Purchasing a Car: What’s the Best Price I Can Get on a Car? (guest post from Frugal Dad)

by Kristen on January 8, 2012 · 19 comments

in Guest Posts

This post was written by Frugal Dad.


(Picture added by Kristen. I thought I’d add a Beetle here, since 3/4 of my children have said they’re going to buy one when the time comes!)

For most people, buying a car is the second-largest purchase they will make in their lives, surpassed only by purchasing a home. When making such a major expenditure of your hard-earned money, it’s important to shop around and make sure you get the most “mileage” out of your dollar. Whether you’re looking for something brand new or a car that’s seen a few owners already, following some simple guidelines can help you make this important purchase a little easier on you and your wallet.

Step One:

A must before heading out to the dealership or meeting with potential sellers is determining what you’re looking for and what your budget is. Having a clear idea of what you are realistically able and willing to spend on a car is essential to getting a good deal; if you haven’t considered your budget beforehand, it’s easy to get caught up in the excitement of shopping and pay more than you really want.

Price-conscious car shopping almost always means visiting more than one dealership or seller; be prepared to spend some time shopping around for the best deals! Be open to looking at cars similar to the specific one you’ve got in mind, too; even if you’ve got a dream car picked out, you may find a better price on one with similar features, design, and quality. Likewise, if you’re looking for a brand new car, also consider cars that are a year or two old. The price difference between a new and almost-new car can be huge, saving you thousands while you still reap the benefits of a low-mileage car in excellent condition. Don’t miss out on a good deal by being too picky.

Step Two:

Once you’ve determined your budget, you can start looking at cars from a number of different vendors, the most popular being dealerships and private individuals. If you plan to buy a brand new car, a dealership is your main option; if you’re shopping used, you have a little more flexibility when choosing where to buy.

One benefit to shopping at a dealership for a used car is that most dealerships offer “certified” used cars that have undergone mechanic inspections and are covered under a warranty. Warranties can save buyers significant expense down the road should the car encounter any problems. When shopping at a dealership, you may feel pressured by salespeople to make a decision and purchase quickly. Take your time; look around, go on test drives, and ask plenty of questions.

Buying from private parties is a bit riskier since few individuals will be likely to offer warranties for their cars. On the other hand, car shoppers can save serious cash buying from individuals who don’t need to up their price for the purpose of getting a good commission. Individuals also tend to have lower prices than dealerships because they are often as anxious to sell their car as you are to buy it. Again, don’t be shy about asking questions and taking test-drives in the vehicle; you’re about to spend thousands of dollars on this purchase, so you can and should take your time.

If you’re looking for a really good deal and are willing to take on bigger risk, you can also shop for cars with salvage titles. These cars have suffered a major accident or theft, and have been restored by repair and body shops. Given their troubled pasts, these cars can be problematic; if the repair work was done sloppily, the new owner will suffer the consequences. However, some salvage cars are carefully reconstructed and looked after, giving buyers a fully-functional used car at a fraction of the usual asking price. Even savvy car buyers can get a lemon when salvage title shopping, so pursue this option with caution.

Step Three:

Once you’ve found a car you feel good about buying, don’t start handing over your cash just yet; you’ve still got a couple money-saving steps to go. If buying a car from a private party or one with a salvage title, always take the vehicle to be inspected by an independent mechanic. Spending $50-$100 making sure a car is in good working order before you buy is worth the investment to be sure your buying price won’t go up a few thousand dollars in major repairs weeks later.

Finally, be willing to negotiate. When it comes time to buy, see if you can get your seller to knock off a portion of the price and give you a better deal. Negotiation is standard practice when buying from a dealership, and you’ll find many individual sellers willing to entertain reasonable offers as well.

By practicing self-control and keeping and your options open, you can hit the road in your new car, confident you’ve gotten the best deal possible.

Do you have any car-buying tips to share with us?

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{ 19 comments… read them below or add one }

1 Renee@FeedingOurLives.com January 8, 2012 at 8:38 am

If you’re uncomfortable negotiating, certain institutions, such as USAA, offer negotiating services for free. For example, we decided which car we wanted, went to USAA’s car buying website, found it listed on their website from a dealer that works with USAA, clicked on the car, was contacted by the dealership to set up a test drive, test drove it, and walked out with the cheapest price possible since USAA had already handled the pricing. While this almost sounds too good to be true, the car ended up being about $1000 less than what other dealerships were offering it at!

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2 Michele January 8, 2012 at 8:49 am

What also needs to be considered is the cost of the insurance of the vehicle that you are interested in. That should be checked into before purchasing a vehicle.

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3 Battra92 January 8, 2012 at 9:39 am

I agree and in Massachusetts, the Excise tax for the first few years should also be considered.

