My wife and I recently took a 3,000 mile road trip, and we became interested in a new car. We did not fall in love with the idea of a new car, but we thought it would be worth examining possibilities. When we arrived home from vacation, we found a letter from a local car dealer offering more for our vehicle than I thought it was worth, so we decided to proceed…cautiously. This time, we were going to approach car buying in a different manner than we had before, where we had let emotions rule our decision. By approaching the car purchase with reason and rationality, we were able to negotiate the best price for a vehicle with features we wanted.
Before beginning our car buying process, we identified our resources, our needs, and, finally, our wants. Since the vehicle we owned met and exceeded our needs and wants, we knew that we held a favorable position in negotiating the purchase of a new car, as long as we did not allow emotional responses to the vehicles to sway our reason, because the salesman and the dealership had a more immediate need to sell than we had to buy.
To begin, we evaluated our resources to determine what discounts were available to us and what we were able and willing to pay.
- Our neighbor is an employee of the auto manufacturer from whom we had purchased our previous vehicle and from whom we intended to purchase our next vehicle if, as Bob Barker used to say, “The Price is Right!” As an employee, she offered a discount plan that sets the negotiated price for the vehicle based on dealer invoice, and from which neither the dealer or the customer can deviate. This eliminated the anxiety often caused by wondering if the best price was negotiated.
- We evaluated our existing car payment and other monthly commitments. While it would be ideal to have lower car payments, it is not realistic to think prices will be lower 3 years later. We understood our payment would go up, if we purchased a similar vehicle. To determine how much more we could afford, we looked at other monthly commitments that had ended recently or that would be ending within a month or two. The reduction in our monthly commitments exceeded what we knew we would have to pay for our desired vehicle.
- We checked insurance rates on the vehicles in which we were interested, as we did not want to negotiate the purchase price, including monthly payment, and find a significantly higher insurance premium.
Next, we discussed what we needed the vehicle to be able to do, whether it was the same or different from our current vehicle. These included:
- Comfortably seating 3 people, though 4 or occasionally 5 would preferable. Our current vehicle was able to accomplish this task with 4 people making a 3,000 mile road trip fairly comfortably.
- Transport a bicycle inside the vehicle. My wife enjoys recreational bike riding more than my daughter or I do, so this would allow her to go on more bicycle adventures. Our current vehicle did not allow for this, so it would be a value added benefit.
- Maintaining high fuel efficiency (approaching or exceeding 38 MPG highway). Our current vehicle averages 38 MPG when traveling 70 MPH and can exceed 42 when traveling at 55 MPH, so this was important to help maintain our budget.
- A color my wife desires. If the color she wants for a vehicle is not available, a purchase will not be made.
- A 5-year/60,000 mile warranty (whether standard for the vehicle or at deep savings from a manufacturer with 3-year/36,000 miles)
The final step before heading to the dealer was to discuss our wants, as these were negotiable and a deal could be made, even if these items were not available:
- Leather interior. My wife enjoys leather, but our daughter does not, so while it is a nice feature to have, one of them would be happy either way.
- Moonroof. The current car has one, which my wife uses frequently, but I see little use for in most commutes. Since this is her vehicle to drive, I am open either way.
- Dealer financing, if it can beat the rates offered to me through my usual lender.
Armed with the knowledge of what we wanted, the visits to dealers began. I visited the first dealer and advised him of the discount plan and the financing I had. Also, I told him the color, model, and trim package my wife preferred for the vehicle, clarifying that the hatchback was preferred as it should be large enough to accommodate a bicycle. I advised him that I was on my lunch break, and I had 30 minutes for him to give me the trade-in value on our car, find a vehicle on his lot that met our needs and wants, and to give me the total sale price, with any incentives. I set the timer on my watch. Seeing I was serious about the time frame, he quickly moved to assess my vehicle, and calculated the price of the new vehicle, without considering the trade-in value, saying the difference could be applied to the loan or could be paid directly to us. With 5 minutes to go, he did not have an answer regarding the trade-in value, so I gave him a warning of the remaining time. He moved to that section of the dealership and stayed there until he had an answer, with 2 minutes to spare. The trade-in value was disappointing, but I did not react other than to say it was substantially lower than had been offered in the letter. I advised him it was time for me to leave, but I would discuss the options with my wife and talk to him the next day.
Seeing that the dealer had not honored the value indicated on the letter, I decided to branch out with our vehicle and dealership choices, and I used an on-line trade-in value calculator to see what the value should be. Besides the one domestic brand, I looked at two foreign brands, one of which came standard with a 5-year/60,000 mile warranty and had an attractive sporty look. The other car is the poster-child for fuel-efficiency. The results of my on-line trade-in calculator did not leave me hopeful for more than what had been offered, as it was about $1,200 less.
