Talk of the Trains: How To Car Shop - Wheel and Deal

Tuesday, April 3, 2012

How To Car Shop - Wheel and Deal

I wanted to write a post on how we shop for cars. I will warn you. This post is REALLY long, however I think all of the sections of it are really helpful. If you don't have time to read it all today, the specifically read the sections on Tips for Car Buying, The Research and The Numbers {all in bold below}. 

The other section will just tell you about our experience with car sales this past month and how a few of them tick. The whole thought of this came up because we basically caught a sales man in the middle of a lie, worked with one who was sketch and then had one laugh when we asked him about the common public and car shopping.

Let me say here that I am a little lady who probably knows nothing when it comes to cars or car shopping. I have bought two cars successfully in my life using this method and that is the experience that I speak from. Let me also say that I don't like getting ripped off and as some of these tactics have worked for us, I wanted to share them in hopes that they will help you out!

As mentioned, I am going to break this post up into a couple of sections. The first will be the three guys we dealt with and the stories there, the next will be tips to car shopping, the next will be brief tips on researching cars and the last will be calculating your budget and the finances.

I hope it helps some of you out there and happy shopping!

Three Car Salesmen
The first guy we chatted with who we were relatively serious about liking a car on his lot took us back to his desk to talk numbers. When we had been out walking the lot we asked about the price of the car. The gentleman quoted us somewhere around $17,500 or so. Now this was ABOVE our price range {especially when you include in tax, title, dealer fees, etc.} but we figured if they were willing to come off of it some and give us a deal on CT3's trade in, then it may be worth discussing.

We walked in and sat at his desk while he figured out how much CT3's trade in would be worth and then he said his finance manager would be right in to speak with us. A few minutes passed and the guy brought us a sheet. It showed the car listed at around $22,500, minus $5,000 for our trade in, meaning that the car was down to $17,500 - like the guy had quoted us on the lot. Weird. CT3 thought something fishy was up and I was trying to give the guy the benefit of the doubt. We left and went home and sure enough, online, the car was listed at $17,500.

GET THIS. They took the LIST price of the car and ADDED ON our trade before setting the sale price at $22,500. If we had taken their first offer, we would have given them CT3's car plus paid them exactly what they were asking for the car on their lot. Not only would they have made profit on the car, but they would have been getting CT3's car for free basically and then turning it for a profit too. SKETCH.

The next guy {at a different dealer} wasn't so bad, he was just a bit off and willing to say anything to close the deal. What killed me about this guy was how he kept telling us that he had put his girlfriend in this one car {an Equinox that we weren't interested in} and she loved it. He then went on to talk about his girlfriend's husband and her kids....hmmm. I couldn't figure out if he was just a sleeze ball and a home wrecker or if he was too busy with his lying to try to sell us the car to care what he said or if his story even made sense. Regardless, we didn't want the car that he put his girlfriends family in.

Lastly, In one of the salesman's offices that we were in,  I asked the guy "how many people come in and tell yall that they want the sale price shown on the ad, sticker or just take the first price yall give them?" He leaned back and chuckled as he said that many people just come in and do that. He said that people also don't realize how much the dealers can make off of their trade-ins and financing and so they use that to their advantage as well.

...anyway, lots of random thoughts and I am sure we all have our stories on car folks, but just remember our little experiences next time you go to wheel and deal! Now onto the tips...

Tips for Car Buying
I had a friend who used to be a car salesman's and when I asked him about this, he just laughed. Here were his tips when going through dealers:
  • Go at the end of the month when dealers and salesmen need to meet their quotas. They will be more likely to give you a deal.
  • Go towards the end of the night {near the end of a month}. To sell a car, the salesman, finance guy and manager all have to be there. If its at the end of the day they want to close and may be a bit more flexible to get you out the door. None of them can go home til the customer leaves.
  • If you have or know someone with a log in to the car dealer auctions, ask them to see what the dealers are trading the cars for. If you know what they are getting the cars for and you see the list price on the cars then you can get a good idea of the mark up and know how to negotiate.
  • Don't tell them up front that you have a trade in.
  • Know the Kelley Blue Book and the Black Book {dealer's version of Blue Book basically} values.
  • They can give you more on your trade in, take dollars off the price of the car or add in features {from warranties to car mats} in the negotiating process. DON'T be afraid to ask. This is YOUR money you are talking about!!! 
  • They will make money on the financing charges! They make it sound like its less to you by lengthening the term however its really the SAME profit to them meaning no discount to you - just takes you longer to pay.
And here are a few tips from yours truly:

