Can you afford to give away $5,000?
That's the difference between what savvy and not-so-savvy buyers recently paid for the exact same Nissan Altima in Southern California.
Those who paid too much, up to $25,800 for the popular family sedan, probably bought their cars the old-fashioned way: by walking into a dealership blind, with no research, and buying the car after a brief test-drive. (They may have also cost themselves thousands more in unnecessary warranties, service plans or accessories.)
Those who got a killer deal, as low as $20,600, probably came armed with knowledge about the car's real market value, then followed a systematic process to negotiate the price — over email, instead of in a glass cubicle at the dealership.
The prices paid locally for Altimas come from TrueCar.com, one of an array of new digital tools that can help buyers get the best deal. Like so many other industries, the business of selling cars is changing fast. The proliferation of car-buying websites and real-time market data has, for the first time, given car buyers equal footing in the most stressful of transactions.
With the right tools and methods, the informed buyer can be sure of getting a good deal, even the best deal, in a fraction of the time many buyers spend in dealerships — and without the unpleasantness of face-to-face haggling. You can strike a rock-bottom deal, in fact, before ever visiting the lot where you'll buy.
We're here to tell you how in this step-by-step guide.
But first, keep in mind two overarching truths.
Most important, new cars are commodities. It doesn't matter where you buy one, only how much you pay. At most times in any metropolitan area, hundreds to thousands of identical vehicles are available.
Secondly, think about buying as separate from service. A car dealership may tell you they will “stand behind” the vehicle should any problems arise. But any dealership will eagerly service your car — that's how they derive a large chunk of profits. And they get paid by automakers for all warranty or recall work.
Often, the best place to service a new car is the nearest reputable dealer. But the best place to buy one is determined solely by price.
Some dealers understand that greater availability of price data and other intelligence is empowering consumers. They know they have to back away from
the hard sell to win these buyers.
Many are experimenting with no-haggle pricing in a variety of ways. They are cutting deals with car-buying sites including TrueCar.com and Edmunds.com. Through the sites, dealers give buyers discounted offers for individual models. Dealers pay the websites a fee; consumers pay nothing.
In June, Edmunds.com coaxed 300 dealers in Southern California and New York to participate in Car Week, during which they agreed to sell vehicles at the average transaction price or lower, without negotiations.
These dealers are seeking to profit on competitive pricing and volume sales rather than hassle and haggle.
Regardless, it pays to be prepared. Why settle for a good deal when you can get the best deal?
Time to go shopping
Know what you want.
Are five seat belts enough, or do you need space for seven passengers? Do you want fuel economy or cargo room? Basic transportation, or speed and sex appeal?
Manufacturer's websites, with their digital car-building tools, can help you pinpoint the trim level and options you need.
To answer such vexing questions, start with five must-see websites.
Fueleconomy.gov — Compare fuel economy of car models. Personalize your estimates by entering your split between city and highway driving, local fuel prices and annual miles traveled.
IIHS.org — Check out safety ratings and crash test results from the Insurance Institute for Highway Safety, a trade group with an economic interest to get you into a safe car.
ConsumerReports.org — A vast library of unbiased reviews, ratings, consumer survey data and car buying advice. A one-month subscription online is $6.95.
www.TrueCar.com — To make sure you don't overpay, look at the bell curve of prices others paid for the vehicle you want.
autos.jdpower.com — Get detailed ratings of brand and model reliability for new models and 3-year-old cars, a good indicator of long-term dependability.
Use all this information to create a consideration list of up to half a dozen models.
Go for a drive
Take your list to an auto mall, where you can test drive cars from multiple brands. Leave your checkbook at home.
Don't give the test drive short shrift. You're about to drop tens of thousands of dollars on a product you might use almost every day for a decade. A two-mile spin is no way to make that decision.
Drive on streets and a highway or freeway. Be sure to merge and change lanes. Parallel park and try parking in a crowded lot. Back the car up. Those are among the best ways to discover how the vehicle maneuvers and to check for blind spots.
To get a sense of the ride quality — and build quality — drive the car over potholes. Plan on driving at least a dozen miles. It will take at least that long to figure out if the driver's seat is really comfortable. If the salesman complains, tell him you can't buy a car based on a 10-minute drive.
Testing the interior features is just as important, especially in today's technology-laden cars. Work all the controls. Some automakers do a better job than others on the design and placement of switches, dials and buttons. Try the controls out when the car is parked and when it's moving. The best technology is intuitive and doesn't distract.
Check to see whether the vehicle has a good Bluetooth connection. Attempt to sync your phone yourself. Get on the freeway where there is road and wind noise and call someone to determine whether you can hear them and they can hear you.
