Buying a New Car on the Internet

Buying a new car online usually means that you end up getting in touch with a local dealership to finalize the purchase. The online part is where you do research — gather information to prepare yourself for the purchase (and save a good deal of money as a result). The dealership part is where you move from the virtual world of information into the real world of bumpers, tires and salesmen.

You can use the Internet to gather information about vehicles, arrange your financing in advance, and save money on insurance. But you want to actually test-drive the car, see its color for yourself, feel its leg room, examine the trunk space, and otherwise physically engage the machine at a dealership. And you sometimes must negotiate prices — both for the trade-in and the new car — with a real salesperson.

For these reasons, online car-buying services are often mainly referral-services — they put you in touch with a dealer in your area. The difference between the online approach and traditional car buying is that you meet the dealer already prepared. You can, therefore, greatly reduce the amount of time that you spend at the dealership and the amount of negotiation necessary to secure the deal. And above all, you can greatly reduce the price that you pay for a vehicle. Going online to buy a car is really a smart move.

TIP
At the time that you first visit the dealer to test drive the car, ask for a blank copy of the dealer's standard contract. Now, however, isn't yet the time for negotiation. You want to go home and, in the peace and quiet of your bubble bath or whatever, read the thing and circle any bad or confusing spots. You're then even better prepared when you return to the dealership for the final negotiations. This tactic is yet another way to do your homework before you get down to the real nitty-gritty of negotiation. You're making two trips to the dealer instead of just one, which gives you a significant advantage over just checking things out and making the deal in a single visit.

Sure, a few companies actually do sell cars online, and you never need meet with a real human being to complete the transaction with such online dealers. But these few direct-sales businesses are primarily either credit unions, fleet-sales outfits, or brokers.

WARNING!
Car sales are probably second only to liquor sales in the number of laws governing the transaction. What's more, many of these laws currently rule out auto sales to consumers across state lines.

The companies that people widely use and know on the Internet, such as Autobytel and CarPoint, don't actually sell cars themselves. They merely put you in touch with a dealer. You then finalize the purchase at the dealership.

Several other chapters in this site show you how to do your homework — finding financing, insurance, the car that best suits you, the dealer cost of that car, the value of your trade-in, and so on.

In this chapter, I assume that you've done the homework. You've even gone so far as to take my advice and have already chosen a nearby dealer (for convenient servicing and maintenance) and a dealer large enough to make negotiations as flexible as possible. What's more, you've visited the dealer and taken a test drive — finalizing your selection by actually experiencing the car in the real world.

This chapter, therefore, focuses on your actually buying a car — the point where you finalize the negotiations with the salesperson and pay some money. Before getting into the details of completing the deal, however, I'm first going to look at some of the cars that other people are choosing. If you've already decided on your dream car, the following lists may reinforce that decision. If you haven't yet decided, however, perhaps checking out a few top-ten lists may inspire you.

Joining the Crowd

If you read some of the other chapters in this book that tell you how to narrow your selection of a new car, but you still can't make up your mind, maybe you just need to go with the crowd.

If you're like most people, you sometimes buy a book or a record simply because it's a bestseller. You figure that sheer numbers of sales must indicate satisfied customers. Popularity, after all, counts. If you can't make up your mind, taking a look at how others made up theirs sometimes helps.

Can the Internet help you determine which new cars are currently selling the best? (The answer is yes.) Which cars are the favorites of GenX buyers or of fat-cat Boomers? Is the Earth round?

To find out which new cars are the most requested at the CarPoint site for the past 12 months, open your Web browser and go to www.carpoint.msn.com, CarPoint's home page. Click the Table of Contents link. Then, in the Featured Articles section, click CarPoint User's Top Ten.

After You Get to the Dealer

After you finish your online research and decide on a vehicle to purchase, you're ready to take up arms and march right in on a dealer — and avoid getting slammed. With the advice that I offer in this site, along with all your online research, you can now give the dealer a few hundred dollars profit on the sale (instead of a few thousand). A few hundred dollars, after all, is plenty of profit for the few hours the dealer spends as you test and then negotiate terms for the new car.

Say that, thanks to your research, you already know what car, what accessories, and what options you want. You've already arranged insurance and financing online. You know the dealer cost of the car you're after, and you're prepared to ask to see the factory invoice. (See, however, the following Warning.) Three steps to a successful purchase remain. The first step is to discuss and finalize the money that you're to get for your trade-in. For most of us, the trade-in provides the down payment. That's a very good reason to insist on getting a fair price. Most new car buyers, however, get the shaft during the trade-in negotiation.

WARNING!
I'm repeating this warning from previous chapters so that you're not negotiating in a dreamland. You must get an accurate dealer cost of the car that you're buying. If you get a new-car dealer-price quote from an Internet source, it's merely an estimated dealer cost. This figure can be a low-ball estimate by several hundred dollars. Why? It can exclude extra options, import fees, gas charges, possible extra advertising costs, and so on. At the dealership, ask to see the actual factory invoice for the car that you're buying. This figure is usually higher than the prices you get on the Internet for the standard models. Don't decide your final offer merely on the estimated dealer-invoice price that you find on the Internet.