  • Be TOUGH. This is YOUR hard earned money you are talking about!!!
  • Know your budget and go in with the numbers already set. 
  • Negotiate on the OUT THE DOOR price. This is NOT the sticker price but the final cost on the car including ALL fees. 
  • Do your research in advance.
  • As you do your research and find cars you like, be willing to compromise. Sometimes the fancy cars with all of the bells and whistles are nice, but are they REALLY within your price range? Is it really that important that you drive a cool car or would you rather be able to buy diapers for your kids? Think functional and realize that functionality is OKAY! 
  • Don't wait til you ABSOLUTELY have to have a car to begin shopping. This adds pressure and when you have to have a car you are more likely to spend more just to get it done.
  • Be willing to walk away. 
  • Be willing to walk away. 
  • Did I already say to be willing to walk away??
  • If you are financing, try NOT to let them lengthen the term of your payment to get your price in your range. i.e. If they first quote you at 36 months at $400 and you say you cant do that but then they say 60 months at $240 then they are still getting the same amount and it will take you longer to pay off with potentially more financing charges. Still they are the ones getting the deal.
Researching Cars
Here is how WE do it.

First, we talk numbers and what kind of car we want. We include the "if money grew on trees" and the "hoopties" that we would be willing to drive. For this last car search CT3's top choices were Jeep Wranglers and his lowest choice was a Camry or Corolla. {Not that he doesn't like those cars, he's just more of a truck guy than a sedan guy!} We talk about the number of miles on it {if you are shopping used - i.e. no more than 60,000 miles} and we discuss a price range. In the mean time, find out the approximate trade in value of your car by looking on Kelley Blue Book.

When we discuss price range we include the LOWEST trade in amount on our vehicle. So for instance if we knew that we had $10,000 to spend and that our trade in was between $4,000-$6,000 we would say that our OUT THE DOOR price range is around $14,000. Don't expect the dealers to give you the most money for your car as it may cause you to overspend. Once you have an estimated figure there begin your search.

Since we had our favorite car {the Jeep} and our least favorite but willing to drive car {the Corolla} we started looking there. The Jeeps were too expensive yet we found that we could afford more than the Corolla. This eventually led us to the Ford Escape which was right in our range and a great look for CT3 with the mix of a truck but better gas mileage, etc.
We shop everywhere from Craigslist to Dealers to Carmax.

Craigslist is good because you don't have to pay taxes and dealer fees. Craigslist can be not so good as you never really know what you are getting and it doesn't necessarily allow you to do a trade in. For us, we needed the extra few thousand on CT3's car to help in our car cost so we didn't shop Craigslist. Craigslist you are paying in cash too, so if that's not an option for you then I wouldn't recommend shopping there. We knew we couldn't sell CT3's car independently {it needed too much engine work done} so the dealer was the way for us to go.

Carmax is fine, however they didn't have anything we were interested in and there isn't one near us, so we scrapped that pretty fast. Not that I wouldn't have shopped there but I don't think we could have gotten CT3's car there in drive able condition to trade it in, so we nixed them.

Lastly, that left the dealers. I searched everywhere from privately owned to the large dealers. I pulled the numbers {cost, mileage, etc} for the cars we were interested in and I printed their carfaxes. We had lists for probably 4 or 5 dealers and once I had everything listed, we ran the numbers and headed off on our search for the perfect car!!

In doing my research, I will say that while I know exactly what we want to spend, I will pull a car or two that is a stretch. Meaning, I will pull a car that is slightly out of our budget but sometimes I do that either to see if the dealers will come down on it or as a negotiating tactic.

The Numbers
Let me walk you through how I calculate numbers and then I will tell you how it went down with our recent car purchase. Note:: These numbers do NOT include financing charges.

Take the List Price of the car.....................................$20,000
Subtract your trade in value ......................................-$5,000
Leaving you with the remaining cost ..........................$15,000
Add in dealer fees {a good estimate to use is $500}.... +$500
Giving you ................................................................$15,500
Multiply in your tax {ours is 7%} .................................x 1.07
Giving you ................................................................$16,585
Add in Tag/Title/GWRA {I estimate around $100}..... +$100
Giving you your out the door price of ........................$16,685

So for our recent purchase, we knew that we could write a check out the door for $11,000. We knew that CT3's car was valued between $4,000-$6,000 and so we were shopping cars around the $14,000 or less price range. I forget exactly what the sale price of his new car was listed at but I think it was around $14,999. I knew that if they either came off their price a bit or if we got more than $4,000 for his car, we would be in our range so we decided to go for it. Here is how our numbers worked out::
Take the List Price of the car ...................................$14,999
Subtract your trade in value ......................................-$4,000
Leaving you with the remaining cost ..........................$10,999
Add in dealer fees {a good estimate to use is $500}.....+$500
Giving you ................................................................$11,499
Multiply in your tax {ours is 7%} .................................x 1.07
Giving you ...........................................................$12,303.93
Add in Tag/Title/GWRA {I estimate around $100} .....+$100
Giving you your out the door price of ...................$12,403.93

Note:: As mentioned, the above does not include financing charges. If you are financing a car, your financing charges can depend on the interest rate and the terms of your loan, so the other things you need to think about are how long do you want to pay off the car {36/48/60 months}, your down payment and what is the max you will pay per month. Kelley Blue Book, as well as lots of other sites have an "estimated car payment calculator." Do your research here too and know what you can afford BEFORE stepping in to the dealer.

