The road to my very first new car began two weeks ago when the check engine light came on the way home from work. It wasn't the first time it had happened while I'd owned the car; in some cases it meant a small problem, and others a big one. Considering I'd just done major work on the car in January, I had a feeling this wasn't a good sign. But, I was still hopeful that it could be fixed with minimal pain to my bank account. I'd been looking at new cars for the last year, but I just wasn't ready to dive back into the land of debt, having only paid off the Escort 3 years prior. For kicks last Monday, I solicited some bids for a new Honda Civic and a Toyota Prius through Edmunds.com new car buying service. I wasn't really planning on buying just yet, but I thought maybe it was a good idea to start looking since my car was becoming increasing unreliable. I wanted to go the Internet route, because I wanted to be able to do my price research online and to avoid the high pressure sales tactics until I was actually ready to buy and walk into a dealership.
Buy the end of the day Monday, I had 7 bids which I could use to compare prices on the base model plus the options I was looking at. Much to my surprise when I got home I had 5 voice mails from dealers, despite requesting that I only be contacted by email. Apparently, I wasn't going to be allowed to escape their sales pitches after all. Since I really wasn't ready to buy, I just deleted their voice mails. This was a drill to be repeated several times over the next few of days. These folks just don't listen. When I say, "Don't call me; I'll call you," I mean, "don't call me" NOT "ignore my request and call me anyway."
I was waiting for my Friday appointment at the Ford dealership to figure out what was causing that pesky red light on my dashboard. Finally, at noon on Friday came word from the Ford service department that my Escort was on its last legs. They catalytic converter was dying a slow and painful death. While it wasn't immediately fatal, it could be soon. It was going to cost far more to fix the problem than the car was worth and I was suddenly tired of pouring money into an automotive bottomless pit.
After picking my car up at lunch, I set the wheels in motion to find financing. Capital One, with whom I have a credit card, has been pummeling me with offers to get me to finance a car through them for about 6 months. They promised great rates, no down payment and the ability to walk into any dealership and negotiate like you had cash. It all sounded a little too good to be true, but I thought it wouldn't hurt to apply and see what they offered me.
I applied for my loan online and within 10 minutes I had a call from CapitalOne Auto Finance to verify it was me actually me applying using a series of security questions. Ten minutes later I had an offer for a loan at a great rate, with more money pre-approved than I had any intention of spending, and a blank loan check on its way to me to be delivered the next morning. I couldn't believe how quick and easy it all was.
Now that the financing issue was settled, I started digging back through my email for the bids from the various car dealers. I tossed them all into a spreadsheet to see who had the best deal. I combine their information with the reports I had received from Edmunds True Market Value (TMV) Report.
The TMV report gives you two key pieces of information. The dealer invoice price and what others in your area are paying for the base model. These two pieces allow you to see how much a mark up the dealer has placed on the price they gave you and how good of a deal others in your area have been able to negotiate for their vehicles. I went into my dealer negotiations knowing there were very few deals out there for Honda Civics--no special finance offers or cash back deals. They are popular cars and they pretty much sell themselves based on the quality of the vehicles and the good gas mileage. With my TMV pricing report, various bids and my pre-approved loan, I was finally ready to step into the dealer bear cage. I was ready go in for the test drive and to negotiate.
On Saturday morning, I picked one of the two dealers who had actually listened to my requests not to call me, located about 15 minutes from my house, Keenan Honda of Doylestown. Keenan wasn't the cheapest, but I knew that they guaranteed that they'd meet their competitor's prices, so I knew I had room to negotiate. I scheduled my test drive and was hooked on the Civic with Nav system in minutes. Being the techno geek that I am, I loved the all the Nav system features, voice activated response system and XM radio immediately. By the end of the test drive I was completely sold.
I followed Ron Davenport, Keenan's Internet Sales Consultant, into his office tucked away in the back of the dealership. Since he wasn't dependent on walk-ins, he had no need to see the walk-ins coming into show room floor. We sat down at his desk and began the negotiation process. He pulled out his 4-square sheet which all dealers use to negotiate the price you end up paying.
