Buying A Car 101

I sold cars for a year, and in that time I tried to learn as much as I could about the trade. It’s always a pleasure to learn about things from the other side of a transaction, and being in car sales you see it all, it’s all so simple.

First, let’s cover some of things people fret about but really shouldn’t.

• Color. When you are in your car, you don’t see the color of it. The interior color of the car (options grey or black, or, light or dark) matters more. Do you want it to be bright inside or not? You won’t use the color of your car to help you find it in a parking lot (that’s what the panic button is for! Or, more subtly, just hit the lock button a few times on your keyfob to get one beep out of your car). And don’t even give me that, “cops pull over more red cars.” schtick. You want your car to be visible to other drivers, don’t you? Why buy a color that is statistically involved in higher accidents? Black and grey cars are the most dangerous to drive in (statistically) so why are you going for that color? Because you don’t want a speeding ticket? I want my car to be as visible as possible, but I will also settle for a black or grey car if it meets all the other requirements on my checklist.
• Trinkets. You aren’t going to use that moon roof. Your rearview camera will smudge and you’ll neglect cleaning it for months. You will stop using heated seats after a week. You won’t be exploring with your navigation system on a car you bought for commuting. You should connect your bluetooth though, because it’s dangerous to text and drive. Never buy a car because of its premium features. I’ll explain more on this later.
• Brand. Almost every brand is manufacturing different parts in many different nations. Nothing is completely local. Also, with regulations in place, cars are basically the same across brands. There is very little difference in your typical compact car. There is no reason to be loyal to a brand. I was foolishly loyal to Kia, because I sold them and had to buy into their products, this was until I needed their help after I bought a lemon. They left me completely out to dry. No more Kia products for me. It’s completely acceptable to reject a brand, but be clear with your intentions, once you put them behind, never step floor in their dealership again, you’ll only waste everyone’s time.
• Price. Whoa now! The price? Hol-up yo. The price is the biggest deal when it comes to buying a car, right? Price actually doesn’t matter much, you need to know you can afford the payments, and that’s all. If you can’t afford the payments, tell the salesman what you can afford. Trying to shave off a dollar or ten a month doesn’t work like how it used to. With the internet, information is available to all buyers, including margins and profits for dealers. Not only that, for used cars, dealerships are looking at what others are selling cars for, and basing their prices on each other. That super cheap car you saw? It’s being sold with no profit (and it probably has a few problems and the dealer wants it gone) in order to bring customers to the lot. Sure, you can ask for a few grand off the price, but you need to know the magic words, which I’ll tell you, for free, later on.

Okay, so those are a few of the things you shouldn’t be worrying about, so what should you focus on when buying a car?

