The Joy of Buying a New Car: 9 Car Buying Tips

By Vincent Scordo on 5 December 2009 (Updated 6 July 2012) 16 comments
Photo: RBerteig

The process of buying a car is just not what it used to be. Gone are the days of brand loyalty, limited selection, and awkward and long-winded pricing negotiations. Nowadays, consumers often focus on car reliability rather than nameplates, the exact model that meets their families’ needs, and are well versed on exactly how much their car should cost, including all selected options. It’s safe to say that the car buying momentum has shifted from car dealer to car consumer, and it’s a great time to be buying a car! (See also: How to Save Money Buying a New Car and Be Happy)

There are, however, a few key areas and tips that prospective car shoppers must keep in mind when looking to buy a new or used vehicle. At the least, the new or used car buyer must do his or her research upfront and be as prepared as a trial attorney on court day before buying a new or used hunk of steel. Here, then, are 9 key car buying tips that stem from years of industry knowledge and practical, hands-on experience.

1. The Magic Word: Reliability

Long term reliability is defined broadly as how well your car will run without expensive maintenance and repair (outside of standard oil and filter changes, new tires and brake pads, etc.). Toyota and Honda, for example, have had excellent long term reliability over the last 10-15 years, and most customers are extremely happy with various models from the two brands. Vehicles with good reliability require fewer trips to the mechanic and provide piece of mind while on the road, not to mention playing a large role in resale value. In short, reliability should be the number one item on your car shopping list.

2. Buy and Hold: Cost of Vehicle Ownership

The Cost of Vehicle Ownership is the amount of money a car owner will spend over the lifetime of a car. Just image if you knew how much your fancy foreign car would cost you to insure, repair, and fill with fuel every week — would you buy the same car again? Most cost of vehicle ownership information includes vehicle depreciation and online tools. (Edmunds’ True Cost to Own exposes the full five year cost of owning and buying a vehicle.) From a practical perspective, you may find that even though a particular make and model has a higher initial purchase price, it may be cheaper to own over a 5-10 year period (making a more expensive vehicle, at times, a better value).

3. The Myth of MSRP: Pricing

Car dealerships are privy to a host of pricing data such as MSRP, dealer invoice price, rebates, special interest rates, OEM incentives, vehicle availability, etc. Fortunately, car consumers have access to the same data via the many third party auto sites (Edmunds, MSN Autos, KBB, etc.)! Let’s break down the data points:

  • MSRP: this is the manufacturer suggested retail price, and it’s exactly what the acronym implies (what the producer <or OEM> of the car suggests the dealer should sell the car for). Car shoppers should ignore this figure.
     
  • Dealer Invoice Price: this is the price the dealer paid the OEM to acquire the vehicle, and it is never the same price as the MSRP. If you can get dealer invoice price on a vehicle that is in demand and has good reliability, then you’ve gotten a great deal. You should be able to get a document stating dealer invoice from your dealership (or simply get the VIN# and call the OEM).
     
  • Special interest rates and incentives: these are additional cash back offers and special interest rates on particular makes and models. The OEM or dealership can offer the aforementioned incentives, and they are usually disclosed upfront.

Generally speaking, a car shopper should never go into a dealership until they’ve completed all the necessary pricing research. Moreover, a car shopper should always focus on the total price of a vehicle (regardless of whether you’ll be leasing or buying) versus a monthly payment (this is a typical dealer tactic that sways the shopper’s attention away from overall pricing to a monthly payment figure). Generally, the dealer wants to make a profit on every vehicle they sell, and unless you’re buying a vehicle that nobody wants, you can expect to pay a little bit over the dealer invoice price for your new car (the trick is to find the dealer invoice price, which is below MSRP, and then start negotiating).

4. The Age Old Dilemma: Buying/Leasing

Buying a new vehicle will, generally, save you a ton of money over the long term and is often the better choice from a finance perspective. There are some benefits to leasing a vehicle though, such as driving a new car every couple of years and limited maintenance and repairs (a new car should have less maintenance than an 8 year old vehicle, for example). However, putting down a decent down payment and buying a new car will save you money over the long term — provided you maintain your vehicle according to OEM specs and aim to pay off the vehicle as soon as possible.

