Eight Steps to Buying a New Car
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Eight Steps to Buying a New Car
10 Steps to Buying a New Car on Edmunds.com: Learn how to locate, price and negotiate your next new car.
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While the internet appears to be helping buyers, I'm finding that many dealerships view it merely as a toll to gather sales leads which they then want to lure into the same sordid sales process. Price quotes are many times meaningless. It's hard to get dealerships to compete on an out-the-door price on the "same vehicle", because there is such a wide variety of trims, options, and add ons.
Perhaps the answer is more customers knowing exactly what make and model they want, and being flexible about colors and minor cost options in the hope that within that spectrum there are cars that fit their needs at almost every dealer within a reasonable distance, then insisting on going to the dealer only to take delivery.
I'm trying to do this right now. Hopefully it will be the first time in over forty years of buying many new cars that the memory of purchasing one won't be unpleasant.
Wake up you manufacturers! Many of us have been ready for years to buy online in a streamlined process that allows us a level playing field in your game of "guess what the dealer really paid for this car and what he might actually accept to sell it to you".
Can you imagine having to buy everything else you do not knowing the price you are going to have to pay? It's long past time for a change.
Short version of events:
I was a life long Connecticut resident living in the middle of the state. My car had died unexpectedly, so I went out and, after a few test drives, I bought a car in November 2009 and it wasn't the right car for me so I traded it back to the same dealer for purchase price minus "registration fees" Those fees came to $1011.00. But I bit the bullet and took it as a "rental fee".
The dealer showed me a 2006 Ford Fusion... When he went to get the keys for the test drive, I asked to see the carfax. The carfax report was clear. I test drove the car and thought it was a decent car.
During the execution of documents for purchase, the dealer said that the "lender is requiring a 2 year extended warranty" I pushed forward. The car also came with "free tires for life". I had received $10,900.00 for trade on the first car and financed $7,367.00 for a total purchase price of $18,267.00.
In January 2010, I called to get the car brought in for new tires... It was at this time that I was informed 1) I was informed I had to drive the car at least 25,000 miles before getting the new tires and 2) that the car had to have all oil changes done at the dealership and that since I had not done so, the tire warranty was void.
In April 2010, the power window on the passenger side of vehicle stopped working... The motor worked but nothing happened. Further, if I hit a bump, the window would slide down on its own.
In October 2010, BOTH power mirrors stopped working the same day... I suspected a fuse and check... as far as I could tell, it was not a fuse.
At the very end of December 2010, I had moved to Rhode Island and went through registration & required inspection process. The car failed inspection due to a check engine light that was on. The check engine light was reset and codes cleared to see if there was a problem or if it was a one time code... it came back on again.
On February 2, 2011, I took the car to a repair shop that could do further diagnosing of the issue and I was informed that BOTH catalytic converters were shot and needed to be replaced at a cost of $2,000.00 each (according to my research).
On February 4, 2011 I took the car to a dealer to just get rid of it. The dealership offered me $5,000.00 trade... a loss of $13,267.00 in 13 months!!! I was just about at boiling point... It was about to get worse...
The dealership stated that according to the carfax they pulled, this Ford Fusion had been in an accident in July 2007; LONG before I purchased the car. I was now livid. I asked to see the carfax which they provided and in black and white was an accident from July 10, 2007. Further, the car had been sold at auction in March 2009, September 2009 and November 2009. The dealer I purchased it from listed the car for sale on November 30th, 2009.
Additionally, the car was practically idle from March 9, 2009 to when I bought it having been driven on 179 miles in just over 9 months.
I am now left to pick up the pieces from a horrible deal and see what, if any, action I can take against the parties involved.
I know this was supposed to be a short comment... guess that couldn't be done...