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4 Meghan January 8, 2012 at 10:12 am

A tip if you’re buying from a private party is to thoroughly inspect the floor board. I purchased a used car about a year ago and I had a mechanic make sure that it was in working order and looked at the Carfax. The car had been garage kept for most of its life, so it was not until we had a good rain that I discovered the car had a nasty leak somewhere towards the bottom. After seeing the puddles, I noticed that every piece of metal on the floor board was rusted! The seller (2nd owner) of the car probably never even knew about the leak.

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5 Alice January 8, 2012 at 11:22 am

Cute bug! Absolutely agree about insurance – one of the (many) reasons we’ve avoided a car loan is that we save a TON on insurance (we don’t get things like collision and theft, which the loan companies require).

If you absolutely *have* to get a car loan, be sure to set it up in advance, rather than through the dealership. Sometimes their ‘financing offers’ are actually good deals, but that’s a rarity.

Bring a friend/spouse/wingman. I’m a rather conflict-avoidant person, and so am much less likely to question the slew of tacked-on fees when on my own.

Especially if you’re looking at a more ‘popular’ model of car, look at dealerships that are a bit farther from you – when we were buying a Prius, the dealership in Berkeley wouldn’t even return our calls, since they were so far above the quota that they were required to sell – they were focusing all of their sales efforts on their SUVs. :/ Santa Rosa was a much better fit.

Lastly, know how you make decisions – I like to mull things over, so getting as much information as I can ahead of time, then sitting down and thinking about it WITHOUT a salesperson hovering was the best way. Slower, but since I’d budgeted in time for it, it made it far easier to get what I wanted without price inflation.

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6 EngineerMom January 8, 2012 at 2:31 pm

I would also add to never tell the seller your reasons for buying a new car. Our current car we bought because we had wrecked our previous car (snowy highway in Indianapolis plus no ABS). We were under a time constraint because the insurance company only covers a rental for so many days after telling us they considered it totaled. However, we did NOT tell the dealership that!

Our credit union gave us a better loan deal than the dealership could match.

Also keep in mind that you can walk away. That’s your leverage in negotiating price – you can just leave, there’s no one holding a gun to your head to buy the car. If the price isn’t acceptable, walk out the door.

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7 Michelle January 8, 2012 at 2:57 pm

I agree that car insurance should be thought of also.

My insurance is super cheap for full coverage on a 2008 car (around $60 a month), and I don’t know how some people spend $200 or $300 a month on that!

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8 judy January 8, 2012 at 3:19 pm

Great post

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9 Tara@riceandbeanslife January 8, 2012 at 3:56 pm

Cute bug! I had a ’72 and loved mine.
I can understand wanting to save on a salvage titled car but I’ve read a lot of articles that say they are difficult to insure. I’ve never tried to buy or insure one myself but it’s something to look into before heading down that path.

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10 Just Gai January 8, 2012 at 4:45 pm

Of course, the most frugal choice would be not to buy one at all! The average cost of running a new car in the UK is 6,689 (4,724 for a second hand one). I realise that this is not an option for everyone but is worth considering.

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11 romney January 11, 2012 at 6:42 am

We are the junior partners in a car share, just having it on the weekends usually. Works out really well because we don’t need one everyday, just for day trips and weekly shopping. Besides the obvious cost saving, it means we just don’t have to bother with it the rest of the week. No thinking about where to park it, no checking it’s ok, that the tyres are up, etc.

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12 Susanna January 8, 2012 at 6:28 pm

I’ve been in the position of twice of HAVING to buy a car – 1st time truck had high mileage and the repairs were eating me up and the last needed repair was very expensive and it was time. That time a friend’s hubby worked with a guy selling a 2 yr old car with low mileage. The 2nd time that car was totaled in a wreck and I was in a bad situation – showing up in a rental(the rental wasn’t a year old!) might as well have stuck a flag with ‘sucker and desperate’ on my car. I made a hasty decision(and I’m not good with decisions) I bought a new civic – it’s a good car – but paid more than I really wanted. I’m already thinking of ‘what if’ for the next vehicle. I think if I’d had a good idea of what I wanted before that happened things wouldn’t ahve been so stressful and expensive. I didn’t have the option of borrowing a friend’s vehicle(no friends – well I do but they wren’t here at the time) but if you have a vehicle that’s not too old but not just a couple years old you can drive to the dealerships you’re in better shape I think.

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13 Monique DiCarlo January 8, 2012 at 7:05 pm

That’s why I love my 2008 Scion XD! No buying hassle, all Scions are the same price anywhere and you can customize pretty much the whole car. Have about 70.000 miles on it with NO problems…again, love that car!

