How to Buy a Car at the Best Price: Pro Tips and Secret Negotiation Strategies

April 6, 2016

 

Welcome to the San Francisco Bay Area.. Surprise!  Now you need a car.

My clients that move to the San Francisco Bay Area from New York, London, and other transit-friendly cities around the world are often shocked to discover they need to buy a car for the first time ever. While San Francisco proper has a decent array of trains, buses, and ferries, the entire Bay Area is spread over 9 counties and it is not like New York or London where outer boroughs are connected by an efficient subway system. 

 

So if you find yourself in the position of having to buy a car in the Bay Area and feel like a newbie...never fear! I’ve helped clients arriving from around the world find the right car at the best price and feel good about their purchase. Below you will find some of the best car buying tips and tricks I've learned over the years . While the first two tips may seem basic to some, they are super helpful for expats, newcomers to the Bay Area, and first time car buyers. The last three are secret strategies even savvy car buyers can use to save hundreds, if not thousands of dollars on their car of choice.

 

1) Rank Your Top 3 Cars.

 

Start the journey by researching the best possible car for your lifestyle 1 to 2 months before you really need a car and ask yourself the following questions. What car works best for your situation? What is your budget? New or used? What will the car primarily be used for - commuting or transporting family and kids? What is the current price of gas? How many miles will you drive your car daily and how many miles per gallon does your ideal car get? Does it have a good resale value? The answers should help you arrive at 3 cars to narrow your search.

 

Pro Tip: Consider a plug-in hybrid or electric car. Plug-in hybrids and electric cars offer great resale value and their drivers get a special decal allowing them to use the coveted high-occupancy vehicle (HOV)  lanes. My plug-in hybrid shaves an average of 45 minutes off my commute each day by allowing me to use the less crowded HOV lane on the Bay Bridge and other Bay Area freeways.  

 

2) Find the Market Value of the Car You Want.

 

Dealers and car-owners know the market value of their cars, and so should you in order to have the best leverage in price negotiations. Use Craigslist (look in the dealers and private owner section) and Kelley Blue Book’s website to find the price range of your ideal car so you know what to expect in your negotiations. Remember that car values vary by region, so be sure to take that into account in your research. Take that knowledge with you when you buy and you will know a good price quote when you see one.

 

 

3)  Buy vs Leasing.

 

If the bottom line is the most important aspect of your decision, then weigh the options of buying vs leasing. There can be tax advantages to leasing a car, especially for business owners who use their car for business and may be able to write off the monthly lease payment. However, many lease terms limit the amount of miles you may drive over the term of the lease  (anywhere between 30,000 to 45,000 miles on a 3 year lease) and charge costly “overage fees” if you drive more than the limit. There are benefits to buying a car if you drive over 10,000 miles per year or if you are not able to write off a leased car payment in your taxes due to your employment classification (ask your accountant).

 

Now that we have some of  the basics covered, here are some insider tips to get the best deal possible.

 

4) Decide how you will pay for the car.

 The big question is if you will finance or pay cash. This is important because it will affect your price and strategy. If you are new to the U.S., some car salesmen may tell you that you will have to pay a very high interest rate if you finance (8-18%), which can cost thousands of dollars over the life of the loan. To get around this, call a few dealerships and ask to talk to the manager. Ask if he/she can get you a good interest rate (3.99 percent as of this writing) if you buy the car from them. Be sure to get the interest rate quote in writing or in an email from the manager.  I have succeeded in negotiating a 3.99 percent loan for expats with no U.S. credit history so I know this is possible. Shop around for your own financing from your bank or credit union before you go to the dealership and if you get a good quote take it to the dealer and ask if they can beat it.

 

Pro tip for financing buyers: Hint that you have several friends in the same position as you, moving to the area that will be interested to buy soon as well. (This is true because you will soon have many coworkers in your position that you could recommend a dealer to.) This may open the financing doors for you.  In my case, this is very true since I always refer my clients looking for financing to dealers that offer very low interest rates.

 

Pro tip for cash buyers: If you have the money and have decided to pay in cash, do not tell the dealer you are buying the car in cash up front! Dealers will often ask you at the beginning how you plan on paying for the car. Dodge the question. This is because dealerships get kickbacks from lenders when you finance the car and prefer you to finance. They will push harder to get the best price for you if they think you are financing the purchase. Always negotiate the price of the car before discussing how you will pay for it.

 

5) Test Drive but Do Not Buy (Planting the Seed).

 

Many car shoppers are under the impression that if they step into a dealership and test drive a car, they are supposed to make a purchase right away. Resist this pressure! Go to multiple dealerships to test drive the cars on your list. This is not like shopping for a pair of shoes, but a decision that could have financial impacts for years to come. Get a quote from each dealership, and let them know that you are in the market for the best price. Remember that you are in the driver’s seat in these situations because you are not in desperation mode for a car. The dealer, however, may need to make his/her quota (more on that later). Let the dealer make the first move and quote their best price on the car and sidestep the sly question “How much are you looking to pay for a car?” The answer I give is, “I’ve done my research and I’d like to hear your best price.” This step will help plant the seed for step 6.

 

Pro Tip: This step is easier to achieve if you go to one of the several “Auto Malls” around the Bay Area. These are whole commercial districts in some cities where all the major automakers have dealerships in one place. You can even tell the dealer that you are shopping for the best price, and will be just down the street!

 

And finally, the secret tip that has helped save my clients even more money...

 


6) Negotiate! (But not in person)

 

Once you have your ideal car and you know the approximate cost through research, and you have planted a seed with a face-to-face test drive, start negotiations - but not in person! Email 3 to 4 local dealerships within 40 miles of your home (and even a few outside of your local area) as well as the dealerships where you test drove cars. Dealerships just outside large metro areas often give deeper discounts on price, so if you are willing to drive an hour or so to save up to $1,000 on a car, include a few distant dealers on your email list. Tell the sales team that you are writing to several dealerships and that whoever has the car you are looking for at the best price will make the sale. If you received a good quote from a dealer through your test drive, even better. Include this quote and tell the dealerships to beat that price and the sale will be theirs. Remember, dealerships in the U.S. are independently owned - so two different Toyota dealerships will compete to give you a better price if they know that they have the car you want.

 

 

 

 

Once you have a price quote from several dealerships, send the lowest quote to each dealership again to start a bid and give them one last opportunity beat the lowest quote and make the sale. Your previous research will help you to know a good price quote when you hear one.

 

 

 

 

Pro Tip: You are not desperate. There is nothing car salespeople love more than desperation. Must have car today. No! Even if you really must have a car soon, you will get a better price if you act like you have all the time in the world. When the salesperson asks you when you must have the car, tell them you are not in a hurry and don’t give a specific time frame.

 

Pro Tip: Negotiate around the end of the month. Some dealerships have quotas that reward a bonus to the staff for a certain number of cars sold that month. They may sell you a car for far below MSRP(Manufacturers Suggested Retail Price) if they will meet the quota as a result of your sale. This is why it is important to send your list to several dealerships and keep checking back throughout the week.

 

So there you have it. Some basic car buying tips for expats in the U.S. and some secret strategies that even the most savvy shopper can use. Happy shopping!

 

Love,

Move Bay Area

 

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