How to Buy a Car

A Modern Survival Guide Interlude

This is the Modern Survival Guide, a guidebook for navigating and interacting with the modern world. And this is an interlude, an article that talks about a tip for modern living. This isn’t a philosophical insight, or a deep discussion of human impulses, or an explanation of some major phenomenon; it’s just something people might want to know. And one thing everyone ought to know is how to buy a car.

So let’s get started with a simple statement of resignation— car shopping, if done correctly, is kind of a pain in the ass. It takes time. It takes patience. It takes some negotiating savvy. I can help you with two out of three, but I can’t give you time, so just know moving forward that everything else I say here has that caveat.

To buy a car that you actually like, for the best price, that works, I find it useful to start with one key decision: are you buying a new car or a used car? There are many reasons to make this choice one way or the other, and I’ll outline them now.

Choosing Between New and Used

Why would you want to buy a new car? Well, for lots of reasons. There is significantly less risk of finding pre-existing problems with a new car. They tend to be prettier; even lightly used cars typically have some scratches and stains. They tend to have the newest electronic bells and whistles. There’s also that “new car smell,” but that’s actually just carcinogens out-gassing from the plastic, so maybe don’t make your decision based on that. The interest rates are sometimes better for new cars, which can in some cases equalize costs vs. used cars over the long run. And, of course, they meet the latest safety standards.

Why would you want to buy a used car? Well, for lots of reasons. They tend to be cheaper, of course, usually by several thousand dollars. You get to skip the first few maintenance milestones with a lot of brands, which can add up to savings of hundreds of dollars. You get some of the benefits of an established product, which is to say that you can find out whether or not the model has a history of particular problems. And most of us don’t value a used car quite as much as a new car, so you can use them for beater cars, commuting vehicles, or as training cars for new drivers.

Ultimately there is no generic “right” answer here. Choosing whether to buy new or used is totally situational, and totally personal. I personally prefer a good used car, when I can get it, because I hate the thought of driving off the car lot and instantly losing a few thousand dollars on the car’s valuation (which is exactly what happens with new cars). Other people love the fact that they can buy a new car. It’s up to you.

Buying a Car

So you’ve made your choice, either used or new. The good news for the rest of the article is that the strategies for buying either one are pretty much the same. You’re going to need to do research. You’re going to need to do shopping. You’re going to want to negotiate. And then you have to actually buy the damn thing.¹

Research

Let’s start with research. Before you hit the car lots, check the internet. You can cross a lot of options off the list very quickly by looking at your local dealerships and seeing what they have for sale. You should be looking for:

• Price — I don’t advise buying a car that costs more than 1/3 of your gross annual salary, whatever that is. So if you make $60,000, your purchasing power for a car loan is probably in the $15,000 — $20,000 range. I recommend using an online monthly payment calculator (like this one) to see what your monthly payments would look like. It’s sobering and will help you narrow the field.
• Model — What kind of car do you need or want? Sedan? Truck? Minivan? SUV? Let me answer that one for you, no one needs an SUV. That was easy. Coupe? Let me answer that one for you too, you don’t need a coupe, you need a sedan. Sports car? Do you like the idea of being able to drive fast, with the perpetual frustration of not being allowed to? Then get a sports car! Ah well, don’t listen to me, buy the model you want.
• Safety — Cars are fucking dangerous. Crashes kill a decent-sized war’s worth of people every year in the US, and accidents result in serious injury to millions more. Buy a car with good safety features, and avoid like the plague any car that doesn’t get good marks. Here’s the federal resource for that.
• Quality — Not all cars are created equal. Not all cars are designed to last for 200,000 miles. Not all cars are made with parts that will let you get to 50,000 or 100,000 miles without a major repair. Check quality ratings and consumer guide reviews to make sure you’re not buying a lemon.
• Looks — Don’t buy an ugly car unless you really have to. You’ll get in it every day and say to yourself “This is an ugly car,” and that’s an annoyance you don’t need. You’re paying big money for this thing. Buy a car you like to look at, if possible, because you’ll be seeing a lot of it.
• Efficiency — Gas costs money. Strange but true. Buying a fuel-efficient car is important if you want to save money, but don’t let efficiency ratings trick you into buying a very expensive car. It probably wasn’t worth it for some of the first wave of hybrid adopters, for example.
• Interior Design — You’re going to spend a lot of time in your car, if you’re like most Americans. Make sure you like the interior. Be aware: leather seats look nice, but cost much more and are actually less comfortable than cloth. I know, I know, leather is a status symbol. Maybe you can repeat a mantra of “This looks so cool” while you deal with backsweat during the summer. But I’m just sipping my tea.

So, check your online resources for local dealerships and see what they have in stock. Make a list of likely candidates. Check it twice. Find out who’s naughty or — wait, that’s a different thing. But definitely make the list, it’ll help later.

