Derek’s car-buying guide

I’m glad that I’m writing this now. When I left the car business two years ago, I thought that I would give it three months before I wrote this. Three months became six months and then it became a year.

Why now? Because I still get asked for car buying tips and see people on Facebook ask for advice on how to buy a car. Having had four years of selling cars, I can give a lot of advice but dumping all those thoughts clearly and concisely is difficult. That’s why I’ve wanted to put my thoughts in one place.

Over those years, I saw a lot of people have a good time buying a car and people who had a bad time. People hate buying cars because the process can be difficult. It’s a big investment in a depreciating asset, which is the type of asset you would almost never willingly jump into in another area of life.

Yet, most of us have to purchase a vehicle at some point. That means that you’ll likely have to bite the bullet at some point.

Don’t buy a car like your grandparents

The cool thing about 2019 is that you have access to the entirety of civilization’s knowledge in the palm of your hand and you should use it. I’ve long said that the internet is the great equalizer because it has leveled the playing field between car sellers and buyers.

Online you can:

• Shop and compare the inventory of different dealerships.
• Receive price quotes.
• Research makes and models.
• See what your current vehicle may be worth

There’s more, too, but the point is that you should make it a point to do internet research before setting foot in a dealership. Increasing your knowledge will make you more comfortable and confident for when you step into a dealership.

Here’s what you shouldn’t do. Many times a person would walk onto the show floor to tell me they’re looking for a used car. I can only assume this person goes to a bar and asks for “a beer” or walks up to an airline’s ticketing counter to ask for “a flight.”

If you don’t know what kind of beer you want, you’re not ready to order. Same thing — if you don’t know what kind of vehicle you’re looking for, you’re skipping crucial steps. The only difference is that buying beer isn’t one of the biggest financial decisions you’ll make in your life.

Only you know your needs

Here’s another thing that puts you in an uncomfortable-if-not-disadvantaged position in front of the wrong salesperson: not knowing what you need or what you can afford. Realizing that your new vehicle doesn’t meet your needs or that you can’t afford it after you’ve taken it home would be a nightmare.

Yet, I met many people over the years who sat in front of me not knowing either their needs or budget. There are a few ways to conduct this self-assessment beforehand. A few questions I asked people in this position included:

• “What does your current vehicle not have that you need” or “How has your life changed since you purchased your current vehicle?” Someone who has kids probably needs to upgrade from that gas-sipping sub-compact car. Similarly, an empty nester may no longer need that seven-seat SUV since they’re just commuting now.
• “What things are most important to you in a vehicle?” or “What does your next car need to have?” This helps figure out what your must-haves or dealbreakers are. These musts could include room for a car seat, safety features, or bells-and-whistles and more. You’re the one who’s going to have to drive the thing.

Only you know your budget

There are some people who are taught to never tell the salesperson your budget, which may have been a good strategy 30 years ago but can make your life more difficult in the dealership. As a salesperson, someone who wants to play poker while you just want to earn a living is a challenge. You don’t know if you’re showing them a car that’s too expensive or too cheap.

If you don’t feel comfortable telling a salesperson your budget because you get a bad vibe from them, don’t buy from them. There are innumerable dealerships and many salespeople who will treat you right. If you expect to be ripped off, you’re going to see everyone as a thief.

The reality is that people check online reviews before setting foot into a dealership and automotive manufacturer surveys are often tied to the pay of the salesperson and dealership management. Manufacturers have worked hard to shed the sleazy label.

Do bad experiences legitimately still happen? Absolutely. Is a bad experience guaranteed? No. If you’re going to mentally survive the process, you’re going to have to trust someone.

Figure out your budget by figuring out if:

• “Am I writing a check or financing the vehicle?” This is straightforward: are you planning to write a check for thousands of dollars at once or are you going to make monthly payments?
• “Do I have a down payment?” I was amazed at the people who said they didn’t know if they had a downpayment. Like, aside from drug dealers, who isn’t sure if they’ve set aside large sums of money? Usually, people who do save money have a purpose for it that gives them an idea of what is available. I always told people it was silly to pay interest on your tax, title and license fees and should put enough money down to cover them.
• “What can I afford?” Sometimes this is determined by a person’s income and other times by someone’s preference. Some experts suggest that your car payment be no more than 10 percent of your monthly income.

Once you’ve completed these self-assessments, you’re ready for online research.

