Buying a new car question

[warreng88]

So, my brother worked at a car dealership for several years and gave me some tips on how to get the best price for a car. My wife and I, fortunately, are in the financial position where we can afford to purchase a car outright, using cash. I thought this was the best way to approach a salesman telling them I can write a check today for the full amount. My brother had a different strategy to use. He said when negotiating the price of a vehicle, to say we are going to finance the car using the dealership's in house financing and we should get a better price. The reason being is they will make more money on the back end of the financing, either by a lump sum paid to them by the financial institution doing the financing or a small percentage of the interest rate each month. So, the dealership can afford to not make anything off the actual sales price of the car since they are making money off the financing. Then, when we get into the financing area where they are putting us through the ringer, ask how many payments we have to make in order to not get charged a prepayment fee. The typical length of time is 3-6 payments. After that time, pay it off. So, even if we are looking at 3% interest on a $30,000 car, that would be $225 in three months or $430 in six months of interest. But if we can save $1,000 or more off the sticker price, it would be worth it.

Has anyone ever tried this or have any other insight?

[Pete]

Yes, they certainly make money off the financing -- a big part of their business.

Finance it, put the cash in a 6-month CD, then pay it off.

BTW, I always use CarsDirect.com to get car pricing and either go through them to a dealership, or take the print out of the price to a dealership of choice.

[catch22]

Do not mention cash at all until you are in the payment stage.

During the negotiations they will use a lower price thinking they will make up the money over payments.

If you mention you are paying cash they will not give you the discount you think you will be getting. Cash discounts apply for private sales and small lots, but the mega dealers want your monthly payment and will give you a low price to secure the payment.

So talk them down on price without mentioning how you plan to pay. When you agree on a price pull your checkbook out and pay for it. If they have a problem tell them you are walking off the lot. They will fold and go with the agreed price.

[Filthy]

When buying a vehicle from a dealership, the car deal itself is split into two different transactions. Front end, and back end. Its all seemless to the buyer, but they are both looked at in equal parts, in regards to importance to bottom line profit for the dealership. So, if you do your due diligence in regards to negotiating/buying the car right on the front end...the dealership will try to recoup/maximize profits on the back end of the deal by offering services/warranties, and buying interest rates down from individual lendors. There are also lendors who will pay a fee $100-$300 just for submitting a deal over to them. so yes...it is definitely in the dealerships best interest to capture financing.

There are many strategies, and philosophies when purchasing a vehicle, but in regards to your "Exact" scenario... it would probably be wise to atleast tell them, that yes...you are open to financing with them, as long as they have something lucrative to offer. Once they present the financing to you, it is all once again negotiable...just like the purchase price of the car itself. They are typically making anywhere between a quarter of a point, to a full 2 points on interest. So at that time....you can decide what is the best option for you and your family. Maybe paying cash outright for the car is the best way, however sometimes you can let your money work for you, by financing at an extremely low rate....and having the cash put away in a bond, or high interest savings account. (Like what Pete mentioned above)

[kevinpate]

An important point to remember - what a charming, and disarming, face says to you may or may not mesh tightly with the paperwork you sign. Once signed, the words on the paper mean far more than those which slid out the mouth of a face.

[warreng88]

An important point to remember - what a charming, and disarming, face says to you may or may not mesh tightly with the paperwork you sign. Once signed, the words on the paper mean far more than those which slid out the mouth of a face.

I work in banking so I know everything needs to be read with a fine tooth comb. Thanks for the reminder!

[kevinpate]

You are welcome. Hope it may help others as well. I sometimes have to internally shake my head over what the general populace will sign without having bothered to read it at all. And sometimes I am less than successful at internalizing the shake.

[warreng88]

You are welcome. Hope it may help others as well. I sometimes have to internally shake my head over what the general populace will sign without having bothered to read it at all. And sometimes I am less than successful at internalizing the shake.

I worked as a loan officer at a bank and completely agree with this statement. Even though I did some mortgage lending, when I went to close on my own house, I took a good 15 minutes to look through everything. Again, I did some mortgage lending and did that. I knew where every little thing that could be changed was and on what page and it took me that long. People would come in to my office to get a loan for a car, I would print up the documents and they would sign them. Apparently they didn't care what they were signing away as long as they got their money...

[BBatesokc]

i may have missed it, are you planning on buying brand new or used? I know the thread title says "Buying a NEW car" but that can often still mean "New to me" instead of brand new.

Obviously the best dollars spent are the ones on a used car over new vehicle purchase - unless you're able to take advantage of some incredible tax incentives.

[warreng88]

i may have missed it, are you planning on buying brand new or used? I know the thread title says "Buying a NEW car" but that can often still mean "New to me" instead of brand new.

