New Car Shopping

[Evas]

I just started shopping for a potential new car purchase and the experience has been tedious. The discrepancies between adds, online prices and what gets offered in the show room border on deception. I haven't gotten too deep in to a haggling session yet as I haven't felt fully equipped to negotiate from a position of strength. But I'm working on a spread sheet now, so their time is coming.

While I don't have any problem with them turning a profit, I am having a little trouble understanding the whole picture. The couple dealers I have been to speak to the invoice price as though it is their true cost and the selling price as their only source of income. But that is clearly not the case. I know there is a "Holdback" of about 3% of the MSRP that they get refunded by the manufacturers. From what I understand, this amount is rarely given up by sellers. That's OK, but it belies their claim that they don't make any money if they sell at invoice. I am pretty sure there are also other incentives and rebates that are likely in play as well, though I'm not sure how large they might be.

Basically I am thinking an aggressive but plausible offer might be something a few hundred dollars below invoice. There are plenty of online resources for something like this, but some personal insight would go a long way.

Anyone have any experience on the dealer side of things?

[Lions]

I just went through a similar process less than 3 months ago. The best advice I can give you is to figure out what you want and what you're willing to pay for it. I used KBB and Edmunds to then narrow down what I should expect to pay in my market. I was able to beat that price by a nominal percentage due to some negotiating and research on available incentives. For example, I made the dealer take off an additional $250 due to an auto show discount that they had conveniently left off. So do your homework before you negotiate, stick to your guns, and play the dealers off each other.

[roncollins]

I generally try to view buying a new car as "not a negotiation." I do what homework I can, and I decide how much I'll pay. And I walk in to the conversation completely ready to walk away. Sure, there's sometimes some give and take under that (I'll always agree to pay less), but when I'm at my limit, I'm at my limit.

[Matt]

I watched an interesting situation happen with my parents last year.

A drunk driver crashed off the main highway onto their side street, and plowed into my parents front porch, but not before taking out their SUV in the process. (Yeah it was a mess.) Anyway, the SUV is totaled, insurance pays it off.

I arrive in town the day my parents are going up to Eatontown Ford to pick up the new SUV. My dad tells me the story of why we are going to Eatontown. He has shopped around the area, starting with about 5 Ford dealers, and eventually narrows it down to 3 as the first two really jerk him around. He finally gets a price he likes from the Eatontown dealer, and it's about $4000 less than the dealer in Toms River (closest to him) wanted to sell the vehicle for.

He wants a particular color, and Eatontown doesn't have it. He tells them when they get the color, he'll come pick it up and sign the papers. Their people hunt around other dealers in the area, and call him back saying they have located the vehicle, exact model and color he wants. They'll have it in Eatontown when he gets there. We make the 30 minute drive, and he is inside signing the papers when the vehicle is pulled up to where I am standing together with my mom. I take a look at the invoice. It came from the dealer in Toms River that wanted to sell it to him for $4000 more.

[Bill]

I watched an interesting situation happen with my parents last year....

My brother in law did a similar thing. He negotiated back and forth between a dealer in Raleigh and a smaller dealer outside of town. The smaller dealer basically picked the car up from the dealer in Raleigh and delivered it to his door and saved him like $500.

I hate non-transparent dealings and buying a car is usually about as opaque as possible. I go into it just trying to get ripped off as little as possible and consider that a win.

[Denny]

The last several vehicles I have purchased I just bought from individuals--from classified ads in the paper (then) and Craigslist (today). I've never had a problem with sketchy characters, and paid a good deal less than I would have from a dealership.

Of course this is not an option for buying brand new, and there is always the danger one is buying someone else's problems--you have to do due diligence.

[Evas]

The last several vehicles I have purchased I just bought from individuals--from classified ads in the paper (then) and Craigslist (today). I've never had a problem with sketchy characters, and paid a good deal less than I would have from a dealership.

Of course this is not an option for buying brand new, and there is always the danger one is buying someone else's problems--you have to do due diligence.

The new vs. used decision is still one I'm struggling with. Spending less money is a primary objective. But paying 66%+ of what a new car costs with additional risk and much less warranty may not be ideal ideal either.

I am sure I can find a better value in a used car. I am just not sure what my appetite for risk is. Maybe certified pre-owned is safest middle ground.

