Some Golden Rules & Tips to Save Money for used Car buyers

Posted on 19. Jan, 2009 by Frank in cars

The Bottom Line Do your research, follow these rules, avoid dealer tricks, and you can get a great deal.

I tend to like new cars because I know I won’t be buying someone else’s cast-off headache, and I can easily find the invoice price, dealer holdbacks, etc. on the internet to help me formulate a fair offer.

But my attitude recently changed when my husband decided it was time to put his old Neon out to pasture. I have a 2002 Pontiac Aztek, affectionately named “Canyonero,” that I love, and I’m constantly harping on the benefits of a larger vehicle with side airbags. Apparently it’s had some type of subliminal effect over the past two years, because he announced he was going for an Aztek.

He priced a new model, but realize that a used one would be at least ten grand cheaper, not to mention that the option packages on the older Aztek models are much more in line with what we like. Side airbags were standard in 2001 and 2002, but now it’s hard to find a 2004 that has ‘em because they are an option that most dealers seem to take a pass on.

RULE 1: KNOW EXACTLY WHAT YOU’RE LOOKING FOR

As I mentioned in my intro, my husband knew that he was looking for an Aztek, and he knew exactly which options he wanted. This knowledge kept him from becoming the prey of salesmen who might entice him into something inappropriate or some lemon that’s been sitting on the lot for the last six months. This is something to know before you ever set foot on a dealer’s lot. Start out with internet research to narrow down the models you are interested in. Find friends who own those models or do some day rentals. Yes, that will cost you money, but think of it as an investment. Renting a couple of cars will cost a lot less than getting talked into a pricey vehicle that doesn’t fit your needs.

In our case, it was easy because I owned an Aztek. My husband was also considering a Vibe, Durango, and RAV4. We visit Florida a lot, so it was an easy matter to rent those models. After trying them, he narrowed his choice down to an Aztek because he didn’t like how the others drove.

RULE 2: RESEARCH, RESEARCH, RESEARCH

In buying a used car, my initial fear was, “How will we know a good price?” Fear not…the internet is just as useful for the used car buyer as it is for those who buy new.

Our first stop was cars.com, where we got a list of all the used Azteks for sale within a 30 mile range of our home. You can narrow it down by price, year, etc., but since Azteks have only been produced since 2001, we wanted the full range. Most of the vehicles will be listed by dealers, although a few private owners were listed too. You’ll see price, mileage, VIN number, options, seller information, and often a photo of the vehicle, too. Now you can see the full range of vehicles and compare options and prices to get a ballpark figure.

Some dealers don’t list the price, and we learned to be wary of them. A phone call usually produced a response like, “What are you willing to pay?” Sorry, nothing to you, buddy! If you’re going to play games, you’re going to be eliminated from my search up front. We did visit one dealer that played the “no price” game because they were close to our house, and they were just as sleazy as you might imagine. We wanted to talk price, and they kept insisting that they only quote in terms of monthly payments (we’ll cover why you should never do that in rule 3).

Cars.com, coupled with a few phone calls, allowed us to narrow down our list and take the next research step. We took our short list and pulled a car fax report on each of the vehicles from carfax.com. It costs a bit, but it is well worth it. For example, we discovered the reason that one dealer had over half a dozen low mileage Azteks. On the phone, I was told they were lease returns. In reality, they were rental cars from Hawaii! Those at the other dealers turned out to be trade-ins, one-owner auction vehicles, or lease returns. Knowing this information in advance allowed us to judge the truthfulness of the dealers. The best ones already had their own car fax reports ready to show us.

We also pulled some prices from CarMax, the no-haggle superstore. They tend to be high, but it gave us another reference point. In addition, we visited Edmunds.com and pulled their True Market Value (TMV) for the vehicles on our list that we were most interested in. Lastly, my husband checked to see how much our insurance company would pay if the vehicle was totalled; you don’t want to pay $20,000 for a vehicle for which you’d only be reimbursed $15,000 if someone ran into you and destroyed it the next day.