5. The No-Brainer: Buying Used

I’ll let you in on a little secret: almost all new vehicles sold in the U.S. today are made to run maintenance free for at least 100K miles. Thus, a well maintained vehicle should have no problem lasting 200K+ miles. What this means is that buying a 3-4 year old used vehicle will be one of the smartest financial decisions you’ll ever make (as you let the person who wants that new car smell — which is artificially sprayed into the interior of the vehicle at the factory, by the way — pay for the depreciation, which is close to 50% at the three year mark). So, buy a reliable 3-4 year old used vehicle with low cost of vehicle ownership and good reliability. Oh, and skip the certified pre-owned designation dealerships slap on used vehicles. (This is often a practice that varies from OEM to OEM, and at the minimum, includes checking brake ware and engine oil and filter.) My advice is to bring the used vehicle you’d like to buy to your favorite independent mechanic and have him or her inspect the vehicle.

6. You Don’t Need a Butt Warmer: Necessary Vehicle Options

When people think about vehicle options they think leather seats, GPS, rear gate closer, automatic starter, iPod compatibility, etc., but they often disregard key safety features that no car driver should be without. So, when looking for a new or used vehicle, make sure the following vehicle options/features are included:

  • Electronic Stability Control (or ESC): this feature will basically save your life if you lose control of your vehicle. ESC works in conjunction with the vehicle brake system and engine management software, and if the vehicle computer senses wheel slip (because of sudden breaking on ice or wet roadways), the computer will begin braking and de-accelerate the vehicle so that the driver can regain control and avoid a crash. You’d be surprised how many people overlook this life saving feature (and by 2012 ESC will be standard on all cars sold in the U.S.).
     
  • Side Impact and Rear Air Bags: Like ESC, many high priced car brands include additional air bags as standard, and that’s a good thing! Air bags, of course, save lives, and additional front and rear passenger side and front bags are worth the added expense.
     
  • Anti Lock Brakes: Yes, this is becoming more and more standard on new vehicles, but when I purchased my 2005 Mazda 3 I had to select Anti Lock Brakes as an option. Controlling a vehicle that has suddenly locked up its tires is difficult, even for trained professional drivers.
     
  • Back up camera: given that many new cars have curved exterior styling, it’s become increasingly difficult for car drivers to see out of the rear and side of their vehicle (hence the increasing amount of blind spots). A good back up camera (like the one found in the 2009 Nissan Murano, for example) will make up for the inability to see out the back and side of most vehicles.

You can skip leather seats (which are often synthetic), GPS (just buy an aftermarket device or use your Blackberry or iPhone), heated and cooled seats, rear seat entertainment packages, special paint, fancy rims, and low performance sports tires (they are often disastrous in snow and rain and have a low tread life).

7. The Car as Appliance: Styling

Here’s where the luxury OEMs begin to tempt your non-analytical side: German manufacturers, for example, claim “European” exterior styling with “cutting edge lines” and “beautifully sculpted” interiors with “maple wood grain,” “Nappa” leather, and “ambient lighting” that make you feel like you’re at your local AMC movie theatre. My advice (and you probably guessed it by now) is to skip the urge to buy a vehicle because of looks or what other people may think about the styling of your new vehicle. From an ownership and cost perspective, you should pretty much avoid buying a car because it looks pretty.

8. The Only Thing The Mafia Got Right (i.e., only be loyal to your family): Brand Loyalty

As a recent NY Times article stated about car shopping trends, brand loyalty is dead. Gone are the days when dad would head down to the local Ford Dealership every ten years and pick up a new car (often buying 4-5 new cars from the same mom and pop dealership over a lifetime). Moreover, dad would also train little Timmy to buy from the same dealership, and the trend would continue over generations. (This is just not happening anymore and will never happen again.) More and more, car shoppers will abandon their previous make and model for a cheaper and more reliable vehicle, even if it means switching brands and dealerships. The new “loyalty” is about which vehicle lasts the longest, presents the best value, and will not bankrupt the owner to maintain over a long period of time.

9. Don’t Be Afraid: Repair and Maintenance.

It’s a fact that at most dealerships, the biggest revenue producing departments are the Parts and Service areas. The dealership relies on new customers thinking they have to service their vehicle where they purchased it (charging $45 for an oil and filter change, for example). Well, this is not true and, moreover, incredibly costly. In my opinion, the only work that should be done at a dealership is any item under warranty (thus, free work). For all other maintenance (oil and filter change, new tires, brakes, exhaust system, alignments, etc.) and repair, go to your local ASE certified mechanic. And treat your local mechanic well (buy him wine and lunch)!