[roncollins]

I have never in my life bought a "new" car. But for me a car has no real intrinsic value beyond basically getting me from point A to point B. I mean, I can enjoy driving a bright, shiny "new" car as well as anyone. But I don't give that much value in the thought.

[Coqui]

We have gotten good value out of used and new cars; it just depends upon several factors. We generally try to use the rule of thumb that driving a car for $2000 per year in depreciation (ignoring maintenance, but including repairs) is a worthy goal, and if you do better than that, you're cheating the system:

Example 1: In 1998 my soon-to-be-wife spent $15K on a 1995 Nissan Maxima with ~20K miles on it. After putting about 140K miles on it, we sold it in 2009 for about $2K, and over the course of that time, we put about $1.5K in repairs into it. So we figured that we drove that car for a little over $1K per year (i.e. $15K purchase price plus $1.5K in repairs, less $2K sale proceeds), which is a great, great deal. (And if you calculate receipt of insurance proceeds from a couple of other-guy's-fault fender benders, it's a better deal than that.)

Example 2: In 2008 we bought a new 2007 Honda Odyssey and paid $27K (if memory serves - it was a pretty good deal because it was old inventory, end of the month, etc.). We still have it (100K miles), and estimate that it is probably worth about $10K if we were to sell it right now (hauling around six kids and their gear tends to beat a van up, as does living in an urban area with a lot of traffic). So that's an estimate of a little over $2800/year, but the "best" years from a value perspective are ahead of it. We're about to spend ~$1K (timing belt), but should be able to sell for ~$6K in another 5 years, which would make the per-year cost to drive ~$2K assuming no repairs (which isn't a particularly safe assumption). That's OK, certainly not as good as the Maxima, but to us it was probably worth it to have started with a new car. (And we got kind of a lemon with a lot of stuff that went wrong early in the car's life (it's perfectly fine now), which is rare in a Honda, so the manufacturers' warranty was of particular value.)

Obviously, insurance, interest if you take out a loan to buy the car, and things like brakes and batteries and tires add to the true cost to own a car- and there are differences between models, particularly on tire cost, but we have found the quick and dirty measures above to be effective yardsticks to help guide purchasing decisions.

I'd also guess, without having purchased them, that the $2K goal that we use as a metric is too low for SUVs and trucks. You're buying more vehicle there, so it would stand to reason that the cost to drive per year should be more.

Gas mileage can be an important consideration, too, if you drive a lot. We don't, relatively speaking. We recently purchased a third vehicle (long story) and ran the math, and since we drive only ~25-30K miles per year split between the (now) three vehicles (and probably no more than 12K max on any vehicle in any year), the differences between 35mpg economy vehicles and 14K gas hogs were pretty immaterial in the grand scheme of things (and tended to start to cancel out when you factored in insurance costs).

So I think that there is value to be found in either new or used, but it does take a LOT of research and work into things like potential resale value, repair records, and repair costs. Good luck! Car shopping is one of my least favorite things; I think I'd rather have a colonoscopy.

EDIT:

One other point, if you really want to research it to death, is that the value of new vs. used changes over time with the economy. If you have the freedom to zig while the economy zags, all else being equal, it's probably a better value to buy new cars when the economy is bad (and others are buying less of them), and used cars when the economy is good (and more people are therefore buying new cars than old). The whole lease vs. buy option is one that you shouldn't dismiss out of hand either if you are looking for the best 'deal'. While I haven't read anything to that effect, I think that the industry uses lease deals to help control new car inventory. Obviously, leasing isn't for everyone (and full disclosure: I have never leased) when you consider things like mileage penalties and the like, but there have been occasions in our car shopping history (my wife and I have bought at least 7 cars together over the 15+ years of our marriage, only 1 new) where a lease was just as attractive financially as some of the purchase options that we were considering. You should research the hidden fees carefully, of course, and to me, the misery that is car shopping and being forced by the end of the lease term to make another car decision would be debilitating.

[Reg]

My only experience with buying a car came directly after my wife chose to run over a bucket rather than hit a car in the next lance. Long story short...the bucket caused the car to catch on fire and we went from having a paid for car to having a totaled car in about 15 minutes. We decided to definitely go used so there were a couple of places that I liked because they very simply had sticker price no haggle policies. We ended up buying a used car for Enterprise. I basically told them what I was looking for and how much I would pay a month and they got me my payment within 20 dollars but that also included a five year extended warranty on the transmission and engine. While I haven't bought anything from them, (I have sold to them) Carmax is another dealership that offers sticker pricing with no haggling.

