Car Buying Strategy (Paying Cash)

[Bob Moyer]

A guy at mey church found out I was in the market for a used truck; he worked for a number of years at a dealership and told me to do the following. Investigate the trade-in, auction and resale value of my trade; find the truck I want; find out the wholesale cost, trade-in, and asking price of the truck I want. Calculate the difference in the values, find the best deal from other dealers. When you know or believe you have the deal you want; go to the dealer who is selling the truck you want. After the preliminary BS; and you enter the serious stages of buying and when it appears they are not going to get to where you want them to be, write out a check for the amount you are willing to pay. Example, if they are at $14,650 and you only want to pay $18k including tax, transfer etc. Write out the check for $14k and watch the show.

It worked for me!

[Joe Pelonio]

That's a great idea, saving a lot of time.

I have not done it exactly that way, but it was close. I had refinanced and kept $22k for a new vehicle for my wife, and she wanted a Jeep Liberty, the one she wanted was $32k. After the test drive and dickering over the price and my trade in they wanted me to do a credit ap. I told them that I was writing a check and had that amount, no more to spend, and was not willing to make any payments on it. When he came back and was 4k over my offer I turned to walk out, in fact that happened twice more until they finally agreed to it. Took 4.5 hours.

Unfortunately I didn't do it this last time on my truck. I did get a good deal but have a big payment every month.

[Jeff Yates]

Research is key...

I did the research on the vehicles I was really interested in and went looking, when I found the first one I wanted I told the salesman he had one chance to make the deal or I was leaving, I gave him the price I was willing to pay, TT&L, out the door cash transaction. I had an inside line, I knew what they had actually paid, and was willing to allow them to make SOME money off me, but not a reaming. They were making $1500 over what THEY ACTUALLY PAID.

He went to his manager and came back with an offer about 4 grand over what I had told him. I looked at my GF and stood up, went to walk out the door. His manager came running over to ask me what the problem was. I explained why I was leaving. His response wasn't to sit down, but it was they 'Won't do business that way'. I shrugged and went on my merry way.

It wasn't until I was in the car the phrase he used clicked. Not that I was breaking the bank, but that they refused to be dictated to on what you will and won't pay.

I finally found the vehicle I wanted, in Oklahoma of all places. I called, made the deal over the phone on Tuesday, left a credit card deposit, flew out Friday morning made the deal and drove home.

All in all my time at the dealership was under 1 hour. Signed the paperwork (after reading it), gave them the certified check...and I was on my way.

There is no other way to purchase a car.

Find the right dealership, you don't have to give up your day to do it.

[Rob Bodenschatz]

Isn't anyone going to ask Jeff how much he paid in airfare?

[Jeff Yates]

Isn't anyone going to ask Jeff how much he paid in airfare?

Laugh...I paid $90 to fly from Houston to OK City...

The salesmen picked me up a the airport, and I spent less than an hour at the airport getting through security and waiting...

Plus I got to drive a little north and visit my Great Aunt in Bartlesville...and give her a ride in my MINI...that was priceless..

[Ken Fitzgerald]

Buying vehicles....and buying houses.......two of the biggest purchases you'll make in your lifetime and yet two of the biggest circuses.


I have little patience for the normal buying procedures. I always research what I want, what it cost the dealership to put it on the lot and what I'm willing to pay for it.

I once walked into a dealer. The owner waited on me. I told him "I only want to hear one figure. If it's too far out of line, I'm on my way to Spokane to another dealer and I"ll stop in Moscow enroute." He said "Okay." I placed my checkbook on the table, opened it to the balance page and told him to call the bank and verify the balance. He said I wouldn't bounce a check that large and he believed me. I told him what I wanted and he immediately said "Well....we start at $13,500 and add options" I closed my checkbook and told my wife "Let's go!"......The dealer asked what was wrong and I told him I said one figure....and he was already too high.

I bought that full sized SUV with all the options I wanted for $13,144 in Moscow, ID 30 miles away......

[David G Baker]

Another way to save money, the further away the dealership is from a major metropolitan area the less you will have to pay for the vehicle in many cases.

[Joe Pelonio]

I bought that full sized SUV with all the options I wanted for $13,144 in Moscow, ID 30 miles away......
Ken, you didn't go to "that dealer" in Kellog that advertises that he will pay the airfare from Seattle if you buy from him?

[Michael Lutz]

I needed to get an economical car, that I was going to put a lot of miles on. So I went searching around for honda civics and toyota corrollas. I was buying used at the time. After checking out the recent used vehicles at the Honda and Toyota dealers, they were unwilling to move off their price, so I walked. At the Chevy dealer, we found a used Honda Civic sitting on their lot. My wife and I set a price that we were willing to pay for the vehicle. We held our ground through several iterations until they finally agreed to sell us the car for our price. It was a cash transaction.