In the morning, I wrote to the salesman explaining what I needed from him in order to purchase a vehicle from him. Most importantly, I advised him that I believed the company to have been deceptive with the letter they had sent, and I needed them to come closer to what had been indicated in order for me to proceed with good faith. After not receiving a response for the morning, even after calling and leaving a message for the dealer, I was ready to talk to other dealers. I made an appointment with one of the foreign dealers, and then I received a call from another dealer of the domestic brand. This dealer was about 40 miles from our home, but he assured me that his salesperson would make it worth my time to drive to them. I stated that I would be passing at least 5 of his brand’s dealers to get to him, so I would not be pleased if some incentive was not given. Knowing the car was our first choice, I cancelled the other appointment and traveled the 40 miles to this dealer, enticed by an offer for a 48 hour test drive.
When we arrived, a handsome young salesman met us and showed us the available vehicles that met our criteria. After getting our test drive set, he asked for the keys to our trade-in and said they would evaluate the vehicle the next day and have pricing available for me by mid-day. I told him that since we would have the test-drive for 2 days, I would not need an answer before 4 PM, but I would expect all numbers, including total sale price, to be complete by then. I reminded him of the promise that the deal would be worth the extra distance traveled and time spent to come to his dealership. We enjoyed the drive home, and the next day, my wife drove to several places to get a better feeling for the car. She found she loved it. By 4PM, the dealer called, but his offer of the trade-in value was no better than the 1st deal, and given our neighbor’s discount, I knew there was no additional money to be taken off the purchase price. Also, he called with approximate payments rather than total sales price, interest rate, or any specifics. I advised him that I was not pleased with the lack of information, and he promised to call back in 20 minutes with the details I required. Almost 3 hours later, he called with the information, but by this time, I had located another vehicle that interested my wife. When we spoke, I advised him that another vehicle was being considered that was less expensive and had a better factory warranty, and his numbers did not reflect any additional incentive for having visited them. At 9:30 PM, his boss called me to ask for our business, and he indicated he would get us an extended warranty on the car, after he confirmed it with his boss in the morning.
Friday, the day of the decision, I received a call early in the morning from the 1st dealer asking if I had made a decision on the vehicle. I told him that since he had not responded to my email or phone call, I had started speaking with another dealer. He informed me that he was off on personal business, but he would work very hard to re-earn our business. I advised him that I was waiting for final numbers from the 2nd dealer and that my wife was going to test drive a different vehicle at lunch time. I promised to call him after I had the final numbers and my wife returned. He agreed that was fair. At 11 AM, I received a call from the 2nd dealer saying an extended warranty had been included and proceeded to give me the full set of numbers I had requested. When he finished, I questioned him about the warranty, as his numbers were not adding up, if the warranty was included. He told me that he did have to charge me for the warranty, but that it was being sold “at dealer cost”, which when he provided the price seemed accurate based on an extended warranty I had purchased for my own vehicle. Given his tardiness, I advised him that I would not be able to provide an answer to him about the vehicle until my wife returned from a test drive.
When my wife returned from the test drive, she had mixed emotions. She loved the other car, but it failed to meet one of our needs. Our daughter had gone on the test drive, and she was uncomfortable in the backseat. Given our daughter is only 8 years old, this vehicle would not work as a 2nd family vehicle, as it would only become more uncomfortable as our daughter grew. I proceeded to call the 1st dealer, and I told him the offer from the 1st dealer. He countered with a nicer trim package, a 5-year/75,000 mile warranty, and $200 more trade-in value, but he took away a $1,500 rebate in order to provide better financing. Again, I needed time to discuss the offer with my wife. We decided to give the 2nd dealer a final chance and told him what he needed to do to earn our business. He countered the upgraded vehicle with a better equipped version with a lower MSRP based on package discounts, a 5-year/60,000 mile warranty, the same trade-in value as before, but he found a matching interest rate from a different lender, which allowed us to keep the $1,500 rebate. Though I could have tried one more round, I had met my goal of getting the most value from the purchase. We agreed to purchase from the 2nd dealer, and I called the 1st dealer to thank him for his efforts.
In the end, we got a better car than I had expected, though it did not have a moonroof. We saved about $1,000 on the warranty, and we got a great interest rate and kept our $1,500 rebate. Since our program pricing was already negotiated, these savings were above what had been negotiated by the manufacturer, and the savings came because we were prepared to end the car search at any time, if our needs were not being met. In previous car purchases, we let the dream of a new car overshadow the fact we paid more than what we needed to for the vehicle, and we accepted what was available instead of what we specifically wanted. Reason and rationality on our part helped us win in this round. The salesman’s and dealer’s desire to make a sale may have clouded their judgement in making the deal too sweet.