“Someday the car manufacturers are going to realize that people are tired of the games that their dealerships play with buyers. Just look at this article (Edmunds.com 10 Steps to Buying a New Car), loaded with warnings about how you could get taken to the cleaners during virtually every step of the car buying process! What does that tell you about the integrity of the whole class of businesses that sell cars? While the internet appears to be helping buyers, I'm finding that many dealerships view it merely as a toll to gather sales leads which they then want to lure into the same sordid sales process. Price quotes are many times meaningless.”
I see this kind of frustration everywhere but let’s put this into prospective. Yes, decades ago there wasn't the internet and nobody knew what cars should sell for. You had no choice but to "believe" what the dealer told you. Then the US passed The Automobile Information Disclosure Act in 1958 that required every car to have a sticker on the window, clearly outlining, among other things, the manufacturers suggested retail price (MSRP) for every optional item, including destination charges.
Nowadays, where most of the dealerships are corporate owned or owned by individual businesspeople, governed by a myriad of laws, they are run in a normal business environment where customer retention is of paramount importance. The industry is in a crossroad of climbing out of the old ways into the new paradigm of customer satisfaction.
So, why all the negative discourse. Well it’s simply because this is about the only retail environment that negotiates price. Negotiation breeds adversity from the very onset. Where people genuinely need advice on a complicated piece of machinery they are afraid to go into a dealership to seek that advice because they fear the process of negotiation and bad press.
There seems to be confusion about what a dealer pays for a car. Not that it really matters (you can't find what a dealer paid for a refrigerator, or a couch, or a big screen TV, or what Macy’s or Marshalls paid for that designer dress or what it costs to build a 2000 sq. ft. house?). I can tell you simply it’s the dealer invoice (yes the real invoice between the manufacturer and the dealership) less what was held back by the manufacturer and later given to the dealer. This "holdback" is often 2 or 3% of the base MSRP. This is what the dealer pays to have inventory on their lot so you don’t have to special order every car you buy and wait months like many countries around the world.
So, let’s be perfectly honest and I defy anyone to dispute these facts. Using Toyota as an example, we can test some real numbers. If you take the MSRP and subtract the Invoice, then subtract the holdback, here’s what you get in terms of gross profit.
Vehicle Gross Profit Margin
Prius 7.72%
Camry 9.9%
Tundra 9.5%
AVERAGE 9.04%
For those non-business types, gross profit margin is the profit in dollars divided by the selling price (ie $2,332 / $30,190 = 7.72%), expressed as a percentage. From the gross profit, a business must pay for all their expenses, including salaries, rent, supplies, utilities etc. to arrive at a Net Profit or Loss.
As I said, let’s put this into prospective. From actual Annual Reports found on the internet, here are the facts compared to a Toyota Dealership at 9.04% gross profit.
Best Buy = 24.5% gross profit margins
Big Lots = 40.6% gross profit margins
Macy’s = 40.7% gross profit margins
Costco = 13% gross profit margins
Walmart = 24.8% gross profit margins
Marshalls/TJ Maxx = 26.2% gross profit margins
Safeway = 28.28% gross profit margins
Most of these companies represent a bargain in your minds; but every single one of them pulls a greater profit from you than a Toyota Dealer would IF you purchased the car at full MSRP.
So, what games are dealers playing with buyers? How are you getting taken to the cleaners during virtually every step of the car buying process? What does that tell you about the integrity of Car Dealers? How are you being lured into the same sordid sales process?
If you don’t like the games (its never the dealership that starts the negotiations), go in and buy the car at the carefully researched, competitive and fairly priced MSRP. You’ll love the experience and the expert guidance you’ll get from the product consultants (salespeople). Plus you will be getting a real bargain compared to ALL the other products you buy every day.
"Does Edmunds sell cars?... "If they can sell for that price, then buy from them..."
End of the story...
