New Car Buying Tips

[Stan Calow]

Thanks for the responses, good information. I don't have a trade in and won't be getting a loan. I'll be paying cash so that makes it easier to get out the door prices.

Do people find this strategy to be true? My understanding (and one experience a few years ago) was that because the dealers/carmakers make money on the loans, they may make a better deal to get you to sign a loan whether you need it or not. My one experience was getting down to the final negotiations on a new truck, and the sales manager said he could meet my offer only if I agreed to a loan (I was offering cash). He said that I could pay off the loan after a couple of payments and we'd all be happy.

[Jim Becker]

Stan, I think that Andrew was referring to be able to get "a price" simpler because of not having a trade or involving financing. There's only one number to negotiate. Yes, some dealers work really hard to get a commission on financing, although they get less incentive with manufacturer backed financing that is very prevalent today. There's no harm in taking advantage of low rate financing if available if that gets you a better out the door price on the vehicle and then paying it off and manufacturers are starting to get back to low rate finance offers. That lets one consider keeping their cash earning money if the rate of return is higher than the financing. Of course, that scenario also requires a buyer with stellar credit scores...many folks are getting hit with new car financing rates in the 6-8% range because of credit scores.

Now real world, I essentially paid "cash" for the MY23 Subaru Ascent Touring I'm now driving, but that was because I sold a vehicle to a friend since Professor Dr. SWMBO is no longer driving and had a good trade offer for the MY19 Ascent Touring. I still got dealer invoice pricing which at my dealer is normal for repeat customers. The MY19 was partially financed, but at a very low rate and I paid it off in three years. That was more advantageous than pulling money out of investments that were earing far more than the loan interest rate.

[Andrew Joiner]

Looks like the base model Mitsubishi Outlander ES is a really good value for what we need. I'll send out the mass emails to the dealer soon inviting them to compete on a price.
The factory 5 year warranty is included. Surprisingly consumer reports predicts the reliability to be as high or higher than some of the more expensive three row competitors.

[Jim Becker]

If you are opting for a midsize three row SUV because you need the seating, before you plunk down your money, sit in the third row. Really. Many folks don't realize how "compact" that area is in many vehicles, including some of the most popular names. If you want the extra space for cargo (which was my motivator in 2019 in going to a three row) then the seat size "back there" doesn't matter as much. Also check the safety ratings.

[Doug Garson]

I don't have a trade in and won't be getting a loan. I'll be paying cash so that makes it easier to get out the door prices.

In my research on car buying, I have been told by experts to never say up front that you will be paying cash. As someone else said, dealers make a big part of their income from financing. Don't lie, tell them you want to negotiate the best out the door price before discussing financing or trade ins. Once you have an out the door price that's acceptable then let them make their best financing offer, then you can decide if cash is your best option. Last car we bought, albeit 5 years ago, came with two years zero interest financing.

[Dave Anderson NH]

I just bought a new Subaru Outback 2 weeks ago. I opted to take the 1.9% factory financing because my credit union is paying me 4% on my high yield account deposits. My last Outback had 0% financing in 2017. I always prefer to use someone elses money.

[Jim Becker]

In my research on car buying, I have been told by experts to never say up front that you will be paying cash. As someone else said, dealers make a big part of their income from financing. Don't lie, tell them you want to negotiate the best out the door price before discussing financing or trade ins. Once you have an out the door price that's acceptable then let them make their best financing offer, then you can decide if cash is your best option. Last car we bought, albeit 5 years ago, came with two years zero interest financing.

Yes, that's sound advice. Price first. How to pay for it last.

[Bill Howatt]

Got the 2017 Grand Caravan at 0% for a whole 7 years! Don't think that is happening now with the higher rates. Paid off this coming May.

[Jim Becker]

Bill, low rate subsidized financing is making its way back at this point, even though market rates are much higher. With the average new vehicle cost in the US being about $49K and given that's an average, a lot of the sales are higher, finance rates can be meaningful marketing tools once again now that supply issues have moderated.

[Bill Howatt]

Jim, I can see the reduced rate being an incentive for sure but it won't be a beautiful 0%.
When I was setting up the purchase the way things were presented to me were always based on the monthly payment amount. I had to keep telling the sales people that I didn't care about the monthly payment, I wanted to know the total price. But I guess for a lot, perhaps most, buyers being able to afford the monthly payment is the principal concern for their budget.

[Jim Becker]

That's true, 0% subsidized rates are going to be very rare unless market interest rates drop down into the gutter again, which is unlikely. Dealers talking about monthly payments is a sales technique that removes the actual price being paid for the vehicle from the conversation...sometimes masking higher prices and expensive but extremely profitable dealer add-ons. The same is true for folks who lease...don't discuss payments. Don't do a down payment. You negotiate the price of the vehicle that the dealer is willing to sell it for (for leasing, they are actually selling it to the leasing company) as well as what the residual will be before the topic of monthly cost comes up. You want the lowest price and the highest residual value. Knowing the money factor (effective interest rate) is also important.

[Myles Moran]

If you're looking at a Hyundai/Kia, I'd make sure you get a quote from insurance using a VIN you'd be interested in buying. Even if it's not affected by the theft issues, some insurance carriers are treating them all the same and you might find it not as good of a deal with insurance costs factored in.

And on the financing side, as long as you keep the loan for 90 days, the dealer gets the incentives from the bank. I haven't seen one that has a pre-payment penalty, but that doesn't mean those don't exist. If you're interested in cash, I'd at least ask if there is a difference in price for cash vs financing. Worst case they tell you the price is the same.

[Brian Elfert]

Sometimes there is a rebate for financing with the manufacturer's financing arm. I didn't have cash to pay for my current vehicle, but I took the more expensive factory financing and then refinanced in a couple of months with my credit union. There is a trick dealers use if they line up financing with a lender that isn't associated with the manufacturer. The dealer will offer the financing at a higher interest rate than the lender's interest rate. The lender then gives the dealer a commission on the increased interest rate.

[Jim Becker]

f you're interested in cash, I'd at least ask if there is a difference in price for cash vs financing. Worst case they tell you the price is the same.

Never discuss how the vehicle will be paid for until a final price is agreed upon. If you ask that question, you are giving the dealer an opportunity to direct the negotiation rather than it being you.

[Andrew Joiner]

Yes, that's sound advice. Price first. How to pay for it last.

Great tip!
Thanks everyone for your all your input on this.