Don't give away you trade-in

All too many people (most people, in fact) quickly cave in if a dealer offers a really, really low price for their trade-in. In the typical trade-in example that I describe in the following section, if you agree to the salesperson's "considered offer," you lose money by being either too timid or too uninformed about auto negotiating. Saving you this ridiculous waste of good money is the topic of this section.

If you're trading in your existing car, your first step in negotiating at the dealership is to agree on the trade-in price. The reasons are two: The salesperson is unlikely to start the negotiations with this topic, so you gain immediate control of the negotiation process. More important, most people, after buying a new car, worry that they got too little for their trade-in. Why? Because they did get too little.

Most people perhaps spend a couple of hours haggling over the details of the new car they're buying, and then almost everything is set for them to leave the lot in the shiny new car they now love. Only one ittle detail remains: What do they get for their existing car? At this point, most people cave and accept the (pitiful) offer that the salesperson provides — along with a song-and-dance about how "offering this price is common these days" or "the moon is in the seventh house" or "our mechanic reports rusting on the undercarriage" or whatever.

You can find used car prices in the Blue Book. Three prices are available for used cars. Imagine, for example, that your car lists for a used retail price at $12,000. It's then likely to list for around, say, $9,000 wholesale, with an auction price of about $8,300. A salesperson is likely to offer you around $5,700 and, if you scream and moan, the salesperson may go up to $6,500, weeping all the way about what the sales manager is going to do after this shockingly high price becomes general knowledge. (No Christmas goose for his son Tiny Tim this year. Thanks to you.)

Find out the Blue Book value and the Black Book value before you start negotiations. You want to know what the dealer can sell your car for — and remember that the auction value is a rock-bottom value. If the dealer offers $5,700 (using the examples that I give in the preceding paragraph), you counter with $9,000, the wholesale value. Then you can allow the salesperson to whittle you down to a couple hundred dollars more than the auction price of $8,300.

Just add the word firm
Don't accept any amount lower than the auction price for your trade-in (unless you have a really good reason, such as that the entire undercarriage is really rusting). If necessary, extract your current car from the negotiation process. You can almost always easily get the auction price by putting a classified ad in the paper — phoning in the ad and including the word "firm" so that you don't need to haggle with strangers isn't that big of a deal. At the auction price, moreover, you can be firm. Someone almost certainly is going to buy it unless you live in some remote Wyoming outback, in which case your negotiation strategies must take geographical extremity into account.

After you save yourself two or three thousand dollars on the trade-in, you can let the sales process move on to Step Two: the cost of the car that you're buying (including all options and accessories — everything).

Negotiating the price

Not everyone pays the same price buying the same car at the same dealership. Remember that fact. Unlike most cultures, most Americans simply aren't accustomed to haggling. From lack of practice, they're not good at it. And they tend to think that it makes them look cheap, stubborn, pushy, disagreeable, or impolite — or some combination of these traits.

Unless, however, you're willing to learn the rules of negotiating a low price, you want to pay someone else to negotiate for you (see the section "If You Simply Can't Negotiate," later in this chapter), or you really want one of those new no-haggle cars (in other words, a Saturn) — expect to lose hundreds and maybe even thousands of dollars on the price of your new car.

People pay different prices
People pay different prices for the same car. You can pay top dollar, or you can pay close to dealer cost — or you can pay somewhere in between. Bad negotiators may give the dealer $3,000 in profit; great negotiators may give the dealer $300 in profit. Obviously, salesmen and dealers prefer to get $3,000 from everyone — but experience shows that they can expect a spectrum of profit depending on how the customer behaves during the process. If you're polite, persistent, and prepared — you can usually drive the price down near the low end of the spectrum.

If you follow the steps that I outline earlier in this chapter, you're likely to get a good price from the dealer for your trade-in (or you do after you sell it yourself through the classifieds). Now to complete the process of buying the new car. This point is where you discuss — and finalize — the price of your new car.

The dealer is likely to begin negotiations with the full list price, acting as if that amount's understood as the selling price. I repeat: Remember to proceed with the negotiations at your own pace and remain ready at all times to walk. But always stay friendly and polite. You usually get better results if you don't make an enemy.

Stay polite, yet firm
My favorite tactic is courteous firmness. You do your homework and you know what price you're willing to pay. Respond to the dealer's first offer with whatever price you've already decided you're willing to pay. One tactic is to simply, politely make your first and final offer. You can sit there and dicker, but make quite plain to the dealer that, no matter what happens, you've already researched the price and you've already made your one and only offer. Other experts suggest making a low offer and then gradually giving in to the salesperson's attempts to bring you up to your final offer. Whatever approach you take, make sure that the dealer's clear that you're a serious buyer and always remain calm and pleasant.