Some of the worst advice possible for most consumers. Price is the most important aspect of a car purchase for a whopping 6% of car buyers but the average consumer is made to FEEL like they still HAVE to negotiate because it's the way it always was before the internet and they build up very unrealistic expectations, it's not the dealers that make it still feel like the 1960s. A least once a week I get a prospective buyer that immediately wants a $5000 discount on a vehicle like our Sorento, and then gets completely irate when they are told it is not even remotely possible. The profit we make as a dealer from a vehicle like that is $1719. Even adding a current factory rebate of $1250 to this would only give a consumer a discount of $2969 by selling the vehicle at our cost and making $0 to do it, yet somehow they expect yet another $2000 less than this again. Of course people dread buying a car and have a horrible experience, how can a customer even begin to enjoy the process or be excited about taking home a brand new vehicle when everyone tells them how to prepare for how bad it will be.
The internet has made manufacturers far more competative than ever before. The average markup in a 2011/2012 vehicle is between 4-12%. The rough markup of a side of fries and a drink at McDonalds is somewhere around 96% but I can guarantee you never hear "I'll buy the burger if you throw in the fries and drink otherwise I"m going to Burger King".
It's not just the car the customer is purchasing, they are buying the dealership. When a client takes the time to build a relationship with the dealer and their salesperson, the shop generally goes a step further when it is time to help them down the road. Washing their car during service, use of a loaner vehicle, discounts on needed parts, extra services performed at no charge, items that may be just outside of warranty might be written off as goodwill, etc... A buyer who fought for the lowest price or bought 1 town over to save $500 will get no such treatment from their local dealership; $500 might sound like a lot but how much is it actually WORTH over a 3-10 year life of your vehicle.
As a sales professional, when a prospect's first demand on the lot is "absolute lowest price, i'm comparing with 5 other dealers in the region, or X dealer has priced it for this can you do better?" my usual response is to thank them for stopping by and wishing them the best of luck in their search and sending them on their way. Most don't understand why and only a few will ask why: - In the same time it takes to argue pure price for 1 vehicle and make virtually no profit I can sell 3 other vehicles at regular prices to 3 other clients who who will get exceptional service and that I will have built a lasting relationship with, (which is worth more to both of us in the end). Now I don't mind working out a deal for my clients, including some extra accessories or maintenance visits but it's no longer about price at that time, it's about value and relationship. Even if we only have a couple of hundred dollars to work with they are generally very happy when we can come up with something that works for everyone. I enjoy it when we can find accessories to include that work for a client because it means their "deal" became much more personallized and had more to do with actually satisfying their needs and they are much happier with their purchase than if they just fought over a number on a page.
I might not sell a vehicle to every person I meet, but my own clients are always extremely happy to buy from me again and again and they send many of their family and friends to buy from me as well.
- Highest Quality
- Best Service
- Lowest Price
Guess which of the above most clients I meet are willing to sacrifice first?
The last vehicle I purchased was all done through the internet. The fact that I was 500 miles away from the dealer probably helped. First thing you need to do is test drive the vehicle(s) you are interested in but tell them you are only test driving today. You can ask for the internet salesman, get his business card, it should have his e-mail address on it. If it doesn't ask him what it is. Tell him you will contact him. If he wants your information just give him your e-mail address but not your phone number.
Once you narrow down your choice then start checking different dealers inventory. If you have the internet salesmans e-mail address send him an e-mail and tell him what car you are interested in and that you want him to send you their internet price. If he says you need to come down to their store, tell him no you don't and if he won't send you the price then tell him "we are done here".
On my purchace I knew my out the door price, I knew my interest rate. I knew what my monthly payments were. We had pre approval from Ford so we didn't have to fill out a credit app. iWe showed up at the dealer and were out in an hour.
The new car has a window sticker, minus rebates you qualify for.
The trade-in has a value.
The difference figure has a break-down of out the door, or payment.
Four square. Period. Not hard for customer to understand. A small amount of negotiation may be required for all parties to be happy.
Thank you very much.
Do you-all make money from car sales or not?
I think so.
Post this.
You are welcome
First of all, one reader wondered what "so-called dealer dic fees" are. This was an unfortunate typo -- it is "doc fees," which stands for documentation fees. This is the amount the dealer charges to draw up the contract. Some states will cap this fee, usually at $100. Other states leave the fee unregulated and sometimes it can be up to $600.