Using the internet to your advantage

Did you know that you can all but test drive a car online? Yes, you can compare the actual inventory of different dealerships in your area. You can use third-party tools to get an idea for the average sales price of a make and model.

Heck, you can work with a salesperson online to get vehicle information that can build rapport before you ever meet in-person. Think of all the time you can save from going from dealership-to-dealership, though I would advise doing enough research to where you don’t have to dealership hop.

The internet can also help you get an idea, not a guarantee, of what your current vehicle is worth if you’re considering trading it in. Many people in Minnesota do trade in their vehicles because you don’t pay sales tax on the value of your trade-in, which saves more money. Similarly, you should have an idea whether you’re trading your vehicle in or not.

When to go to the dealership?

I always said that people in the exploratory stage of the process should avoid visiting on a Saturday. Saturdays are the busiest day in the car business and you will likely face crowds or even a wait to work with a salesperson.

Visiting during the week will likely provide a calmer experience. The show floor will be less crowded and the parking lot won’t be buzzing constantly. You may also find that you receive better one-on-one attention, too.

However, this isn’t always easy. You may have a family to take care of after work that makes it hard to make it to the dealership before they close. It’s also difficult for many people to take a half day just to look at cars. If you do have to go on a Saturday, go early and think of it as going to Chipotle during lunch rush.

Make an appointment

I loved appointments as a salesperson. Having an appointment allowed me to make sure that the car my customer wanted was available and ready for showing. This way, I could eliminate surprises, educate myself on the car and make a good impression for my customer.

As the customer, you’re less likely to wait around for a salesperson and then wait some more as they pull the vehicle around for you. Making appointments is a great way to make the process more efficient.

There also appointment don’ts. For instance, an appointment that’s a half-hour before the dealership closes is going to feel rushed; a test drive alone can take 10 to 15 minutes. This is a big decision and should be treated like one.

Another thing that happens with appointments is people who no-show or didn’t have the courtesy to say they couldn’t make it. I would rather have someone call an hour before and say they can’t make it than turn down other walk-ins. If you make an appointment, try to be there on time or call if you’re going to be late or can’t make it.

Regardless, appointments are beneficial to the customer and salesperson. The salesperson is able to have the vehicle ready for the customer when they arrive so there are fewer surprises and the customer already knows who they’re meeting with and what they’re looking at.

I always felt bad for people who walked in wanting to see a car but it was sold or otherwise unavailable. Calling ahead can help maximize a person’s time during their car search.

Should you test drive?

Test drives are uncomfortable, usually for newer car buyers. Most people don’t like driving an unfamiliar car that they don’t own and with a salesperson they met less than 20 minutes ago.

Here’s the thing, test driving cars is important. You can do literally everything but sign the paperwork for the vehicle and test drive online. The whole reason you’re in the dealership is so that you can see the vehicle and determine if it’s a good fit.

Within reason, you should drive the prospective vehicle as you drive your current vehicle. I once had someone driving five miles below the speed limit on an open and dry road and asked them if they always drove so slow. They replied no and I told them they shouldn’t do it here either.

Maybe part of the reason people don’t like test driving is that they don’t know what they should be watching and listening for. Here are a few things to pay attention to:

• Does the vehicle accelerate smoothly and well enough that a person would feel comfortable merging into highway traffic?
• Are there any weird sounds or smells?
• Is the vehicle pulling in one direction or another?
• Does the heat blow hot and does the air conditioning work? People who buy a vehicle in the winter may not think to check the air conditioner, but the first 80-degree day of the summer is not the day you want to find out that the air conditioning doesn’t work.

If there is something that seems like a problem, ask the salesperson. They may have or may be able to get more information on any potential problems. When I sold cars, we kept inspection reports on most used vehicles and sometimes was able to walk them over to a service advisor to get a better idea.

The reality is that no used vehicle is perfect and sometimes it’s just a matter of what you can live with. New cars were easy because everything was under warranty and finding a replacement vehicle was usually easy.

Someone who is looking at a new-used vehicle should absolutely test drive any vehicle they’re seriously considering. It’s not as important with a new car but still a good idea because it’s impossible to know if the car’s ride is comfortable or if you can see well enough out of the rear.

Trading it in or sell it to a private party?

