Friday, November 22, 2013

How to Buy a Car: Part 4 - Doing the Deal

William H. Macy played a sleazy car dealer in "Fargo"
The single biggest challenge of negotiating a car is information.  Without it, you won't know what a fair price is--either for the car you're buying, or the one you're trading in. 

It seems complicated, but buying a car comes down to four things: 

  1. The price of the car you're buying
  1. The value of your trade in
  1. The finance terms you can get
  1. Your payment terms

Years ago, when my grandfather bought cars, he didn't have access to the internet or other sources of information about car prices.  Instead just he'd go in and haggle with the salesperson.  This could take all day or several days as he started with an unreasonable offer, picked apart the car he was looking at, and generally annoyed anyone who wanted his business.  It would go on and on until the salesperson or the sales manager practically threw him out of the dealership.  That's when he knew he was close to the dealer's best price.   

Today there are books and internet sites like Kelly Blue Book, NADA,  and Edmund's that provide pricing information for cars.  You can get information on the new car's invoice price, and what the dealer actually paid for the car, as well as any incentives or rebates.  You can also get wholesale and retail values for used cars as well as the car you're trading in.  And there are even calculators to create a custom appraisal for your trade in or the car you're looking at, based on mileage, condition and options. 

Financing is another key piece of information.  Even if you finance with the dealership, which typically works with a number of lenders, you need to know your credit score and what terms you an qualify for.  The difference between a 3% or 6% interest rate can add $20 or more to your payment.

Smartphones are a great equalizer when you get to the dealership because this information is readily available at your fingertips.  Having this information was invaluable for me recently, when I went to a Ford dealer in Raytown several weeks ago. 

I made the trip planning to buy a 2012 Ford Fusion, a gray SEL V6 with leather.  When I got there, the car was in the service department and we had to walk through the new car showroom to get to it.  Sitting on the showroom floor was a brand new 2013 Fusion, SE Sport Package with the Ecoboost engine, in white platinum metallic paint. 

My one criticism of the 2012 was its Plain Jane looks.  Then again nothing in the midsize segment is eye candy, with the exception of the Kia Optima.  But the 2013 model is stunning.  Ford cribbed off Aston Martin and Jaguar and threw in a bit of Audi S7 for good measure.  The result is one of the best looking sedans in recent memory.  The car in the showroom was exactly everything I wanted but didn't think I could afford. 

Doing the math on my phone, I realized I could afford it, if I cut some other things out of my budget like running to Starbucks or eating out at lunch 2-3 times a week.  Given the choice between driving leftovers or eating leftovers, I decided I could live off Hot Pockets or yesterday's dinner. 

The negotiation process was short.  The dealer had advertised their best price on the car and a quick check on my phone to Edmund's and confirmed the car was priced a few hundred dollars under dealer invoice, and below what both websites calculated as their target price.  Given the easy access to this kind of information, most dealers are now upfront about their prices.  The days of the car price guessing games are largely over. 

I spent most of my negotiating time on the trade in value of my car.  Dealers want to sell cars at retail prices and buy cars at wholesale prices.  Buyers want to buy cars at wholesale prices and sell their cars at retail prices.  Since I was already under invoice, or the wholesale price for the Fusion, I tried to bump up the price on the Nissan Pathfinder I was trading in, and managed to get a price I thought was acceptable.  Given more time and persistence, I may have been able to get another $100 or so out of my trade in, but I knew the value of the car and knew that overall I was getting a very good deal. 

I agreed to the terms of the deal and sat down to wait on the sales manager to put together the paperwork and my trip to the finance office.  I was halfway done, but still had to get through the finance process, and the myriad of extended warranties, credit protection, and accessory packages offered by the dealer before I could go home.    

Tuesday, November 19, 2013

The $15,000 Question: Ford Fusion SEL V6

This is the car I was going to buy--a 2012 Ford Fusion SEL V6.  For me, it represented the best blend of value, performance, and practicality for $15,000.  Practically every car publication has given it good reviews and it would be in my driveway today if I hadn't fallen in love with the new body style.

The four cylinder Fusion has adequate power for most situations, but the V6's burble and additional power makes the car somewhat more performance oriented.  It's not the silky smoothness of a BMW inline six or even the Maxima's 3.5 V6, but there's enough sound and fury there to enjoy.  It also handles well enough to be rewarding on curvy back roads, but not enough to seek out those same roads during your daily commute. 

What the Fusion provides is competence in any situation.  It's not a minivan or seven passenger crossover, but it will carry 4-5 people and a decent amount of luggage.  It's not a Jaguar or Lexus, but equipped with leather and the Ford Sync infotainment system, it's interior is a nice place to pass the miles.  It's not a BMW or Audi sports sedan, but provides enough balance between ride and handling to be rewarding to drive.  For 98% of the car buying public, it's an ideal balance between need vs. want. 

