10 Steps to Buying a Car or Truck



Problem to Solve

This guide will help readers solve the problem of not only paying too much for a new or used car, but to feel more in control while dealing with the dealership.


Buying a car is something that most everyone has to do at least once in their life. And if you are like me, you would rather get a root canal. But, do you know what the difference in you and me is? The difference is I have spent the last 21 years in and around the car business. Yep, that’s right. Even with all my experience and exposure, I still get nervous going to buy my own car.

That’s because of the fear of the unknown, the fear that you don’t really know if you got a “good deal” or not.  The fear that someone will take advantage of you and make you pay more than the last guy did.

Not only was I in the car business for over 10 years, I was a Finance Manager. We are the guys who really make money for the dealership.  I am still a consultant to auto dealers so I can’t divulge my name or they will blackball me if they find out I told you these secrets.

Ten Steps

  1. Work on your budget. Find out how much per month you can really afford to pay and be sure to include insurance and maintenance. You should plan on buying a car just like you would plan on buying a house. First you determine what you can afford or want to pay. If you can pay cash, that’s great. However, most of us have to buy a vehicle on the installment plan. Many people think they want a $30,000 car, then after finding out how much the payments are they realize they only can afford a $20,000 car. The bank will tell you that, the dealer won’t. He wants to sell you as vehicle as he can and finance for as long as you and his bank will let him.
    So, before you ever go look, know what your budget is, including your car insurance. That one item can really put you over budget. Go to your bank or credit union and find out about your credit. Ask to be pre-approved based on what you think you can afford monthly. They will tell you how much you can afford to buy. Your bank or credit union will tell you the real truth about where you stand credit-wise. A car dealer will generally only get you approved for more to sell you the car. They don’t care if you repo next month or not. They already made their money.
  2. Look at the ads in the Sunday papers but ONLY look at the rebates. Ignore the monthly payments or prices, they are almost always phony.  Some dealers have been known to add a supplemental window sticker on a vehicle that shows body side moldings. They charge up to $300 for a $20 item. They do this so they can run a Sunday ad that says “$10,000 discount from MSRP”.  In case you were wondering, MSRP stands for Manufacturer Suggested Retail Price. Now the first lie is that the phony discount is really off of DSRP, Dealer Suggested Retail Price or the “We Think You’re Stupid” sticker. Also, while on the subject of stickers, look out for the supplemental sticker that uses the term “ADP”. They will tell you this stands for Additional Dealer Products, in reality it means, Additional Dealer Profit.
    One thing you can do is find website like www.cartipsonline that will tell you not only what incentives are on vehicles for the customer, but will also inform you as to dealer incentives. Sometimes the factory will give the dealer cash back to help encourage them to move the cars. If you know about this money, you can possibly thousands of dollars
  3. Decide what kind of car or truck you want. Go to a dealer unprepared to buy. Have a time deadline, have somewhere to be. Take hungry kids with you, just kidding, that doesn’t help either of you. Leave your checkbook at home. Take a friend with you who is not involved in the buying process and have them set a time with the salesperson that you must leave by. Look at all of the cars you are interested in. Drive them all. They encourage it. If you have to make several trips, do so but make sure that the last trip is by the end of the month
  4. Go test drive the car you want and make sure you like it. You can’t wait and decide whether it’s the vehicle you really love or not when it’s time to buy it. You have to go in unattached. Take the sticker price and subtract about 11-13% from it, not including anything the dealership adds, in fact you do not want anything the dealer adds at this point. Then leave the dealership without buying. If you have a trade, leave it at home when you go look until you get to Step 6 .
    The test drive is a very important part of the process. Make sure the salesman does a “walk around” demonstration of the car first. Then, let him take you on the test drive. He will generally drive first thru a pre-determined route stopping at a pre-determined spot to change places with you. He has a route that he wants you to take back to the dealership. This route will not take you over any bumps or bad road. It will consist of mostly right turns as they don’t like you to drive the car with left turns as you may then find out you don’t care for the visibility as much.
    When you trade places, take another route while telling the salesman, “you don’t mind if I go this way do you?” If he has any sense at all, he will not object.
    Another thing about test drives, we make $20,000 + purchases based on a 20 minute test drive. Don’t you think you deserve more? I do and the dealer will to if you just stand up for yourself, no one else will. Once again, you may need to take a friend with you to make these suggestions to the salesperson if you are timid. They refer to these people as “third baseman”. They don’t like them, but know they have to be nice to them so they don’t negatively influence you. That’s why you bring them, of course.
  5. After you find the car you want to buy and know that you can afford, go home and do your research, call dealers in other towns from you and ask about pricing if you drove in from out of town, they will always quote you a great price because you are what’s called “plus business” for them since you don’t usually shop there.