If buying used, look for a car on a lot that is a different brand from the new vehicles the dealer is selling.

Mike

[mark page]

After 20+ years in the auto business, although service not sales, I can state this. Little is made on NEW car markup's. Money made from this sale comes from manufacturer volume kickbacks, dealer holdbacks, and "the backend" sales. More on that later. USED cars are where the money on the "front end" is made. Most used cars are trade-ins or auction cars. They are bought or traded in at a very lower value than retail, then resold at a retail value. The "numbers game" on the dealership side can vary greatly and can be very complicated procedure on paperwork. Everyone works on commission so the numbers are juggled, adjusted, and compromised to make the biggest gross profit on paper that they can so they can get the largest paycheck possible from the situation. So basically in a nutshell, NEW cars little profit on sales, USED cars larger markup and larger profit on sales.
Now heres the kicker. No dealership likes a CASH DEAL, and here's why: THE BACKEND PROFIT. When you go see the F&I dept. (finance and insurance). This is where the bank loans and extended warranties come into play. The dealers will get a kickback percentage of the loan interest amount in points from the bank. The bank will approve the loan on a discounted certain percentage amount (depending on the individual buyers credit rating, down payment, etc) and the dealer will mark the percentage amount up by an amount and your bank note is written for the final percentage amount. (Hint, the average person does not look at the final numbers, only the monthly payment. If they can afford the monthly payment, then car sold). Then if loan is not defaulted the interest markup is returned to the dealership. (Now this is a very little markup in interest, but figure on volume business a month and this is a lot of money to the dealership coming back on financing). Then the extended warranties also have a markup and gross profit the dealership is making. Now a day's most dealers have their "in house" extended warranties, and they make even more money from them. (Too long to try to explain the process).
So to make a long explanation short, sometimes it's best to haggle to the best price possible and go through the finance situation, get a loan approved, drive away in your car,THEN PAY THE LOAN OFF IMMEDIATELY WITH NO INTEREST ACCRUED AT THE BANK two weeks later. The dealer will cut a better deal up front knowing that some more money will be made on the back end, plus taking the chance that the F&I dept will sell and extended warranty.
Just my .02 cents worth of knowledge on the subject.

[Per Swenson]

Ya gotta try real cash if ya wanna have some fun:eek:

Ju know, jes like a mang from Bogata.:cool:

Real Filthy Lucre.:D


P

[Dave Lehnert]

It has been my experience that dealers don’t like cash. They make money off the financing and extended warranty’s. I went with someone once to buy an inexpensive Isuzu truck. We made them believe we were going to finance it to the hilt and was interested in the extended warranty. When we got a rock bottom price he said he changed his mind and was going to pay cash. (And no extended warranty) They got very upset and 3 other managers came in and told us how we would be much better off to make payments etc….

[Bob Moyer]

After 20+ years in the auto business, although service not sales, I can state this. Little is made on NEW car markup's. Money made from this sale comes from manufacturer volume kickbacks, dealer holdbacks, and "the backend" sales. More on that later. USED cars are where the money on the "front end" is made. Most used cars are trade-ins or auction cars. They are bought or traded in at a very lower value than retail, then resold at a retail value. The "numbers game" on the dealership side can vary greatly and can be very complicated procedure on paperwork. Everyone works on commission so the numbers are juggled, adjusted, and compromised to make the biggest gross profit on paper that they can so they can get the largest paycheck possible from the situation. So basically in a nutshell, NEW cars little profit on sales, USED cars larger markup and larger profit on sales.
Now heres the kicker. No dealership likes a CASH DEAL, and here's why: THE BACKEND PROFIT. When you go see the F&I dept. (finance and insurance). This is where the bank loans and extended warranties come into play. The dealers will get a kickback percentage of the loan interest amount in points from the bank. The bank will approve the loan on a discounted certain percentage amount (depending on the individual buyers credit rating, down payment, etc) and the dealer will mark the percentage amount up by an amount and your bank note is written for the final percentage amount. (Hint, the average person does not look at the final numbers, only the monthly payment. If they can afford the monthly payment, then car sold). Then if loan is not defaulted the interest markup is returned to the dealership. (Now this is a very little markup in interest, but figure on volume business a month and this is a lot of money to the dealership coming back on financing). Then the extended warranties also have a markup and gross profit the dealership is making. Now a day's most dealers have their "in house" extended warranties, and they make even more money from them. (Too long to try to explain the process).
So to make a long explanation short, sometimes it's best to haggle to the best price possible and go through the finance situation, get a loan approved, drive away in your car,THEN PAY THE LOAN OFF IMMEDIATELY WITH NO INTEREST ACCRUED AT THE BANK two weeks later. The dealer will cut a better deal up front knowing that some more money will be made on the back end, plus taking the chance that the F&I dept will sell and extended warranty.
Just my .02 cents worth of knowledge on the subject.