I'd read Edmund's undercover report about the car buying process and knew this was one of the key tools dealers use to attempt to jack up the price. In the upper right hand corner, they put the vehicle price, and in the other boxes, the trade-in value, payment amounts and down payment amounts. Usually they start out by asking what size monthly payments you want and how much you want to give them for a down payment. You tell them the amount you want and then they usually say "Up to ..." and let it hang in the area until the unsuspecting person tosses out their upper limit not knowing they've just committed to paying more $50-100 or more a month than they needed to. Same thing with the down payments.
I intended to escape all of those traps since I'd done my research ahead of time. As soon he asked if I'd gotten the vehicle price I sent him, I took control and pre-empted what I knew was coming. I told him that I'd gotten bids from 5 other dealers and that his wasn't the lowest. I let that sink in for a moment and then asked if he was willing to meet the lowest price I had from another dealer. Looking unhappy, he said that it was their policy to meet the competitions price. Visions of his commission must have been going up in smoke at that point. I pushed the email from the other dealer across the desk and he looked even unhappier. The competing quote I had was at dealer invoice, far less than the average going price in the area and nearly $2,000 less than his original offer. He picked it up and went off to talk to his manager.
He came back 10 minutes later, to find me looking relaxed and reading his newspaper as I waited. I think he was used to coming back to anxious and nervous customers. He told me his manager had signed off on the price and then we started to negotiate the options I wanted--moon roof, moon visor, fog lights, auto-dim mirror and iPod adapter. In the mean time he sent someone out to look at my trade-in.
Finally, the topic came around to the financing and payment issue. He reached for his 4-square and I stopped him once again. I broke the news to him that not only was I pre-approved, but I had gotten a really good finance deal. After telling me that Capitol One was slow to pay dealers, he asked if I would be interested in financing through Honda. I told him him I'd consider it just to make him feel better. I knew I wasn't going to get a better deal, but I figured there was no harm in letting him go through the motions he was supposed to go through. I had plenty of reading material in the mean time. Finally, 15 minutes later he came back admitting defeat. He couldn't top the deal I had gotten. So, we finished filling out the paperwork and I gave him my vehicle deposit. It would take about a week to find the color I wanted and get my extra equipment installed.
I could have gone to a dealer that had what I wanted in stock and probably driven it off the lot that Saturday, but most of them had already shown themselves to be pushy and aggressive and I just didn't want to deal with that. So, I waited the week to get what I wanted. I'm now the proud owner of a new 2007 Honda Civic with Nav system in Atomic Blue which I love and I got it with minimal haggling and pressure.
I learned that there are 4 keys to having a pleasant car buying experience:
- Do your research. Use the Internet to look up the cars you are considering and the options you want. Find out how much the dealer invoice is and have a firm understanding of what others in your are paying for the same vehicle. This gives you negotiation wiggle room.
- Get prices from more than one dealer. Take the time to shop around and make them compete for your business. This only strengths your negotiation position. My sales guy seemed shocked that I had gotten prices from more than one dealer.
- Go in pre-approved for your loan if you intend to finance your vehicle. This allows you to negotiate from a position of power. If you don't like the deal you're offered, you can walk out of the dealership at any time. You don't have to play the "Up to ..." game. If you have access to the Internet, you can find a great deal. CapitalOne Auto Finance has great rates. You can also get competing offers through sites like LendingTree.com. Don't forget your bank. Most banks allow you to apply for a loan online in just minutes. It never hurts to allow the dealer to try to match or beat your offer. Occasionally, they do have special finance incentives. But, keep in mind, unless your credit is spotless and well above 720, you aren't going to qualify for their best rates.
- Don't be afraid to walk out if you don't get a deal you don't like or aren't treated with respect. If you follow steps 1-3, you're in control, NOT the dealership. You aren't beholden to a dealer for financing or just because you happened to test drive the vehicle there. If you feel like you're being jerked around, you probably are. Unless you live in a tiny town with one dealership, others will be just as eager for your business. And if you do live in a tiny town, drive to a bigger one. There's a good deal just around the corner.
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