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How to save money buying a new car in 5 quick steps

When I wrote CarBuyingTips.com, I wanted to put in as much information as possible to educate my readers. I have received feedback from people telling me that they don't have time to read all of the pages so I have created this slimmed down version of the information.

In order to get the best deal on a new car, you need to understand that the dealer is playing with a stacked deck. As we show in the introductory chapter of our complete article, you are basically involved in a shell game. By following the steps on this page, you will be able to take away the dealers “house advantage” and get the best possible deal on your new car.

Step 1 - Determining a fair price
Before you do anything else, you need to determine what a realistic, fair price is to pay for the vehicle that you want. We have created a free spreadsheet for you to use to figure this out. Just click here to download the spreadsheet. In order to figure out the fair price, you will need the invoice pricing for the vehicle. There are two places to get invoice pricing. FightingChance sells a package (for $35) that includes the invoice pricing data as well as other valuable information like current dealer inventories and deals that other's have gotten. Although they charge you $35.00, the money you spend can end up saving you $1000's. Edmunds has invoice pricing available for free but from experience, it does not seem to be as accurate as FightingChance. Recently a friend of mine bought the fighting chance package (and saved $3200 off MSRP) on a 2005 Chevrolet Avalanche. The FightingChance data was perfectly accurate and his spreadsheet calculated the invoice price to the exact penny. When he priced the same vehicle using Edmunds, the invoice price was off by over $1000. Keep in mind that there are certain advertising fees (which can range from 1-3% of the MSRP) which are part of the invoice but neither FightingChance nor Edmunds will give you because they tend to vary from market to market. This fee can be found on the actual invoice, which the dealer can show you once you are into the negotiation. Our offer spreadsheet will estimate this cost if you don't have the exact fee amount.

Step 2 - Using competition to your advantage
After figuring out the fair price, the next thing you should do is fill out a free quote request from all of these web sites, InvoiceDealers, Cars.com, Yahoo!Autos, Edmunds.com, MyRide.com and CarsDirect. It only takes a few minutes to fill out each form and using all the sites, will guarantee that you will have the maximum number of dealers to negotiate with. The more dealers that you work with, the higher the likelihood that one will sell it to you at the lowest possible price.

When you fill out the forms at InvoiceDealers, Cars.com, Yahoo!Autos, Edmunds.com, MyRide.com and CarsDirect, you will be asked to give contact information (email, phone and address). This information is only used to provide you with a new car price quote and is not sold to any email or mailing lists. If you don't provide real contact information, you will not get a quote. Shortly after filling out the quote forms, the dealer internet sales managers will contact you. Tell them up front that you are working with multiple dealers. Give them the details on the car you are looking to purchase, and ask them to give you a bottom line price including all dealer fees. At this point, tell the dealer that you will not be trading in a car. If the subject of financing or special financing deals come up, tell them you will deal with this later and are only interested in the price of the car, not what your monthly payment will be.

Step 3 - Getting your financing in order
Most people are not aware that shopping around for financing is another way that you can save money. Let's just end one of the biggest myths of car shopping right here. The dealership is not the only place where you can get new car financing.

Before you can get the best rate on financing, you have to know what your credit score is. You can get a representation of your FICO credit score from Experian, Equifax or TrueCredit. You may have heard that many states entitle you to get a free copy of your credit report each year but this report does not include your FICO score. Your credit score is what is used to determine the interest rate (APR) that you will pay on your new car loan.

Now that you know your FICO credit score, you should apply to online lenders like Up2Drive for the best rates. If you are unable to get approved by Up2Drive, try myAutoLoan.com. They have a wide array of lenders for people with various credit backgrounds.

Step 4 - Figure out your trade-in value
Use Kelly Blue Book to estimate the trade-in and private resale value of your car. It will be up to you to decide which way to go. Trading in will be simpler and easier but you will get a higher amount for your used car by selling it privately. You will also need to consider the savings on sales tax that you will receive by trading in your used car. The trade-in value of your used car will reduce the taxable amount of your new car purchase by the value of your used car trade-in. You can play with the numbers on the offer spreadsheet to help you decide what to do.

Step 5 - Negotiating your new car purchase
Now that you've determined a fair price, figured out expected trade-in value, and received new car finance rates, it's time for the negotiations to begin. By this time, the forms you filled out at InvoiceDealers, Cars.com, Yahoo!Autos, Edmunds.com, MyRide.com and CarsDirect should have yielded many dealer contacts. The key to getting an accurate picture of the dealer's offer is to request that they give you the out-the-door cash price excluding rebates, incentives or trade-in's. The price should include all dealer added fees. At the beginning, don't let them use your trade-in or financing as part of the negotiation.

Tell the dealer that you will be paying cash and you will be selling your existing car on your own. Get the starting price from each dealer that you have made contact with. Then, take the lowest price and contact each of the other dealers. Tell them, another dealer offered me $XXXX.XX and ask if they can beat it. After round 2, take the lowest offer and repeat. At some point, they will stop going lower. You can tell that it is a fair price, by using our free "offer" spreadsheet, as well as forcing the dealers to compete against each other. Once the dealers have stopped lowering the price, contact the dealer which gave you the lowest price and say you would like to purchase the vehicle.

Now is the time to negotiate your trade-in value (unless you decided to sell it on your own). If the dealer doesn't offer you something close to the Kelly Blue Book price threaten to walk. Once you have agreed upon a fair trade-in value or decide to sell it yourself, you are ready to negotiate your financing.

NEVER NEGOTIATE BASED ON MONTHLY PAYMENT
Only negotiate based on the interest rate of the loan. There are many “games” the dealer can play with loan term and down payments amount. By this point you should have your quote from Up2Drive. Tell the dealer what rate they have offered you and ask if they can beat it. There is a good chance they will say "we can't beat the rate but if you finance with us you can get a $1500 rebate." You have to be very careful here. Sometimes it is better to take the lower rate instead of the higher rate with the rebate. Use this spreadsheet to figure out which is better. If the dealer offers you better financing, by all means, take it. If the Up2Drive deal is better, follow the instructions to use the check that you should have in hand to complete the transaction. Some dealers will try and scare you away from using Up2Drive by saying their checks bounce and they won't take it. This is not true. Tell them either they can take the check or you will find another dealer that will.