Beat the Dealer: Buying a New Car Cheap

We’ve been talkin’ cars of late. I’ve explained how one can save money when buying a car. I’ve given my detailed strategy for those choosing to buy a new car. But the impetus for all this car talk was my recent purchase of a shiny new Subaru Impreza, and I’ve left the masses on the edge of their seats wondering, “How’d the transaction go? Did Paul outfox the crafty salesperson, or was he crushed like so many before him?”

Well wait no longer – today we’ll find out how I did, and it will conclude my efforts to milk my recent car purchase for posts.

I’ll mirror my post on buying a new car, so if you get lost you can refer back to that post. It’s pretty long, so you may get lost there too. At least it’ll be good for pageviews.

Step 1: Pick your make and model

This step was easy. I used the greatest guidelines for saving on a car purchase ever written, and it landed me at the Subaru Impreza.

You might be saying, “Um, isn’t that car more suited to someone who’s, like, young?” Yes. Yes it is.

The social protocol for a new car purchase is pretty well established. You note that someone has a new ride, and no matter what, you’ll say, “Wow! That’s really nice!”

So it’s been pretty funny as I’ve unveiled my Impreza to friends – they just look at it with a slightly confused face and have no comment at all 🙂 When your financial decisions make no sense to the average person but eminent sense to you, you have entered the happy world of the contrarian.

Step 2: Go for a Test Drive

This was also easy.

I went to a nearby dealership during the middle of the day on a Tuesday. It had the exact car I wanted in a color (“crimson red pearl”) that I would never buy, so I could use it as a stalking horse for my eventual purchase.

The salesperson intercepted me in the lot, and after some paperwork and happy banter, we were ready to go.

The test drive was fine and confirmed it had everything I ever dreamed for in a car (namely, it could drive on a road). I took a lot of pictures before and after, and I even handed her my phone during the drive so she could take some video. You always think you’re going to remember everything, and you’re always wrong.

After the test drive she begged me to meet her manager ‘cause I guess that’s important for salespeople. He seemed like a great guy and had a wonderful handshake, but they both realized I wasn’t buying today. I told them I’d be in touch within a year.

Step 3: Organize Financing

I organized financing by moving some money into my checking account. Done!

I know it’s easy to say “pay cash for your car”, but it may be very difficult for folks with tight budgets and light balance sheets. Setting that as a goal, though, is a great way to avoid overspending. If you’re not comfortable writing a check, you might be buying too much car.

Step 4: Organize Your Trade-In

As part of the deal I needed to unload my 2012 Mini Cooper Countryman.

First, I wanted an estimate of its value, so I searched for “Kelley Blue Book Value” (you can read how Kelley became the standard for U.S. used car values here).

KBB and Autobytel both popped up, and I used the latter to get the following estimates for my car:

It gave me the following:

• Trade-In Value $7,889 (Excellent)
• Trade-In Value $6,983 (Good)
• Private Party Value $9,212
• Suggested Retail Value $11,208

I’d taken good care of my car, so I was hoping it’d rate as “Excellent”.

Granted, these values were just informative – unless there was a huge discrepancy between these values and both my CarMax and dealer offers, I wouldn’t be doing anything with them.

Next was a visit to CarMax. I called ahead to confirm they weren’t busy, and 10 minutes after I arrived, I had an offer for $8,000. I love you CarMax. That offer was good for 7 days, so I could use it in my negotiations with dealers.

The data suggests that I was leaving some money on the table (~$1,200) by not selling the car to a private party. But you have to earn that $1,200. I had no desire to deal with a bunch of Craigslist psychopaths, and a bright red manual transmission Mini with bonnet stripes is an acquired taste – I might be selling for a while. If my trouble-prone Mini had any more problems before I unloaded it, I’d be much worse off . Sometimes in the battle of fear v. greed, let fear win.

Step 5: Spreadsheet Time

Saving money by buying a less popular model with a very unpopular feature (manual transmission) sounds awesome in theory.

However, as I started to build my inventory of potential purchases from local dealers, I discovered a problem: there were very few base model manual transmission Subaru Imprezas around DFW. And when I say, “around DFW”, I really mean, “in Texas”.

Then, the missus threw another wrench in the works: I wasn’t allowed to buy a white base model because it had black side mirrors and looked like a contractor’s car. Jeezsh. (To be fair, I came around to her line of thinking after she mentioned it – spouses can help with your blind spots.)

