Four steps to buying a new car stress free
Today I’m going to show you how to buy a new car in four steps with absolutely no stress.No sweating it out at a dealership hoping you’ll get approved for that shiny new beauty.
We’ve all been there, well most of us anyway. Pulling into the dealership, feeling the eyes of the vultures, uh, I mean salespeople on you. All waiting to see if you’re going to drive away, or park and get out.
You get out and start looking around. One of them comes slithering out to meet you.
Man or woman, doesn’t mater. They give you the same spiel. The go into the conversation assuming that you’re here to buy, ready for you to sign on the dotted line right now, we’ll pick a car and figure out the terms later.
How they get you
First they gauge you by what they believe your income level is. Or your personality, marital status, age, any number of factors. Then they will steer you not to what they think you can afford, but what they assume you will be attracted to. Are you a sporty person or a practical driver? Bunch of kids? Once they narrow it down to a particular vehicle they ask the most critical question.
“What color are you thinking about?”
Don’t do it
Just tell them that you haven’t decided on a color yet.
After you tell them your color (they knew you would) they’ll walk you around the lot looking for it. If they don’t have that model in that color they’ll pick a different one for you. One that “suits” you, that goes with your eyes. From that point on that vehicle is referred to as “your car”.
They then start spouting numbers like how cheap they can get you in your car. They might ask you what you can pay per month, then tell you that they think they can work with that.
If you try to walk away, they will make sure you know that another couple was in here just this morning looking at that car. They were really interested in it. It would be a shame if they got it before you did.
The Sales Office
When they get you in the sales office the real world starts closing in. They can let you drive this car home today if you’ll work with them. They’re trying to get the sales manager’s approval, but can you do a little more?
Back and forth between you and the sales manager they trod. Can you come up with just a little more cash? Can you go a little higher on the payments?
Long story short you drive out with your new car, leaving your old one with them as a trade-in. A couple of days later they call you with some bad news: The bank wouldn’t do the deal that we wanted. You’ll need to come up with some more money or your interest rate (and your payments) are going up.
You see, the dealership isn’t a bank. They have people who draw up the paperwork and send it to their finance company. They are the one who handles the final approval.
I’ll just take my old car back
They’re sorry, they’ve already sold your old car. No way to get it back.
Now you’re stuck. Bring the new car back, forget the deal and walk home, or take their crap deal and live with it for the next 5 years or more.
There’s a better way.
Four steps to buying a car stress free
The last three vehicles I’ve purchased, a used truck, a new Toyota Camry, and a new Honda CR-V I’ve bought the same way. No stress and I didn’t even break a sweat.
Now this isn’t a speedy process, you’re not getting a car today. You’re probably not getting a car this week. But you’ll find out that it’s worth it.
Step 0ne – Financing a new car
Wait. Financing is first? Isn’t that what you do after you’ve picked out your car?
No. That’s the way those “other people” do:
1. Find a car
2. Haggle over price
3. Get financing from the dealership.
That is backwards to how it should be done. Let me show you how Larry does it.
The two things to do first: determine what is the maximum amount you’re willing to pay per month. Remember, that’s your choice, not what the dealer tells you. Then figure out how much money you have for a down payment. If you have a car that you want to trade, check KBB.com and Edmunds.com for the wholesale price and determine the minimum you’ll take for it.
Actually, if you can swing it, you’ll come out better selling your car outright, but not everybody has that option.
With that knowledge, contact your bank or credit union (yes, YOUR bank, not the dealership’s) and find out what interest rates they’re charging. Then using one of the available online calculators like this one here at Bankrate, figure out how much money you can spend on a car using 36 or 42 months as a payment period.
But I usually get a five year loan
Anything over 36-42 months on a new vehicle and you’ll be sorry. Have an accident where the car is totaled and you might wind up owing the bank or just get a small fraction of the value . Try to sell it, and you’ll owe the bank a huge chunk of the selling price.
Here’s the part people don’t like. If you can’t swing the payments for the car you really, really want for a 36 or 42 month term, either wait until you can save more for a bigger down payment, or pick a less expensive vehicle. Don’t be tempted into a 5 or 6 year loan.
