How to Buy a Used Car Without Getting Screwed: Part Two
Or, “What Happened When I Used These Rules to Buy a Car”
So: you’ve prepared as well as you can, and you’re ready to go into the lion’s den. Here’s what you need to know to get from “good data” to “good deal.”
ALWAYS BE CLOSING
7. Play the field before you get serious
In my experience, it’s best to approach the process in two steps. In the “research” phase your goal is to decide on the exact make/model/year of the car you want, and the dealerships you are prepared to buy from. You will need to decide your must-haves in terms of features, colors, etc. and your deal-breakers in terms of the condition of the car. You’ll also want to get a feel for the dealerships and salespeople themselves, especially what their “niche” is. Are they a high-volume, low-price dealership that just wants to make a sale as quickly as possible? Do they try to impress you with service and “customer experience” as a way to justify higher prices? Are they a small shop that prices competitively, but may not have a lot of room to negotiate?
When you’re in this phase, you’ll want to tell the salesperson that you’re looking to buy in a few weeks, and that you’re interested in a car they have on the lot because you’re interested in the type, or the manufacturer, or whatever. But also emphasize that A) you are not ready to buy yet, and B) you only have an hour or so to spend on this before your next appointment. This will allow you to spend most of your time learning about the car, and not worrying about salesmanship.
This is not the time to start directly negotiating on price — you can give them a general idea of your budget, but once you start the haggling process, your relationship with a salesperson fundamentally changes, usually to your disadvantage. I would try to postpone this for as long as possible.
Once you have a couple of favorites, you’re ready to proceed. Now is where you’ll have to invest serious time researching every last thing about these specific cars — looking up the CarFax and AutoCheck, reading reviews, and checking forums to learn about quirks and maintenance issues common to that type of car.
This is also where you should start deciding which cars you want to take to your mechanic. I find that the threat of spending $100 on an inspection helps me clarify my thinking: If I don’t want to take a particular car in, I probably don’t love it. Maybe it’s the wrong color, the wrong price, or in a slightly worse condition than other cars already in contention, or maybe I just get a bad vibe from the dealer. In any of these cases, it’s important to remember that your relationship with a car is emotional as well as rational, and nothing spoils that as quickly as regret. Better to move on than be stuck with baggage for years and years.
8. Everything is negotiable, if you have the right leverage
A dealer isn’t going to give you anything just because you ask nicely. You have to create leverage first.
Price-wise, a seller will try to convince you to pay what they want by emphasizing competitiveness, quality, and cost.
Dealers can and will claim their prices are competitive until the cows come home. Only you can decide if they are competitive or not. And if they aren’t truly competitive, you have to show them counterexamples: similar cars from nearby dealerships, private sellers, or even eBay listings. Check the dealership price against CarMax, Beepi, and similar online dealerships — the convenience premium for these types of dealers can be as high as 20%, and there’s no reason their prices should be anywhere near that of a regular dealership. Be prepared to bring up your trade-in and auction research, and bring listings from other sellers that put the dealer on the spot, even if they’re not necessarily a representative sample of the market in your area.
Quality is relatively easy to determine: get your mechanic to inspect the car beforehand. If they find defects, you should be able to negotiate a lower price relative to other cars in the market. If they don’t, then you should be prepared to pay for a quality car.
Cost, meanwhile, is the dealer’s trump card. Basically, you as a consumer will never know the dealer’s break-even point for the car. You can get a sense of what an average car might get, but not that particular one. And the dealer isn’t obligated to accept an offer just because it’s not in your budget. The challenge is knowing when a dealer really is getting into the red — and when they’re just saying it to put pressure back on you.
To that end, it might be easier to get non-price concessions from a dealer, especially for items that a dealer can do for less than retail. For example, let’s say that you have a car that is otherwise great except for a few scratches and dings, or a damaged headlight, or similar. You might ask them to do that work as a condition of purchase. Even dealers without an on-site shop will usually have relationships with local mechanics and parts retailers that let them get services at close to cost. But the key here is that you have to either make them complete any repairs before you sign the purchase agreement, or get them to commit to any concessions in very specific writing on the purchase agreement.
9. Walk away, early and often
Once you get serious, salespeople usually pull out every stop trying to confuse, confound, or distract you: wasting time with their manager, trying to get you to focus on monthly payments, telling you why their car is “too good” to match to another listing you’ve brought in. No matter how well you prepare, your resolve is limited, especially in the face of someone who has mastered the art of making you squirm.
