trade-ins. Worse yet, you could be "flipped" from a good purchase into a really bad lease. See our Car Buying Secrets and Auto Leasing Secrets pages for details.

Dealer Cost Information. Once you've narrowed your new car search down to one or two specific models, it's time to get the "real dealer's cost" numbers AND the actual prices that other smart shoppers are currently paying for the same model. Remember that dealer invoice is NOT the same as dealer cost, and the goal is to pay less than the dealer invoice price. How much less? That depends on the car, where you live, how desperate the dealer is to sell that car, how well you have done your homework, and how good you are at negotiating. Collecting the "dealer cost info" is where a lot of new car shoppers make two big mistakes: They insist on using free dealer cost information and they don't know what smart shoppers are paying for the same car, so they end up paying too much for their new car. A lot of the free "dealer cost" info on the Web is incomplete: secret factory-to-dealer incentives and other rebates to dealers are often missing or inaccurate, and free dealer invoice numbers are sometimes inaccurate or outdated. Getting actual prices that other smart shoppers are paying for the same model could be even more important than the dealer cost numbers, because those prices sometimes reveal unknown rebates or incentives that lower the dealer's real cost. For example, if you didn't know that other people were buying the car for $1000 or $2000 below invoice, you might end up buying at the invoice price, mistakenly thinking that you were buying at a "rock-bottom price." To avoid making this expensive mistake, smart shoppers don't mind paying a nominal fee for accurate information. US motorists should use Fighting Chance to get dealer cost numbers, secret incentives, rebates, actual smart shopper prices and other valuable negotiating material. Their New Car Information Package also comes with a "coach" -- a live, new car buying and leasing expert you can talk to if you have any questions. Click Here for US information. Canadian motorists should use CarCostCanada to get information on dealer cost, rebates, and average dealer markup. Be sure to check out their Canadian New Car Buyer's Checklist.

New Car Price Quotes. After you've completed all of the previous steps and you are prepared to buy your new car or truck in a week or two, start collecting free new car price quotes from as many dealers as possible. The easiest way to do this is to get free (no obligation) quotes from the following car buying services: Yahoo!Autos, CarQuotes, Autos.com, and CarsDirect. By completing one short form at each site, you will end up getting multiple written quotes that you can use as a starting point for negotiating lower prices at several dealers. (This is covered in the next section, Negotiating The Best Deal.) Get quotes from all four sites to make sure that you're not missing out on a better deal!

Negotiating The Best Deal. If negotiating is not your strong suit, don't worry. Doing your homework and following instructions will enable most people to act like expert negotiators. For smart car shoppers, it's best to do all negotiating by email. Don't try to negotiate in person, because dealers and their salespeople have extensive training in tricking people into buying now (making it an impulse purchase, not a level-headed, intelligent transaction) and paying too much. Some dealers will refuse to cooperate because they want to control the process and get more of your money. Just cross them off your list and get more quotes from other dealers. Here is your negotiating strategy: If you completed the previous section, you should have a pile of email price quotes from multiple dealers. If you only got two or three quotes, that usually means that the zipcode you entered on their form was for a small town that does not have competing dealers, so go back to those sites and submit your info again using a zipcode for a nearby city with a bigger population. You want quotes from at least 4-5 different dealers (6-8 is even better). Set aside the lowest quote for now, and email all of the other dealers. Be friendly and polite. Here's your message (change the wording if you want, just make sure the point is the same): "Dear [name]. Thank you for providing a quote on the [year, make, model]. I also received quotes from other dealers and one [or more] of them offered to sell the same car at a lower price. I would rather buy from your dealership because [it is closer to where I live, I would rather have your dealership perform the maintenance and repairs, or some other reason that sounds good], but price is important to me in this bad economy. The lowest bid was [actual price] from [name of dealer]. If you could beat their price, I would buy from you instead. I have my financing pre-approved at [lender name] and no trade-in [if applicable], so this will be an easy transaction for you. Of course, if you can provide better financing, I would consider using that. I look forward to your response. Sincerely, [your name]" Mentioning that you would rather have them do all the servicing on your new car is usually effective because dealers need the business, but this probably won't work if the dealer is several hundred miles away. After you've gone through all the dealers with this approach, hopefully you are getting lower quotes that are close to the prices other smart shoppers are paying (obtained from the dealer cost/smart shopper information service mentioned above). If not, send follow-up emails stating that their prices seem high compared to the prices that other people have paid, and ask if they can do any better.

New Car Delivery. When you finally have an acceptable quote, make sure that it is in writing, with a complete description of everything you were expecting: year, make, model, colors (inside and out), option packages, etc. Hopefully, the winning dealer will have the car on his lot to avoid having to do a "dealer trade." (Try to avoid this, as dealer trades can be messy, with the buyer putting up a deposit first, then the car arrives in the wrong color, it's missing an option package, etc.) Sometimes the dealer will try to raise the price, even though you had a written quote. If you have to order a new car, make sure every detail is in writing first, including a complete vehicle description with interior and exterior colors, options, the quoted price and a right to cancel with an immediate refund if they can't deliver the exact car you ordered at the quoted price. If they make you put up a deposit before ordering the car, use a credit card. Do not use cash or check, because you might have to cancel your order when they fail to deliver the exact car you ordered. Using a credit card for the deposit will give you the option of doing a chargeback if they won't give you a refund. Be sure to give the new car a complete inspection and road test before accepting delivery, and do this in broad daylight to make sure you can see any cosmetic defects. During the road test, try all the accessories to make sure they are working. Make a list of all items that are not acceptable. If the car is missing any items that the dealer is supposed to install, make sure all of those items are installed and working before you take delivery, and make sure that all necessary repairs or adjustments are done, too. (It's usually easier to get a dealer to fix things if you haven't taken delivery yet.) After verifying that everything is OK, sign for the car and drive it home.

Extended Warranties. When you're buying a new car, the dealer will usually try to sell you an overpriced extended warranty/service contract "to protect you from major repair bills" (and to line the dealer's pockets with another huge profit). Before you pay those high dealer prices, see SmartAutoWarranty first for a free quote. This company offers great extended warranties at discount prices, and they even run occasional specials that make their deals even better. Don't be pressured by the dealer to buy the warranty with the car because you can probably get a better deal from the dealer if you buy it later. (Offer to pay 50% of the price quoted by the dealer.) Remember, if you buy a new car without getting an extended warranty, you can still purchase one later as long as the vehicle is within certain mileage limits and still covered by the manufacturer's original warranty.

We hope you enjoyed reading How To Buy A New Car Below Dealer Invoice. To learn how to save even more money, be sure to visit our Money Saving Tips page.

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