As it turned out, when I scanned a 100 mile radius of DFW for a base model manual transmission Subaru Impreza that was neither white nor a color I hated, there was one. In an homage to Henry Ford, I could have any color I liked as long as it was black 🙂

The dealer locations and cars that made it on to my spreadsheet (all manuals) were:

• Fort Worth – gray sport sedan / MSRP $23,850 / internet price $21,960
  This was just for giggles. The “sport” package added features I didn’t want, and there was no way it would be competitive with the base models. But since there were so few manuals available, I decided to include it. The cost of a phone call is rather low, after all.
• Tyler – black base hatchback / MSRP $20,309 / internet price $19,559 / invoice $19,313
  Like hell I’m driving to Tyler, Texas.
• McKinney – white base hatchback / MSRP $20,112 / internet price $17,998 / invoice $19,186
  This is the “contractor car” the missus banned. So much for my future career as a plumber or painter. But this is the perfect example of a car that can help lower another’s price.
• Grapevine – red base hatchback / MSRP $20,337 / internet price $18,700 / invoice $19,331
  My test drive vehicle. Crimson red pearl is not really my color, but the deal-killer is this is the same color as the missus’ Outback, which would just look weird.
• Denton – black base hatchback / MSRP $20,309 / internet price $19,213 / invoice $19,313
  Ah, Denton. We meet again. It seems you have the only viable manual transmission Impreza in all of Texas.

This is shaping up to be a bloodbath of a negotiation. There is literally only one car that will work for me.

The sport model is too expensive. I don’t want to drive to Tyler. I don’t want to look like a plumber or a painter. I don’t want a cutesy crimson red matching pair of Subarus with the missus. But here’s the key: none of the dealers know that. As long as I play my hand well, they will think they’re in vicious competition with each other, when we all know I’m heading to Denton.

Step 6: Set Your Expectations

You should definitely check more than one site to get a “fair market value” for your car.

I went to KBB, which I assume is deep in league with the industry now, and they said a Fair Purchase Price was $18,956 with a Fair Market Range of $18,506 – $19,405. That sounded pretty suspect because it was higher than anyone’s “internet” price which required no negotiation at all.

Car Gurus proved to be more aggressive. They gave me the following* for a base manual Impreza, including the destination charge I added on:

• fair price $18,936
• good price $18,065
• great price $17,567

* Each of the cars on my spreadsheet had slightly different options, but they all totaled less than $200. If you have a lot of options, you’ll need to enter the cars individually to get an accurate fair market price.

(N.B. I can’t go to Car Gurus and navigate to the price analysis page I used. I had to search on “fair market price subaru impreza” and select the Car Gurus landing page for that specific search.)

Step 7: Dialing for Dollars

This is a lengthy bit, but it’s good background if you\’re trying this yourself and have some initial troubles. Otherwise maybe skip ahead.

The order does matter when dialing for dollars. There’s always a risk if you keep going back to a salesperson that they get mad, think you’re playing them, or simply stick in their heels. So you want to practice and improve offers with the folks you don’t like, then very nicely ask your beloved to beat a bona fide, hard-fought price.

So…speaking of folks I don’t like. Hello, Tyler.

Now Tyler, Texas is a fine town. It’s just that it’s about 120 miles from where I live, so it’s not a viable option even to save a few bucks. But if I lived on the eastern edge of DFW, Tyler would be an option – perhaps I can convince the salesperson of that.

The call to Tyler, unfortunately, didn’t go well. The salesperson understood he’d need to give his “best price” over the phone, got all of the information on my Mini, and promised to call me back. When he called, he went to the normal script: they’re already losing money, there is no markup, etc. etc. So he could not budge at all from his internet price of $19,559. So much for my great negotiation skills.

However, there was good news! He said they had “the value” of my Mini at $9,000!!! $1,000 more than CarMax! Yeah!!! Because all I care about is the net, right?

We all see what he was doing, right? That $9,000 figure would disappear the moment I drove out there. Then I’d be stuck in Tyler, and they’d start squeezing me mercilessly. I admired his craft and cunning, but I wasn’t going to fall for that. Thanks buddy, but I’m treating the trade as a separate transaction. I told him how I was calling around and would go with whoever had the best price, so he should let me know if he could improve the pricing on the new. I sounded totally confident and strong like I had tons of options. He said, “OK!” and hung up.