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14 Amy January 8, 2012 at 8:43 pm

In addition, if you are financing, be careful with financing “extras.” When I bought my truck, the finance guy was trying to sell me on the maintenance package. He was trying to tell me that instead of paying for each service as it was rendered, I could roll it into my monthly car payment. He gave me a number that the package would cost, and a number that would be each service individually. The individual number was of course less than the package number. What he failed to account for was that if I rolled it into the financing, the interest would make it cost MORE than paying per service.

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15 Maggi January 9, 2012 at 11:22 am

Good advice. As someone who has had to purchase quite a few new cars over the last 10 years I have this to add:

Extended warranties are not evil, but they are ABSOLUTELY negotiable. Do not be surprised if you managed to get a good deal on a car only to have the dealer refuse to negotiate on an extended warranty. Go ahead and decline the warranty. You do NOT have to buy it when you purchase the car. (Although, if you can only afford it by rolling it into the existing loan, you are stuck but that’s another problem we will not get into.) You only need to purchase the extended warranty before the original manufacturer’s warranty (3/36,000 in a lot of cases) expires. Further, if you are keen on purchasing the Manufacturer’s extended warranty (Honda, Toyota etc. versus an aftermarket warranty company) you do NOT have purchase it from the dealer you originally purchased the car.

Look online. Many people are loyal to particular car brands/models for whatever reason and most have forums/web pages for their fans (For example, http://priuschat.com/ for Prius owners). Many give heads-up on dealers who sell extended warranties at a discount.

Example, when I purchased my Toyota Prius in August 2006, we got a great deal on the car (Heck, avoiding ADM was a real issue back then, and we still managed to get it below MSRP) but they were not willing to budge on the price ($1400) for a 6/12K/$0 ded. extended warranty. Two years later, I purchased the same warranty, online from a Toyota dealer in Massachusetts for $800. I’ve had to use it twice (which actually paid for the warranty and then some. Problems not related to the hybrid system, ironically.) and had no problem whatsoever from Toyota.

So, if you are buying a car that you know you will have until it dies, and/or is a model you foresee might have an expensive repair (Lets face it, I was a tad leery with the hybrid at first) then an extended warranty might be right for you.

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16 Janknitz January 9, 2012 at 4:56 pm

NEVER, NEVER, NEVER, EVER, EVER, EVER pay the sticker price. It should be called the “sucker” price. There is always room for negotiation.

You can purchase information from Consumer Reports to help you negotiate the price. These reports tell you what the dealer paid for the car and what a reasonable price is for the dealer. There are hints and tips about how to negotiate. They have this for used cars as well.

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17 Kevin @ Debteye January 9, 2012 at 6:54 pm

Great list. I especially point #2. I never buy new cars..such a waste of money. I always look at used/certified cars first!

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18 CelloMom January 10, 2012 at 1:16 pm

Here is one strategy that is often overlooked: when planning to buy a car, be brutally honest with yourself about what YOU NEED. Emphasis on “you”: make sure you’re acting on your own script, not one whispered sweetly in your ear by the admen, or by societal pressure (=the Joneses). Emphasis on “need”: buy just enough for your daily needs. For the once-a-year grandparents visit, rent a van. For the once-a-decade home renovation, rent a truck. You’ll come out ahead.

Most importantly, get an engine with enough horsepower, but no more. In the US, where you’ve not allowed to go 150mph (except in places like Minnesota), and where vast areas are quite flat, you don’t need a throbbing engine (=gas guzzler). My quick estimate says (http://bit.ly/tzqzNX) that 150HP is plenty for a Honda Accord sized car to navigate the nation’s interstate (and still speed a little).

By going for a smaller car with a smaller engine, you’ll save in the purchase price, in the gas expense, and in the trouble to park the thing in tight spots. Overly-powered engines may be (a boy’s idea of) fun, but they tend to make your toddlers’ heads wobble as you step on the gas, and don’t go well with delicate groceries and delicate musical instruments.

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19 EmmaPeel February 25, 2012 at 11:03 am

Best idea when thinking of purchasing a car — new or used — DON’T! walk!

If you are American, chances are over 80% you’re overweight.

Select an APARTMENT — not a house. Upstairs if you desire quiet and security. Look for playgrounds. If you’re a single and don’t have rugrats and need peace and quiet, select an apartment with no playground area.

If you swim, make sure the pool is to your liking, and if heated, all the better. This will save you approximately $100 a month (figuring in gas, travel, wasted hours to get to the pool) and oh, so convenient.

If you really want to consider the money you’ll save, make sure your apartment is within walking distance to groceries and pharmacy. Check out the vehicles in the parking lot and you’ll have a fairly good idea of the demographics.

Don’t buy a car. WALK. Take the bus.

Look at the old movies where people walked. Who was fat? Look at our society and the growing obesity epidemic even in China. All thanks to automation.

WALK.

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