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In Depth Car Buying Guide by Chanlee Sutoyo. She is a proud owner of a 2008 Nissan Altima. She shares with us some useful tips in buying a new car.

Buying a new car can be a stressful and nervewracking experience, but with the right information and strategy, you can get a great deal without even setting foot in a showroom. I recently bought my first new car, a 2008 Nissan Altima, for $1340 under invoice, and in this post I will show you how I did it.

I don’t usually obsess over products that I buy, but this being the biggest purchase I’ve ever made, I was determined not to be a victim. We’ve all heard horror stories of unscrupulous dealers who cheat you out of your hard-earned money. So I began with some Google searches.

Several searches quickly revealed CarBuyingTips.com and Fighting Chance as the best advice sites, and Yahoo!Autos and Edmunds as the best pricing and data sites.

Best Auto Advice, Pricing and Data Sites

CarBuyingTips.com

The author of CarBuyingTips.com wrote a 7-chapter manifesto called How To Buy a New Car [link]. I pasted it into a Word document and printed it so I could read it on my commute; it was 62 pages of single-spaced 10-pt Arial font with one-inch margins. The website warns that you will miss out on thousands of dollars of savings if you don’t read every chapter, but I found a lot of it to be repetitive. I used the guide for the financing tips and to get an idea of the high pressure sales tactics and tricks that dealers are notorious for pulling.

The strategy of CarBuyingTips.com comes down to doing your homework before going to the dealer, calculating the dealer’s real cost and adding a 3 to 5 percent profit margin to be fair to them, and making that your offer and sticking to it until someone gives you that price. This approach works well if you are assertive and can withstand high pressure sales tactics. If I had used this and succeeded, I would have paid $20,953.58 for my Altima assuming a fair profit of 5 percent over the dealer’s real cost of $19,955.79. (Note: Prices are before 8.25% Los Angeles County tax and $200 DMV fees.)

Fighting Chance

Fighting Chance is run by a guy who wants to help people get great deals on cars. I used their “fax/email attack” strategy and their industry and pricing data to research the different cars I was interested in. When you place an order, they email you a whole package including information by year, make and model, a detailed analysis of the make, tips on dealing with a trade-in, whether to get an extended warranty and, the most useful part, the Fax/Email Attack chapter, which sets forth a step-by-step strategy for getting the best possible price.

The strategy of Fighting Chance comes down to figuring out the car you want with the exact specifications, identifying about a dozen dealers in your area, faxing them a price proposal letter (not making an offer - here’s why), and going with the lowest bidder. Instead of arguing with a salesperson about why your offer is fair, you make dealers compete with each other for your business. This approach is for people who are weak negotiators – hence, it was my strategy of choice. The only downside is that you have to pay. It’s $39.95 for the advice packet and pricing info on one car and $12 per additional car. But considering that I paid $19,866 or $90 under the dealer’s real cost, it was worth it.

Disclaimer: I am not affiliated with Fighting Chance and am not receiving any remuneration for recommending them. I am simply a satisfied customer who wants to get the word out. For the complete advice package which includes telephone scripts and language for a bid letter, contact Fighting Chance.

Actually, if you read their website, you will get practically all the car industry information you need short of the specific pricing data and “big picture” analysis on your car. I’ve done my best to link to the pertinent parts of the website above. You can figure out the invoice and MSRP prices of your vehicle and each option using car pricing sites like Edmunds.com and Yahoo! Autos. So you can get away with not paying for the package if you really don’t want to.

Yahoo!Autos

Yahoo has done a great job with a user-friendly auto section that gives you tons of information to help you choose a car. It helped me decide on the ‘08 Altima after I read user reviews on how the ‘08 Camry and ‘08 Accord simply paled in comparison. It’s pretty shocking, actually. For 2007 and 2008, the Camry and Accord only scored 2.5 out of 5 stars, while the Altima scored 4.5 out of 5 stars.

Edmunds

Edmunds was useful for looking up pricing info (e.g. the invoice price of splash guards or other options) and getting an idea of what people around the country typically pay for a certain vehicle. They call it their “True Market Value” (TMV). I’m happy to say that what I paid for my Altima was well below the Edmunds TMV. They also have a handy comparison tool..

Let’s Get Started!