Next was the sports model in Fort Worth. When he called me back, he also refused to move – the internet price of $21,960 was firm, and he didn’t seem interested in selling over the phone at all. This wasn’t going well.

Then to the white “contractor” car at $17,998 in McKinney. My troubles only got worse: when I did one last minute check online before calling, it was gone! Someone else in Texas had wanted a manual Impreza. My time-tested car buying strategy was falling apart.

I was getting concerned when I called Grapevine with the red car I didn’t like. My test drive salesperson was really excited to hear back from me so soon, and she got all of the information on the Mini and promised to call back.

When she did, I told her, “Hang on, let me find you on my spreadsheet” (see – you’re just one of many). She said the price was $18,700 (same as the online “internet price”) and then went through a painfully long build up of the out-the-door price. I laid out on her when she was done, and she finally asked “Are you still there?” I said, slightly incredulous, “So the $18,700 is your best price?” She explained that they had already done a massive discount from MSRP, so that was the lowest they could go. But if I came in they would try to “work with me…”

With my strategy in tatters, I tried to act super confident when I told her, “Just to be clear, I’m going to finish pricing on the phone and buy from whoever is lowest.” As I was about to hang up, that’s when the break occurred.

She said, “Where are you trying to be?” Haha – here we go. “As low as possible.”

“Are we in the running?” Said like it was the most obvious thing in the world, I told her, “No.”

“Where do we need to be?” Now it was time to play hard to get. “I don’t want to shop everyone against each other because then everyone will be mad at me. I just need everyone’s best price, so if you can improve the offer feel free to give me a call.”

Without missing a beat, she shocked me with, “What if I took off $600 to bring it down to $18,100?” I tried not to giggle at how fast she caved, and I just replied, “That’s close. It’s certainly more in play than it was 30 seconds ago. It may just depend on how much my wife doesn’t want to drive to McKinney or Denton.” I wanted to imply she wasn’t the best offer and other dealers were most definitely in play, but you’ll note I was fully compliant with my own counsel of, “Do not lie.” I got her full “out-the-door” price with fees then told her I had a few more calls to make first. She sounded really sad that she had opened herself up and I was still playing the field. Sorry, but that’s the point.

I finally had an offer that felt like a good deal, so it was time to call the girl I really wanted to take to the dance.

The Denton salesperson was clearly more experienced at handling phone call sales. I confirmed he was my first contact (he was clarifying credit for the sale) but I referenced the missus’ buy 5 years prior. That got him excited for an “owner loyalty coupon” which we didn’t have and clearly didn’t qualify for (it required trading in a Subaru or having taken an extended warranty), but he said he’d figure out a way to make it work. Car salespeople are resourceful.

After the niceties, he asked, “What do you need to know before you make an appointment with us?” I went to my script and told him that we were buying a car today and was happy to consider an offer from him, but there was no way we were driving to Denton (Denton! Are you kidding me?) unless he had the best price.

He asked about financing, and I laid my cards on the table – I could do whatever lowered the price. Because Subaru was offering a discounted 0.9% rate, they would lose money when they financed, so he had an additional $500 incentive if I didn’t finance through them. Now we’re talking! I told him to price it without his financing.

He wanted to find the car, confirm mileage, work his best price, and call me back.

While I waited, the Grapevine salesperson texted me with an improved offer for $18,000. That was great news, but I also felt kinda sad for her and her desperate ways.

Denton called back, and he tried the out-the-door price trickery, but after probing, his base price was a weirdly precise $18,246.67. He was quick to inform that he was only making $150 profit, so he must’ve thought me cheeky when I told him Grapevine was $18,000. He spluttered* there was no way it was a comparable MSRP car.

* when they splutter, it’s a good sign

Actually, it was – I told him the Grapevine MSRP was $20,337 versus his $20,309. I even listed out the features on each. It really pays to have a full breakdown of options and MSRP for each car when you make these “apples to apples” comparisons.

He then went into all of the B.S. fees that some of his competitors charge – his doc fee was only $150, while others charge $250 plus a lot of other stuff. I told him Grapevine was also $150 and that was the only “hat money” charge. (Spreadsheets are really important when buying a car over the phone.)

He said, “What if I do $17,900?” The slowing rate of improvements in their offers and his incredulity at the Grapevine price told me I was getting close to a good deal. So I told him, “If you do $17,900 and the only hat money is the $150 doc fee, you have a deal.”