  6. Go back to the dealer, make your offer, tell him what you will pay for the car and that he has a set time period to take the deal or leave it, if he let’s you get back into your car without stopping you, you really did make an offer too low, but do not go back in, call from home.
    This part of the transaction should be the quickest and smoothest part of the whole transaction, but it’s not. It is the tough part. Tough because you have to know what you want going in and stand firm on that. If you ever begin to think that you are wrong and they are right, LEAVE immediately. This is when they make the most profit on a vehicle. When you waver, they win.
  7. If you have a trade-in, leave it at home. This is critical. If you have a trade in, all of a sudden you will notice that you have no idea of what you are paying for the new car, but you may be ecstatic over what they are giving you for your trade in.
    They switch you to what they call “trade difference”. That means that if the new car stickers for $20,000 and should be sold to you for $15,000 to be a fair deal for you, and if your trade in is only worth $3000 and you want $4000, they will do the following.
    They will say to you, we will sell you our car for $18,500 difference. Now, can you tell what you got for yours? There is no way. Now you think that you got a discount and a good trade in for yours but they probably only gave you $2000 for your car and made $5000 more on the new one than they should have. This is even worse with a trade in. They have a bag full of tricks that they use and you cannot outsmart them once the bag gets opened.
    Remember, deal for the car and then deal for your trade in.
  8. Buy the car at the price you previously decided to pay. If something comes up in the negotiation, go home before you commit. DO NOT buy the car at this point. You will always lose money at this point. Do not finance with the dealership unless they can offer you better terms than your bank or credit union. Do not let them “spot deliver” you, under any circumstances. And if you have a trade in, now is the time to let them know and make sure you get at least wholesale blue book on it. If you feel like turn about is fair play, then by all means, go for it. By that, I mean, tell them that you have the car sold to a friend, but he won’t have his money for about 5 days or so. That’s all good, but you need to have your car sold BEFORE you can buy your new car. Now, this always gets them greedy. They will not let you leave the dealership without making you some kind of offer to at least give you what your friend is giving you. You can figure it out from here.
  9. If you have done your homework you will know exactly what you can get at your bank. That’s not good enough. Call around a few credit unions, which is where you will get your best rate. When you find the best one out there, tell your salesperson you are not financing with them. This also ensures that they do not switch you to “payment buying”. That means they only come back to you with $XXX down and $XXX per month. That is the best way to pay too much for your car.
    When you see the finance manager, tell him what your rate is, whether you bank there or not and I promise you, he will get close to that rate. If it’s close, you may want to consider using their bank because it is a lot easier, but if they can’t match it or get close, then if you followed step 1, you are already approved at your bank. Go finance there. Many times we made $3-5000 profit for the dealer just in the business office with financing, credit insurance and warranties.
  10. Do not buy credit insurance at the dealership. It is the second most profitable item they sell. I once had a dealer tell me to sell more, that’s “what pays for my new dealerships”. He used his credit insurance income to pay for his acquisitions. That’s a lot of money. They make anywhere from 45-55% on every dollar of premium.
    Do not buy any warranty or alarm system yet, you can always get a better price later. You can get a lot better price on alarm systems at aftermarket retailers. As far as extended warranties go, the manufacturer’s is the best, but you can buy it cheaper after the sale. If you want it, call around to every dealer that sells your make of vehicle and get a price, be sure and call towards the end of the month because the F&I person gets bonuses on how many they sell and if they sell one to a “walk-in”, it could make a big difference in their pay. They will sell it cheaper to get the numbers in their favor on payday.
  11. Do not allow the dealer to “spot deliver” you unless you have your own financing locked down and you know you can finance with your bank. “Spot deliver” means they send you home in the car while they get your financing approved. This works in the dealers favor in that you get attached to the car, your neighbors see it and you might be embarrassed to return it if the financing doesn’t go your way. They may tell you they are sure they can get it for you with $1000 down and $250 monthly, but then they call you back and tell you they need $2000 down and they payments are $350 per month and it’s for 72 months. They have now made a killing on you and they knew what they were doing from the very beginning.

In closing, buying a car or truck is like going to Vegas. If you are skilled and rational about it, you can win. But if you don’t know what you are doing and let your heart decide instead of your head, you will go to the cleaners with them every time. The average salesperson sells more cars in a month than you will buy in your life, so who’s better at it? That’s right, they are. But play it safe and you can win every time.

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