• The Basics. How many people are going to be driving the car? What is the size of your family? Are you commuting? Is gas economy important? Do you need to haul stuff? Are you going to be moving big objects? Will an adult ever need to sit in the backseat? These are all the basics you need to envision before you choose a vehicle, especially if you aren’t going for the same exact make/model you already own.
• Don’t Go New. There’s no reason I can think of why you would want to buy new. Let some other sucker pay for the depreciation. Instead look for something a couple of years old, preferably a previously leased vehicle. Someone in a lease had to follow a maintenance program, and by the time they returned the vehicle, it will most likely need replacement of the basic stuff, like brakes and tires. No big deal, the dealer will have to make sure everything passes safety inspection. New cars may have some pretty cool deals, like $6,000 off or 0% financing, but in the end you are still spending more for it.
• Don’t Go Too Cheap. Always Always ALWAYS check the carfax to find out if the vehicle was ever in an accident. The history of your used car is the most important thing. If the dealer says they don’t know the history because they got it at auction, and they haven’t mentioned to you they can look it up, you are being swindled and offered a very risky deal. Even I made this mistake because I was, A) focused on brand, and B) thought I found a super deal, except I forgot the tiny detail of the car’s carfax. When I went to sell the car, only then did I learn it had been in TWO accidents! Don’t make that same mistake, it will cost you thousands. As a rule, if it’s less than 10 grand, it’s probably not worth it, or too good to be true. Don’t ever get a vehicle that was in an accident.
• What To Look For. You won’t be able to tell much by looking at an engine these days, as they are mostly covered up. You also won’t find any rust on most cars, especially not ones a few years old. Instead, what you want is a car that has the most basic features which are the most convenient. Power door locks and mirrors (and air conditioning) are the only quality of life upgrades a car can possess. Everything else is an expensive luxury to replace down the road. Turbo engines are another thing tacked onto the main engine that will be expensive to replace down the road. The more basic the engine, the better. If you can, get a manual transmission. The whole reason for this is because of what your maintenance will cost years down the road. Xenon lights, LEDs, cameras, navigation systems, power this, computer that, will all be costly to replace after your warranty expires. The lesson? Your car doesn’t need a lot to please you, you can save thousands by opting for a basic trim model. As for miles on a vehicle? If it’s not very old and it has a lot of miles, it means it was driven on the highway a lot, which is not bad at all. If it’s low mileage and older, it means it was probably driven in the city a lot, and the stop and go is harder on the engine. I would always shy away from anything over 150,000 miles and favor anything less than 80,000.
• Cash, if you can. Because you are buying used, you want to buy it cash, if at all possible. Start a car savings fund yesterday. You will save thousands buying cash. Why? Because the interest on the used car loan will add up to thousands of dollars (the banks are the true winners in a car deal, the government comes in second because they gain more in taxes than the business makes in profit). I once had a guy back out of a deal at the last second because he didn’t understand interest rates and thought the car he was buying was a lot more expensive than he originally thought. He thought we lied to him, when all we did was show him the true total cost of the car after you added in interest, assuming you made all the payments. Nothing changed with his payments, which he agreed to, but he saw the total cost of the car jump up by thousands and thought he was being skewered by us. He got sticker shock and lost out on something that would probably have been no different than another car he would have to buy at the same monthly payment.
• If You’re Going To Negotiate, Get What Matters. I live in a cold climate. What matters the most for a car? The only part of it that actually touches the ground. That’s right, your tires. Instead of trying to get dollars knocked off the monthly (which you shouldn’t be doing anyway because you are buying cash), you should be trying to keep the same payment (or total price) and add in snow tires. You might also want tinted windows. They come in handy when the sun is blasting through your side window at the right angle at certain times of the day. You don’t need to negotiate for anything else.
• The Magic Words. “If you can do X for me, I’ll buy it today.” These are the magic words. You are telling the salesman he can have a sale right now if he can meet your demands. If he can, you have a great deal and he gets a sale, it’s a win-win. If he can’t, then you know the dealership’s cards, that they are going to lose money on this deal, and don’t want to deal, or they don’t need the sale that badly and are willing to call your bluff. This happens, but it’s good to know when you have stepped out of bounds. It’s not your fault, it’s nothing personal, something in the deal is not going to work. Don’t be a jerk and ask for 10 grand off a used car selling for 16 grand (I’ve had people do this). I think the most profit I’ve ever seen in a car was around 4,000, and that’s because the guy who traded it in took our lowball number. A previously leased vehicle (by the way, you should never lease unless you can write it off because you are self-employed), doesn’t have that kind of profit margin. Only old wildcard cars do, and you aren’t going to be buying one of those. The magic words work for when you are negotiating your own trade. Don’t say things like, so and so down the street is willing to give me X, why can’t you? Just make your intentions entirely clear, you want 3,000, not 2,000 for your trade, if they can make it happen, you’ll buy today. If they come back with, we can do 2,500 for your trade, go ahead and take it, 500 is not as big of a deal as you think. It’s a tank of gas or a bag of groceries a month. You may already be dropping 40 a month going out to dinner when you should have stayed home and cooked the meat sitting in your fridge.

So, any last thoughts? Let’s look at how the dealer would try to get you.