Also, one of the readers said that the dealer leads system didn't work well for him. It's true that some dealers don't respond with an actual price. Instead, they say to "come on down and we'll take care of you." You need to either email or call them back and say, "I've already test driven the car so I'm just looking for a price quote." In most cases, though, if you contact 5-7 dealers, you will get 3-4 firm quotes.
Finally, many readers used this space to discuss how horrible the car buying process is. If you find a good dealership, and do some research, and know how to navigate the system, the process can be enjoyable. It is changing, but slowly. And some dealerships are still using sales practices from the dark ages. Look for the good dealerships and give them your business.
Philip Reed, Senior Consumer Advice Editor, Edmunds.com
Philip Reed, Edmunds.com Senior Consumer Advice Editor
When it comes to trade values KBB is the worst and most unreliable site on the web. KBB never takes into account what it cost to run it through service, advertise it, certify it, and detail it.
If you can sell it yourself for more than you should. But be ready for people that can't really come up with the money, and ball busting offers.
Bottom line I use the K.I.S.S. rule: Keep it simple stupid. Find a Sales Rep who is informative and you feel you can trust, and a dealer who is going to take care of you for the long haul. All of that is part of a good deal. Again, with the small margin that dealers really have to work with everyone is set up to get the vehicle that they are going to enjoy for many years at a very fair price.
That is a tough pill to swallow. This site provides quite a bit of knowledge, I wish I would have discovered this site 4 years ago. We are vulnerable without the Knowledge that the Edmunds site provides.
I am driving the exact car I wanted and have the exact financing that I wanted for the small portion of my car that is financed, but I had to work to get the financing I wanted. It was worth the work.
The dealership I bought from has a fantastic service department, is close to where I live, and I worked with a sales professional who earns by units sold. The deal we put together was perfect.
Now to the point of my comment...
I told the finance department how important it is to me to keep my money local and wanted my small loan to be with our local Credit Union. I was told 3 percentage rates from lenders, all huge corporate and not the Credit Union.
I went into the finance managers office to speak to him about this. After 10 minutes of him telling me how the Credit Union was offering a very high interest rate and the 3 lenders offer lower finance rates.
I went down the street to the Credit Union and was not at all surprised to hear this is very common at this dealership and 2 other dealerships close by as well. These are all high volume dealerships.
I refinanced with the Credit Union when I received my loan docs.
I am now an educated car buying consumer, after learning some lessons that I am hoping someone finds beneficial.
Pre approval from the CU does not seem to matter. Customers have come in to these dealerships pre approved by the CU and walked out with loans like mine!
Stop whining and be happy that you get the chance TO get a better deal. Also the crap about extended warranties not being worth it is BS. I've always recouped my money and then some from them. Cars will do something stupid before the extended period is over. I went through 3 computers and 2 cam sensors under warranty as well as some cv boots.
Grow some or pay the sticker and shut up.
Marketing/Focus group/Rebranding Hack job at it's worst.
Way to dilute a brand.
1. Be aware of incentive or rebate expiration date. A dealer may not have the specific model you want, and you may have to order one and wait.
2. Try calling private small dealers as well. They may able to get you a car from official dealer at better price.
3. Service package price is far more negotiable than car price.
Dealers always want to close the month strong, and you WILL get a much better deal on the 30th than you will get on the 3rd.
1. Price the vehicle out on your favorite web site (Edmunds.com will work).
2. Acquire your own financing.
3. Price your old vehicle very reasonably and sell it yourself.
2. Don't use your main email to ask for quotes. I have been unable to get off the dealer's spam email lists even after 3 years of asking to be taken off.