RULE 3: ARRANGE YOUR FINANCING AHEAD OF TIME

So now you know what vehicle you want, where your prospects are located, and approximately how much you will be spending. If you are planning to finance the vehicle, DON’T count on the dealer to do it. Often, they will take onto the interest rate to fatten their profit. Talk to your own credit union or bank and get a pre-approved loan. That way, you can still see what the dealer has to offer, but if they can’t beat your own financing, you won’t have to worry about it.

This also allows you to avoid the “payment” game. Dealers prefer to quote monthly payments to you instead of a car’s bottom-line price because it’s easy to disguise an inflated number into payments stretched out over five, or even six, years. We had one salesman try to pull this, and he was totally stymied when we kept insisting, “We want a total price for the vehicle. The total price has nothing to do with financing, which we’ll discuss later.” We finally got a figure out of him, but I got the impression that most customers fall for the monthly payment routine. Don’t let yourself be one of them or it can cost you dearly.

If you are planning to pay cash, don’t let them know up front. Otherwise, if they know that they won’t have an opportunity to soak you on the loan, they might not be as flexible on the price of the car.

The same thing goes for a trade-in; never let them know if you’ll have one until after negotiations for the new car are complete. Actually, I made it a rule never, ever to trade in at a dealer because if you got a good price on your car, they will be sure to rape you on the trade amount. I’d rather just sell it outright. If you definitely want to do a trade, get an evaluation from CarMax, know the NADA and Kelly Blue Book figures, and see how much comparable vehicles are selling for. Otherwise, you can lose all the ground that you gained in your purchase negotiations.

RULE 4: SHOP ON A WEEKDAY AT THE END OF THE MONTH

Many people know that the end of the month is a good time to shop because the salesmen might be struggling to make their quotas. But they often choose to shop on the weekend because it’s more convenient, not realizing that a weeknight foray might result in a better deal.

On Saturday afternoons, popular dealerships are usually swarming with people. The salesmen have plenty of “ups” (customers) and won’t be as hungry to spend time wheeling and dealing with you if an easier-looking mark just walked in. But on weeknights, you can often walk in and be virtually the only customer. If the dealership hasn’t sold a car all day, they might be willing to cut a better deal.

RULE 5: DON’T GET CARRIED AWAY WITH EMOTION

Emotion is a salesman’s friend. He counts on it to make his job easier by letting you sell yourself on a car that you’ve fallen in love with. That’s why Rule 1 is so important. It’s a lot harder to get carried away when you know exactly what you want. It’s like going to the grocery store without a shopping list and getting enticed into buying lots of junk food.

In our case, my husband was very familiar with Azteks and knew the exact options he wanted. He had some color preferences, but there is no one color that he adores so much it would cause him to lose his senses. Since many of the dealers had multiple Azteks, that put us in a stronger position of power because we weren’t in love with a particular individual vehicle. Instead, we were taking the “commodity” approach, and if one dealership wouldn’t give us a good price, we could easily go to another one that had the exact same commodity.

In my research on dealer tricks, I read that a salesman always wants you to take a test drive because they believe the vehicle will sell itself and that it is the first step in getting you to take mental ownership. But this won’t happen if you’ve already tested the vehicle under neutral circumstances as described in step one, like renting it or borrowing it from a friend. Instead, you can spend the test drive concentrating on how well that particular car runs, if there are any strange noises, etc.

RULE 6: BE AWARE OF TYPICAL CAR DEALER GAMES

I won’t detail them here, as there are plenty of great resources that can be uncovered in a simple Google search. But before you ever leave for the dealership, you MUST read the article “Confessions of a Car Salesman” on edmunds.com. They sent a reporter undercover to work at two dealerships, and his report will amaze (and horrify) you.

Two of the games to be most aware of are 1) The control game. The salesman will want to maneuver you into a test drive and then into a little cubicle or office where the pressure can be applied. This is fine when you are serious about buying a vehicle, but don’t let them pulled any b.s. that gives them an upperhand. For example, they’re going to quote you some obnoxious beginning price that has no bearing on reality, knowing that you will give a counter offer. Then they like to go back and forth, getting you to bump up your offer a little bit each time.

