Buying a New Car

For those of long memory, you'll remember that I have written before about this usually unpleasant ritual. But, you know, it really shouldn't be unpleasant if you think about it. It's your money and it's a chance to buy a technologically advanced, safer vehicle that you can get excited about, especially if you’re a motorhead and slightly obsessive as I am. Recently I had the opportunity to replace my old beater and am happy to report that it has become easier, no doubt aided by the biggest car buying downturn in decades - supply and demand at least temporarily working in the consumer's favor.

The other biggest difference is the Internet. Keep in mind that you usually buy a new car infrequently and have little skill or knowledge of the process. The professional car salesperson does this every day, and the person you will be dealing with has survived this market so you know that they are tough and resourceful.

I've also noticed that the further upscale you go they tend to be nicer and more sophisticated, so doubly watch out. This is really a zero sum game with one of you doing relatively better only at the other's expense. Realistically, you know that they have to and will make a profit; you just want to keep it "reasonable" and minimize your anxiety. Can it actually be fun? Good luck to you on that.

The one thing that you need here is knowledge. Fortunately there are many sites which will lay out the process and show you what you need to know and do. Just Google “car shopping” and follow the yellow brick hyper-link road. Now, there are docs who are exceptions to the "knowledge is power" rule, like my buddy who just walked a few blocks to the closest dealer and drove something home. No planning, minimum stress, but also no fun and a questionable deal.

First, you have to decide what your actual needs are and what you can afford. The car-related sites can walk you through this if you are undecided. You narrow your list to a few models and go to the dealerships. It's probably best if you do it alone until you are ready to show your spouse/friends your decision and reasoning. It's hard to keep a clear head at this stage with other people to tend to. Have a list of prepared questions, kick the tires and drive the cars. Make it clear to the salesperson that you are not going to buy today, you are just trying to decide. They will ask you for your contact information, but in my case I told them I would contact them at the appropriate time, not vice-versa. No barrage of phone calls and emails for me, at least not yet.

Once you have decided on a particular car, if you can be flexible on color and options you will be in a good position. Salespeople are under pressure to move cars off their lot because it costs them money for cars to sit there. If you are picky, every dealer has a computer that will tell you every model available at every dealer in the US. If you find just the one you are looking for, the dealers will swap cars and voila.

If you are really picky, you can order a custom build (at no extra cost, just extra waiting) and, if it is European, you have the option of picking it up over there for a combined test drive vacation.

The most important other thing that the Internet can do is allow you to pit your local dealers against each other in a bidding situation. There are sites that will do all of this for you so that you just have to drive to the dealer, sign the papers and drive away. No fuss or hassle. I used the Amex site and asked for quotes for the make and model I wanted relative to the invoice price. I repeat: the invoice price from the manufacturer, NOT the MSRP on the window sticker.

I told you these people are well-practiced, so they know people do this. For one thing, most of them do not pay the invoice price; there are manufacturer "hold-backs" and incentives that guarantee the dealer a profit even if the car is sold at the invoice price. If you want an in-demand car where the dealer wants MSRP or even has "Dealer Added Profit" on the window, just wait. The car I am replacing was such and they initially wanted a huge premium over MSRP. I told them I would be back after the initial rush was over and get the car at my price, which I did. If you want such a vehicle, keep in mind what the owner of the dealership told me about the in-demand car; "We build them every day. They're only steel and glass and rubber. We'll find you a car." How refreshing.

Also Consumer Reports will sell you a $14 printout of how much people have recently paid for your particular dream machine in your area. After looking at what to expect in my area, I then gave out my contact information to the five dealers in my area and got five offers in writing by return email. Four of them were below the lowest recent deals on my printout. I called the lowest and closest, made an appointment, and was politely given the deal I was quoted. No hassle, no bait-and-switch and they honored my email print-out.

Lastly, and very importantly, the cheapest way to buy a car is with cash. So you need to get the cash price of the car first and alone. Sometimes the dealer will give you a very good price on the car but get his extra profit on the financing or on your trade-in. Do NOT discuss any trade-in or financing until after the new car price is set. And if you need financing to buy or lease, after you have the cash price set in writing, ask if the manufacturer has a promotional, subsidized rate. Many do, currently. A creative alternative, if you can, is to buy your car with a home equity credit line, because the interest rate for that is usually lower than commercial rates.

Also, check with your CPA to see if you can write off some of this purchase as an "ordinary and necessary" business expense, and pay for as much as the dealer will let you on a cash back-or-miles credit card (that you pay off in 1 month). Don't forget checking insurance rates for high-performance cars and resale values for whatever you're interested in. They vary quite a bit and may alter your decision equation.

After all my research and obsessing, I called my sister to tell her all the interesting details of my quest and purchase. But the only thing she wanted to know was the color. The color! Some people just don't get it.