Buying a Car, the Easy way; Step 5

Step 5: Buy the Car!

After all the research, test drives, narrowing down, you’re left with one car.  You know you want it, now to buy it!  This involves going to the dealership, picking out the exact car you want, negotiating, financing, and signing on the dotted line.  We’ll cover each of those in turn.  This step sounds like it’s one of the easier ones, but it is the most complex, so I have broken it into several sections, to ease the pain of digesting the whole car-purchasing process in one fell swoop.

1. Picking a dealership, and finding THE car

First, find two or more dealerships in your area and go to their online inventory sites.  Find the car or cars that has all the options you want and is the right color.  Write down the stock or VIN (Vehicle Identification Number) and then call or email the internet department at the dealership which has the car.  You’ll want to do this for each dealership in your area that sells the car you want to buy.  Inform the internet salesperson (or if you kept the salesperson’s card from your test drive, contact them) that you are intent on purchasing the vehicle, and give them the stock number or VIN.  Ask them what their best price is on the car.  This is where I will differ from other car-buying tips: Ask each dealership for their OTD, or Out The Door price.  Some dealers will refer to this as an OTR, or On The Road price.  You can’t compare each dealer’s price with another, because some will quote you a price without dealer fees, tag fees, taxes, destination (delivery), or state-mandated costs.  This gives you apples-to-apples comparison numbers, as well as a place to start with each dealer.  If one dealer is closer, but has a higher price, quoting the other dealer’s price will usually make them lower their price.

2. Arriving at a realistic On The Road (Out The door) price

Here’s where a little research will come in handy. has their True Market Value, which gives you the average price a particular car sells for in your area.  It’s a good place to start, but can usually be beaten by a savvy shopper, sometimes by up to 15% depending on the car.  From this simple research, and what you’re willing to spend on a car (not necessarily this car), come up with a price in your head that you’d be happy with.  This is where you will be assigning a value to the car.  Now take 10% or so off of that number, and that’s your starting negotiating price.  Remember to base your price on the one the dealers gave you.  They might drop 5% off the sticker price if they believe you are serious about buying the car, and if they don’t, you know you’re dealing with a greedy dealer, and it may not be best to buy a car from them.  At the start of this relationship, if they aren’t willing to budge on their price at all, it sets the mood for the rest of car ownership and dealings with them.

Let’s pause now for an example:

On an American luxury sedan with a sticker price of $45,000, let’s say lists the average sale in your area at $42,500, which would be close to the “dealer invoice” price (also listed at Edmunds).  Let’s also assume you have $2,000 in negative equity (your trade-in is worth $2,000 less than what you owe), and that the sales tax, tag fees, etc. all come to $1,750.  Your OTD or OTR price, if you ask for what Edmunds tells you, is $42,500 plus your $2,000 negative equity, plus $1,750, for a total $46,250.  That’s what you’ll be paying for the car, plus interest over the life of the loan.

If a dealer recognized you as serious about buying the car, they may have offered you a price below the sticker price, or asked you what it would take to get you in the car on the day you took your test drive.  You can take this amount (if offered), or give them the Edmunds amount if you’re averse to doing some simple math, but I highly recommend pulling out a basic calculator and taking some percentages.  Start at least 5% below whatever the lowest price is (the sticker price, or the dealer’s first offer), and take another 5% off of that.  That’s usually a good starting point for negotiations, and is your “low ball” offer.  The dealership will usually balk at this number, unless that particular car or model hasn’t been selling well, in which case you might take a lower amount to another dealer, and try there.  Just remember, you can always move up in price, but it’s usually harder to move down in price.

