how to buy a car
well, talking about the lease (fleece) of a vehicle got me thinking about an old post. Walte had posted "how to buy a car" and it is a GREAT read. Here it is, enjoy!
Ah the thrill of the deal...
I have worked for the mfg/dealers/sold cars and have worked finance and insurance for around 25 + years in one form or antoher.
If your looking for any vehicle, I recommend using www.edmunds.com for info on "real life" pricing, and follow the instructions below, and you can beat the dealer at his own game, somewhat.
But you will end up saving anywhere from $3,000 to $15,000 depending on which vehicle you decide on.
First Step:
Know your credit score!!!!
One can get a free credit report from your local credit reporting agency, free once a year, thats a new federal law.
Dealers love low credit scores in the 600's, which means high intrest rates, this is called "D" paper.
Credit scores of 700-750 is "C" paper
Credit scores of 750-800 is "B" paper
Credit scores of 800-850 is "A" paper
Credit scores above 850 is "A1" paper
Now you know around what kind of intrest rates your going to be offered at the dealership.
Also check with your local credit unions, and your banker about their current intrest rates. A pre-approval is a blessing in disguse.
As you can use that per-approval rate as a bargining tool on the dealers finiancing rates.
In the Finance & Insurance (F&I) department, is where you sign the finance papers, and they offer you Life & Disiablity insurance, Extended warranties, and anything else that can add more to the price.
The F&I dept, sends your credit application to 2 or 3 SELECT credit agencies (depending on your credit score) for approval.
If the credit agency offers to buythe dealers contract at say 6%, the dealer will state that the best he found was 9%.
This allows him to make a 3% profit on the overall cost of the vehicle.
The people with A1 paper are the ones that get the 0% intrest, and best terms
A paper your looking at 1.9 - 3.9%
B paper your looking at 6.9 - 9.9%
C paper your looking at 12.0 - 28.0%
Second Step:
NO DEALER!!! uses the "NADA", or the "Kelly's Bluebook", as they are outdated before they are even printed.
All dealers now use the "Blackbook", and NO! you just cant go out and buy one, you have to subscribe for a full year, "they are printed every week", and they are expensive!!!!, around $600 a year or more to subscribe.
The "Blackbook" is a regional, usualy covers 5 or 6 states or a region.
The prices listed in the "Blackbook" are updated every week!
And the information contained in the "Blackbook" are what vehicle are " SELLING FOR AT THE DEALER AUCTIONS"!!
This is the book that the dealer does not want you to know about, and it is not advetised.
Anyway, check out www.Edmunds.com, they list as close as possible as to the "Blackbook".
It will show the acutal dealership cost from the mfg, average sales prices in your area, and the Mfg Suggested Retail Price (MSRP).
Also if you have a trade-in Edmunds, will tell you exactly what the wholesale value, trade-in value, and the private sell values are on your current vehicle.
Also look for any dealer or mfg incentives, they can be listed at Edmunds and also at the mfg's web page.
Third Step:
Select the vehicle you want. Select from the mfg on-line, they will also show what dealerships have the vehicle that you specified.
Then do all your homework at Edmund before starting anything, add all the options that you want on the new vehicle, and be honest on the condition of your vehicle when reviewing its actual worth.
Go to Edmunds at get all 3 of the prices, dont forget the options!
Find the vehicle you want to buy from the dealers lot, that you have done the research on.
Figure the payments, based upon your credit scores for the intrest rates, the "Acutal Dealer Price" +$500 of the new vehicle, and the value of your trade-in.
This will give you a rough ideal as to the payment plans, that you can work with.
Fourth Step:
Clean up your trade-in, wash the exterior, clean the inside out really good, amour all everything, make it shine!!
Remove all trailer hitches, headache racks, brushguards, campers, pickup-bed covers, aftermarket stereo systems, window tinting, decals / stickers, non stock large tires / rims.
If you recently purchased a new set of tires say with less than 12,000 miles on them. Get them taken off, get a good looking used set for $80-$100.
Then keep the new tires for later use, or try to re-sell them and make a little extra money, dont give them away in the deal!!!!