Shopping

Now comes the fun part — you get to go to dealerships and sit in, comment on, and drive around someone else’s cars! It’s a great opportunity to find the car you actually want, while sampling cars you can’t afford. It’s like being able to eat caviar for free at a debutante's soiree.

But seriously, you should at this point have a list of dealerships and a list of cars you want to look at. You should definitely test drive those cars. You’re looking for things like:

• A smooth ride — Do the shock absorbers work? Does the transmission stutter? Is acceleration smooth? These are all indicators of quality — bumpiness is never good.
• Ergonomics — Is the car comfortable? Can you reach and see everything you need to reach and see? How’s the sound system? This will all affect your ability to drive the car safely.
• Turning radius — This will come up all the time, so make sure the car turns in what feels like an acceptable turning radius. This will help you do u-turns, perform 3-point turns, and navigate parking garages.
• Power — How fast does the car accelerate? How fast can it stop? Do you have options for 4-wheel drive or low gears? These things will affect your ability to navigate traffic and bad weather conditions.
• Damage — Is the car obviously damaged or scratched? Is the interior clean and intact? This will affect the price and possibly lifespan of the car, so make sure you know what you’re buying. If you’re buying a used car, always get a Carfax or similar damage-list report from a consumer agency. Never buy a car that has been in a frame-damaging accident.

Oh, and one other thing, never believe the salesmen when they talk about how good the car is. It is their job to sell you the car. Their job ends once you drive off their lot in the car. They do not have your long-term best interests in mind, even (perhaps especially) if they are friendly and seem competent. Don’t trust them. Trust metrics, reviews, and consumer data.

Negotiation

So you’ve done your research, you’ve shopped for the car you like, and now you’re working on the price point. Good news! Buying a car is one of the few times in America when you can negotiate the price! Bad news! If you want to get a car for a good price, you have to negotiate.

Let’s start with the obvious point: negotiating is an art form, not a science. It will not work perfectly every time, and there are instances where dealerships simply won’t negotiate at all. If the economy is going gangbusters, for example, dealers are much less likely to be willing to give you major discounts.

But there are some times when you can negotiate from an immediate position of strength: at the end of the month, at the end of a model year, and during economic downturns. At the end of the month, dealers are feeling pressure to make their sales quota. At the end of the model year, you may be able to pick up the “old” model cars cheaper as the dealers try to clear their lots. And during economic crises, when fewer people have money to spend, dealers are a lot more happy to give discounts in order to sell cars.

Now for the fiddly bits. Here are some good, time-tested negotiation tactics. Feel free to mix and match:

• Walk away — If you’re car shopping, and you find the car you like, your first move should be to engage with the sales rep, let them start to think you might buy, and then leave. And I mean leave, as in leave the dealership, go home, and turn on Netflix. Come back the next day, and ask to see the same salesman. Look at the same car. Ask for the price again, and see if it comes down. If it doesn’t, walk away again. Make sure they have your information, and they will call you back if they want to make a sale. If not, they weren’t going to negotiate much anyway; try another dealership.
• Match prices — Ask dealerships if they will match the price of a cheaper car sold by their competitors. This works especially well if you can find two dealers for the same car brand who have different prices; this can be thing between rural and city dealerships, for example. This also can work between competing brands. The salesman who wants the sale will match the price.
• Ask for discounts — Just ask “I’d like a discount, what can you do for me?” A salesman who wants a sale will make it work. It helps if you’re a member of a professional association or consumer association, like the American Automobile Association (AAA). A fun variant of the discount question is “Do you offer deals for AAA members?” or “Do you offer deals for Rotary Club members?” for example. The salesman who wants the sale will straight-up make up discounts to justify it.
• Ask for free upgrades — Heated steering wheels, leather seats (you know my opinion on leather, but still), lighting options, free maintenance vouchers… all of these things can be negotiated as part of the deal. The salesman who wants the sale will include at least some of them to get the car off the lot.
• Inflate trade-in values — Salesmen have some leeway in how much they can offer you for a trade-in vehicle. It may not be all that much (a few hundred bucks, maybe), but it’s money you don’t have to pay on the principal of the deal. The salesman who wants the sale will be a little flexible with this number if it gets you in their car. Always make sure you know the Blue Book value of your trade-in car!
• Ask for interest rate reductions — It may be possible to arrange financing such that you pay 0% (or a radically reduced) interest rate for several months after buying a car. Do the math, but it may be worth it to bargain for these kinds of deal.
• Be intense — This is kind of weird, but I’ve found that simply staying quiet and just staring at the salesman (after they make an offer) can lower the price. They’re looking for a reaction from you. If you don’t react, they get a little wigged out. If nothing else, they’ll give you the ‘ole “I’ll just step over here and give you time to think it over” line, and that’s actually a good prelude to them coming back just in time to see you walking away. The salesman who wants the sale will get a little freaked out by a reticent customer, and may stop you on the way out the door with a better price.

