This post was originally written in 2016 around the purchase of our Mazda 3. It is republished here with updates from additional new car purchases. I continue to use the same unique new car purchase process. The hacking continued to produce significant savings from our recent purchase. Over the years I have found many others that have benefited from these processes, so I decided now was the time for an update.
Why a New Car Purchase?
Depreciation on a new car can be massive. Many people that buy a new car do so on a schedule that simply does not allow you to support a frugal life style. If you are buying a new car every 2 years it is very unlikely you will be able to stock pile enough cash to become financially independent. However, I don’t buy a new car every 2 years, so that argument does not apply.
I do buy cars to last a decade, as made obvious by my current car ownership that contains a second decade old car. The depreciation on a new basic car amortized over a decade will be minor. The added benefit is that you will know the history of the car and can enjoy a care free warranty for the first few years. That being said, the process I describe below will help you regardless of whether you are interested in purchasing a new or used vehicle.
How to Lower Your Price
The key to getting the best price on a new car or any purchase negotiation is to identify a person with a need equal or greater then your own. Then fill that need while filling your own.
Choosing the Car
One such need to be on the lookout is the end of model year. We recently purchased a 2019 Toyota Highlander. Before we even get into the discussion of dealership negotiation below, we have the need of Toyota to rid themselves of 2019 models to make way for the 2020 models. That ultimately meant significant Toyota financial incentives for our purchase, about $2000. It also means all dealers are motivated to some degree to clear the space for next years models. Finally unlike the first model year which typically has a lot of bugs to be worked out in the manufacturing process, the final model year is probably as reliable as that model gets.
Finding the Dealership with the Biggest Need
Once you’ve identified your target model it is time to find the dealership with the best deal. It is a well known fact that car dealerships manage to a monthly quota. So, it stands to reason that hitting them up for a purchase around the end of the month will work in your favor. Each dealer will have a different level of need. Some will be fighting to stretch that last little bit of their quota, while others will be looking for the sale simply to keep the doors open by meeting their financial obligations. The key is to find the dealer with the biggest need, but how?
The Dealer Search
The key to this strategy is to get price quotes on a similar car from as many dealers as possible and ensure they know they are actively competing with another dealership for your business. In this way you are creating the same situation they create for you when in their office and they go to ask their supervisor for a cheaper rate, a feeling that they could lose the sale if they do not put their best foot forward.
To start compose an email. This email should be addressed to the dealership and ask them for their lowest price on the specific, make, model, options, and color you would like to purchase. Include in this message any financing you require. Denote in this message that you will purchase in the next week, that you have sent this request to multiple dealers, and that they should send you their best price. Wherever possible separate the sale of your existing car from this purchase to keep the negotiation as simple as possible.
Send this message to all the dealers within 50 miles of your home via their internet contact us page. Note that it does not matter if the dealer has your options on site, as many dealers will trade for a car with another dealer if it means their sale.
A note on an Out of State Car Purchase
I receive one question about this process more then any other. What if the dealership with the best deal is in a different state? Well in almost every case it does not matter if you purchase a new car in or out of state. There are one or 2 exceptions in the country, but usually you will only pay taxes and need to follow the process of the state you register the car in, not the purchase state.
I have purchased cars from each of my surrounding states. In every case I paid the same taxes as if I had bought in my home state. Meanwhile, 3 times in a row my home state dealers have been at least 10% more expensive. In fact, in my case these out of state dealers even registered the cars in my home state for me. The process was identical to purchasing in state for thousands less. Anyway, back to the process.
Making the New Car Purchase
After a day or 2, you will have 1 or 2 much lower offers for the car with several more you can thank and pass on. At that point you can decide if you want to play the two dealer prices off against each other or choose one. Consider getting the price quote in writing before driving in to purchase your car. This will ensure they do not attempt to renegotiate upon your arrival.
Then avoid any of the extras while completing your purchase and your all set. One final note, pay attention to whom you bring with you to the purchase and the situation you put yourself in at the purchase. This will ensure you don’t inadvertently reopen the negotiation at the dealership. Do not go into the dealer without a way home if the purchase falls through. Also do not bring someone who is impatient with you who might undermine you.
I’ve used the above method to save thousands of dollars and so can you. For the record, with the original post a nice new Mazda 3. I walked out the door at over 4 grand under MSRP and 1K under invoice. For the reprint I purchased a new Toyota Highlander. I saved $8K under MSRP and they threw in a free trailer hitch.
Do you have a car purchase story?