As for our car shopping and with the numbers above, here is where the wheeling and dealing came into play. Everywhere else had quoted us $5,000 for CT3's car - and Kelley Blue Book agreed. We felt like this dealer was low balling us here by telling us they would only give us $4,000. Had we not done our research though we would not have known. We talked to them about this first and they said okay, they would give us $5,000 for it. Making that switch in the figures above, brought our out the door price to $11,333.93. At this point, we still felt like they really hadn't done much of anything to come off of the list price of the car.

We then told them that we would pay their price if they threw in extended warranties. They said they would do this if we would be willing to finance the car - remember when I said earlier that dealers can make money in the financing? They would have just taken the extra $$ from the financing charge and paid off the warranty that they "said" they were giving us. We didn't budge on that and we actually left. 

This time, leaving was HARD as I felt pressured to get CT3 a car. His truck was literally on the brink and next time we wont wait so long. Thankfully and only by the grace of God, this time it worked out. 

The next morning, I received a call from the dealer trying to negotiate more. They wanted us to come up to $12,000 {include warranties, blah blah blah}. I said no thanks and hung up. We had two appointments that day to go look at cars and I told the guy that we had made our final offer and were ready to move on. About an hour later, the general manager called me and said they would meet our price. I asked him if I needed to see that in writing and he said he would be there all day and to ask for him when I got there....I told him that if we got there and they tried to negotiate more, we would not be happy and that my husband who would be leaving work early to come do this would be angrier than I! Ha. 

We showed up right on time that afternoon and the money was in order. We signed the deal at $11,000 and left in our new car. Now, I did feel like they could have come off of the car more than $500 BUT I also felt like according to Kelley Blue Book which had a car exactly like this one in excellent condition valued at $16,006, that the car that we bought was reasonably priced to begin with.

Because I had done my research, I knew that we probably wouldn't get much more from them but that if they met our price, it would be worth it. The car we bought is a bit beaten up inside {scratches on the cup holder and the pocket behind the seat is a bit torn} so that took off a bit of value and the dealer probably got it a bit cheaper from the auction, but I have to remember that they are a business as well. They threw in a few things like new floor mats - and random stuff like that and we should have negotiated for a second key. DUH! Now we have to go and pay $90 to have one with a chip in it made. 

When we actually looked at the final paper work, the dealer actually hadn't given us $5,000 on CT3's trade. He had given us $4,000 and then taken a thousand off of the car - making it $13,999. He did this because they can turn CT3's car and try to sell it and now make a larger profit off of it. Make sense? Regardless, we got a great car with super low miles at a really reasonable rate. We didn't find any others  even the same range as this one so we felt good about it. 

In the end, the dealer came off somewhere between $1,500 and $2,000 of his list price. We got the out the door price that we wanted and we were happy campers. 

Anyway, I hope this helps some of you car shoppers out there!! Let me know if you have questions and thanks for bearing with me through this super long post! 
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  1. Just have to say coming from someone who worked in the accounting office of a large car dealership for over 9 years... You were right on target with everything you said. I have seen everything imaginable at a car dealership. I've seen some great bargainers and very savy customers, but then I've seen some real crazies too. Doing your homework is the most important thing. I would only add one more thing to everything you've said.... I would highly recommend purchasing GAP insurance on any financed vehicle. It usually cost about $200 (in my area anyways). For those who don't know, GAP insurance is just in case something happens and you vehicle is totaled but you insurance company only says the car is worth X.XX amount of dollars but your payoff to the bank is greater than that, then GAP insurance will pay for the differance. It's a very smart thing to buy. You don't want to be left making payments on a vehicle that the insurance company has said is a total loss. Also if financing, always check with credit unions first. Their interest rate is usually much lower. You can even get pre-approved before you start shopping around and that will save you lots of time in a finance office.

    Great post

  2. This is an awesome post!! We just bought a new-to-us van in October. We searched and searched for a few months because we weren't in any hurry. We ended up at a dealership and saw one that we thought was WAY out of our budget. It came down to $100. They left us sitting in the office for so long and would come back in to talk us in to going over our budget by $100. We were confident in our budgeted decision and knew THEY could come down! We told them we would walk because we had prayed over our amount and were completely sure that we would find exactly what we were looking for whether we bought it from them or not. The manager gave us exactly what we wanted at that point. STICK TO YOUR GUNS!! You are correct, it is your hard earned money and there is PLENTY of wiggle room!

  3. You are awesome!!! I want you with me the next time we buy a car!! Your parents must have taught you these awesome shopping techniques. :)

  4. This so great, I'm sharing this!! Practical, solid advice. It is SO EASY to get in a bad spot while car shopping, and I think what you've written here will help someone from making common car shopping mistakes!


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