If that seems like faint praise, consider two things: 

First, years ago Ford positioned the Granada, a distant ancestor to the Fusion, against Mercedes Benz in their advertising campagin.  It was laughable for the sheer absurd audacity, like comparing Ron Burgundy to Walter Cronkite.  But if Ford position the Fusion today against the Mercedes E-Class, I'm not sure it would be that far off.  The car might be 8/10ths a Mercedes at half the price. 

Secondly, I almost bought one.         

Friday, November 15, 2013

How to Buy a Car: Part 3 - Test Drives

Never, under any circumstances, buy a car you haven't driven!  You need butt time in the seat to determine if you like the way the car drives and if it's comfortable.   

Let me give you an example why the test drive is so important:

Recently I was looking at four cars to replace my Nissan Pathfinder--the Nissan Altima, Chevy Malibu, Nissan Maxima, and Ford Fusion.  I had already done my research and those four cars were in my price range, offered the features I wanted, and had received good reviews from a number of automotive publications. 

The Altima was my top choice, until I drove it.  The steering was vague, and while I didn't mind the CVT transmission, it would drone under full throttle and didn't snap off crisp gear changes, even in the manual shift mode.  It also felt cheap inside, with cheap plastics, and I didn't like the orange font on the stereo or gauge cluster.  But what really bothered me was the noise level and ride quality.  It rode like a ten year old Honda Civic, which is okay… for a ten year old Honda Civic. 

I also drove the Maxima, which despite being built on the same platform as the Altima, was a revelation.  Many automotive journalists have bashed the Maxima for costing as much as an Infiniti without being as good to drive.  They argue that the Altima is a better car for a third the price.  But as a used vehicle, the Maxima is a screaming deal.  It has Nissan's 3.5 liter V6, which is one of the best engines of all time.  It's got immediate power and will go from 50-90 miles an hour faster than you can say, "Scotty, I need warp speed now!" 

But the Maxima also suffers from the same Jack o' Lantern display as the Altima.  And even though the ride was sublime until you gave it the beans, it just didn't feel quite right to me.  I can't explain it, but I just didn't love the car like I wanted to. 

I think part of the reason was because I drove the Chevy Malibu and Ford Fusion.  I know it sounds like I'm comparing cream to creme brulee', but hear me out--both the Malibu and Fusion nail the right balance of ride and handling for the midsize car segment.  They also offer more features and nicer interiors than the Maxima.  Neither car will show its taillights to a BMW 3 Series, but they aren't supposed to.  You won't take a Malibu or Fusion to Laguna Seca.  You also wouldn't take a Maxima to Laguna Seca, although Nissan's marking to position it as the "four door sports car" make you think you should want to. 

2012 Ford Fusion 4-door Sedan SPORT FWD Dashboard

The last car I drove was the Ford Fusion with a V6.  It was almost as fun to drive as the Maxima, but it had a nicer interior and more features.  In my everyday slog to work, those things are more important.  A quiet ride, heated seats, Bluetooth connectivity to my phone, are more enjoyable than a snarling exhaust note, track tuned suspension, and whippet handling, when I'm commuting in stop and go traffic. 

If I hadn't driven those four cars, I'd have picked the Altima and never looked back.  Instead, I ended up picking the Fusion.  I liked the looks, and the interior.  It felt like a quality car and checked all my boxes.  I started looking for a used one with leather and a V6.  I found several on the internet within 30 miles of my house, including one in one of my top colors.  And on a cold, damp November Saturday, I headed for a Ford dealer in Raytown to see a man about a Fusion. 

But things didn't go exactly as planned...  

Friday, November 8, 2013

How to Buy a Car: Part 2 - Used Cars

Used cars have come a long way.  Back when cars seemed to wear out after 5-6 years, buying a used car was a risky proposition.  Today, with all the advances in technology, cars last longer and are more reliable than ever.  In 2012, the median age of a car in the US was 11 years old and had over 100,000 miles. 

It used to be that a used car was a car a new car dealer took in on trade and moved to the back of the lot, so a guy in a plaid suit could have a job.  Today, used cars are big business and are more profitable to sell than new cars.  Part of this reason is that more new cars than ever are leased for 2-3 years and then turned in to the manufacturer.  The manufacturer then runs the leased cars through an auto auction, where they are bought and transported to your local dealer. 

The biggest advantage to buying a used car is price.  New cars depreciate 30-50% in value over the first three years of their life.  By buying a 2-3 year old car, you take advantage of the depreciation instead of taking the hit.  It's a good way to buy a car that sold for $40,000 new in 2011, for $25,000 today.  