If you feel pressure from the salesperson and become uncomfortable, you can always ask for a different salesperson at that dealership. Or you can leave and take your business elsewhere.

You don't need to explain your personal preferences in a car or describe your lifestyle, your hopes, and your fears. You don't need to make friends with the salesperson or the supervisor. You've arrived at the dealership with a precise idea of what you're willing to pay for a particular car. You know exactly which options and accessories you want (and don't want). You're paying cash — you have a check in hand because you've already arranged the financing. You don't need to worry about insurance because that's finalized. You've already decided whether you want an extended warranty and what to pay for that. You've reduced all the variables to one: How long does the salesperson take to realize that you're not going to change your offer?

In fact, all you need to tell the salesperson is that you're willing to pay X dollars for X car with X accessories. It's a simple, straightforward few hundred dollars for the dealership to make. Make the dealer aware that he's dealing with an Internet buyer. In other words, the dealer has a new kind of customer: someone who knows just what he wants and is already decided on just what he's willing to pay for it. And if you take that advice that I give you earlier in this chapter, you've already studied a copy of the dealer's contract and made a note of any questions that you want the dealer to clear up before you sign the deal.

If you simply can't neqotiate

If you absolutely can't stand negotiation but realize that, by avoiding it, you may cost yourself as much as $2,000 or more when purchasing a new car, consider hiring an auto consultant (also known as a buyer's agent) who can do the dirty work for you. The cost of such a consultant can prove remarkably reasonable, considering the savings that you get in cash and the burden the agent lifts from those who were trained from day one to avoid conflict at all costs. And the operative word here is costs if you're overly passive about negotiating.

Can you find such consultants on the Internet? Well, the Internet hosts almost every possible topic. If you can imagine a profession, a service or a topic, you're likely to find it available on the Internet, as the following sections confirm.

Try the National Association of Buyers' Associates
One good resource if you want to hire an agent is the National Association of Buyers' Associates (at www.naba.com on the Web).

AutoAdvisor can help you negotiate
Another good online source of auto buyers' agents is AutoAdvisor (at www.autoadvisor.com on the Web).

Going, Going, Gone! Using Online Auto Auctions

Although you don't currently find new-car auctions on the Web, you can buy a used car via online auctions. And now and then you can find at an online auction a used car that's "almost new" (very low mileage). Some experts claim that if money is your main concern, buying a low-mileage pre-owned car is the greatest bargain going.

Why can't you find new-car auctions online yet? Congressional politicians, or lawmakers as they sometimes prefer us to call them, keep on making laws! (No surprise there.) They've made laws governing interstate sales of new autos, and those laws seriously restrict such sales to individuals — and that includes through online auctions. This situation may change in the future, however, as these lawmakers are in the business of making laws, so they sometimes pass new legislation that rescinds their previous legislation.

WARNING!
You, the consumer, face another little problem with buying cars through online auctions: The important test-drive portion of a new-car purchase is usually impossible. Going to eBay to buy a cookbook is fine — if the description of the cookbook fails to mention that the index is torn out and grease splatters cover many of the pages, you're out only a few bucks. But how can you explain yourself if you spend thousands of dollars on a car with serious flaws and then must spend thousands more repairing those flaws? Remember the advice of your grandfather, the farmer: Never buy a pig in a poke.

Auctions R Us: eBay sells cars

Speaking of eBay, the grand old leader of online auctioning added a special vehicle-auction page to its other auction wares back in August 1999. Some cars were put up for auction at eBay before this official recognition, but now eBay offers this section of its site solely for vehicle auction sales. You can find ordinary vehicles here as well as a special "Showroom" featuring classic cars.

To access eBay's auto zone, first go to eBay's home page (at www.ebay.com on the Web) and then click the Automotive link.

The week that I checked, eBay was offering 1,545 cars, 549 trucks, and 139 RVs at auction, as well as hundreds of motorcycles.
If you're not familiar with the eBay auctioning process, you can easily learn about it by connecting to eBay. They offer excellent help and tutorials.

If the possibility of finding a real bargain in a car at an online auction attracts you, in spite of the potential difficulties that I describe in the preceding section, check out the Microsoft Network's auction site (at www.auctions.msn.com/html /cat17466/pagel.htm on the Web).

If you go to the MSN car auction site, you're probably going to find its features a little familiar if you've ever bought something from eBay or other online auction sites.

New-vehicle auctions

Rolling Wheels, a very interesting online vehicle-auction site, now actually offers new vehicles and also provides for test driving before you buy. The site puts you in touch with one of its "member dealers" in your area so that you can drive the model you want to bid on to see whether it's what you're after. To discover what the Rolling Wheels auction site offers, go to www.rollingwheels.com on the Web.

This site describes itself in the following manner: "Your new-vehicle auction center. The most hassle-free way to by your next new car. If you buy a vehicles from Rollingwheels.com, you set your price and we gurrantee that you're in and out of the dealership in 60 minutes or less. You set your own price because and sell all our vehicles using our exclusive auction format."