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How To Buy A New Car and Avoid Scams

Using our advice and tools, you'll get a great deal that is still more than fair for the dealership. If you aren't prepared then prepare to get ripped off, it's that simple. People have no problem taking weeks to plan a vacation, but don't spend a few hours doing research before they buy a $30,000 car. You will be able to save a ton of money if you follow our advice.

cars in a row

The Best Price Doesn't Mean You Got a Good Deal

A good deal means that you were treated fairly and the dealership made a reasonable profit. The most important thing you will read here on CarBuyingTips.com is to make sure that you don't just focus on the final price. Dealers will play the "Cash Flow Shell Game" so that they can rip you off while making you think you are getting a good deal. An example:

The buyer in this example thought they were getting a good deal because of the low price, but they actually got ripped off. We will explain all of the tricks to look out for and teach you how to avoid becoming a victim. To save the most money make sure you read the whole site. Don't just read half and think you have all the facts.

Begin by getting the lowest price using a service like Cars.com. Don't stop there, if you miss one valuable topic on CarBuyingTips.com it can cost you thousands of dollars. Make sure not to be a "monthly payment buyer" and only look at what your payment will be - that is the worst thing you can do. Doing this or becoming a "trade-in buyer" is exactly what the dealer wants and you will play right into their hand. Once this happens you will get ripped off, I guarantee it!

When is the best time to buy a car?

There are two "best times" to buy. The end of December is a good time. Everyone is out buying XMAS gifts, leaving dealer lots void of customers, motivating them to cut prices and break year end sales records. Another good time to buy is July through October as dealerships sell off cars at lower prices to clear space for the new models.

All Prep Work Can be Done from Your PC, Tablet or Smart Phone

The last time I bought a new vehicle I was able to do all my homework without leaving my house. Back in the "old days" you would waste hours at many dealerships. Luckily the internet was invented so now you don't have leave the comfort of your couch. There are many great sites that allow you to relax, research and get quotes. Once you have determined the dealer with the best price, you take all of your research to them and calmly negotiate the best deal.

Exclusive to visitors of our site, try the Drive Your Dream Auto Buying Program. It gives you special friends and family pricing, leverages volume buying power of large companies, employers, or membership groups. Drive Your Dream also allows you to choose your car and configure options online, and get an instant price quote from a local dealer in the network. This works best for you if you dread haggling.

Invoice Prices, Rebates and Incentives

As you follow this guide you will find that there are a few critical pieces of information that you will need to make sure you are getting a great deal. They are invoice price, rebates and incentives. We will cover these in more detail later but you should know that when talking about rebates and incentives there are some that are well advertised and some that are "secret" between the manufacturer and the dealer.

The most important thing to remember about the invoice price is that it is not the amount the dealer paid for the car. We will show you how to calculate what the dealer actually paid later in this guide.

What are secret incentives?

Secret factory to dealer incentives can be $1,000-$6,000 in addition to known rebates! Because of these secret incentives, if you buy a car at invoice, the dealer earns thousands more. You should haggle over this incentive, as many dealers willingly give up all or part of this incentive, making your cost lower.

If you want the most accurate, complete and up to date data for these three important items, I'd recommend buying the data as part of the FightingChance package. They will also make somebody available to talk to if you have questions about anything that comes up as you go through the purchase process.

Competition Gets You the Best Deal

Enter the dealership armed with "The Folder" that I will talk about in Chapter 3. Once they see that you are prepared it will work to your advantage. The deal will now proceed on your terms, not theirs. Don't enter a dealership without having multiple price quotes or you'll overpay by thousands. Commissioned salespeople fear "The Folder" because they know you did your homework. They rely on uneducated car buyers who don't do any research before they go shopping.

Where to Get New Car Price Quotes

TrueCar takes the haggle and hassle out of new car buying. Using their service you will get a Guaranteed Savings Certificate that will lock your price. They show you what others in your area paid for the same car so you'll know if the price is right.
Get a Hassle Free Price from TrueCar.com

Cars.com gives you free, no-obligation quotes from up to 3 dealers. Just select your make, model, color and options. Getting quotes from multiple dealers pressures dealers to give you a discount.
Get a Quote from Cars.com

Edmunds.com offers the largest dealer network, offering you better choices when buying a car. Edmunds allows you to select dealers within 50 miles of your zip code and avoid dealers that you don't want to deal with.
Get A Free Price Quote From Edmunds.com

Yahoo!Autos offers one of the most extensive dealer networks. Fill out one simple form and Yahoo!Autos allows you to select up to 5 dealers in your area. Their easy to use site lets you see all the trim levels, options and MSRP pricing.
Get A Free Price Quote From Yahoo!Autos

CarsDirect.com lists your purchase price online instantly with better prices than dealers and cool 360° views. As you check off options, the screen shows invoice price, MSRP and your low CarsDirect price.
Get A Free Price Quote From CarsDirect

The Drive Your Dream Auto Buying Program lets you get a guaranteed price quote without leaving your house. This exclusive program leverages volume buying power of large companies, employers and membership groups to get you a low price on a new car.
Get Started with the Drive Your Dream Auto Buying Program

Autobytel has 20,000 dealers, they give you free no hassle low price quotes, list car prices and dealer cost.
Get a Quote From Autobytel

Get More Detailed Reviews of These Sites

Use Competition for All Aspects of the Deal

Competition also works to get you the best rate on your loan. The dealer is not the only one that can finance your car, online lenders are available. Once approved you will have a check in hand and know your interest rate before you even set foot in the dealership. You can use your low rate to negotiate with the dealer or use your online financing if they won't match or beat the online rate. We will cover this topic in more detail in our chapter on auto loans.