3. Visiting the dealership, with the intent to purchase your car

Now that you have a baseline price to go with, visit the dealership you had the best test drive experience at.  If you had a high-pressure salesperson for your test drive, walk in and ask for a sales manager or another salesperson to help with the actual car purchase.  This will take some anxiety out of the process, and you’ll come away happier.  Take a test drive in the actual car you found online.  Make sure its got everything on it that you want, and is on the window sticker.  Once you get back to the dealership, the negotiation will begin. If they didn’t try to sell you the car on your first test drive, they will now.  Start with your low-ball offer that you calculated before even setting foot in the dealership, and ignore whatever speech they give you.  This is where good negotiation skills come in handy, but if you aren’t well-versed in negotiation, don’t fret.  You can get a friend to come with you who is better in negotiating, and let them handle it, or if you go by yourself, just try to stick as close as you can to your original price.  Remember that these are all OTR or OTD prices, not the price of just the car.  Never negotiate only the price of the car! If you want to buy the car for $42,500, and you have $2,000 positive equity (your car is worth $2,000 more than you owe on it, or your car is worth $2,000 as a trade-in), you’re OTD price is $40,500 plus taxes, tags, titles, and dealer/state fees.  So, try and get the dealer to match the price you originally wanted to pay for the car.  Once they meet your price, you’re almost done!  If the negotiations get drawn out, and neither side is giving, your price may be too low, or the dealer may want too much for the car.  At this point, you can take a breather and call the other dealership(s).  Give them the current OTD price and tell them where you’d like to be.  If they are willing to deal, go there, or go back into the original dealership and tell them you have a better offer at another dealership.  Using this back-and-forth technique can save you thousands in the long run, and make the negotiations quicker and easier for you, since the two dealers are now fighting each other to sell you a car. If you need a break in the negotiating, or want to make a call, do so outside.  The dealer will have the car parked there (so as to entice you further into buying the car), and now is a great time to inspect the car.  Find any faults in the paint, interior, anything which may have been scuffed or damaged in transit or by another person.

4.  Inspecting the car, taking a breather

Here’s another good time to take a break.  Many car dealerships these days advertise that they’ll have you in and out in under an hour.  While this may be true, you may be hurried into add-ons you don’t want, or financing you can’t really afford, or a price you don’t really want to pay.  Make sure you’ve carved out enough time in your day to complete the transaction, or at least have a plan of how much you want to get accomplished today.  While you’re taking this break, if you didn’t take one during the negotiation, walk around the car, and take the time to look it over with a keen eye for detail.  Make sure the paint is flawless, the interior doesn’t have any rips, tears or stains.  Any repairs at this point are paid for by the manufacturer, so the dealership should have no problem with fixing anything you want.  If they aren’t willing to fix anything you find wrong with the car before the purchase, think of how they’ll act once you buy the car!  The dealership’s culture, if you will, extends from the salespeople to the service writers, and everywhere in between.

5. Financing

Once you’ve agreed upon a total cost for the car, Financing comes into play.  If you are a member of a credit union, ask the dealer if they can set it up for you (a call to your credit union beforehand to verify the best financing rates comes in handy here).  If the dealership is offering below 4%, chances are they will beat your credit union.  Knowing your credit score is important here, as most financing companies want a score of 720 or 740 to get their “Tier 1” financing, which is the best they will offer.  If you’re using the dealer to finance, run the credit check (a 15-30 minute process, depending on your credit and the dealer).

Now you visit the “F&I” person.  This is the person who explains to you the financing they found, extended warranties and maintenance agreements.  If you’re not happy with the financing agreements available, take a step back and think about it.  If you give them a couple days, sometimes they can find better financing for you.  Extended Warranties and Maintenance Agreements take all forms, so take the time to read through them, ask questions, and negotiate the prices if you are comfortable doing so.  There are literally thousands of web sites which are spent debating the pros and cons of each, so I won’t go into it now, but the idea is that you are comfortable.  If you’re not comfortable paying $1,000-2,000 for a warranty up front, think about paying cash for it, and not financing it, or not getting it at all.  This room is also where you will be signing on the dotted line, the last step before taking delivery of the vehicle.  Remember, once you sign on the dotted line, the car is YOURS.

6. Taking delivery of the vehicle!

Congratulations, you’ve now bought a car!  Hopefully it was easier than your past car-buying experiences, and if this is your first, definitely give yourself a pat on the back – many people have a lot of trouble doing what you just did!  At this point, the dealership staff will thank you for your purchase, and will go out to the car with you.  Ask questions, if you have any, make sure you remove any personal belongings from your trade-in (if you had one), and drive off the lot in your new car.  This time is called “taking delivery of the vehicle,” and at this point, the car is all yours (and your bank’s, if you financed).

By John Suit


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