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

2. The value of your trade in

3. The finance terms you can get

4. 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 Cars.com 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.