My last car was purchased about $1500 less than the lowest of 4 bids. The one before that (although at the beginning of the great recession) was about $3000 off of the lowest of 5 internet bids)
I e-mailed the dealers for a bidding war. I do this sequentially - somewhat random order but starting with bringing the highest to the lowest first. They gradually some opted out until I had my best deal. Interestingly some would opt out and rejoin in a couple days at a lower price.
Never share with the dealer where the other bids are from otherwise they will collude to stop your progress. I also used dealers in several city centers. This process takes a couple weeks rather than days, but highly effective.
No, we try to maximize our profit on each sale by building value so that the customer is pleased with the agreed upon price. The customer is happy, the dealer makes money. An unfair tactic in the eyes of Edmunds and Obama but nothing could be more honest or legitimate.
Just think, the web is full of what price your "vehicle is worth" and what to pay for our vehicle. What the car sites do not tell you is that we would give you the trade-in value if you paid off our MSRP. The rebates and incentives on new vehicles are your discount. If I give you the money the dealership uses to pay the sales person and upkeep on the building plus buy more inventory how do we stay in business? If we sell a vehicle for invoice which we are happy to do at a $1800 discount how can I give you more than what your trade is worth?
I can't give you my advertising budget or holdback. It is what keeps my dealership operating.
Plus, you will go down the street and tell the next dealership "they" gave me this much and you play games more than we do.
1) Research the reliability data (This site has excellent consumer feedback, as well as Consumer Reports), nothing kills that "new car high" like having a clunker that breaks down and leaves you stranded
2) Do your price homework. The "price paid / buying experience" section here in Edmunds is a great resource for seeing what other people have paid. Also, voiceofthedriver.com shows people's reported prices as well, but in a more user friendly format.
The information is correct, but says nothing about the lies and promises dealers will make just to get you in the door.
Dealers won't quote their best price in writing for fear you'll just take it to another dealer to save $100 on the deal.
The best thing to do is to ask for a quote, when they call you to make an appointment, ask for the written quote again, then ask for the sales manager. The manager is the one who walks a thin line of integrity and BS, but at least if you maintain your own self esteem, you can hold that manager to everything they tell you.
One last point, there's no mention on how the cars-sales process is still controlled by the good-ole-boys. Learn how to work with them and you'll be happier in the end.
Dealers are independent businesses, and manufacturers can direct them only through franchise agreements. Dealers set prices.
In a business where you can find the same (or very similar) vehicle on many different lots, you have choices where to buy your vehicle. In essence, choosing to do business at a particular dealership relies solely on customer service. Most consumers would gladly pay slightly more for their new vehicle if the service was above reproach. Remember this when shopping for a vehicle and someone advertises a price that's too good to be true. What's the catch or where is the customer service lacking? Also, when preparing to make a vehicle purchase, don't forget about taxes (if applicable) and all the associated fees (tax, title, licensing, doc, etc.). Assuming that these are made up numbers and that the dealership can absorb them or just make them go away is an easy way to lull yourself into a false sense of reality.
Bottom line, research and be honest with yourself. Don't expect to buy a new loaded Mercedes for a base Ford price. Remember, as sales people, we want to sell you the car more than you want to buy it. We will pull out all the stops to make sure that the deal happens. If a deal isn't reached, then maybe it isn't possible at those terms. While I'm fully aware that this isn't the case 100% of the time, it holds true for most of them.
Thanks, and happy shopping.
The key is to do your homework before your go to negotiate. Some people seem to think they have the negotiation skills to just go into a dealership and get around their sales tactics...Sorry they have been selling cars more often than you have bought any vehicles. I have AAA, and received a price quote prior from an authorized dealer prior to stepping foot on the lot. I did manage to squeeze a couple extra grand more out of the price, and had them include GAP insurance. In addition, I used Truecar.com to find an authorized dealer, and save 5 and 6K on a couple deals I assisted my friends with.
The last two cars that we bought we got from the same dealer with the same salesperson. We test drove both and said "thank you very much" went home to think it over. Then I emailed the next morning after deciding we really liked the car and the trim level to find out their price on it. Then both times they emailed me a price that I thought was very fair and we went in for one more test drive and paid the price they said and then drove the car home.