I really don’t want to waste my time with that. My husband and I had done all of our research and wanted a bottom-line price. Most dealers could see that we weren’t playing games, as we had all our paperwork and printouts with us. But one (which ended up being the one that had the vehicle we liked best), dragged things out for an hour. They’re lucky we didn’t just get up and walk, which is what I advise you to do if they start that routine. Whenever the salesman says he has to go see his manager, say, “If you’re not back in five minutes, I’m going to leave because my time is valuable.” Then get up from the cubicle or office and wander around the showroom or lot. I guarantee that it will light a fire under his feet.

The salesman at the place with the car we liked best asked for our bottom line price “to buy it today.” Normally, we take a night to think it over, but we had been shopping all week and had seen enough vehicles to know the car was a real cream puff. It was a 2002 Aztek that was the identical twin of mine. It had my husband’s preferred options and only 13,000 miles on it. It had been owned by the son of the dealer (confirmed by carfax and other paperwork). It was also a GM certified vehicle, which gives you a three day return option and a 3 month, 3000 mile warranty, whether or not there is any factory warranty left.

In this case, we were willing to buy on the spot if the deal was great. Normally, though, take a day to think about it unless you have done lots of research and are one hundred and ten perfect sure that you have found the right vehicle.

This leads us into the next game: Bumping. As I mentioned earlier, the salesman will run back and forth with figures, playing good cop/bad cop with the general manager. They count on the fact that people will give a lower total than they are really willing to go and see how much they can bump you up. In our case, this was ineffective because we’d done enough shopping around to know how much we would pay, and it wasn’t negotiable.

We gave our figure, and even though we wouldn’t budge, the salesman dicked around for an hour. We would definitely have left, but we weren’t in a hurry and I wanted to see how far they would drag it out before they saw we wouldn’t budge. At first, I thought they were going to stick to their guns. The General Manager came out and said, “There’s no way we can sell you that vehicle for that price, but we have some formal rental vhehicles you might be interested in.” After laughing in his face, I said, “I told you, I am interested in that one vehicle. I gave you our bottom line price, and if it’s not acceptable, we’re going to continue our shopping elsewhere.” Just as we stepped through the doorway, the price suddenly WAS acceptable, and the vehicle is now ours.

RULE 7: DON’T LET YOUR GUARD DOWN UNTIL YOU’RE OUT THE DOOR

We didn’t get a hard sell in the finance/insurance (F&I) office because I think they had figured out that we knew our stuff and weren’t going to go for any b.s. We had arranged our own financing, so it was only a matter of completing the papers. But normally, although most people don’t realize it, the F&I person is just another salesman who wanted to pad the back end of the deal as much as possible. If you have arranged your own financing, this will eliminate a good bit of the game. But they have plenty of other mostly-worthless items to hit you up with, like paint protector (not needed on modern cars) and fabric protectant (you can do the same thing yourself with a $5 can of Scotch Guard). Don’t fall for any of this; the only thing you should do in this office is sign the papers, NOT make additional purchases.

There is one thing that you might want to consider. Some people swear by them, while others say they are a waste of money: an extended warranty.

Personally, I like them, especially for a used car. If it does turn out to be a lemon, I’m not stuck with the repair costs. But there is no reason to pay $1000 to $2000 or more for one, especially since the cost to the dealer is a mere fraction of that amount. I never, ever buy this item in the F&I office. Instead, I ask that it be thrown in as a deal-closer, and so far I’ve never been refused (even though they usually try to resist at first).

In our Aztek quest, most of the dealers were willing to include the warranty in their bottom line price. But at the last one, with our cream puff, they were totally resistant and tried to convince me that the warranty had to be purchased separately, after we made a deal on the car. They also ran a line of crap about the cost and how $1100 would be a huge bargain.

I held firm on the fact that the other dealers had included it, and although it took a long tme, I eventually got a top-of-the-line GM warranty tossed into the deal at my bottom-line price. Now, I won’t have to worry about spending more than $100 (the deductible) for any repair over the next four years.

A word of caution about warranties: there are “aftermarket companies” that offer them, and some are very good and reliable. But if at all possible, try to get one through the manufacturer.