Three year loan example
- Maximum payment – $360 (36 months)
- Cash for down payment – $1,000
- Trade in value – $2000 (nothing owed on car)
- Interest rate – 4%
- Loan principal – $12,200
- Plus down Payment and trade in ($3,000). Total car price $15,200
After a couple of years your loan balance will be around $3,800 and your car’s value would be about $9,600
Another year and you will owe nothing and your vehicle will be worth around $8,000
Let’s compare that to a five year loan
- Maximum payment – $360 (60 months)
- Cash for down payment – $1,000
- Trade in value – $2000 (nothing owed on car)
- Interest rate – 4%
- Loan principal – $19,500
- Plus down Payment and trade in ($3,000). Total car price $22,500
Extending the loan another year and a half gets you $7,300 more car for the same monthly payment. But at that same three year mark the first example loan would be paid off. With this loan you would have paid out $14,500 and for that effort you will have a $12,000 car that you still owe $8,000 on.
Plus with the 5 year loan you’ll pay $2,047 in interest compared to $767 with the 3 year loan.
It’s your choice, but the wise person would go for the one that keeps more money in their pockets.
Step Two – Find a new car – Price, Ratings, and Process of Elimination
New car prices
Checking prices for cars in your price range and allowing for taxes and such (again using KBB and Edmunds), pick out two, three, or more vehicles among different manufactures you might be interested in. Make sure to add in the accessories you want so they won’t be any surprises at the end.
New car ratings
I would advise buying a copy of Consumer Reports‘ New Car Buying Guide. It will give you ratings of vehicles through different years. Not ratings from CR itself, but ratings from it’s subscribers. They send out a survey every year asking people about the issues they’ve had with their car and compile them into this book. You’re able to see if the ones you’re looking at are likely to have issues.
Go find a car
Head to the various dealerships and do some test drives. You need to be firm here. It doesn’t matter if your can “drive this baby home tonight”. And you don’t care about that other couple who was just here today looking at it. You. Are. Not. Buying. Today. If the salesperson is too pushy, walk away or politely explain to them that you’re the customer and you can always go somewhere else. You’re in charge.
You control this part of the process
Let them know that you’re comparing vehicles. If you pick their car you will contact them by email. And what I do if they start running down other vehicles you’re concidering (which a lot of them will), saying things like that Honda or Ford you’re also looking at has had a lot of problems, I quietly explain to them that the fastest way for them to lose a sale is to waste my time talking about how bad the competition is.
My philosophy is: “Never take advice from someone who stands to profit from your decision”
Don’t make a decision at the dealership
Take pictures, inside and out. Write things down. Bring all this information back home and start the decision making process. When you determine which one you want, contact your financial institution and get approved for a three year loan for the principal amount you need.
But I’ve always let the dealership handle the financing
Would you go to the grocery store or Walmart barehanded and hope they can find money for your purchases? No, you bring the money with you. That is no different that what we’re doing here.
Step Three – Find your new car – Haggle free
Now you know what vehicle you want, you’ve picked a color, accessories, etc. Your loan has been approved by the bank. Send out your minions to find your car.
Your minions work for the dealerships, they’re going to do the footwork for you. Contact every salesperson you spoke to (by email), and also every other dealer for that vehicle in your metro area, by web or email. Tell them what you want, color, options, etc. If they don’t have it, can they get it? If they can’t, someone else might just be able to. My wife’s car came from another state, the dealer had it sent down. Be sure to ask them for the “drive out” price. If not they’ll give you the price “plus plus plus”. You want to know how much money to bring. Be sure to include your trade in, that is so there’s no haggling about that.
Don’t haggle
If they give you the old “if you find a better deal, let me know and I’ll see what I can do” speech. Tell them that if this isn’t their best price they had better revise it, because if someone else beats them they will get the sale. You’re not haggling, you’re ready to buy a car.
This might take a while, maybe a week or more, depending on availability of your car. But like I said, this isn’t a speedy process.
Step Four – Go get your car
This is the fun part.
After you find the best price, have them email a copy of the invoice to you. Send that to the bank and they’ll send you a check. Take that to the dealer with your cash, trade in, and pick up your car.
The last two new cars we purchased, we never even saw until we went to pick up .
Buying a used car
This technique can be used on used vehicles as well. Not as effective as when you’re buying new though. When buying used you won’t have multiple dealers bidding to sell you the same car. You’ll have similar vehicles that you’re considering and you’ll have to be flexible with what you will take. But if you are, it will work as well.
Get that car you want on your terms
Bottom line is, remember that you are control. You’re the customer, and the customer is the boss. You are going to buy a car on your terms, your schedule, and best of all, you’re going to buy this car from the comfort of your home, coffee shop, office, or wherever you want. You’re not chained to the dealership.
Now go out and get that new car. If you try this and it works, leave a comment below, or email larry@larryinatlanta.com or on Twitter @LarrynAtlanta.