Saving Money on a Car Purchase

Next to buying a house, buying a vehicle is one of the most expensive purchases we make.  However, it is also one of the most confusing and bewildering.  

It is one of the few times you are going to be pitted against professionals who are specially trained to separate you from as much of your money as they possibly can.  

The good news is that if you go into this process prepared with the correct strategy, you have a good chance of coming out of with a good deal.  For example – when my son Matt went in to get his last car – a Ford Escape, I went with him and we ended up saving him $3,000.  How do I know that?  We found an invoice in the glove box from the previous owner.  A girl had bought the car 2 months earlier and had to return it because she couldn’t make the payments.  Her price tag – exactly $3,000 more than we paid.

Here is one big tip that will save you some money – go in at the END of the month.  That is when the the window is closing for the big sales prizes and your salesman will be at maximum motivation to make a sale.  

Step 1 – Do your research first.  This is at least 50% of the job and with all the resources available on the Internet, there is no excuse for not being fully prepared.  

First you need to look at your situation and determine what model of car your family needs.  Think about what is most important to you.  Is it price, seating, style, safety?  Usually a combination of all these things.  

Some sites you can use to do your research are –,, consumer reports.  Try to focus on “meaty” options like airbags, durability, and reliability rather than “soft” options like color, type of seats (although I do LOVE a seat heater), and fancy trims.  I will drive the ugliest color in the world if it’s a good deal and a reliable car.

Ideally, before you ever set foot on a dealer lot, you should have the following information in your back pocket:

–  The model and features you want (roughly)
–  The range of prices for the vehicle – look at both dealers and private parties.  You may even do some test drives through the Auto Trader just to see what models may suit you.  
–  Roughly how many of this model are available in your area – if you want something very specific or unusual, that is going to limit your bargaining power, but if it is a very popular car that every dealer in town carries, you are in the “sweet spot” for bargaining.

Step 2 – Now it is time to figure out how much you can accord to spend.  Obviously cash is your BEST option, but few people can pay cash for a car – although I have done it four different times – due to inheritances and other windfalls.  Your second-best option is usually a credit union or a bank.  Check the papers or the websites to compare rates.  Using the dealer’s financing is almost always a bad deal – avoid if at all possible unless it is a phenomenal deal.  

If you go into a credit union before a purchase, they will be happy to review your credit and circumstances and pre-approve you for whatever amount of credit you can qualify for.  Keep in mind that this is a MAXIMUM number, not necessarily a number you can easily afford.  Use your common sense, pick a high number and DO NOT budge from it – well, you can go DOWN, but don’t go UP from there, even if you think it is the deal of the century on the most wonderful car in the world.  

Step 3 – Playing the Game.  Realize from the moment you step on a car lot, you are playing a game, even if you don’t think you are.  It’s sort of like a very polite tug-of-war with the dealer trying to get information out of you and trying to drive the transaction in his (her) favor and you trying to turn the tide in your favor.  Be pleasant, but resist the temptation to be chatty – you are a CLAM.  You are not there to be his buddy, you are there to complete a business transaction.  Keep the emotion out of it.  

Above all, do not reveal any financial information to them whatsoever.  If he asks how much you are looking to spend – say you aren’t sure, if he asks to run a credit report – politely decline and mutter something about the dealership next door, if he tries to get you to go talk to the finance guy – again politely decline and mention you will discuss financial arrangements later on.

One cardinal rule of negotiations – the first person who mentions a number usually loses.   

Once you have settled on the vehicle you want (and have checked it over thoroughly for any problems – given it a test-drive, etc.)  Now the game starts in earnest.  He is going to bring you a series of offers that are supposedly approved by his sales manager (actually, they are discussing football scores).  You are going to choose a number that is significantly lower than his offer and stick to it like glue.  This number is based on your research and it is going to be slightly lower than anyone else is offering this vehicle for.  

At appropriate intervals, you can employ your own game strategies – tell him you wish to have you own pow-wow with your husband.  One of you needs to look very dubious and shake your head a lot.  Go out and take another look at the vehicle, giving the impression that you might change your mind, or mention that you have kids to pick up from school soon.  If negotiations seem really stuck – mention that you have been talking to another guy from a rival  dealership and you may get a better deal.  Remember that every dealership in town carries similar cars and has similar deals.  