Warning About Car Dealership Advertising

The number one goal of any car dealer is to get you in the door. If you aren't there they can't pull any tricks or scams on you. They hire the best advertising and marketing companies to come up with ads to get you there.

Optical Illusion

Advertisers spends millions in psychological wording research to trick you. Take a look a the image to the right. You thought it said "I love Paris in the Springtime" right? Wrong! See the extra "the"? It really says "I love Paris in the the Springtime." Your brain tricked you. Advertisers rely on your brain to trick you so they don't have to lie.

Pay very careful attention to the fine print when it comes to advertising. When you see a TV commercial it is impossible to read it unless you are watching on a DVR and you can pause it. I don't know why it is legal for them to put these legal statements in such a small font and displayed for such a short time that no human can possibly read it.

When an ad says 1.9% APR, look for the "*". The fine print will say "with approved credit only" or "qualified buyers only." The 1.9% reels you in. You must have perfect credit to get a 1.9% rate. Most people will not qualify. Other scams you may hear:

In the examples above, the dealer is not doing you any favors, they want you to buy a car from them at full MSRP. They also want your trade-in so they can give you $4,000 below market value and resell it for a higher price. Sometimes an ad can make you think that trading in a car relieves you of your obligation. It does not!

This important fact gets many buyers into trouble. You are actually taking on increased debt when you thought you were dropping one debt for another. They lied to you in their ad, they are not doing you any favors. They are piling on more debt. Very clever trick, but now you're onto them. Next time you hear those ads, you'll know what they're up to. The ads should be worded "We'll get you out of your current car, then roll what you owed plus penalties into your new car purchase so you can payoff 2 cars!"

Don't trade in a car you owe money on. Aside from adding to your debt, you are inviting other problems. Since the dealer doesn't care about your finances, it is possible that they don't pay the bank on time and this can lead to penalties for you.

How Car Dealers Profit From New Car Purchases

You think new car dealers have just one way to coax money out of you when car buying? Thank you for playing. Some new car dealers convince you to spend so much, you didn't know you were taken for a ride! Car buyers who brag of high trade in value were asleep at the wheel leaving money on the table in other parts of the deal.

  1. Offers you $3,000 to $4,000 below market price for your trade-in
  2. The new car purchase price when buying a car
  3. Marking up the rate they give you for new car financing
  4. Environmental package extras and new car extended warranties

The dealership is always trying to maximize their profit. Of course they should make a fair profit on the deal but they shouldn't rip you off. They trick you into a bad deal using what I call the "Car Dealer Cash Flow Shell Game™"

How The Car Dealer Cash Flow Shell Game™ Works

Let me teach you how the game works. Cash spent buying a car pours into buckets. For the best deal you want the most for trade-ins, discounted MSRP, low APR, no extras and few fees. Here's what you and I want:

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The car dealer has other plans. This is what the dealer wants:

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The dealer low balls your trade-in, charges full MSRP, high APR on the auto loan, high profit extras, dealer prep and ad fees and ends up with a huge profit. If you have bad credit they'll lie and say that credit life insurance is required, get more profit and call you 2 weeks later to tell you financing fell through and you need to come up with $2,000 more. A similar abuse of the situation occurs if you're upside down on your current auto loan.

If they know you're a trade-in buyer, they give you what you want for your trade-in. But look what else they do. They jack up the car buying price to MSRP, pile on extras & fees. The amount of cash involved doesn't change, it gets shuffled around the buckets.

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

Here's a good one. They bait you with 0% or a low APR. But then they jack the price to MSRP, low ball your trade-in, pile on fees and dealer extras. Note again that their profit is still the same large amount.

Trade-In

+

Selling Price

+

Interest Rate

+

Add Ons
- Insurance
- Rust Proof
- Sealant

+

Extra
Fees
- Prep
- Admin

=

Dealer's Profit
$$$$

The folks here at CarBuyingTips.com hope you had fun playing the Cash Flow Shell Game for buying a new car.

Dealers have perfected this system over decades. The odds are in their favor. Don't get me wrong, dealers have the right to be profitable. You should know how the game is played, so it can be played fairly and they can make a fair profit while you get a good deal.

In this guide I'll show you how to prevent losses in these areas. You have enemies to overcome including fear of the unknown. We'll turn that fear into a target rich environment of opportunities for a successful new car purchase.

Try to shop where salespeople are not on commission, but on a salary. They still want top dollar, they just don't have commission fever. Some no haggle dealers give good deals, while most do not.

You should shop in a competitive market. Make your offer as shown on this site, bounce it off all the car dealers and even "No Haggle" dealers will bite. Many "No Haggle" dealers have a "low" price on the windshield that you find out later included the rebate, so they actually charged you (MSRP - Rebate), which is no bargain. Dealing with a fleet manager can be helpful, since they are not on commission. If you make an appointment, show up, it's bad business if you don't. Good salespeople like an informed consumer because the process will be more efficient.

No matter how good the deal is that you negotiate with the salesperson it can always turn bad quickly in the "F&I" (Business) Office. Make sure to pay attention to everything in this guide so that you don't fall victim to this common occurrence.

Read Our First Chapter: New Car Financing >

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