As any off the above add-ons acessories actually lower the value of the vehicle.
Because it looks to the dealer and possible new owner, like its been hot rodded, a teenagers vehicle, Monster Mudded, or used as a comercial vehicle pulling large trailers.
And the dealer will have to pay someone to remove all the crap, which is thrown away.
Before the vehicle can go on the lot for sale or to the auction.
Fifth Step:
Every single department in a car dealership is a "Profit Area", each has to make money on your deal, otherwise they will go out of business.
The new car sales dept:
They and the salesman, want to get you into a car!!!!
Sure they would like to get the full sticker MSRP, sometimes they do, and get a good $3,000 -$15,000 profit depending on the vehicle.
And yes they like to sell for the "Edmunds Average Retail", which gives them a good $1500-$2000 profit.
Then there are the guys that have done their homework. These guys are the ones that know the actual dealer cost of the vehicle that they want to purchase, and the actual values of their trade-in.
And they are the ones that get the good deals, becuase they know what they are doing. And what everything is actually worth.
And of course they are not going to give the vehicle away either!!
Hit the dealer up with the actual dealer cost, as to what you are willing to pay.
Most of the time they wont take the first bite.
You have to remember that the mfg has "holdbacks", that are not listed on the factory invoice.
The mfg. holdback payments are for advertising around $100-$250, and volume sales allowances of $400-$750. And the dealer almost never gives this money away.
Depending on how bad you want the new vehicle, use the Edmonds dealers cost, and go in $100 increments in trying to close the deal.
Under not circumstantes offer $500 over the actual dealercost, walk away!!!.
Used car dept:
Will give the new car dept a "trade in value" of your trade. Usual profit margin is 25%-40%, by under pricing your trade-in.
So its really imortant that you know what the actual value of your trade-in is. Don't take anything less than the "Actual Trade-In Value" as listed by Edmunds.
F&I
The last stop before you take delivery...
Don't buy anything extra from these guys!
Insurance:
You dont want their life or disability insurance at all, they mark them up 300%!!!!!!
Extended Warranties:
The factory extended warranty can be bought anytime within the first 3 yrs/36,000 miles,and you want the one that is supported by the "Vehicles Maker" only.
All mfg's offer factory extended warranties, 5yr/50,000 coverage for around $580, 5yr/75k for around $650, 7yr/70k around $750, 7yr/100k for $1,000
DO NOT BUY A AFTERMARKET extended warrany or service contract!!!!
Buy the best you can afford, but make sure that the extended warranty covers "Seals & Gaskets" and "Computers".
Because this is where all the recuuring expensive repairs are, the failures of "Seals & Gaskets" and onboard Computers.
The F&I guy will add on a $50-$200 "Processing Fee" for processing the credit application, making up the loan contract, and for titlework.
This "Processing Fee" is also neogoatable, but, they will insist that it is not, beacuse your taking money away from him.
But your going to have to give him something, I would suggest $100.00 for his part, thats fair.
If you have followed these instructions, there is no way in hell that you cant get a good deal!!!!
November and December are slow months for a dealer, and he has to pay a "Floor Plan", thats intrest on the vehicles that have not sold, each month.
The last week of the month is also another good time to buy, as the dealer is likley to take more marginal deals, to get rid of the floor plan payment and get the holdback money.
Demos & Program Cars:
Demos:
Dealers are alloted X amount of demo's based on their sales history.
A demo is from the dealers stock, and is most likely a high end vehicel, that was used by the dealers owner, or his senior management staff.
Typicaly, a demo is put up for sale as soon as it nears 3,000 -5,000 miles on it.
The dealer is allowed to take a additioanl $2,500-$3,000 more in holdback money for the vehicle when its sold, thats a good deal for you if it is the vehicle you desire.
Program Cars:
Program cars are cars that have come back from going off a lease, or have came of of a fleet account like, Hertz, Enterprise,etc.
And are bought by the dealers at a auto auction.
These vehicles usually have had the crap run out of them, with as little maintance as possible being performed.
Some may even have major body collision or even electrical and mechanical problems. Some of these defects are very well hidden!