RULE 8: ENJOY YOUR NEW VEHICLE!
If you follow these rules, do your research, shop around, and hold firm on your price, you will find the right vehicle for you.

Of course, when you are a careful shopper, you may have to brace for temporary dissapointment. There was one lovely 2001 ‘Tek that my husband fell in love with. It was well taken care of, fully equipped, and in great shape, and the salesman gave us a great bottom-line offer. But it was early in our quest, and my husband wanted to think about it and look at some more vehicles. According to carfax, the car he was interested in had been on the lot several weeks, so surely a couple more days wouldn’t matter.

It was sold the next day!!

Yes, it was a dissapointment, but that wasn’t the only cream puff in the world, as we discovered a few days later when we found the vehicle we ultimately bought. The first one would have been a good deal, but I think we got more benefits from shopping around.

This experience also taught me that my next vehicle is going to be used. My husband’s Aztek is the same year as mine, but because he bought it two years later, it cost $10,000 less. He still has a nice, long warranty on it, just like I have on my new one. My vehicle has depreciated by $10,000, and he used that appreciation to his advantage. As long as you follow the rules and do your research, used can be a great option.

Top 5 Tips to Save You Money When Buying a Used Car!

Tip 1: Where to shop; do you go to a major dealership or to “Smilin’ Sam’s Honest/Reliable Used Automobile Emporium?”

My advice is to steer-clear of the independent dealer… UNLESS you know him or several people who have had satisfactory dealings with him… The vast majority of used cars on the market come from TWO places… Dealership Trade-ins and “Program Vehicles”…

You know what a Trade-in is… you might even have one… (if you do, don’t forget to read Tip 4… Program Vehicles are cars or trucks that have been either on short-term lease (6 months up to 3 years) to businesses or rental agencies. These vehicles are often a decent buy because they have been reconditioned and usually have a portion of their factory warranty left. They are not always a good value, however, because often times they are auctioned to dealerships. Depending on the vehicle, you may get a great deal or pay thru the nose… be sure to know what features you want and what features you can live without.

Trade-ins are simply the vehicles that others have traded in… sometimes innocently to get a new vehicle, other times to get a lemon off of their hands! Usually a prominent dealership will only keep the best of the best on their used car lot. What happens to the rest?

They are sold to wholesalers who then pawn them off on mom & pop/buy here & pay here lots!

So… am I saying you can’t get a good car from a independent car dealer? NO!… but I am saying that the more prominent dealerships in town have already bet against that car being a good value!

Bottom Line: The LARGE Dealership has a LARGE Reputation to Protect. There is too much money tied up with the manufacturer they represent to allow themselves to become suspect in their used car dealings. I know of one Prominent dealership in my hometown where a woman had her used car rebuilt one complaint at a time because the dealership cared more about their reputation than they did about the lunacy of what the deal was costing them!

Tip 2: Never, Never, Never, “take their word for it…” Rarely if ever does the Used Car salesman know the history of the car he’s selling. If he knows anything, it’s probably not true. Managers will “feed” their gullible salespeople lies about the quality of a car, knowing that the salesperson will trumpet it proudly to the unsuspecting consumer. (I sold a new car once to a client on the basis that it had been a “show-car” at the Chicago trade show… it sported a new color scheme to the model, and I bought into the fabrication… hook, line, and sinker. When I sold the car, the manager stood there after the client left and laughed himself silly that the “fact” he had made up sold the car!)

At another dealership, the “aftermarket manager” would glean all he could about the client before meeting him… either from the salesman, or from eavesdropping on the salesman’s conversations with the client… then he would “morph” into a kindred spirit… I listened to his speech about how he’d been wounded in ‘Nam during his tour of duty and weave a wonderful tale… only to find out afterward that he was never in the military after all… but he’d seen the client’s car with a POW/MIA bumper sticker…

Don’t believe them… they are not your friends. The sales and management of any dealership is there simply to make as much money off of you as they can legally… maybe not even legally, if they think they won’t get caught… The only way to prevent being taken is to “GET IT IN WRITING”… and before you sign anything!

Tip 3:How much is too much? Good question.