• The salesman may be aware of a few issues with a used car they have, issues he’s heard of through the grapevine from the mechanics, if they’ve had time to look at the vehicle. Depending on the size of the dealership, and how long they’ve had the vehicle, and how busy they are, the mechanics might not have had any time to look at what a new trade in needs done to bring it up to safety standards. I’ve seen the mechanics list of things trade ins have needed, and they usually average around $1,200 of work needing done. That’s shaved off the profit, which is again why you tend to not be able to negotiate much price off a used vehicle. But you won’t have to worry about that because you’re going for a previous lease. My point here is the salesman probably doesn’t even know the story behind a vehicle, he is just as ignorant as you are of its history. He’s not trying to pull a fast one on you, he simply doesn’t know.
• If anything, the salesman is the least shady person you’ll interact with. All he or she is trying to do is get a sale, they don’t know much beyond trying to say and do whatever to make you happy to buy. Chances are they have been in the industry for a short time (car sales is high turnover) and they don’t know what they are doing. The sales guy who has been around for years is the one you want to be a little wary of. The guy who had been selling for years at the place where I worked would always try to add in as many extra things as he could for the little bonuses he could get. He knew how to sound sincere and make people feel good. Beware of the sales guy who makes you feel good. Politely inquire about a sales person’s history when you are demoing a vehicle you are interested in (always demo the vehicle, I never understood why people didn’t do this) and then when he writes up a payment plan for you, politely decline any and all extras.
• The real people to be wary of are the sales manager and the finance manager. One has been in the industry long enough to know everything about it, and the other is the same, except they know all the financial angles. You are not an expert, as much as you think you are, because you will never in your life buy as many cars as these people have sold. So, in lieu of this, what you don’t want is for your salesman to be going back and forth to his manager a lot, or bringing his manager in to close you. Let’s say you’ve been closed and are now sitting in front of the finance person. This person makes the most money there. Their objective is to put you in a loan and they may get different deals for themselves depending on which lender they use. They also want to sell you extended warranty and other goodies. Reject them all. Unless you love to deal with warranty companies and trying to convince them your problem is their problem and they need to pay to fix it, don’t ever get the extended warranty. It’s like dealing with an insurance company, they will do whatever they can to not have to hold up their end of the bargain. If you have terrible credit, sadly you will have to eat the cost in interest. A lot of poor credit people are happy to get any deal, even if it’s 15% interest, because they are rejected so much. And then they end up buying bad cars that cost money to keep running, and they are stuck forever in a loop of never getting ahead. That’s why you need to squirrel away every last dime you can into a next car savings. One way or another you are going to have to spend that money.

So this has been Car Buying 101 as I see it. Times change and I think the trend is going to be toward less interaction with dealerships and more toward buying online or buying through places with no salespeople, like CarMax. Haggling is slowly going away in car sales, and honestly, it’s not a big deal. The price is the price now, and it’s always going to be more than you want to spend. The dealership I worked at was a salaried position, not 100% commission. We didn’t do high pressure sales tactics, and we attempted to be as honest and straightforward as we could. It didn’t work. The sleaziest guy always had the most sales. For some reason, our culture tends to favor and reward sleazy salespeople. That’s why I created the magic phrase, it disarms both parties and gets the deal done, because that’s the only reason you’re there (or, it should be, there were guys who would come onto the lot and say they were looking around because they were planning on buying a car next year. Like a sucker, I had to work on trying to sell these guys, “say, if we can look around and find something that might be a good deal for you now, would you be open to it?”, “naahh, I just want to see what’s out there, if you don’t mind I’m going to look around now.” Of course I didn’t say I minded, even though I did, because I was trying to make a living, and because I was out there talking to this guy, I now lost my place in the queue for the next customer, someone who might actually be serious about buying. That happened too much, and in car sales it is known that only 10% of the walk-ins with no appointment end up buying. If you’re in a business where you don’t want a customer to be wasting your time, don’t go around wasting businesses time.)