Obviously the best dollars spent are the ones on a used car over new vehicle purchase - unless you're able to take advantage of some incredible tax incentives.

Great question and I am sorry for the delayed response. We have had a good experience at Bob Howard Honda and will look at getting a new Civic in probably the next six months. A year or two after that, we will probably be replacing my Accord with a CRV and will do the same thing if we are in the same financial position. The CRV might be preowned or a year old, but probably not "used" in the sense of a previous owner for an extended period of time. Hope this helps.

[rtz]

The only time to buy a new car is at the end of the month and only if the dealer is near to making their sales quota for that month. If the dealer has to sell X number of cars that month to get the million dollar or more payment from the automaker; they will sell you that car at any price at that point. Read all about it here: Fighting Chance New Car Buying Guide - How to get the best deal when you buy or lease a new car.

Or just buy a new car direct off the internet and have it delivered to your house and be ready in advance when gasoline is $10 or $15 a gallon in the near future: Model S Design Studio | Tesla Motors You'll be wishing you had an electric then. Nissan Leaf best selling electric right now. Can get a Mitsubishi iMiev for nearly nothing new or used. As soon as the new 2016 models come out; range will be an issue of the past. Detailed List of Electric Cars and Plug-in Hybrids | PluginCars.com

[Just the facts]

Here are my $0.02.

First, find the newest salesman on the lot. The dealer wants that person to make sales and since they are new you have some equal footing in the negotiations. The second things is, and this is the most important, the only thing they fear is the "walk out" (Seinfeld reference). Get the best deal you can and then tell them you aren't sure and that you are going to look at some other dealers. They will call you the next day with a better deal no matter what deal they already offered. Even if they sale the car you want don't worry - they make 500,000 exact copies of it. Also, get them to throw in some 'extras' after you agreed to buy the car. You would be surprised how much they will agree to after you already agreed to buy the car. Some of the extras could be free detailing once a year, some extra oil changes, a bike hitch/rack, etc... In most states you have 3 days to back out of the purchase and I think they agree to these items to kind of seal the deal after the fact. Heck, just for fun try taking the car back on the second day and see if they throw in anything else . If they ask why just tell them the insurance on the car is higher than you thought it would be.

[mkjeeves]

The only time to buy a new car is at the end of the month and only if the dealer is near to making their sales quota for that month. If the dealer has to sell X number of cars that month to get the million dollar or more payment from the automaker; they will sell you that car at any price at that point. Read all about it here: Fighting Chance New Car Buying Guide - How to get the best deal when you buy or lease a new car.

Ding! Two of the cars I own now we bought on the last day of the year and I do believe we got the best possible deal that could be had. I've walked out on a few deals too like JTF says and had them come back later in the day or the next day with a new found special way they can cut the last few hundred dollars off the price. I hate that whole car buying process though.

Or just buy a new car direct off the internet and have it delivered to your house and be ready in advance when gasoline is $10 or $15 a gallon in the near future: Model S Design Studio | Tesla Motors You'll be wishing you had an electric then. Nissan Leaf best selling electric right now. Can get a Mitsubishi iMiev for nearly nothing new or used. As soon as the new 2016 models come out; range will be an issue of the past. Detailed List of Electric Cars and Plug-in Hybrids | PluginCars.com

Tesla is going to start making Roadsters again with a few changes! New 400 mile battery and other stuff. (I sold mine a few months ago after five years. I miss the fun.) I haven't seen them talk about price of the new one anywhere yet.

[ctchandler]

Here are my $0.02.

In most states you have 3 days to back out of the purchase and I think they agree to these items to kind of seal the deal after the fact.

JTF,
I like most of your ideas however I was pretty sure the "three day back out" didn't apply, so I googled it and found the following at a federal government web site.

"It is important to remember you always have the right to walk away if you are not 100% satisfied with your deal or dealership. You must walk-away, however, before you sign any contracts. Once you sign the contracts, there is no law that allows you to cancel the contract for any reason within three-days of purchase.".

Buying a Car

Also, at a consumer/private site the following.

"If you are wondering how to get out of a car purchase, your first thought may have been to invoke the federal "cooling-off rule." But this rule, which allows consumers to cancel certain sales transactions within three days as a protection against high-pressure sales tactics, does not cover car purchases. While negotiating with a car dealer is often described as a high-pressure situation, cars lose a tremendous amount of value the moment they are driven off the lot. Therefore, allowing a cooling-off period would force dealers to sell virtually new cars at sharply reduced resale prices. - See more at: http://consumer.findlaw.com/lemon-law/how-to-get-out-of-a-car-purchase.html#sthash.kyK8zmZF.dpuf".