And that’s why I recommend walking away as a matter of course — even if it’s a car you like. Unless you’re trying to buy a unique car and there’s a line of potential buyers waiting outside, there is probably no rush to get a deal done right then and there. When I’m ready to make a purchase, I like to go in, show them my comps, explain that I liked their car, and state a price that I think is fair. Then, I tell them I need to move on to the next appointment, but to call me in an hour to discuss more details, and I walk out.
This takes a lot of advantages away from the salesman. First, it lessens their ability to influence you in non-verbal ways. After all, these people are professionals. They know how to use their body language, tone of voice, sales brochures, and even the talents of their co-workers to put more pressure on you. A lot of these things can’t be done over the phone.
You can also give yourself some psychological advantages in addition to taking away theirs. Find a comfortable place where you can focus exclusively on the task at hand, which is getting a good car at a price that you can live with. Bring your research files and a phone or laptop, so you can quickly look up information and competitors’ listings if you need to. Pour yourself a drink if you find it helps you speak up for yourself.
And, most importantly, if things go badly — maybe they are not budging on the price, maybe they’re pressuring me in a way that I don’t like, or maybe they’re just stalling — I explain why the negotiation isn’t working for me and end the call, firmly and quickly. If they really can’t make it work for you, they won’t call back. But they might just be bluffing.
10. Alternatively, Pay a Little More to Sidestep All this Hassle
To paraphrase George Orwell, it’s better to break any of these rules than to make a bad purchase. And a purchase can be bad for a number of reasons beyond the financial. You might not be able to spend enough time researching and negotiating your way into a good deal. You might know that you have trouble sticking to your budget or resisting high-pressure sales tactics. You might just have a terrible poker face.
The nice thing about new car dealership models such as CarMax, Vroom, and Beepi is that they make the car buying experience much closer to what you’d expect from someplace like Amazon. No haggling, no “let me talk to my manager” time-wasting, a certification process that probably means something, even a return policy!
Of course, people do pay for all of this peace of mind. According to a recent paper in American Behavioral Scientist, people are less likely to shop around for a better price on expensive items, since they value relative price differences higher than absolute price differences. That is, people are more likely to do work to save $100 on a $500 item (20% savings) than they are to save $1,000 on a $50,000 item (2% savings).
CarMax knows this. When I was shopping for my current car, I found that CarMax’s “no haggle” prices were between 10–20% higher than the asking price at a dealership for an identical vehicle. After negotiations, my final purchase price at my dealer ended up being about $3,500 cheaper than the CarMax price. Once again, advantage goes to the dealership, albeit in a different way than before.
That said, during the hunt for my last car, I probably spent 20 hours visiting dealerships and going on test drives. I also paid $250 out-of-pocket for my mechanic to inspect the “finalist” cars. And finally, because my old car was out of commission due to a scattered transmission, I spent another $300 on rentals and gas (though I used these for more than just driving to dealerships). Depending on how much you value your time, you may find this markup worth it.
FROM THEORY TO PRACTICE
So how might these tips play out in real life?
Late last year I bought a car. I had a $20,000 budget and didn’t want to buy new. So I decided on a mid-size luxury car that was a couple of years old. After some research I set my sights on the 2011–12 Cadillac CTS, since it had great reviews and was a better value than a comparable German import.
After a dozen test drives (rule no. 7), I zeroed in on one 2012 and a pair of 2011s that each had under 40,000 miles and were on sale for $21,000. In Texas, several 2011s had been sold at auction for $15,000 to $17,000 in the last few months, and the trade-in price came in around $17,300 (rule no. 4). Data was scarcer for the 2012 model, but another $1,500 on top of the 2011 values seemed reasonable. So, I was confident that I had some room to negotiate down.
I test-drove all three cars and liked them. One of the 2011s had an open recall for a faulty ignition switch on its CarFax (rule no. 3), but as soon as I brought it up the salesperson agreed to have it fixed right away. The other two were clean. However, the dealership with the 2012 only allowed the cars to be driven within a 5-mile radius for insurance reasons, and my mechanic was 15 miles away. I argued with them that my insurance would cover anything bad that happened, but they stood firm. Since the whole goal here is risk-avoidance — I didn’t know any of the “approved” mechanics — I had no choice but to rule that one out.