This is a guest post from Vince Scordo. Check out these other great articles from Scordo.com

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Guest's picture
Rick

Your "#5 The No-Brainer: Buying Used" is good advice. I just bought a used car but with a slightly different twist. I bought a Natural Gas Vehicle (NGV). This isn't for everyone but if your state is friendly to NGVs it could save you a lot of money. I pay 93 cents a gallon for CNG (Compressed Natural Gas) and get a $2,500 tax credit on the car. There are other advantages but some disadvantages. The purchase generated so much interest amongst my acquaintances that I had to post the details online. ( http://www.rickety.us/2009/11/driving-on-the-cheap/ )

I like this NGV so much am I considering another purchase, this time a bi-fuel NGV.

Guest's picture
JacobS

This is solid information. Info on reliability, cost of vehicle info, and buying used is great! Goes right in line with all the other great practical info on Scordo.com.

Jacob

Guest's picture

I just retired after 25 years in auto sales. You covered this subject very well indeed. Good work.

John DeFlumeri Jr

Guest's picture

I am a little perplexed why #4 was not at the top of the list considering this is WiseBread?

Very good points almost all the way through, though while it is true dealer service departments generates higher profit margins than with vehicle sales, service departments are rarely their number one revenue generator. Far more revenue comes from the vehicle sales.

Personally I have found that while dealers, on average, may cost more, like anything else a little comparison shopping and negotiation will keep you on the better side of the averages while increasing the likelihood of higher quality service. Whether you pick a dealer or an ASE mechanic this is where loyalty can be an advantage.

Guest's picture

Leanlifecoach, the tips are in no particular order. However, in my personal opinion, reliability and cost of vehicle ownership are more important than buying versus leasing (from a quality and buying the right car perspective). On where to go and have servce done, I agree with you that loyality is important (however in my experience I've always found dealer service departments to be more expensive than a good quality ASE mechanic.

John, glad the info syncs with your experience in auto sales!

Guest's picture
Clayton

One thing that helps me when talking with salesmen is to write down my goal for the car or any other object, and don't let him see it. For me it reinforces the decision I've already made and then I don't walk out feeling like I made an impulse decision.

Guest's picture

Thanks for the tips.
The best of course is buying second hand. There is incredilbe depreciation on new cars so buying a good second hand one can save you heaps.
My business partner has bought the top of the range, end of model, two years old for a long time and found he has a great motoring experience with an affordable costs

Guest's picture

Good overview article that covers most of the basics. I think that on the leasing, the maintenance benefit is overstated when you look at point #5 which is that most cars won't need maintenance for a long time. If you do your homework and get that reliable car, you won't have many issues. That's one of the real problems that auto makers have today, their products are lasting 10-15 years which means fewer people needing to buy a car. Good for consumers though.

Auto dealers vary widely when it comes to service. Some are very good, albeit expensive, and others are nearly criminal with inflating the services needed. I'd recommend finding a good independent certified mechanic. And I agree, buy them lunch and you'll get your cars done much faster and cheaper.

Guest's picture
Charles Cohn

One consideration that hasn't been discussed here is safety. We drive a fullsize van which we have converted to a camper. We have also had a small car as our second car. A couple of years ago, we were in a freak accident driving on the Interstate, where a car on the other side had a collision and caromed across the median and hit us. We had just minor injuries. I am sure that we would have been a lot worse off, maybe badly injured or killed, if we had been driving a small, politically-correct car.

Therefore, I replaced the van with another full-size van. Since my wife gave up driving shortly after that, the van is now our only vehicle. I am willing to pay the extra gas costs for safety.

Guest's picture
Guest

If everyone gets the invoice price for a new car, the dealership will go under. After all, the employees aren't going to work for free!

Guest's picture
Guest

This is a good one:

When buying an old car, make sure you know where's the nearest car repair garage!

Guest's picture
Rose

Where can I find the number for Honda and Toyota to check what the dealer paid?

Guest's picture

Your advice is definitely sound. Having been a car salesman for the last 20 years. Many car buyers will overlook some of the basic elements of ownership and just focus on the price. I compiled several in-depth chapters and calculators on my site http://hoopdi.com that are helpful to anyone who is planning a new car purchase. #4 Buying vs Leasing is something all buying should look into.

Guest's picture
mcshaun

walk out if deal changes. they are still trying to screw you.

Guest's picture
Guest

A helpful method I learned to find the best price is to use the Edmunds.com message board and http://www.truecar.com to find the lowest price that people are paying for the car I wanted. Then you know the best price you can really expect to pay, rather than the made up dealer prices.

Guest's picture
Brad

We have been living car payment free for about a year now and having that extra money has helped us max out our IRA. We will be trading our cars in soon and this article was very helpful. We always buy 2-4 year old cars and let someone else pay most of the depreciation.