Mark,

I do not want to offend, but, I am well aware that at least one new/used car dealership in my area, makes a higher profit margin on service than they do on sales. A guy in our men's group at church did a testimony on the guilt he had in how they manipulated customers. I am not saying that they all do it, I went to this dealership for service because I liked the guy at my church; after the service manager quoted a price of $2,500 to replace catlytic converters on my Tacoma pickup, my friend told me that they were ripping me off and told me another dealership who did it for $1,200.00.

[Dusty Fuller]

Because it feels good to walk out and never have to send in another check. My wife and I haven't used our credit cards in four months (we've been married that long) except to pay for emergency airline tickets to Buffalo. That was only because my check card doesn't withdraw from our emergency fund (which I am proud to say is back to $1,000). I haven't bought any tools in about a year and a half, but I'm ok with that. I no longer have a bill for my Lasik and her car is almost paid off. No gloating, just happiness about actually getting somewhere financially.

[Dennis Peacock]

Because it feels good to walk out and never have to send in another check. My wife and I haven't used our credit cards in four months (we've been married that long) except to pay for emergency airline tickets to Buffalo. That was only because my check card doesn't withdraw from our emergency fund (which I am proud to say is back to $1,000). I haven't bought any tools in about a year and a half, but I'm ok with that. I no longer have a bill for my Lasik and her car is almost paid off. No gloating, just happiness about actually getting somewhere financially.

Sounds like a "Dave Ramsey" deal to me. :D
We've been trying to get there for about a year now and due to family medical stuff, we have all but exhausted everything we have. Keep going Dusty.!!!! I'm proud of ya man.... :)

[Jeffrey Fusaro]

knowing what the vehicle is worth is key...

i wanted to buy a brand new "left over" motorcycle from my local dealer. this bike had been sitting on the lot for three years (it was kind of an odd duck - you either loved the bike, or you hated it. i loved it). it got to be rather neglected and a bit battered from moving it around and shipping it back and forth between their two stores in an affort to sell the thing.

i finally saved up enough money to consider making an offer. i knew that this bike was worth $3800 - used and in excellent condition. this bike was never titled, but it was slightly tattered, as i mentioned.

i went to the parts counter and had the sales guy print out the list and cost of all the parts that needed to be replaced. it came to about $1200 - a few large expensive plastic parts were the bulk of the cost. i wasn't going to replace them all, but i wanted some ammo for my argument.

i went over to the salesman. i showed him the list of parts and offered him $2200 - cash. he looked at me like i had rocks in my head. i explained my reasoning.

he went into the office and called "mr. b." to discuss the deal. it was saturday afternoon - right before closing time.

a few minutes later he came back and said "mr. b." has to sell that bike for $3800.

i knew that number by heart and i told him why he was off base.

i reached into my pocket and handed him 25 $100 bills and said "that's for everything - bike, tax, title and licensing. that's my final offer. go call mr. b. again."

he shrugged his shoulders and walked away.

a few mintues later he returned.

i said, "well? what did mr. b. say?"

he said, "you really don't want to know. he's really mad. but, he said to go ahead and make the deal."

ten years later, she's still mine...

[Art Mulder]

At the Chevy dealer, we found a used Honda Civic sitting on their lot. My wife and I set a price that we were willing to pay for the vehicle. We held our ground through several iterations until they finally agreed to sell us the car for our price. It was a cash transaction.

If buying used, look for a car on a lot that is a different brand from the new vehicles the dealer is selling.

Mike,
How long have you had that Civic? are you happy with it?

I'm wondering, because your advice is the exact opposite of what I have been advised.

The reasoning is like this: If someone trades in their Honda to a Chevy dealer, then odds are they were unhappy with it and are jumping ship to a different company. Those cars are more likely to be the ones with problems - maybe even lemons. People who are happy with their toyota, trade it to a toyota dealer. Ditto for Hondas, GM, Ford, etc. So I have been advised to NOT look at used cars that are at the "other manufacturers" dealer.

[Rich Engelhardt]

Hello,
After working at a car dealer for a little over a year - I agree 100% with
what Mark Page posted.

Art,
Used cars can come from several sources.
Often dealers will go to other lots and purchase vehicles from them.

