Tips on Buying Cars: Car, confessions of a former car salesman, gas mileage

Question
Hi Ron,

Due to short notice I was have about a week to purchase a car.  This is the first car I am purchasing and which I know will be a used one.  I just graduated from college and started working so my budget is fairly limited, about 11,000.  I am almost positive I am purchasing a Honda Civic because of the gas mileage.  I was thinking about purchasing from CarMax.  Also important to note is that I am able to pay off the car completely, will that give me additional bargaining power?  Any advice will be greatly appreciated!

Regards,

Mike

Answer
Hi Mike,

I just did a quick search at www.carmax.com for Honda Civic's; the only thing I see for close to $11k is a 99 EX. Check it out online for your area to see what's available.

Carmax has a model that works very similar to the one used by Saturn--fixed prices for what they sell, or take in trade. I have to tell you that I'm not a proponent of negotiating, and I devote an entire chapter to in my book, $ave Thousand$ Buying Your Next Car: Confessions of a Former Car Salesman (www.Make-Me-Smarter.com) showing you how to not have to negotiate—ever. But, the typical dealer negotiating business model does allow buyers to buy for less than the advertised price, which are always set high. Fixed price models don’t.

The short answer to how to buy without negotiating is to find the car or cars you’re interested in by searching online, and then look for these cars on the websites and in the inventory at dealers in your area. Then, find out the going prices from the many automotive research sites available. I give you a list of these on my site www.SaveOnYourNextCar.com that you can start from. Once you do this you will be just about as informed as you can be before walking onto a lot.

Now visit the dealer, look at the vehicle, take a test drive, etc. If you like it you simply make them an offer of what you’re wiling to pay based on the going rate (which you got above.) They will naturally take that as your opening offer, disappear to talk with their manager, and come back with a counter offer. You stand by what you offered (which needs to be reasonable) and tell them you will buy now at the amount you offered, which you also state is fair because you did your research and know exactly what the vehicle is worth on the open market. If they don’t want to do the deal, thank them and ask for directions to the next dealership you want to go to.

I can’t guarantee they will take it every time, but this technique works very well. They don’t want to loose a sale, and as long as you’re making a decent offer, will likely take it. If not, be prepared to go to the next dealership. DO NOT buy any vehicle that you’ve fallen in love with and just have to own! Dealers rely on getting you emotionally attached (which is the main reason they make you take a test drive), knowing that emotional buyers not only buy more, but also spend more for the same thing. Use your $11,000 wisely, and don’t let them talk you into something you don’t want, need, or can’t afford.

Finally, the answer to your questions about paying cash and if it gives you additional bargaining power, is no. Doesn’t seem to make sense until you realize that some car dealers can make 35-50% of their revenue from financing, typically referred to as the ‘back-end’ of a deal. If you pay cash, which includes getting your own financing from the bank, credit union, etc., they don’t get any additional money on the deal.

Hope this helps you, Mike. It’s exciting buying your first car; I remember mine like it was yesterday. Good luck!

Regards,


Ron