All told, this can take thousands of dollars off the cost of the car, add hundreds or thousands of dollars of increased value to the car, and give you the potential of hundreds or thousands of dollars you don’t have to spend later. It is very much worth it to negotiate hard for a car.

Purchase

What, you thought this dance was over? Oh hell no. Once you get done with the sales staff, now you have to actually buy the car, and this is its own minefield. You have two things you need to do at this point: secure financing (assuming you’re not buying the car outright) and avoid add-on prices.

If you need a break after the negotiations, ask the dealership to hold the price for you overnight. They will almost certainly do this, especially if you make it clear that this is a condition of you purchasing the car at all. Remember — they’ve put as much effort into you as you have into them at this point. It’s an opportunity cost for everyone if you just walk away empty-handed. They are incentivized to work with you.

So — financing! Financing is all about getting the right interest rate from the right lender. Both of these are equally important. You want the lowest possible interest rate, over the ideal time period to pay off the loan, depending on how much you want to pay per month. This is where an interest rate calculator comes in handy (don’t trust the one they provide at the dealership). Ideally you want to find a rate below 4%. 3% is great. 2% is a fairy tale rainbow purple-spotted unicorn. Of course, this all depends on your credit rating and ability to procure loans.

Remember — it’s not all about the monthly payment. It’s also about the total amount of money you’re paying. If you’ve got a high interest rate, on a high price, and you pay it off over ten years, that’s going to be a TON of cash, compared to a lower interest rate over a shorter repayment period. Financing is about both long-term and short-term math; short-term math hurts your paycheck, but long-term math hurts your life choices.

Now to find a lender. The best loan offers tend to waffle back and forth between the dealerships themselves and credit unions, in my experience. Be careful, though, when you take a loan through a dealership. Ask the dealership’s finance person to identify the actual lender on the loan; it’s usually a third party. Then do some research on that lender before you sign the loan paperwork to make sure they aren’t shady.

A word at this point about walking out (again). You are the customer. It’s your money until you sign the paperwork. Don’t let the dealership people intimidate you into sitting in their finance guy’s office until the deal is done. You live in a free country, and if you feel the need to leave the room and research something, then do that. As long as you’re not asking them to wait a week, the sales manager will probably hold the price you’ve negotiated. Remember: none of these people are on your side, and that goes quadruple for the finance guy — it’s his job to fleece you like a sheep. And with that in mind, let’s move on to avoiding add-on costs.

Add-on costs include any costs that get tacked onto the negotiated price of the car before you drive it off the lot. These can include, but are not limited to: additional warranty offers, registration, title & plate fees, taxes, insurance packages, vehicle add-ons, and the infamous undercarriage coating.

Some of these things are requirements — you will pay the taxes, registration, title, and licensing fees. For these things, make sure you ask the finance guy or the sales manager to include them in the negotiated price of the car by asking, at some point in the negotiations, for the “out-the-door” price of the car. You can very often get them to eat these fees by including them in the price if you negotiate hard.

Everything else is optional. The undercarriage coating is useless, just wash the car from time to time. The extended warranties are only useful if you intend to keep the car past the expiration of the factory warranty. And just about everything else that they offer is fluff — especially any insurance offers. Do not pay for fluff. Never pay “delivery fees,” for example, if you’re driving a vehicle off the lot.

A final thought on this subject — beware the yo-yo scam. This is where a dealership makes you think you signed the finance paperwork the first time, but actually they left out a form and they need you to come back in and sign it. Mysteriously, the price has gone up in the interim. This is bad behavior, should not be tolerated, and should immediately be reported to the local better business association. It’s classic bait-and-switch tactics.

Your New Car!

Once you sign the paperwork, congrats, you now own a car! Well, technically you own the debt, your financier owns the car — it’s the American way! So, some final things before you drive it off the lot:

• Make sure it’s the same car! If you test drove one vehicle, make sure it wasn’t switched with a different car.
• Make sure you have the paperwork! You should have copies of all the primary documents, and double-check to make sure you have written copies of any maintenance vouchers or similar items you negotiated.
• Make sure you gave them the right address! The dealership will typically mail you your new title. Make sure it’s going to the right place.

Otherwise, enjoy your purchase, try to avoid buyer’s remorse, and good luck with the payment schedule. The open road calls!

¹You do not, of course, have to do any of these things (other than the payment bit) to buy a car. You can just wander into a showroom, point at a vehicle, and sign the papers. Millions of Americans do this every year. They are either desperate, rich, or fools, and those are not mutually exclusive conditions. If you absolutely need a car right this second, well, then pay the man. But otherwise, you’re better off following this guide. Even if you’re paying money to rent a car so that you can get to the dealership, it’s still worth it in the long term to take the time to buy a car the right way.