Buying a New Car

Listen Buying a car in the United States is not an easy task. It’s easy if you don’t care how much money you pay. But if you study the process of buying a car before hand, you can save a lot of money. In this lesson, I will explain what you should do and how you should prepare before you buy a new car.

Listen When you buy a new car, the first thing you need to do is find the real price of the car. Each car in a dealership will have multiple prices. You will see a manufacturers suggested retail price (MSRP), and then you will see the actual price. What you will not see is the invoice price. The invoice price is the most important piece.

Listen Before you even go into the dealership to buy your brand new car, look up the invoice price first. You can’t ask them because they will either lie, or not tell you. To find the invoice price, you can go to an automobile site such as http://cars.msn.com. You can choose the car you want and it will show you the invoice price.

Listen Most dealerships will not sell you a car at invoice price. The invoice price is the price that they pay to get the car. In general, most dealerships will sell you a car for $500 above the invoice price. Regardless of what the sticker price says, you should use the invoice price to determine how much you are going to pay.

Listen Here is an example. Let’s say I am going to buy a Mitsubishi Eclipse. I look online and find that the invoice price of a GS with this many options is $21,000. I also find that a GS without any options is $19,500. I continue to look and the GT with no options is $21,000. I look at the GT again with all the options and the invoice price is $23,100. So before I even go to buy the car, I know the price of four different models. You need to find all the different models because you can’t expect to buy a GT fully loaded for a GS invoice price. Basically, the more you know, the better chance you have at not getting taken advantage of.

Listen With the prices in mind, you can now go to a dealership. After test driving the GS and GT, you realize that you like the GT a lot better. You know that the price without options is $21,000, and the price with all the options is $23,100. Now you decide that you want the car with all the options. The sticker price will say, $26,000. The MSRP says $27,500. That means the car is supposed to sell for $27,500, but the dealership will sell it to you for $26,000. For people who do not know how to buy a car, they will think that getting a discount of $1,000 is a great deal. The salesman will say, ‘if you buy today, I think I can get my manager to sell it to you at a discount. We will give you a special and give you the car for $25,000.’

Listen There are a lot of people who believe this and will think it is a good deal. However, in our example, we did the research and we know that they paid $23,100. They usually have other fees here and there, but at most, it will be a couple hundred dollars more than this. So let’s say they actually paid $23,300. With this knowledge, you can say, ‘I’ll buy the car for $23,700.’ You should add a couple hundred dollars so they make a small profit. Don’t think that they will say yes immediately. They will tell you to sign a paper saying this is your offer. Go ahead and sign it, if you are really willing to buy at that price. Then they will say that they have to ask the manager. Usually, they will come back and say, ‘My manager says the best we can do is $24,200. This is $1,800 below the sticker price. What do you say.’

Listen You have to stay firm. Don’t get distracted by what he says his manager says. It’s just a routine to make it feel real. Stay with your figure and don’t budge. Simply tell the salesperson, ‘This is all I am willing to spend and if you can’t sell it then I better be going.’ After you say this, they will tell you to wait and go back to the manager. This might take several times, but once you really start walking out the door, they will say yes. If they are making at least a couple hundred dollars, they will sell you the car.

Listen After you agree to buy the car, they will try to sell you extended warranty. It usually costs around $1,500. I’m not going to tell you one way or another, but I never buy it. In fact, I heard that car companies make more money on the extended warranty than they do on the actual car. If you want the security, then go ahead, but if you don’t care for it, then resist the temptation. They will try really hard to sell it to you.

Listen This method will work for almost every standard car. The only place it will not work is on high end luxury cars and cars that are in demand. For example, many new cars that just came on the market will be high in demand. The price of the car is usually as high as, or even higher than the MSRP. In order to buy these cars, you have to pay a premium because so many people want to buy it. Some cars these days have a waiting list. Also, luxury car dealers will not sell close to the invoice price. They feel that people who can afford to buy a luxury car will not be so concerned about paying $1000 more than they should.

Listen I bought a couple of cars before and I know this works. When you are ready to buy a car, remember to do your research and I know you will be saving a lot of money.