The first order of business is to figure out what car you want. It definitely helps to go on test drives. Of course what appeals to you will be subjective and personal, so all I will say on the topic of test drives is do not get sucked into the showroom and do not talk price. Use the handy excuse that you are still trying to decide on a make and need to go to X dealer to test drive X car, and they’ll let you leave without much trouble. If you’ve never bought a new car before, you’ll get a taste of how aggressive and pushy some salespeople can be. “Hi, I’m here to test drive.” “Test drive and buy?” It’s scary.

Don’t forget to check out Consumer Reports, the National Highway Traffic Safety Administration test results, and the Insurance Institute for Highway Safety scores to see your prospective car’s crashworthiness and reliability ratings.

From start to finish, the process of car buying took me one month, because I did so much reading and preparation and I was indecisive about what car I wanted. Fortunately, I did not need to do much in terms of my finances because I have very good credit. To summarize from the very thorough first chapter of CarBuyingTips.com, you need to know your credit score, take a couple months to improve it if necessary, apply for and get approved for a couple auto loans to get an idea of your interest rate, and be able to put 20 percent down.

From the time you know the exact make, model, options and color you want and have your finances in order, it will take about three days to execute The Plan.

The Plan

Step 1: Identify 12 to 15 dealers in your area and print out their contact information.

NissanUSA.com was great because it let me print out each dealer’s information, including address, phone/fax numbers, and hours on separate sheets, leaving ample space underneath to take notes. You need to stay organized, whether you use a notebook or some other device, because you will soon be inundated with phone calls. Leave ample space to take notes.

Step 2: Prepare a bid letter and fax or email it to each dealer’s sales or Internet sales manager.

This is the secret to getting the best offer available at the moment you happen to be shopping. The best time to buy is the end of December or July to October. More on that here.

Fighting Chance said to call the dealer and ask for the sales manager, i.e. the person with the decision-making power who you would encounter in the salesroom if you went there in person. In my experience, usually after I spoke to that person, got them to agree to my bidding contest, and faxed over my letter, my letter was given to an assistant salesperson or the Internet sales manager. Though Fighting Chance discouraged contacting the Internet department because they tend to be lower on the totem pole and have less pricing authority, I found the opposite to be true. As soon as they saw my well-crafted letter, they knew I was a serious buyer and immediately would email an offer.

Your letter should have the following components (I won’t copy and paste Fighting Chance’s content here out of respect for their product, but this will give you a good idea of what works):

• Timeframe: buying a new Altima within the next few days
• Process: soliciting price proposals from several dealers (this makes clear that you will be in control of the price negotiation); reporting the best offer to each dealer before making a final decision
• Information wanted: itemized out-the-door price
• Your specifications: list out both the invoice and MSRP prices of the vehicle, each option, and destination charge (this data easily obtainable from auto pricing sites like Edmunds.com and Yahoo!Autos)
• Knowledge of the industry: awareness of the holdback dollars (insert the percentage that the manufacturer holds back from the dealer until the sale is completed, typically 2 to 3 percent) and the CSI (customer service index)
• Your contact information


Most importantly, you do not make an offer. You don’t know what kind of financial situation individual dealers are in. Some might be doing well and would not give you a good deal. Others might be close to meeting their sales targets, in which case a sale to you, even at a significant discount or loss, would get them a fatter bonus at year’s end.

Step 3: Await their bids, then call each dealer back to report the best bid.

I started getting calls back within the hour. Usually the first thing they would say was whether they had the exact car in stock. The ones who didn’t tried to convince me to get an alternate interior color or to buy the emergency aid kit for an extra $100, which I didn’t want. Then they made their offer in relation to either the MSRP or the invoice price. Most offered prices right at invoice or $200 to $300 under invoice. I asked them whether their prices were before or after rebate. This revealed that some offers were actually over invoice because they had already taken the rebate into account.

This brings me to an important point. You need to know what kinds of promotions are going on with your manufacturer. When I was shopping, Nissan was having a choice of a $750 rebate or low-interest financing. Since I have good credit, I knew I would be interested in financing, so I had to be careful to ask whether or not the prices were before or after rebate. That was probably the most trickery I encountered during the bidding process - salespeople trying to make their price proposal sound lower than it was by quietly including the rebate.

I emailed or faxed my letter to 14 dealers. Three of them did not have the car in stock, so I immediately eliminated them. A few never got back to me, and after calling them once to follow up and still hearing nothing, I stopped trying to contact them. I received offers that ranged from $200 to $750 under invoice. Pretty good, but not spectacular given that I was shopping so close to the end of the year. Then, I got a faxed printout from a Gardena Nissan’s actual inventory database showing me the exact VIN number and breakdown of the specifications with prices. That dealer wrote the price ($19,866), taxes, fees, and added them up to give me the out-the-door price.