When I worked for "the Bow Tie" dealership, I used to ride around with the used car manager as a "driver".
We'd shop several of the local lots for cars/trucks that fit the "personality" of the dealership we worked at.
He'd find one, negotiate a price for it and write a check,,,I'd toss a dealer plate on it and drive it back.

Auctions are another source. Every week the Automobile Dealers Association of most larger markets hold a dealers only auction. When we were "heavy" on some models or the dealer had picked up something from out of state, they'd go to the auction to see what they fetched.

Civics and Accords are "bread and butter" vehicles in some markets,,,"dogs" in others.
At the dealership I worked at, Jeeps were extremely poor movers. If we were unfortunate enough to get one in on a trade, no matter what the condition or what we "owned" it for, it got shipped out immediatly.

Also - and extremely oddly - El Camino's (used) were absolutly horrible "dogs" - even though it was a Chevy dealer.
Rancheros on the other hand , were extremely "hot" movers.
Go figure!

[mark page]

Mark,

I do not want to offend, but, I am well aware that at least one new/used car dealership in my area, makes a higher profit margin on service than they do on sales. A guy in our men's group at church did a testimony on the guilt he had in how they manipulated customers. I am not saying that they all do it, I went to this dealership for service because I liked the guy at my church; after the service manager quoted a price of $2,500 to replace catlytic converters on my Tacoma pickup, my friend told me that they were ripping me off and told me another dealership who did it for $1,200.00.

Well now the "service department" is my forte. The most money made in the dealership is from parts & service. The original theme for this thread is sales, so I didn't expand to include parts & service. This is a whole nuther topic. I tried to keep the theme topic to sales and not service. But you are right, the most money made is from return's in parts & service.

[Michael Lutz]

Art,

We have had the Civic for just over 4 years. I put almost 100,000 miles on it in that time. Have only had to replace a few items, front wheel bearings, tires, battery, and front brakes. Our local Honda dealer is not known for dealing with their new cars, and when we approached the salesman with our offer for one their used cars he didn't want to even take the number back to his manager. He finally did, but their counter offer was the same as the list on the used car, so we walked. The Chevy dealer came down about 3K, to meet our price. It could have just been a difference between the dealers and their willingness to deal.

Well when we bought our Toyota 4-runner, we were ecstatic to get rid of our VW Jetta, which had been nothing but trouble for the time we owned it. The Toyota dealer put it up for auction. I can see your point about being dissatisfied with a car and switching to different brand. We didn't even consider shopping for a VW.

Mike

[Rich Konopka]

Buying vehicles....and buying houses.......two of the biggest purchases you'll make in your lifetime and yet two of the biggest circuses.

You forgot one Ken. --- College Tuition. 4 years at 40-50K a year for a good school. 20K/year for state schools.

[Mike Henderson]

Because it feels good to walk out and never have to send in another check. My wife and I haven't used our credit cards in four months (we've been married that long) except to pay for emergency airline tickets to Buffalo. That was only because my check card doesn't withdraw from our emergency fund (which I am proud to say is back to $1,000). I haven't bought any tools in about a year and a half, but I'm ok with that. I no longer have a bill for my Lasik and her car is almost paid off. No gloating, just happiness about actually getting somewhere financially.
Congratulations on your financial success to date. One comment regarding credit cards - sometimes it's better to use a credit card than a debit card: (1) debit cards often incur a transaction charge of $1 to $1.50 - a charge just for using it. There's never a transaction charge on a credit card, (2) you have more protection with a credit card. By law, your liability for any unauthorized charges on the card is $50 - and if they steal the number and not the card, your liability is zero. With a debit card, there is no limit to your liability for unauthorized use.

If you facilitate the "unauthorized" use, all bets are off and you're fully liable.

You just need to have the discipline to only charge what you can pay off each month - never carry a balance on a credit card.

Mike

[Don Taylor]

Very helpful thread! Thanks Bob!

I have been seriously considering parking that big butted Tundra of mine in the garage and paying cash for a Gad-About.
I was thinking about the Mazda MX-5 Miata. I am pretty stubborn when it comes to auto dealerships.
I'll pit two or three of them against each other and watch the smoke. ;)
If I don't get my price, I just go home.

I made a great deal with the four door Tundra. I paid $21+ for it 14 months ago and it's worth $28+ today. It took me two weeks and a wait for them to shuttle it from Alabama to Florida and like to wore me out. I can almost assure you that if I were to go back to any of those three they would hang a closed sign in the window! :rolleyes:

DT

[Jim Mattheiss]

I've taken the no holds barred approach to car buying several times. It helps that the LOML deals with equipment salesmen at work 5 days a week. She runs an equipment and party rental business that ranges from tables and chairs to Bobcats and Kubota tractors.

