How To Buy A New Car
sure to read How I
Bought A Popular New SUV for $3,611 Below Dealer Invoice.
If you're just looking for
free discounted price quotes on new cars and trucks, you can
find them below under New Car Price Quotes.
But getting dealer quotes without first reading Negotiating
The Best Deal could be a big mistake because you need to learn the
negotiating strategy that will help you get the best possible price. And the
best possible price is usually lower than all the dealers' price quotes,
sometimes a lot lower. So keep reading, or you might miss out on a really big
This page should be titled, How To Buy A New Car
Below Invoice Price, 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 buy new cars and trucks
below the new car invoice price all the time, in every state. The only time that this is
is when the shopper lives in an area with no competing dealers, or 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 invoice price.
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!
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sure to see our Car Buying FAQ page for
answers to common questions that people have about buying and leasing.
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 breathe 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.
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 the rest of the people who
will 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 score for free at
CreditKarma and you can get your complete credit report (for free) at
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
One application 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.
Those sites have free,
no-obligation quotes and online applications, so apply at both 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 dealer invoice prices AND the prices that other people are paying for the same model.
You can find rebates and
incentives at this Rebates
and Incentives page. You can find Dealer
Invoice Prices at this Edmunds
Pricing link. This will also give you the Edmunds True Market Value™ price,
which is the average price that is paid in your area for that vehicle.
You do not have to enter any personal information here to get
dealer invoice prices. Canadian motorists can get information on dealer invoice prices,
dealer incentives and rebates at CarCostCanada.com.
Remember that the real dealer cost is usually a lot lower than dealer
invoice (at least $1,000 to $2,000 lower), and your goal should be 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.
Pay attention to the prices
that other shoppers are paying for the same model, as they can reveal secret
dealer incentives that lower
the dealer's real cost. For example, if you didn't know that other people were buying the car
for $1,000 below invoice, you might end up buying at the invoice price or
thinking that you were buying at a "rock-bottom price."
The Edmunds True Market Value™ price
represents the average price that other people have paid, which means that
the smart shoppers paid less than that (a lot less). So your initial offer
should be far below the average price, and far below the dealer invoice price.
See "Negotiating The Best Deal" below for more details.
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 all of the following car buying services: Edmunds,
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
three sites to make sure that you're not missing out on a better deal!
Negotiating The Best
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.
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 very important to me. The lowest quote was [actual price]
from [name of dealer] and your quote was $xxxx higher. I'm sure that you could
lower your price and still make a decent profit, so please sharpen your pencil
and send me a competitive quote. 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. The dealer knows that you won't drive that far to get your car
After you've gone through all the dealers with this approach, you
probably won't be getting the kind of prices that smart
shoppers are paying - below dealer invoice, without any rebates. (See the
Customer Rebate Warning below.) Don't be surprised if their prices are still too
high, since no dealer wants to sell below invoice unless he absolutely has to.
But you can get them to do just that, using the following secret strategy.
IMPORTANT NOTE: Be sure to follow this entire negotiating
strategy, including the initial quotes from multiple dealers and using the
following "Costco price" trick. Failure to do this will prevent you
from getting a rock-bottom price.
After getting the second round of price quotes from all of the
dealers, email all of them again. Say that you expected their price quotes to be
a lot lower, since people are buying new cars and trucks at or below dealer
invoice (all the time) using the Costco Auto Buying Program. Then ask them what
their Costco price is for the car you want to buy, and wait for their responses.
Don't offer to buy at the Costco price, because you may be able to get a better
When you do this - asking all the dealers for their Costco price -
dealers are put on notice that you are a smart shopper who knows that you can
buy below invoice, and that they are going to lose a sale to another dealer if
they don't offer you a huge discount. This strategy usually works even if you're
not a Costco member, since most dealers won't even ask if you're a member. (You
could join Costco for $60 if you had to, but it's not really necessary. The mere
mention of their Auto Buying Program is all it takes.)
If you actually used Costco to
buy through their "approved dealer," the dealer's cost on that car
goes up because they would have to pay Costco. This means that you should be
able to negotiate a lower price by not actually using Costco and buying from a
dealer who does not have to pay Costco for your sale. Most dealers are not actually
"Costco dealers" but they will pretend to be just to be competitive
and make the sale.
After asking all the dealers for their Costco price, you should be
getting multiple quotes that are at or below invoice - without a rebate. Since
those prices are still profitable for the dealers, you should try to negotiate
an even better deal. Remind the dealers that you are still negotiating with
other dealers, and ask all of them, "Is that the best you can do?"
Some may go lower and some may say that they can't go any lower.
If you still want to try for a better deal, you could offer to pay
$500 (or $700 to $800) below their
Costco price. This might result in a good counter-offer that you could accept,
or you could negotiate some more. You can continue to
play one dealer against another, until they say that's the best they can do. Or
you can stop once they get below invoice - it's up to you.
Customer Rebate Warning: If the new car you are buying has a
factory (cash) rebate, watch out for dealers trying to use the rebate as a
"price reduction" off the MSRP. Don't fall for this! The rebate
is your money that you can use to pay for the new car, AFTER negotiating the
best deal you can - without the rebate. Be sure to tell the dealer that
you are keeping the rebate, so they should not include it in their price quote.
With a rebate, your final price should be thousands below invoice.
For example, if the rebate is $2,000 and you negotiated the price down to $500
below invoice, your purchase price would be $2,500 below dealer invoice - NOT
$2,500 below MSRP.
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 or
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,
consider this: an extended warranty might be a waste of money. Here is a great article
on this subject: Are Extended Warranties Worth It? If you decide to buy one, don't
pay those high dealership prices just to get some peace of mind. You can usually find a
good deal at CARCHEX, a
20-year-old company with an A+ rating at the Better Business Bureau.
We hope you enjoyed reading How To Buy A New Car Below
Invoice Price. For answers to the most common questions asked by new car
buyers, see our Car
Buying FAQ page. To learn how to save even more money, be sure to visit our
Money Saving Tips page.
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