I have an acquaintance who sells motorcycles and sports vehicles and he has no remorse selling customers at the absolute highest price listed. He views it as the way he makes a living, the higher he sells it for the better commission he gets. So I tend to avoid dealerships and salesman in general.

[Evas]

I have never in my life bought a "new" car. But for me a car has no real intrinsic value beyond basically getting me from point A to point B. I mean, I can enjoy driving a bright, shiny "new" car as well as anyone. But I don't give that much value in the thought.

I'm not far off from you. I don't want a new car because of the awesome shiny neatness of the whole thing. A car is a necessary expense, though it is a significant contributor to quality of life as a spend over an hour a day in it, logging about 60 miles round trip on my commute.

The benefit of new to me is it the virtual elimination of cost of repair and maintenance for a while. Plus I can expect a new car to last somewhat longer than a used car from the date I bought it. So if I expect a car to last 200,000 miles (which is reasonable, as I'm at 176,000 on my current car) and I buy it with 50,000 miles on it, that means I'm really only getting 3/4 of the car I get with a new car.

We have gotten good value out of used and new cars; it just depends upon several factors. We generally try to use the rule of thumb that driving a car for $2000 per year in depreciation (ignoring maintenance, but including repairs) is a worthy goal, and if you do better than that, you're cheating the system:

That does seem to be a fair rule of thumb and is pretty close to my own thinking and experience. I bought my current car in September 2003 new for $21,600 (not a great move in retrospect, but I had just graduated college and was enamored with the concept of a "new" car at the time) all in. I have had to repair a few things on it, but nothing major. Ignoring that it comes out to $2,025 per year.

Gas mileage can be an important consideration, too, if you drive a lot. We don't, relatively speaking. We recently purchased a third vehicle (long story) and ran the math, and since we drive only ~25-30K miles per year split between the (now) three vehicles (and probably no more than 12K max on any vehicle in any year), the differences between 35mpg economy vehicles and 14K gas hogs were pretty immaterial in the grand scheme of things (and tended to start to cancel out when you factored in insurance costs).

Gas mileage will be a significant one for me because of my commute. I'll wind up saving more in gas than the insurance will cost, so that's a nice benefit that should last for the life of the car.

So I think that there is value to be found in either new or used, but it does take a LOT of research and work into things like potential resale value, repair records, and repair costs. Good luck! Car shopping is one of my least favorite things; I think I'd rather have a colonoscopy.

If I could be guaranteed the same outcome as weeks of my researching by getting scoped, I would probably do it.

[Denny]

If it were going to be used *mainly* as a commuting car, I'd definitely consider one of these:

http://www.eliomotors.com/
Actually I'd want to wait a year or two after they came out to see how reliable they are, but still....less than seven thousand bucks new and 84 MPG!?

[Evas]

If it were going to be used *mainly* as a commuting car, I'd definitely consider one of these:

http://www.eliomotors.com/
Actually I'd want to wait a year or two after they came out to see how reliable they are, but still....less than seven thousand bucks new and 84 MPG!?

That's an interesting concept. Sort of a motor cycle you don't have to balance and is also inclosed.

The mileage and price are great. Not sure I'd trust them safety wise though. Plus I'm not sure how well it would holdup in the winter here in Ohio.

[Leones]

If you're going 3 wheels go with the Morgan 3 Wheeler. It's epic!

http://www.morgan3wheeler.co.uk

[Coqui]

I test drove a Nissan Leaf. At one point they had an introductory lease deal for the base model that was approximately $240/month. I missed out on that deal, and with a payment of approximately $300 a month on the next trim package up from that one, it didn't make as much sense. You might want to look at that in your situation. A buddy of mine has one, and put a voltimeter on it to see what the electrical charge cost him and it was something like an average of $1/day (but he only had to charge his 2-3 times per week).

In a commuting situation where you drive 60 miles daily, that might make a lot of sense. I would never buy, being worried about repair and maintenance costs on an electric motor, but I seriously considered a lease. It was a cool car, and I say that as a not particularly green individual.