If you do decide to trade in the vehicle, there are a few things to know. First off, drive the vehicle to the dealership. You’d be surprised how many people wanted an appraisal on a vehicle sight unseen. Most people wouldn’t buy a vehicle they hadn’t seen and a dealership is the same way.

They’re going to ask you some basic questions about the vehicle’s history, including any accidents, when things like tires and brakes were last done, and if you still owed money on the vehicle. The last point is important to the transaction because someone who may owe more money on their car than it’s worth (negative equity) may have a more difficult time purchasing a vehicle.

What was interesting about meeting other people’s cars is that you may recognize smells, sounds, or dents the regular driver had either not noticed or become accustomed to. It’s not that we were trying to devalue their vehicle as much as establish a realistic condition for their vehicle.

Many people would say their vehicle is in excellent condition when in reality, the only vehicles that are in such condition have just rolled off the show floor. No vehicle, even with 50,000 miles on it is going to be in excellent condition. It may be in good but most likely it’s in fair condition and that’s okay. Fair condition is better than poor condition.

When I said to use tools like Kelly Blue Book to get a value, that doesn’t mean that they’re the final say. Those resources are a great way to inform people who don’t purchase vehicles every day. You can expect them to deduct value if your car needs things like tires, brakes or something more serious like a timing belt. They’ll have to fix those things if they hope to sell it.

A dealership will use a number of resources to put a value on a vehicle including:

• Market: Where the vehicle is traded in matters. For instance, a rear-wheel-drive vehicle in a winter climate is going to have less value just like a four-wheel-drive SUV would in Florida. Yet, the time to trade in that sports car may be in early spring rather than into the fall when there are more buyers for it.
• Resaleability: Some vehicles sell better in different areas than others. If that dealership just offloaded a similar vehicle that took six months to sell, they’re going to be less willing to invest in another one. However, if it’s an in-demand vehicle, they may be more willing to put more money into it.

The reason that I say that people should still know what their vehicle is worth is because some dealerships will do what is known as holding money. Some dealerships will knowingly offer a customer a lower number for their trade-in. I was never a big fan of this because it felt like stealing people’s money instead of giving it to them right up front.

Why? Sometimes it was because they knew the customer was going to negotiate and this was a way to avoid overpaying for a trade-in and then having to overprice it to get it on the lot later. Other times, the dealership would pocket the money because they made money off of that.

Being informed about the value of your vehicle going in can give you peace of mind that you’re being offered a fair value on your vehicle. It’s okay to ask the dealership for their reasoning behind their offer.

Now, trade-ins didn’t always work out. Sometimes that killed a deal and other times people tried saying, “I can get more private party” which is almost always true because a private party doesn’t have to recondition the vehicle or pay to market the vehicle to another seller.

Aside from a potential sales tax savings on your next vehicle, some people would take a little less because they didn’t want to have to deal with putting their vehicle on Craigslist. Think about it. Strange people calling and texting you, showing up to your house, and then following them to the DMV to transfer the title because you’re still liable for anything that happens with that car until it is transferred.

Are you getting a fair deal?

As I said above, car buying has changed. You can know and understand the pricing of the vehicle you're interested in and compare that to other vehicles in the area ahead of time. That’s incredibly convenient and again, can ease your mind after the transaction.

So what goes into the way a dealership prices a car? Again, there are several things:

• How long the vehicle has been on the lot.
• How many comparable vehicles they have in their inventory versus what’s in the market.
• The number of rebates and discounts from the manufacturer (new car).
• Any accident or repair history (used car). You may see an identical make and model for cheaper elsewhere, but it could be cheaper because it needs work or has a worse accident history. Chances that vehicle would be priced the same if it had the work done or had a cleaner title.
• The manufacturer. New vehicles come from the factory with a manufacturer’s suggested retail price (MSRP) and an invoice cost (what they own it for). The difference between those things is called the margin and the margins on the Subarus that I was selling were typically less than $2,000. This threw off customers who had bought vehicles like Fords and Chevys where there were thousands of dollars in discounts.

You want to know going into the dealership with a rough idea of what you’re going to pay for a vehicle. There’s usually a reason that one vehicle costs more than another even if they’re identical, but the dealership wants to sell you a car because they make the money on you coming back for things like parts and service.

Can you negotiate?

I sold vehicles in both negotiating and non-negotiating dealerships. Both have their advantages. For instance, in a negotiating dealership, if you needed a $200 discount to make a sale, you could do that. This worked out great for customers that were good negotiators while someone across the show floor may have paid more for an identical vehicle because they didn’t know how to negotiate.