If looking at a program vehicle, take it to a shop that you can trust. Have them do a inspection on everything, look for collision damage, flooding, parts recently changed, leaking gaskets, check the coolant, oil, transmission fluids, drive axle fluids, power steering fluids, clutch, breakes, axle shafts, air conditioning, in other words check everything.
Before you sign the finance agreement!!!!
And lastly, typicaly, the state, depending on which stae you live in, allows you 3 days to back out of the deal. If you find something that you dont like about the purchase.
The dealer will fight you tooth and nail on returning a car within the so called "Cooling Off Period", allowed by your states laws.
But, he has no choice than to return your trade-in, and take his car back, and he wont like it!!!!!
To this day, I still love to screw with the dealers, and make the good deals.
Dont get in a hurry!!! Take your time!!!!!
Its all a game to see who wears out who first, I have been known to set at a dealer for a good solid 8 hours, in working out a deal.
One of my deals:
But then again, in mid December of 2002.
I bought a 2003 1500 Silverado SL Extended Quad Cab, 5.4V8, automatic, with all the options that window stickered MSRP'ed for $30,318.
And was offered a final "Take it or Leave it" deal of $21,000 flat.
Then I walked out, after 8 hours of dealing, with my final offer of $18,800 flat.
I paid $18,867 for it, two days latter.
When I wrote a check in front of the New Car Sales Manger and presented him with a personal check for it, and he took it.
The money for the check, came as a Christmas present, from my employer and my wife. Who both paid $9,000 each, toward my purchase of the new pickup.
Then, at closing, I was offered GM's 0% intrest rate on a four year note, with $6,000 down, the payments would have been $300 per month.
Sure was tempting, but gave them the check, got the keys, and waved bye bye....
Walte
Ah the thrill of the deal...
I have worked for the mfg/dealers/sold cars and have worked finance and insurance for around 25 + years in one form or antoher.
If your looking for any vehicle, I recommend using www.edmunds.com for info on "real life" pricing, and follow the instructions below, and you can beat the dealer at his own game, somewhat.
But you will end up saving anywhere from $3,000 to $15,000 depending on which vehicle you decide on.
First Step:
Know your credit score!!!!
One can get a free credit report from your local credit reporting agency, free once a year, thats a new federal law.
Dealers love low credit scores in the 600's, which means high intrest rates, this is called "D" paper.
Credit scores of 700-750 is "C" paper
Credit scores of 750-800 is "B" paper
Credit scores of 800-850 is "A" paper
Credit scores above 850 is "A1" paper
Now you know around what kind of intrest rates your going to be offered at the dealership.
Also check with your local credit unions, and your banker about their current intrest rates. A pre-approval is a blessing in disguse.
As you can use that per-approval rate as a bargining tool on the dealers finiancing rates.
In the Finance & Insurance (F&I) department, is where you sign the finance papers, and they offer you Life & Disiablity insurance, Extended warranties, and anything else that can add more to the price.
The F&I dept, sends your credit application to 2 or 3 SELECT credit agencies (depending on your credit score) for approval.
If the credit agency offers to buythe dealers contract at say 6%, the dealer will state that the best he found was 9%.
This allows him to make a 3% profit on the overall cost of the vehicle.
The people with A1 paper are the ones that get the 0% intrest, and best terms
A paper your looking at 1.9 - 3.9%
B paper your looking at 6.9 - 9.9%
C paper your looking at 12.0 - 28.0%
Second Step:
NO DEALER!!! uses the "NADA", or the "Kelly's Bluebook", as they are outdated before they are even printed.
All dealers now use the "Blackbook", and NO! you just cant go out and buy one, you have to subscribe for a full year, "they are printed every week", and they are expensive!!!!, around $600 a year or more to subscribe.
The "Blackbook" is a regional, usualy covers 5 or 6 states or a region.
The prices listed in the "Blackbook" are updated every week!
And the information contained in the "Blackbook" are what vehicle are " SELLING FOR AT THE DEALER AUCTIONS"!!
This is the book that the dealer does not want you to know about, and it is not advetised.