How to Get Out of a Car Purchase: Is There a Cooling-Off Period? - FindLaw

[Just the facts]

Well C.T. this might be a case of my local dealer lying to me. I have bought my last 5 cars from the same dealer and every time they have told me I have 3 days by Florida law to back out of the deal. Like you I goggled it and can't find it. I will say this though - all 5 times they have given me a yellow document outlining it, but since I never wanted to back out I never read it and threw it in the trash.

[Jeepnokc]

Well C.T. this might be a case of my local dealer lying to me. I have bought my last 5 cars from the same dealer and every time they have told me I have 3 days by Florida law to back out of the deal. Like you I goggled it and can't find it. I will say this though - all 5 times they have given me a yellow document outlining it, but since I never wanted to back out I never read it and threw it in the trash.

I did a quick search and found this document from the Florida Highway Safety and Motor vehicles Dept.. Look at page 6.


http://www.flhsmv.gov/safetytips/PDFs/BuyingVehicle.pdf

[Just the facts]

Thanks Jeepnokc. Now I wonder what was in the yellow document they keep giving me.

[ctchandler]

Thanks Jeepnokc. Now I wonder what was in the yellow document they keep giving me.

JTF,
I didn't think about the fact that this is not a federal issue and a state could have a law covering this it. But looking at Jeepnokc's link, it appears that Florida does not. However, if it's in the dealer's contract, I would think they would be required to honor it. It sounds like you have a good dealer with a good product.
C. T.

[kevinpate]

JTF, since you were ok with your dealer and weren't particularly paying attention, it might be that the dealer was making a point there is not a 3 day call it quits provision for a car sale.

It is truly amazing how many people think that rather limited rule exists for any purchase, anywhere. I think it arises from folks meshing a misunderstanding of the 3 day rule with the notion that a customer is always right.

Neither of those is an absolute one size fits all notion. However, for some folks, if God (Zeus, Thor, Eywa, FSM, [Insert others]) descended from the sky and said Dude, you be wrong, so chill out, they still likely wouldn't believe.

I'm now past the 38 year mark of car purchasing, but only one of mine was from a dealer vs. gift/purchase from a family member or other private seller. Far less paperwork involved in my typical transaction, but I've had a lot of questions about 'that 3 day rule' over the years in other settings.

[warreng88]

There is a three day right of recision on the purchase of a house, that's not what you are referring to, it is JTF?

[Filthy]

Like already posted, there is no "State Law" allowing a 3 day "grace" period, as stated. However, there are many dealerships, and dealership groups across the Country who do offer a "buyers remorse" walk away, type program. Auto groups such as Enterprise, and CarMax are very open about this program, and it is part of the seling point of buying from them. Basically stating, that you buy a car...and within the first 7 days...pay a $300 fee...and return the car, no questions asked. (As long as the car doesn't have more than 500 miles since purchase)

There is also a "Lemon Law," on new vehicles. Which in itself is actually confusing..because its not an actual law...but a program offered by the manufacturer. If a "Brand New" vehicle is purchased, and it has a reoccurring problem, that has been addressed, and fixed more than 3 times, in a 12 month time frame...that car can be purchased back by the manufacturer, under the "lemon law." However, it is a very long drawn out process, and most people give up before even getting to this point.

When it comes to a used vehicle here in Oklahoma...once you sign the paperwork, it's yours. If you pull out of the lot, and the car breaks in half...and falls into two pieces.....Guess what? You own both pieces.

[turnpup]

Does anybody remember way back in the late-90s when somebody drove a car around town that had lemons plastered all over it (I guess they were made from construction paper or yellow duct tape or something like that)? Apparently they were mad at the dealership and trying to make a point about that particular car being a lemon.

I'm not a very good car buyer, as far as getting a good deal. My last two vehicles I've had to have the dealership find one in another state because the exact color combination and features I wanted weren't available on any of the cars in the local lot. They don't exactly negotiate downward under those conditions. Maybe it's because I'm a girl, but I've never thought the hassle of haggling over the price a whole lot was worth it. But in reality it probably is. I just get so excited when it's time to get a new car that I want it to be over and done with ASAP. Want. Shiny. New. Car.

[SoonerDave]

I realize I'm a bit late to this thread, but I'm going to toss in my $0.02.