So over the weekend I catch an ad for a car company that is running 20% off their cars that have been on the lots the longest. It gets my attention as we've considered a couple of their "almost luxury" models in the past. I go online and find that there are several examples of their bottom model at the discount but none online of the next model up, the one I really want. So I email one dealer that has several (and according to one site online one of them has been on their lot for 230 days). I basically tell them that I see some of the bottom model at the special price and was wondering if by any chance any of the model I want fall under that special.
So far so good. But then they email back with all 3 of that model that they have listed out with MSRP and "Your Price" listed for each. And for each one "my price" is exactly the same as MSRP. Oh, well, no hard feelings if it isn't part of the manufactures sale then it isn't part of it. I didn't get around to replying to that email so they send a follow-up one the next day. I reply to that one with a simple "I was hoping one would be part of the 20% off and at $6,000+ off it would be a hard deal to pass up. But since it isn't I'll hold on to my current car for several more years as I had been planning to do"
Then I get an email with "Great news! My manager says we can do a discount of $5,000 to $6,000 off that car!". So it went from zero off to $6,000 off? That is a big difference. I didn't play games, I was upfront in what I was looking for an what discount I wondered if applied. But they had to start out with the "lets see if we can get full MSRP" when we've got huge factory discounts on the car game. Where else in the deal are they going to try that? You want to make $500 or $1000 on the car you sell me? That is business. You try to make $7,000 to $8,000 on a $30,000 car that is what gives car dealers a bad reputation.
I think this car may be jinxed for me as I almost bought one 4 years ago before we bought one of our other cars. But the salesman slid over the paper with the magic number on it and it had $4,000 in added "market adjustment" on it. When I got up to leave the sales manager yelled out of his office "is it the price that is an issue?". I just smiled and left but I wish I had said "no, the issue is that you think I'm stupid enough to pay that price"
Unfortunately, STATE laws were created in the early 20th century prohibiting competition so dealerships have NO incentive to help consumers but themselves as dealerships have Lobby groups to help them!
Buyer beware! Good luck!
Not sure about the author's intent but there wasn't much that was written here that was based in reality or even truthful. Just overall bad advice, designed to arm the consumer with information that will put them at odds with the salesperson when it comes down to negotiating price. The consumer goes into the dealership thinking that just because they got their information from Edmunds.com, that it must be correct. Then the salesperson looks like the bad guy for giving the consumer information that is based in reality.
Take it from me. I was a factory certified vehicle salesperson and I learned a lot about the industry. As I stated earlier, there is lots of bad information here but I will limit my remarks to Step One.
First off...
Let's get something perfectly straight: Before you even think about setting one toe into a dealership, you have to do your homework.
Step One really should be: Check your credit score. This is paramount!
Knowing that will help you know where you stand when it comes down to interest rates, dealer incentives, and other sales promotions. The price you eventually pay for your new car is all based on "OAC" (on approval of credit). Plus, there is no penalty if you check your own credit. Knowing that will enable the dealership to give you an estimate without your credit score taking a hit. But keep in mind that if you do decide to finance the vehicle, the dealership will have to run your credit, and that might cost a few dollars. If you're paying cash, then of course there is no need to run your credit.
You may check what your bank or credit union has to offer financing wise but that is somewhat unnecessary, as the dealership has access to hundreds of banks all across the nation. This allows the dealership to offer interest rates that are the same or even better than your bank or credit union. Can you get 0% financing from your bank or credit union? Probably not.
What you eventually pay for a vehicle is mostly based on approval of credit.
Most of a consumer's horrible experiences are based on believing all of the bad information that is culled from the internet, friends, family, and co-workers. Reading one or two articles on car buying doesn't make you an expert in the automotive industry. That would be like a vehicle salesperson going to your job and claiming to know everything that you know after reading an article or two about what you do for a living.