I was looking to buy a VW Passat new from the dealer.

They had upped the trade in on our Explorer after we balked at the trade in offer (Oh the wholesaler called back - someone willing to offer $X more than we originally thought!).

We come to terms on the numbers. Everybody's smiling. LOML sees a 6 year old kid walk thru the showroom with a Radio controlled car transporter with 6 VW Bug cars in a retail display box.

She looks over at the salesman and say's - I'm not getting anything here. If you don't throw one of those trucks in the pot, were out of here. They got really nervous - they didn't want to have to rip it out of the kid's hands. The had another in stock - so we closed the deal.

I've had that VW 7 years and 123,000 miles. The last laugh was apparantly on me - that car has been a continuous stream of irritating problems and expensive to run. I'm going to continue running it into the ground.

Good Luck

Jim

[Dusty Fuller]

It is a Rasmey-ish plan. My wife and I figured it would be best to quit petering around with the minimum payments on everything. We pick one thing to pay a bunch on, and go for it until its done. It takes a while, but once you see that remaining balance at 0.00 you get more motivated. We're lucky because its just us and the dog, and since we live on a state park (I'm the assistant manager) we don't have a house payment. Its for that reason that we're not going full-Dave and have opened some investments before paying everything off. As long as a person has a plan and sticks to it, it usually works. It wasn't the amount of money we were making that had to change, it was how and where we spent it. Next up are our student loans :eek:.

Dusty

[Aaron Beaver]

Excuse my novice new car buying prowess here, but where does one find the amount the dealer pays for a car? Like someone said it's not that I don't want them to make money, just don't want to get taken either.

[Bob Moyer]

Excuse my novice new car buying prowess here, but where does one find the amount the dealer pays for a car? Like someone said it's not that I don't want them to make money, just don't want to get taken either.

http://www.kbb.com/
http://www.edmunds.com/advice/strategies/articles/45993/article.html
http://www.automotive.com/new-cars/pricing/
http://www.motortrend.com/new_cars/pricing/

[Don C Peterson]

My Dad used to tell me that "Everybody drives a used car." I am much more of the "Buy them used for cash and drive them 'til the wheels fall off" mindset. Three years ago I was tempted to buy a new truck with a 1.9% interest rate. Instead I bought a used car for what the downpayment would have been. I've been driving that car ever since. I've put new tires on and changed the oil but that's it.

A few months ago a lady rear-ended me. The car is still very drivable and her insurance wound up paying me nearly as much as I paid for the car in the first place. Since there's no way in the world I'm putting that money into the car, I have been driving a car for three years for free. All because I'm willing to drive the ugliest car on the block.

If I ever start to feel a little bad about my dumpy car, I just remember how great it feels to not have a car payment. I haven't had a car payment in 5 years and I love it.

[David G Baker]

Don,
Your car will never be stolen either.

[Rob Russell]

Don,
Your car will never be stolen either.

Actually, somewhat used Toyota Camrys have been on the top of the stolen list for a few years. They don't need to be brand-spankin' new to be a target.

[David G Baker]

Rob,
It so happens that I am the proud owner of a used Toyota Camry (bought it new). It is a 2000 model and has just over 100,000 miles on it. One of my better investments. I did finance it through Toyota and feel that I was not ripped off to badly.

[Jim Kountz]

Another way to save money, the further away the dealership is from a major metropolitan area the less you will have to pay for the vehicle in many cases.

Actually around here its the exact opposite. If Im willing to drive the less than two hours to the DC area I can save a load on a new car or truck. The podunk dealers around here kind of have the "we are it so you're stuck buying it from us" attitude.

[Rob Russell]

Rob,
It so happens that I am the proud owner of a used Toyota Camry (bought it new). It is a 2000 model and has just over 100,000 miles on it. One of my better investments. I did finance it through Toyota and feel that I was not ripped off to badly.

My brother and his famil have gone through 3 or 4 Camrys. About a year ago they replace the Camry with a Highlander Hybrid. They needed the extra room of the SUV but with the hybrid technology, it's as economical as the Camry was.

[Jim Becker]

My brother and his famil have gone through 3 or 4 Camrys. About a year ago they replace the Camry with a Highlander Hybrid. They needed the extra room of the SUV but with the hybrid technology, it's as economical as the Camry was.

I've been quite pleased with my Highlander Hybrid...28 mpg in a mid-sized SUV is quite nice and there is plenty of space for the family even for travel. Of course, when I bought it...there were no discounts... :(