First, I would *NEVER* convey to the dealer up front how I plan to pay for the vehicle. The key in general to the best deal is negotiate the est possible price for the vehicle FIRST, and arrange paying for it second. That boils down to getting the most information you can about holdbacks, floorplan allowances, customer incentives, and other dealer incentives that all come off the so-called "invoice" price the dealership claims they pay for the car. Keep in mind that if a dealership wants to know your financing issues before they give you a price, they're obviously factoring in a chance for additional profit. And the last thing most dealerships want you to do is think about sales price - they want you to think about monthly payments. Financing is merely a means by which the dealership can throw more tinfoil in the radar to obscure what boils down to their "take price" for any given car.

Several pricing services these days offer MSRP and invoice prices for most popular vehicles, and selecting a car with the combination of stuff you want allows you to establish a starting point for an "invoice" price. Now, you have to keep in mind NO dealership really "pays" "invoice" for a car. As noted above, there are myriad back-end elements from the manufacturer to the dealer that obscures that actual cost to the dealer, along with the financing the dealer acquires to buy the vehicles into their inventory.

You have the most control when you have the most information about car price, and the amount of money a dealership typically mandates as a minimum profit percentage.

When I bought my wife's Sienna a few years ago, I did considerable research into the exact options she wanted, and came up with the "invoice" price. I then deducted from that what was reported to be the dealer's holdback allowance (which is a percentage of the sticker kicked back to the dealer by the manufacturer after the vehicle sells), minus some other incentives (which vary from time to time). That gave me a baseline figure as the most realistic assessment of the dealer's actual vehicle cost, which ends up well below the "invoice" price. To that I added what seemed the industry percentage for dealership profit, which can vary widely from 1-3% (and even more). Armed with what I believed to be a best estimate of cost+profit, I set up an anoynmous email account, and solicited offers for the exact vehicle I wanted to three local Toyota dealerships, and specifcially solicited from them their "best and final offer inclusive of any and all fees and sales charges."

The winning dealer hit my number within $50.

I picked it up that weekend. The salesman who met me tried to add back in their asinine "doc prep fee," and I showed him my solicitation letter stating specifically their bid was a "BAFO including all fees," and he took it right back off. Their closer tried to hit me up with their financing, but they couldn't touch the rate my credit union was offering me at the time unless I was willing to buy warranties, undercoating, super protector crapola, and whatever, all of which I declined. He then admitted to me he couldn't match my rate, and he was always trying to steer me to payments.

The point in all this was that I was in control of the transaction 100% of the time, I had decided that I knew what I was going to pay, and knew how I was going to pay for it. It removed the power of the dealership closer, and 99% of the hassle factor. It's a path I highly recommend. The key is DO YOUR PRICING HOMEWORK FIRST. And AVOID Internet pricing sites that tell you *only* "what other people are paying for the same car on average," because most people pay way too much. I want to do *much* better than average.

Good luck.

[SoonerDave]

JTF, since you were ok with your dealer and weren't particularly paying attention, it might be that the dealer was making a point there is not a 3 day call it quits provision for a car sale.

It is truly amazing how many people think that rather limited rule exists for any purchase, anywhere. I think it arises from folks meshing a misunderstanding of the 3 day rule with the notion that a customer is always right.

Neither of those is an absolute one size fits all notion. However, for some folks, if God (Zeus, Thor, Eywa, FSM, [Insert others]) descended from the sky and said Dude, you be wrong, so chill out, they still likely wouldn't believe.

I'm now past the 38 year mark of car purchasing, but only one of mine was from a dealer vs. gift/purchase from a family member or other private seller. Far less paperwork involved in my typical transaction, but I've had a lot of questions about 'that 3 day rule' over the years in other settings.

The biggest misconception about the 3-day rescission rule arises from the real such rule relating to door-to-door sales. That's morphed into the misguided notion that there exists such a rule covering ALL kinds of sales. It doesn't.

[SoonerDave]

I'm not a very good car buyer, as far as getting a good deal. My last two vehicles I've had to have the dealership find one in another state because the exact color combination and features I wanted weren't available on any of the cars in the local lot. They don't exactly negotiate downward under those conditions. Maybe it's because I'm a girl, but I've never thought the hassle of haggling over the price a whole lot was worth it. But in reality it probably is. I just get so excited when it's time to get a new car that I want it to be over and done with ASAP. Want. Shiny. New. Car.

That's precisely the kind of customer most dealerships love , and precisely why pricing info sites like TrueCar are a fool's gold. TrueCar tellls you the "average price" people pay "for a given car," and because most people pay too much, that average is too high. LIke I said before, I intend to do *way* better than average

When you go in armed with information, you neuter the worst of the sales demons. And with the Internet becoming a pervasive means for generating sales, dealerships are gearing this way accordingly, discovering that volume in lower-margin sales with less haggling works just about as well if not better than haggling for the homerun with a consumer who pays full sticker for a car and thinks its a great deal.