After about the 3rd round of offers, up your offer slightly to give him a little encouragement.  If it seems like he is starting to get within range of a final number (something that seems somewhat fair and affordable based on your research) consider offering him 10% less than that figure.  If you are truly stuck and he won’t come down at all – go ahead and go home.  I guarantee you will get a call from him later that night offering you something that is probably the best deal you are going to get.  Sign the deal and enjoy your new car.  

Final note – regarding add-on items, be cautious.  Undercoatings and stuff like that – you probably don’t need and they have a huge mark-up.  Warranties are usually a pretty good deal, but you have a week or so to do a little research before you sign on the dotted line for them.  I get my electronics warranties from Square Trade and they are about a 40% discount over the retailers.  They may offer car warranties or there may be other sites that offer reduced pricing, but be sure they are convenient to use and seem like a legit company.  

Photo credit:  Image courtesy of Grant Cochrane /


  1. Ahhh I wish I could negotiate. I did the best I could when I got my car a few years ago. I did pretty well, but I felt bad for getting the extended warranty! I’m not on the market for a new car yet, but I’ll have to remember not to mention any numbers! Dropping by from SITS!

  2. Stopping by from SITS Sharefest! I am getting ready to buy a new car in the next few months so this article is perfect!

  3. I worked in the dealership environment for years. Yes there are dealers out there that want you to part with your money and then there are dealers that want a little over time. Go with the ones that want a little over a long time. They want to build a relationship with you. I am not sure if you were talking about new or used cars in your piece. If you are purchasing a new car going at the end of the month is a good idea. For two reasons, if you have done your research you should know all of the factory incentives that are being offered. Those go away at the end of the month. New ones come out at the first of the month and there may not be any on the model you want. Also the salesman has a number of cars as does the dealership have a number of new cars that they want to sell per month. The factory will pick certain models and give the dealership an incentive to sell so many of them. The dealership does not have to give you any part of that money. But if they are one away of that model from hitting a 50,000 bonus and you want that last model they may give you some money to purchase it. They do have to give you all of the cash incentives by law. Also another good place to see how much for a new car is Here you can see your model and what people in your area paid for it. You can get a TrueCar price and the dealer will honor it. Before printing the certificate go in and ask the dealer if they will honor the truecar price and you will not need to do the certificate. When you hit a dealer with that certificate they have to pay a finders fee, save them some money and they will save you money… Be nice to your sales man, be a hard ass with the manager. They are paid the big bucks, not the sales man. Also the sales man will be your to go guy after the sale, you want someone on your side, not an enemy. Used cars are a whole different ball game, there is a lot of wiggle room, really do your home work for what you are looking for in year make and model and miles. This is where a dealership makes their sales money, it is not in new cars. They only usually make on a $35,000.00 new car about $1000.00 if that, a lot go out as mini deals making only $400.00 That is nothing compared to buying a pair of jeans at Kohls….. Great piece…. BTW I just bought tow new cars, and love them…. Visiting from SITSgirls ShareFest, great article.. LOVE IT!!!!

  4. I’m a little intimidated by dealerships…actually, I’ve never bought from one. My family prefers the strategy of buying cars through individual sellers rather than dealers because of the factor of not dealing with a trained salesman or the dealership markup. For that strategy, it is good if you or someone you know is skilled at inspecting the mechanical condition of the car and identifying any possible problems–my FIL is a mechanic, and most of the guys in my family have a pretty good history of working on their own cars so that gives us the confidence to buy from individuals–most recently my grandpa bought a 1997 Suburban in great shape, no rust, barely over 100,000 miles for $3,000. That was almost a year ago and that car’s been driven across the country and back with no problems, definitely a good buy!

  5. When we bought our first car, I did all the negotiating. My husband just sat back and watched. We went from dealership to dealership because no one would give me the price I wanted. I had done all the research. Finally at the last place, the salesman gave me his final price on the car we’d been discussing and I said thank you, and got up to walk out. He said “wait, what price do we need to be at for you to buy today?” I told him, he looked at me like I was nuts and said “why on earth are you bargaining so hard on a car at this level?” We were newly married and had no money. I replied that I’d done my research, and that someday we were going to be able to afford a nice car and I wanted to be able to negotiate well. The poor guy sighed, left and came back a few minutes later with my deal. So they didn’t make much, but they did make something and they sold a car. And I learned how to negotiate. I tell you though, my husband would have given in much sooner if he’d had his way…we spent a lot of time before we got the price I wanted!

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