Anyway, check out www.Edmunds.com, they list as close as possible as to the "Blackbook".
It will show the acutal dealership cost from the mfg, average sales prices in your area, and the Mfg Suggested Retail Price (MSRP).
Also if you have a trade-in Edmunds, will tell you exactly what the wholesale value, trade-in value, and the private sell values are on your current vehicle.
Also look for any dealer or mfg incentives, they can be listed at Edmunds and also at the mfg's web page.
Third Step:
Select the vehicle you want. Select from the mfg on-line, they will also show what dealerships have the vehicle that you specified.
Then do all your homework at Edmund before starting anything, add all the options that you want on the new vehicle, and be honest on the condition of your vehicle when reviewing its actual worth.
Go to Edmunds at get all 3 of the prices, dont forget the options!
Find the vehicle you want to buy from the dealers lot, that you have done the research on.
Figure the payments, based upon your credit scores for the intrest rates, the "Acutal Dealer Price" +$500 of the new vehicle, and the value of your trade-in.
This will give you a rough ideal as to the payment plans, that you can work with.
Fourth Step:
Clean up your trade-in, wash the exterior, clean the inside out really good, amour all everything, make it shine!!
Remove all trailer hitches, headache racks, brushguards, campers, pickup-bed covers, aftermarket stereo systems, window tinting, decals / stickers, non stock large tires / rims.
If you recently purchased a new set of tires say with less than 12,000 miles on them. Get them taken off, get a good looking used set for $80-$100.
Then keep the new tires for later use, or try to re-sell them and make a little extra money, dont give them away in the deal!!!!
As any off the above add-ons acessories actually lower the value of the vehicle.
Because it looks to the dealer and possible new owner, like its been hot rodded, a teenagers vehicle, Monster Mudded, or used as a comercial vehicle pulling large trailers.
And the dealer will have to pay someone to remove all the crap, which is thrown away.
Before the vehicle can go on the lot for sale or to the auction.
Fifth Step:
Every single department in a car dealership is a "Profit Area", each has to make money on your deal, otherwise they will go out of business.
The new car sales dept:
They and the salesman, want to get you into a car!!!!
Sure they would like to get the full sticker MSRP, sometimes they do, and get a good $3,000 -$15,000 profit depending on the vehicle.
And yes they like to sell for the "Edmunds Average Retail", which gives them a good $1500-$2000 profit.
Then there are the guys that have done their homework. These guys are the ones that know the actual dealer cost of the vehicle that they want to purchase, and the actual values of their trade-in.
And they are the ones that get the good deals, becuase they know what they are doing. And what everything is actually worth.
And of course they are not going to give the vehicle away either!!
Hit the dealer up with the actual dealer cost, as to what you are willing to pay.
Most of the time they wont take the first bite.
You have to remember that the mfg has "holdbacks", that are not listed on the factory invoice.
The mfg. holdback payments are for advertising around $100-$250, and volume sales allowances of $400-$750. And the dealer almost never gives this money away.
Depending on how bad you want the new vehicle, use the Edmonds dealers cost, and go in $100 increments in trying to close the deal.
Under not circumstantes offer $500 over the actual dealercost, walk away!!!.
Used car dept:
Will give the new car dept a "trade in value" of your trade. Usual profit margin is 25%-40%, by under pricing your trade-in.
So its really imortant that you know what the actual value of your trade-in is. Don't take anything less than the "Actual Trade-In Value" as listed by Edmunds.
F&I
The last stop before you take delivery...
Don't buy anything extra from these guys!
Insurance:
You dont want their life or disability insurance at all, they mark them up 300%!!!!!!
Extended Warranties:
The factory extended warranty can be bought anytime within the first 3 yrs/36,000 miles,and you want the one that is supported by the "Vehicles Maker" only.
All mfg's offer factory extended warranties, 5yr/50,000 coverage for around $580, 5yr/75k for around $650, 7yr/70k around $750, 7yr/100k for $1,000
DO NOT BUY A AFTERMARKET extended warrany or service contract!!!!
Buy the best you can afford, but make sure that the extended warranty covers "Seals & Gaskets" and "Computers".
