30 Car Buying Lessons

Random Observation/Comment #670: The car buying process is broken and all dealership are finding ways to make profits. I’d personally use an “Amazon for buying cars” to reduce the stress of being upsold during the close.

Why This List?

I have driven quite a bit as a city dweller with zipcars and rentals during travel, but now I’ve entered into a new phase of car ownership. After doing some youtube searching and studying, I’ve learned quite a lot about this broken market. I’ve written this list into the steps I’ve taken from research to car closing.

Note: July 2020 is a terrible time to a buy a new or used car. You might get some deals for the 2020 models before Sept 2021 comes out, but there is no new inventory at the dealerships. Not much wiggle room on negotiation. Also, contactless online payments have embedded fees (with additional platform convenience fees).

Research Phase

  1. Understand your car needs. Car usage? Car size? Number of kids? Eco-friendly? 4 wheel drive? Weather? Terrain? Driving distances? Types of trips? Fit of car type to neighborhood (don’t want to have the worst or nicest car on the block)?
  2. Understand your constraints. Price point? Driving comfort (not too big?)? Safety ratings? Car seat? Financing options for down payment?
  3. Map your needs to your car type. Standard vs luxury? Sedan? SUV? Coupe / Sport?
  4. Read Consumer Reports or similar sites to see which cars can be narrowed down by year and reliability. I looked into Edmunds, Cargurus, and Kelly Blue Book quite a bit. Narrow down to 4 or 5 cars (for me, it was the Subaru Forester, Subaru Outback, Audi Q5, Toyota Highlander, and Toyota RAV4 –> these were used for initial test drive targets)
  5. Dive deep into each car. Within each model, there are usually 3 or 4 tiers that have different naming for engine and base. For example, Audi Q5 have premium, premium plus, and prestige with tons of packages and options. You will need to know how to talk about these and why you’re choosing one option over another.
  6. Read about the current market. Is this a time to buy new? Buy used? Buy certified pre owned? Lease? Which is best for you? Edmunds has a good car buying analysis. I’d wait until Sept on the Used Car market.
  7. For used cars, figure out how long the car has been on their lot – There are drops of 30 and 60 days. There are incentive mechanisms based on car volume in dealerships.
  8. Make a new email for your car buying process. I tend to do this for most bespoke processes.
  9. Show up around end of the month around Monday or Tuesday – Dealers to meet their unit goals
  10. Watch videos about car dealership process and how to not get screwed over. Your Auto Advocate has some good discussion.
  11. Understand how dealerships make money – Car sale, car packages, finance deals, additional products and insurance fees. Since the information online is transparent, there’s usually less room in negotiation of the MSRP. Money is usually made on the finance side for 48-month plus payment packages. Go to the dealership to close with approved finance.
  12. Know the standard buy process
    1) Test drive and gather info to find the right dealership and sales person
    2) Negotiate with the car salesman to get the right price on the car and packages
    3) Finance room – get up-sold like crazy on how you’ll pay for it with loans
    4) Additional sales – While waiting for finalization, you may be sold a hundred other accessories and packages that lock you into the garage/mechanics
  13. What information not to reveal during the buy process because you want to give yourself a way to walk out and have negotiation leverage
    A. Your high price range
    B. Your urgency for a car
    C. Your locked in love of one car (say you’re shopping for cheaper or more expensive options across multiple dealerships)
    D. Your intentions on length of ownership – say you will reevaluate in 3-4 years
  14. Show you’re interested and ready to buy with a way to walk out the door. Usually you don’t buy the first time you enter a car dealership.
  15. Collect your salesperson info by email and follow up
  16. Plan ahead so you can be patient on your buying for the right price. This may take weeks.
  17. Plan your test drive day. Go to 2 or 3 dealerships to have your significant other test drive. Whenever you’re going, be sure you start early and tell the dealers that this is the first/closest, but you’re looking to go second or third other dealerships. When you’re test driving, make sure your partner is on the same page with not revealing certain information about urgency to close sales.
  18. Contact your insurance company for the rates to your car year and model in order to be cleared when buying. Usually there’s a discount (10%) for getting the policy a week ahead.
  19. Contact different mechanics. If you are getting a used car, you may be able to have a third party appraisal rather than fully trusting carfax. This is much harder during a pandemic and used cars seem to have high prices at the moment.
  20. Make a reservation to buy the car. It will take a whole afternoon. This is the stressful part, so be prepared. If you want to reduce the stress, you can use contactless solution (with baked in fees, but less headache).
  21. On your buy day, bring your driver’s license, a checkbook, and the insurance info. It’s necessary for closing. You can ask on the phone to confirm.

Buy day

  1. Remember: don’t tell them you’re paying cash if you are or else you will not get the best base price. If they ask how you want to pay, say you’ll discuss it with the finance team when we’re ready
  2. Car itself will get sold with a lot of features and numbers. Be sure you know what the approximate price is for all these desired bells and whistles. Go in with the fair price number. Do your research.
  3. If you’re buying used, you can ask for the car history information or look it up on carfax. This is usually transparent. Not an issue if it’s a one owner car or CPO.
  4. You need a sales price agreeable before going into finance room. The separate process will really try to provide extra everything if it’s a new car. This price is checkable with online sources, so this process has been heavily arbitraged out (not a big dealership advantage now).
  5. When you agree on the price, they draft up the paperwork for different finance options for 48 or 60 month to get a low price per month. This can be tricky. Do some math.
  6. Ask the finance officer to step out as you review terms. First pass is to make sure the administrative fee is less than $100. Usually $75 and not $500. Red line and circle areas. DMV and sales tax fees are usually low.
  7. With the second pass ask about the additional fees that are just made up. Check this video for what hidden dealer fees look like. It is recommended that you bring up removal of these fees by saying you will close if it’s all removed.
    For new cars:
    – Delivery/destination fees – should not have it unless it’s with a new car
    – Advertising charges – paid for by manufacturer
    – Theft protection/vin etchy etc – insurance will cover this
    – Nitrogen machine? – deflate and reinflate tires
    – Vinyl strip – $15 to put on
    – Additional dealer mark up ADM – do not pay over msrp for a markup
    – No need for mudflaps – take it off – no extra fee to remove features
    – Finance office credit life insurance – way over priced and can buy premium term life insurance separate (in the event of your untimely death who do you want it to be sent to)
    – Temp tag or dealer prep
    For used cars:
    – Reconditioning fee
    – Destination fee
    – Cash up-charge
    – Carfax or auto check
  1. If they ask for finance options, see if they will allow for half down 36 month financing. Today, there are low financing option deals.
  2. After the deal closes, hopefully you’ve got a good deal. They will try to sell other things while you’re waiting for the final processing. Buy it if you need it, but it’s a lot of extras.
  3. Do not buy the car if there’s a bank fee for cash. There is currently a surplus of cars and I don’t see why they wouldn’t want a full payment for short term capital.
  4. Help fill out a manufacture CSI survey for your dealer. They will be grateful and this can also be leverage earlier in the process.

For my negotiation process, I lucked out in finding a Toyota and Subaru dealership next to each other. Talking to the salesperson, I was able to ask for recommendations of sales people. This became a specific car showdown of features and price. I think it has worked out in my favor when getting close attention and closing.

~See Lemons Own a Subaru