What I also disliked about negotiating was that you really took turns lying to each other. You sit down and tell the salesperson, “I can’t pay more than $______!” They come back and say, “Well, I can only go as low as $____.” Then you say you may need to think about it, they run to the manager and magically the price is somewhere between what you both said initially.

I don’t like games. I like efficiency and straight to the point. With the non-negotiating approach, I could tell people what the price was and that the next Tom, Dick, and Mary walking through would pay the same price for that vehicle. That didn’t mean the price could never drop for inventory or market reasons, but that price wouldn’t be negotiable. The vehicle was either in the budget or it wasn’t.

Once, I had a lawyer who came back after thinking over buying a car over lunch who laid out her case for why the price should be lower. She was so well-prepared that I let her finished and informed her I couldn’t move off of the sale price. As someone who was used to negotiating, she was annoyed but happy.

This also meant that I got paid commission based on the number of vehicles I sold instead of how much I sold them for. Most liked hearing this because they knew that it made more sense for me to sell them any vehicle rather than the most profitable vehicle on the lot. One customer sighed and told me that they were relieved because they felt they could tell me my actual budget.

The thing about a negotiating dealership is this, you can’t just come in with a ridiculous number because it sounds good. You’re more likely to be successful if you can justify why the dealership should sell you the vehicle for a lower cost. We also always got commitment first before getting approval from the manager. If you can give a realistic number and say that’s where you need to be to buy the vehicle, you have created real leverage for yourself.

You also need to know what number you’re negotiating. For me, unless I’m paying cash for a vehicle, I don’t care about the total price of the car; I care about the monthly payments that I’ll be making. I’ll say “I want it lower than $350” a month. Now, if I were writing a check for the total price of the vehicle, I’d care a lot about the tax, title, and license fees in addition to the sales price.

Please, whatever you do, if you come to an agreement on the terms of the vehicle, do not continue to shop. There was nothing worse than when seemingly good people would continue to shop after agreeing and even putting a deposit down on a vehicle. This will not earn anyone any favors. It was always the most seemingly nice people who would never as much as cross the street without the correct traffic signal that would do this. Treat others how you want to be treated, right?

How are you buying the vehicle?

As I mentioned above, you can go through with purchasing the vehicle in a number of ways. You can finance it, lease a new car, or write a check (also called paying in cash).

If you’re going to finance it and have your own bank, you should check out their rates ahead of time and get an idea of what an approval would look like. And when you go to the dealership and have chosen a car, have them see what their financing options are.

Why? Most dealerships work with many lenders that they send millions of dollars to every month. This means that they may be able to get a better rate than a person who frequents the same bank with their thousands per year. If they can beat your bank’s rate or not, you know that you’ve gotten the best deal on a rate. It’s like shopping around for the best loan terms without having to do all the running around.

Leasing has worked well for me but doesn’t work well for everyone. I like getting new cars and always have things under warranty. People tell me, “But you don’t own it.” Sure, but you don’t own a financed vehicle until you’ve paid the loan off; the bank does. And then what do you own, a five or six-year-old vehicle that needs things like brakes, tires and so on. Not that financing is a bad option but both have their benefits.

Many folks, mostly people of retirement age preferred to write checks for their vehicle. I still remember the first time someone paid for a fully-loaded Acura MDX with a $60,000 check and being stunned. This way you don’t have a car payment but you just wrote a $60,000 check. These customers I always encouraged a low-financing option like zero percent or 0.9 percent because it allowed them to keep their liquid assets.

At any rate, I always liked to have my customer approved by the time they got in because this can save at least a half-hour of waiting in the dealership if they were walk-ins. In turn, those people were usually the happiest because they felt like they got in and out without spending their entire day in a car dealership.

What to bring to finalize the transaction?

It’s amazing the things we’d have to remind people to bring. Things like driver’s license and current insurance cards are musts. So are documents like a car title for a trade-in or a lien release that shows a trade-in is paid off. Sometimes banks need pay stubs or proof of residency documents and those should be brought too.

You should also remember to grab sunglasses and other easy to forget items from your trade-in vehicle.

Car buying is an important but often stressful process. The idea that it has to be this way, however, is an outdated belief and can be simplified with the right approach.