Because this is where all the recuuring expensive repairs are, the failures of "Seals & Gaskets" and onboard Computers.
The F&I guy will add on a $50-$200 "Processing Fee" for processing the credit application, making up the loan contract, and for titlework.
This "Processing Fee" is also neogoatable, but, they will insist that it is not, beacuse your taking money away from him.
But your going to have to give him something, I would suggest $100.00 for his part, thats fair.
If you have followed these instructions, there is no way in hell that you cant get a good deal!!!!
November and December are slow months for a dealer, and he has to pay a "Floor Plan", thats intrest on the vehicles that have not sold, each month.
The last week of the month is also another good time to buy, as the dealer is likley to take more marginal deals, to get rid of the floor plan payment and get the holdback money.
Demos & Program Cars:
Demos:
Dealers are alloted X amount of demo's based on their sales history.
A demo is from the dealers stock, and is most likely a high end vehicel, that was used by the dealers owner, or his senior management staff.
Typicaly, a demo is put up for sale as soon as it nears 3,000 -5,000 miles on it.
The dealer is allowed to take a additioanl $2,500-$3,000 more in holdback money for the vehicle when its sold, thats a good deal for you if it is the vehicle you desire.
Program Cars:
Program cars are cars that have come back from going off a lease, or have came of of a fleet account like, Hertz, Enterprise,etc.
And are bought by the dealers at a auto auction.
These vehicles usually have had the crap run out of them, with as little maintance as possible being performed.
Some may even have major body collision or even electrical and mechanical problems. Some of these defects are very well hidden!
If looking at a program vehicle, take it to a shop that you can trust. Have them do a inspection on everything, look for collision damage, flooding, parts recently changed, leaking gaskets, check the coolant, oil, transmission fluids, drive axle fluids, power steering fluids, clutch, breakes, axle shafts, air conditioning, in other words check everything.
Before you sign the finance agreement!!!!
And lastly, typicaly, the state, depending on which stae you live in, allows you 3 days to back out of the deal. If you find something that you dont like about the purchase.
The dealer will fight you tooth and nail on returning a car within the so called "Cooling Off Period", allowed by your states laws.
But, he has no choice than to return your trade-in, and take his car back, and he wont like it!!!!!
To this day, I still love to screw with the dealers, and make the good deals.
Dont get in a hurry!!! Take your time!!!!!
Its all a game to see who wears out who first, I have been known to set at a dealer for a good solid 8 hours, in working out a deal.
One of my deals:
But then again, in mid December of 2002.
I bought a 2003 1500 Silverado SL Extended Quad Cab, 5.4V8, automatic, with all the options that window stickered MSRP'ed for $30,318.
And was offered a final "Take it or Leave it" deal of $21,000 flat.
Then I walked out, after 8 hours of dealing, with my final offer of $18,800 flat.
I paid $18,867 for it, two days latter.
When I wrote a check in front of the New Car Sales Manger and presented him with a personal check for it, and he took it.
The money for the check, came as a Christmas present, from my employer and my wife. Who both paid $9,000 each, toward my purchase of the new pickup.
Then, at closing, I was offered GM's 0% intrest rate on a four year note, with $6,000 down, the payments would have been $300 per month.
Sure was tempting, but gave them the check, got the keys, and waved bye bye....
Walte
0
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Great info!
Pete0 -
Good info- but I have not bought a NEW vehicle since 1971. My current employer gives us first shot at our company cars when they are traded in. No one has driven them but US. They have been in a sceduled maint program. Usually about $500 under the blue book. I then drive them until the wheels fall off. Not having a car payment makes your money go a LOT further.[:p] 0 -
I agree with you! We havent had a car payment for a few years now. (just have a harley payment lol) 0 -
I feel sorry for you guys who don't have a car payment.
You don't know what you're missing!
To show you what a nice guy I am, I'm willing to do you a favor and share mine.[:D]0 -
We haven't had a car payment, credit card payment, or house payment for a few years. I am trying to keep it that way.
I make the payments to myself and when the money is in the bank I go buy the car.0
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