Figure out what functions on your smartphone — such as music streaming or navigation — can be run through the car's in-dash system and speakers. A USB port is the most handy
electrical connection in a car, but many still don't have it.
Inspect the car carefully. If it is a sedan, see whether it has handy fold-down rear seats. Look inside the trunk and check for the spare tire. Some new models no longer come with spare tires and jacks — something you should know before you run over the nail.
Now that you have done your fieldwork, it's time to decide which car you want. If you are still deciding between a couple, you might want to do more research and go back for a second look and drive.
Once you know what you want, find out what you want to pay.
Start at TrueCar.com, which provides more useful data for negotiating a deal than rivals Edmunds.com and Kelley Blue Book's KBB.com.
Plug in the car, the trim level and any options, and you'll get a no-haggle price from multiple dealers. Think of that TrueCar price as an upper limit of what you will pay. You're likely to get a better deal through your own negotiations.
The site also gives data on the range of prices others are paying in the region. And it's a big range — from $22,544 to $25,858 was a recent spread on a 2014 Ford Fusion SE, for instance. You should target a price that's in the lowest 20% of these purchases, or less than $23,000 in the Fusion example (excluding taxes, registration and other fees.)
Most manufacturer's incentives will already be figured into the TrueCar price. But some automakers provide additional discounts for specific groups, such as military personnel or owners of the same brand. Be sure to ask about any additional discounts that might apply to you.
Next, you'll want to figure out how much you'll need to pay in taxes and fees. Use the California Department of Motor Vehicles' online fee calculator. It adjusts for the differences in tax rates and fees depending on where you live. In Los Angeles, that comes out to $2,321 for a $23,000 car. Dealers can also charge as much as $80 more for filing the registration.
That makes the “out-the-door” price $25,401 for the Fusion in our example.
Make dealers bid
Now you know what you want to pay, but it's still not time to head to the dealership. You'll have a lot more success — and less hassle — negotiating from the comfort of your home computer.
Seek out four or five of the biggest dealerships for the brand you want to buy. Be polite and give the dealership where you drove the car a shot at your business, since they spent time showing you the vehicle.
Find the email address for the Internet sales manager for each — you might have to call and ask — and send each an email that goes something like this:
“Hi, I am in the market for a Ford Fusion SE, with the following options. Online data on recent sales show these cars selling locally for about $25,401 out-the-door with no other taxes, fees and charges. Can you beat that price? I am ready to buy this week.”
If you need specific options — maybe a USB port or a sunroof — make that clear in the email. But avoid getting into paint colors at this point. Nail down the deal first. Some dealers will try to charge more if they think you must have a particular color.
Also let the dealer know if you qualify for any additional incentives, such as those for brand loyalty.
Wait a day or two for the responses, then take the lowest offer you get back and send another round of emails. Let dealers know the price you've been offered and the dealer, and ask if they can beat that deal by a “meaningful amount.” Repeat that you are ready to buy.
You can keep soliciting offers this way as long as it keeps bringing down the price, but you'll likely get to your best price in just two or three rounds.
Say no to add-ons
Once you have a confirmed price, call the dealership's general manager and make sure that they have the car and that there will be no changes in options, price or fees.
You can also ask about special low-rate financing that might be offered by the automaker's finance company. Sometimes they can beat a credit union or bank. Regardless, be ready with another source of financing. Arranging high-interest-rate loans is another way dealers make money.
Tell them in advance that you are rejecting all extended maintenance, tire warranties, gap insurance, special paint protections or alarm systems. Don't cut a great deal and then get taken for a ride on these unnecessary add-ons.
The ubiquitous paint protection offer is a great example. Auto companies do an excellent job painting their cars. They all have rust protection. You don't need a paint sealant; just keep the car clean and wax it.
Extended warranties don't make sense, either, if you've done your homework and you're buying a reliable car. How can a dealer assure you that you're buying a solid vehicle, then sell you protection for all the horrible things they now say might go wrong?
After all is buttoned down, give the dealer the information it needs for the contract and ask that you be called after it is completely filled out, with the exception of your signature. When the dealer calls, once again confirm the price.
Make an appointment to sign the paperwork and pick up the car. Better yet, ask if the dealer will deliver it to your house. For handling a trade-in, see our accompanying story.
For decades, consumers have said in surveys that they dread negotiating a car purchase more than any other transaction. People love getting new cars, but hate buying them.
It doesn't have to be that way if you use the available digital tools and follow this systematic approach.
But as you start on your car buying journey, remember to stick to the plan. Deviations will get you into trouble. Don't waste time in hand-to-hand combat with car salespeople.
Arrange the deal — on your terms — and get to driving that car of your dreams.
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