So, I set up appointments at my mechanic for the remaining two contenders (rule no. 5). He couldn’t see them for a couple of days, and in the meantime I started the negotiation process, though I refused to sign anything until the inspections were completed (rule no. 9).
I brought a couple of other listings for similar cars at a lower price, as well as printouts of recent auto auction lists with 2011 CTS sales on them. Instead of going on a big song-and-dance about testing the market and trying to find a best price within my budget, I simply asked them to justify why they were asking over $20,000 when the comps that I showed them were closer to $19,000, and the auction/trade-in prices averaged out to $16,500 (rule no. 4).
The first dealership had been around for over 50 years and prided itself on its “obsession” with service. The salesman talked for over 15 minutes about how I was not just buying a car, I was buying their entire “customer experience” (rule no. 1). However, this experience — from cookies in the waiting room to classes on Cadillac ownership to a vaunted 182-point pre-sale inspection that every car goes through — meant that they “could not afford” to go below $19,400. The other dealership, meanwhile, had no such emotional angle, and simply said they were willing to go to $19,250.
A day passed, and just a few hours before I expected the results from my mechanic, the first dealership called me back. They were eager to pick up a new customer, and were willing to drop their price to $18,750 if I could complete the paperwork today.
Then I made a mistake. I have to admit that I’d bought in to their whole pitch. They’d treated me really well throughout the process, and I got along with my salesperson, since we were both around the same age. I was expecting to hear back from my mechanic a bit later, I said, “so let’s proceed under the assumption that everything will check out just fine.”
Then I called the second seller and mentioned my other offer. They could only go down to $18,900 (rule no. 8). So I told them I’d probably go with the first dealer.
About an hour later, I got a call back from my mechanic. The car from the second dealership — the one I’d just passed on — was in near-perfect condition, inside and out. The only mark against it was that the tires were nearly worn out.
“Now, the other car,” he said. “Did they mention it had been in an accident?”
My mechanic found evidence of a minor accident on the back end of the car — even though, you’ll remember, the CarFax was completely clean (rule no. 3). Although the frame was fine and the powertrain was in good shape, he had discovered a small crease in a door and a shoddy repainting job on several body panels. Combined with scuffing and scratching throughout the interior, plus a lingering smell of cigarette smoke in the car that I had not caught — I’d been more focused on blasting the A/C and heat to make sure they worked — he guessed that the previous owner had been a bit hard on the car and a bit cheap with repairs. He estimated that it would cost upwards of $1,000 to get this car in the same condition as the first one.
“So if you could get the one car with the tires from the other, you’d be in great shape,” he said.
I cursed myself for turning down the second dealership too hastily.
A half an hour later, I was getting an earful from my salesperson — the one who, up until now, had been nothing but helpful to me. His nose was pretty sensitive, he said, and he never smelled smoke the entire time he’d been in it. Also, he had their body guy come out and use the “paint meter” to assess the so-called damage, and he estimated the repairs to be only $300. He even interrupted me several times when I used the word “accident” — we didn’t know anything about where the damage had come from, so it seemed to him a bit reckless to assume that it was from a car accident rather than, say, backing into a concrete post. (rule no. 1).
“So, with all that said, what will it take to get you into this car?” he asked.
I pointed out that I’d found the issue with their car, and that I felt it was enough to make it worth far less than the market price. However, I told him that the ball was in his court to come up with a reasonable response to what I’d discovered.
He offered the car completely as-is for an additional $500 discount. (rule no. 2)
I laughed, thanked him for his time, and hung up. (rule no. 9).
And the reason that I could be so abrupt? As soon as I got off the phone with my mechanic, I called the second dealership back and asked if their offer was still on the table. Lucky for me, nobody had made a serious offer on the car in the past six hours (things move fast in the car buying world, but not that fast).
“My mechanic said that the car needed some tires, though,” I said.
“I think the tires are fine,” said my salesperson. (rule no. 1).
“Sorry, I’m going to have to rely on my mechanic’s judgment,” I said. (rule no. 8).
She agreed, ordering a set of replacements at the local Discount Tire store. Which was good, because when we walked out to the car after signing the paperwork, one of the tires was flat.
Three months later, I’ve taken the car into the mountains, down West Texas country roads, and through the Chihuahuan desert. It’s in perfect shape, and I’m still happy with it — and the deal I got for it.
Darryl Campbell is a former medieval archaeologist and Jeopardy! contestant. He lives in Dallas, and tweets at @djcampb.
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