I thought we were done, but he got cold feet and said he needed to check with his Director to confirm the price because he would be losing money. Director? Who is that? I’ve just heard “boss” or “manager” before. I was in uncharted territory.

To help with the “Director”, I told him that he would have a crack at my trade (he oddly hadn’t asked yet) and told him he needed to be quick because we’d be heading out shortly, hopefully to Denton.

In just a few minutes he called back with the Director’s blessing, and we had a deal. I texted my friend in Grapevine and told her the bad news – thanked her, promised to use her for our next purchase, etc. There was no value in leaving her hanging, and why not be nice?

Reducing Denton’s “internet price” price by ~$1,200 may seem modest, but it was a material improvement on an inexpensive car and took me from above Car Gurus’ “fair price” to almost “great price” territory. The same tactics should work on a much more expensive car and could save someone thousands.

I negotiated from the comfort of home with very little stress. Things never got contentious because I was mostly in a passive, reporting role and the salespeople were fighting each other. I have to admit that I actually enjoyed it, and when do you get to say that about a car purchase?

Step 8: Confirm Pricing

Before I hung up with Denton, I confirmed that my build of the price from the $17,900 to the out-the-door matched his to the penny. He was happy to hear I was paying cash.

Step 9: Prepare for the Purchase

I called my insurance company to confirm I’d be fully covered at purchase, especially as my Mini no longer had collision coverage.

The 12 y.o. who answered said, “I’m pretty sure it’ll be fine.” Kids nowadays! I told her to find out because this was kinda important. I also asked her to figure out if both my old and new cars would be covered today, because I wasn’t sure if I’d be trading or selling to CarMax.

She found someone competent and confirmed I’d have coverage on both (including collision on the new) for today, but I’d need to call to sort things out once the dust settled. Your insurance company may differ, so this is an important detail to confirm.

I emptied everything out, and the missus took a final picture of me with the Mini. I wasn’t really feeling it, though. Our relationship had been souring for a long time.

Step 10: Go to the Dealership

The only real uncertainties when I went to the dealer were my trade-in offer and the quality of their coffee.

I’m happy to report their coffee was fantastic. They had to brew a new pot before I was through, but that’s the cost of doing business with Paul.

The trade-in offer, not so much.

Turns out my counterpart was the manager of the entire sales team. That further confirmed my theory that phone / internet sales are often routed differently than someone who just wanders in.

He took my Mini to prepare their offer, and we went for a test drive of the Impreza (not to confirm I liked it, just to confirm it worked). The salesperson was a good guy, and he enjoyed talking cars with the Subaru-loving missus.

On our return, the trade-in offer was ready. He smiled softly and slid it across to me, and I tried not to burst out laughing. It was for $5,500, $2,500 less than the offer from CarMax.

I’ve never had any success getting better economics than CarMax, so I just told him no thanks – we’d be selling to CarMax. He asked if I had the offer, so I pulled it out and showed him.

Because local rules allow you to net a trade-in against your purchase and thereby save the car sales tax of 6.25%, the dealership could offer you less and still make you whole. He told me that, and I said I knew, so if they gave me $7,600 we had a deal (I rounded up 8,000 / 1.0625, hoping their arithmetic was rusty). He scurried off to check with whoever, and 30 seconds later he agreed. Time for a celebratory cup of coffee! (Always always always get a back-up offer for your trade!)

After all of the paperwork was done, I went ahead and called my insurance company to cancel the Mini and properly add the Impreza with collision coverage. I’d have to do that anyway, and there was a chance greater than zero that I’d have an accident on the way home. Driving with temporary plates always makes you feel like a target for other drivers,but thankfully we made it home without incident.

Even with my streamlined process, we spent over an hour at the dealer. From start to finish, buying my new car took over half a day. But most of the time was on and between phone calls, and it was done from the comfort of home. It certainly beat playing the waiting game trapped at a dealership, and it shows you can buy a new car at a great price with very little stress.

Buying Cars Doesn’t Have to be Unpleasant

While the industry has designed a purchase process that maximizes their advantages and leaves you angry and frustrated, you need not play by their rules. By changing the way you buy and minimizing time at the dealer, you can swing the negotiation to your favor and make it far more pleasant. Some might even call it fun 🙂

What is your best or worst car-buying experience? Have you ever broken away from the traditional model for buying? Let me know in the comments.