On New Cars, it’s easy to know what the dealership is making off of you. The invoice is easy to attain… either from the dealer himself or over the internet. Once you know how much “hold back” they have, you can make an intelligent offer on their vehicle using a certain amount over invoice as your benchmark. However when it comes to used cars, there is no such availability. Three virtually identical cars might be on the lot, and they might have paid three totally different prices for each one. Why would they do that? Usually because the guy they paid the least to knew the least going in to his negotiations.

His Loss Should Be Your Gain.

The biggest thing to know going in is the approximate value of the used car you are seeking. Again, the handy tool called the internet is useful; “blue book’s” are useful; and knowing what are add-on’s for the price and what are delete’s is helpful. Does one of those three cars have excessive mileage… 12,000 to 15,000 miles per year is considered normal today… so if you’re looking at a 2 year old car with 40,000 miles, the price better reflect the excessive driving.

Is the vehicle availble with a standard and an automatic transmission option. If so, the automatic will be an add on or the standard will be a delete… depending on vehicle.

Engine size, type of sound-system, power windows or manual… all of these are potntial fluctiations in a used car’s price, just like they are on a new vehicle…

Know which options you have to have… but remember it will be more difficult to find a car “just the way you want it” in the used car market. The dealer will tell you… “There is no used car factory…” But that doesn’t mean you need to pay thru the nose for something you don’t want. There are more cars and more dealers down the street if you can’t find something you like there… or if the dealer tries to rape your wallet in the process…

Tip 4: Trade In’s. Almost as many cars are traded in during a used car purchase as are during a new vehicle transaction. Of course, they are usually less desireable and rarely will find their home on a reputable dealerships lot. But the same truths about trade in’s that I spoke of in giving you tips for New Car shopping hold true here as well…

The Sales Manager is going to give your trade-in the once over. He is going to shake his head sadly and point generally at the supposed “flaws” in your trade in. All the things he can’t see on the car he is selling you he will see on the one you are in essence selling him! He is going to offer you a trade in value/appraisal that is going to have been padded for the sake of negotiations. IF you accept his appraisal at face value, he’s just made the company and himself and the salesman their shares of the hundreds of dollars he has under-offered you. IF you shake your head sadly and make gestures like you might leave, he will up the ante for your car or to prove his appraisal was “genuine” he might find a couple of hundred of dollars to knock off of the sale vehicle. Either way, you are the winner.

Any sales manager worth his salt has added that cushion to the appraisal. They might use terms like “I’ve given all the money”, but the truth is they know they have held back, and they will make a show of “shopping the wholesalers” to get a better offer… and generally act surprised that one of the wholesalers offered what you wanted…

DO NOT LEAVE MONEY ON THE TABLE!

Tip 5:Financing your Used Car. As a general rule, used cars are not financed for as long as a new car. So just because you are buying a used vehicle you may be paying as much or more per month as you would for a new one. Be sure to consider that when deciding what your budget needs are.

Like with a new car, a used car customer should be “pre-approved” by their own financial lending institution if at all possible to keep them from the mercy of the “finance manager.” The dealership’s finance manager lives for one thing… to make money for himself and his dealerhsip. When he comes to you and says he got your loan approved at 8.3%, what he means is he got it approved at 7.9% and has added .4% for the dealership. It’s called “back-end” money and he makes a tidy portion of it. The salesman might make a piece of it, if he sells enough cars, and the dealership will make a nice piece of it.

If you are pre-approved by your own bank, they can’t make it!

If he wants to shop you anyway, let him. What harm can it do; if he comes back with a rate lower than what you got, go for it. Who cares, then, if he’s making money because he just saved you some! But if at all possible, have a good rate already pre-approved… you’re then in a win-win situation.

There are less after-market items to worry about in the used car market, but your car still might qualify for an extended warranty. Like with new cars, the more it covers, the more it costs. Of all the offered items, I swear by extended warranties, and if at all possible, opt for the most coverage for the longest time! However, beware… they are going to try to make a “hit” on you for that too. Different companies have different programs, but a “good” finance/business manager will try to add on to the rate… he’s not doing his job if he doesn’t; and you’re not doing yours if you don’t know that!

Hopefully these 5 tips will help you save money on your next used car purchase.

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