The drawbacks of a used car are primarily age and mileage.  You're getting a car that is several years old and may no longer be covered by the new car warranty.  But there is an exception to this rule on "Certified Used" cars, which offer some of the benefits of a new car, including a warranty, as well as special incentives or financing.  What you get for the certified status, depends on the manufacturer, but in most cases it will include a one year warranty and the same financing rates or terms as a new car.

Tuesday, November 5, 2013

The $15,000 Question: BMW E39 5 Series

File:BMW E39 5-Series MY1999 523i (3).JPG

The  1996 to 2003 E39 might be the best 5 Series BMW will ever make.  A good looking, reasonably modern car, it's a better driving Bimmer than the two generations that replaced it.  It's not that the newer cars are bad, just that priorities have changed.  People want cars with sat-nav, Bluetooth integration, and in-car infotainment.  Driving has become secondary to whether or not you can stream Pandora from your smartphone or get directions for dinner.

File:BMW M62B44.jpg

For $15,000 you can buy anything from a BMW 525i to an M5.  Any choice should be a good one, but the M5 has the potential for appreciating in value, like the older M5s and M3s are currently doing.  The 540i is also a good alternative to the M5, with it's V8 engine from the 7 and 8 Series but without the Red Bull laced edginess of the M.  Either way you go, you'll get a focused driver car, with the practicality of a Honda Accord. 

File:BMW E39 5-Series MY1999 523i (5).JPG 

The only drawbacks to these cars are age related.  Even the newest one is ten years old, and like all older cars, what you get is largely based on how the car was taken care of.  When something breaks, parts are usually readily available but the repair bill will be expensive.

Thee biggest challenge of owning a BMW, any BMW, is the yuppie factor.  There was a time that a BMW was the required vehicle for young urban professionals.  It was a status symbol, like a Rolex watch or Hugo Boss suit.  That perception exists today, can dampen the inherent baked-in goodness of the car, but if you can tolerate that perception, or welcome it, the E39 makes a good all around car for an enthusiast on a budget.               

Friday, November 1, 2013

How to Buy a Car: Part 1 - Research

I've been out car shopping this week.  The truth is, I'm always out car shopping, but usually I'm just window browsing.  This time it's actually to buy a car to replace my Pathfinder. 

Car shopping is looking at different makes and models to get an idea of what you want.  Car buying is about numbers.  Most car dealers are reputable, but to buy a car you have to have information.  The following is a list of information or things I think about when I'm getting ready to buy a car:

  1. Research.  I look at sites like, Edmunds, or Autotrader to get a list of available cars in my area.  Carmax is also a good source.  You can search locally, within a specific radius, or nationwide.  You can also narrow your search by make, model, trim level, options, colors, year and mileage.  You can also use these tools to read reviews about the cars you're interested in--reviews by regular people or people who work for the companies that manage the websites.  I use these tools to put a list of cars together that I'm interested in, before I set foot on a dealer's lot. 

  1. Test drives.  Don't ever buy a car without driving it and checking out several other makes and models.  You need what I call butt time in the driver seat.  Do you like the way it drives?  Is the seat comfortable?  Do you like the color or colors?  The way the car is designed?  Buying a car is like entering a multi year relationship.  You wouldn't move in with someone based on their online dating profile, so don't buy a car you haven't driven. 

  1. More research.  After I've driven some cars, I go back and research them more thoroughly.  I look at the reviews and check out publications like Consumer Reports to get information like repair ratings and reliability.  I also call my insurance company to find out if my rates will go up and by how much. 

  1. Financing.  If you're financing a car it pays to get pre-qualified and know what interest rates and terms are available.  The difference between a 3% and 6% interest rate can make a big difference in your car payment. 

  1. Trade in.  Are you trading your old car in?  What's it really worth?  I like to check out sites like Edmunds, or Kelly Blue Book to get the value of the car I'm trading in.  These sites will give you the value of your car as three numbers--wholesale, private party, and retail. 

  • Wholesale is the value of your car at a dealer auction.  This is also the close to what the dealer wants to pay in actual cash value for your trade in. 
  • Private Party value is what you could expect to sell the car for yourself, if you placed an add in the paper or online. 
  • Retail is the price a car dealer would list your car at, if they sold it on their lot. 

Normally, I will try to get retail or private party value when I trade in a car.  But it depends on the deal.  Carmax and stores that offer cars at a fixed price will typically only pay wholesale value for a car.  Or if the car I'm buying has been significantly discounted and is far below the retail price, the dealer may not offer much more than the wholesale amount. 

Next week I'll talk more about new and used car prices as well as how to equip yourself to negotiate the best deal.