It seemed too good to be true, so I called the dealer and asked whether the price included the $750 rebate. The sales manager said no, because she didn’t know whether I would want the rebate or the attractive low-interest financing. Even then, I wanted to be absolutely clear. “So your offer is $1340 under invoice?” I asked. She confirmed. “How do I know this price will be honored?” “Because you will be dealing directly with me,” she said. I knew there was still the possibility of a bait and switch, but it was the best thing I had going so far.

I then called back the other dealers and told them my best offer was $1340 under invoice. All but one immediately said, “I can’t beat that.” One guy actually laughed at me and said, “If that’s really the price, you need to run over there and get that car right now!” Only one dealer wanted to try to beat it - Performance Nissan in Duarte, CA, who initially offered $250 under invoice. This is where things got stressful.

The sales guy acted like it would be no problem to beat the price, but wanted to make it contingent on my verbal commitment to buy the car that very night. I had a bad feeling about that, but he said (very smooth), “My manager’s gonna need to know that before I can make beat the price.” Since I wanted to know his new offer, I said yes. I don’t remember whether I told him that the price from Gardena Nissan was before rebate.

About half an hour later, he called back and told me $19,650, but the price was after rebate. He was using the rebate to make it sound like his offer was $1556 under invoice. I responded that the other offer I had was before rebate, so if I used the rebate there, it would actually be $2090 under invoice. There was a brief silence, then his entire tone and manner changed. Up until that moment, he had been charming and nice, but he suddenly turned spiteful. “That’s…something’s not right there. That can’t be the price. They’re probably offering you the demo car. There are laws against that. I want to earn your business. I won’t play that game. We want you not just to buy this one car from us, but to buy future cars from us. If you buy from us, you’re not just getting a car, you’re gaining a friend for life.” I was so stunned by his change in attitude that I didn’t know what to say. It sounded almost like he was revoking his offer, so I said, “So, does your offer still stand?” He just told me if things don’t work out at the other dealer, give him a call.

I was pretty upset for a couple days, even after I’d bought the car from Gardena Nissan. That sales guy tried to trick me by playing with the numbers, and when I caught him, he turned it around and tried to blame me for not being straight with him. It was a taste of what would have happened if I’d tried to negotiate in person in a showroom. While I was signing papers at Gardena Nissan and for a few days afterward, another sales guy from Performance Nissan tried to get in touch with me to continue negotiations, saying things like, “Price is not an issue. Let us help you get into a new car.” Part of me was curious about whether they could beat the other offer, but I had to tell myself that I didn’t want to deal with that guy. Can you imagine having to navigate the remainder of the buying process with someone who just made you feel like crap? Personal rapport with the salesperson is paramount.

Step 4: Decide on a dealer and make an appointment to sign the papers (assuming they honor the price).

Obviously, the winning offer was $1340 under invoice from Gardena Nissan. The salesperson was a female Internet sales manager who was and continues to be completely honest with me (as far as I can tell). The next night, my husband and I drove over there to test drive and inspect the vehicle, decide on financing, and sign papers. It’s a good idea to bring a buddy who can help you look for any defects and ask questions.

While we were there, I used every defensive safeguard recommended by CarBuyingTips.com, but the dealer proved themselves to be trustworthy every time. CarBuyingTips.com talked about dealers switching out the model with a lesser model, adding unnecessary fees, faking your credit score to make you take a higher interest rate, or rigging their computers to show a higher monthly payment so they can pocket the difference. But this sales manager ran my credit score while we were sitting in her office and showed us the computer screen. We could see everything she was doing on the computer. We brought our own laptop with spreadsheets to doublecheck the numbers and they were only off by a few dollars. Maybe we lucked out with this dealer or this particular salesperson, but we really didn’t have anything to worry about. If anything, I felt a little embarrassed secondguessing them so openly but, really, better safe than sorry.

After four hours, I drove home with my new Altima at 11:30pm. The salesperson told me to inspect the car in the sunlight for any defects that we couldn’t see that night. It turns out there are a couple scratches on the bumper. Though CarBuyingTips.com warns that if it isn’t in writing, they won’t do it, this dealer is sending out its paint crew to my house to fix the scratches. I guess they are the exception.

If I Did It Over

Looking back, I wish I had worked an extended warranty and LoJack into the negotiations, especially since I didn’t find out until the last minute that online extended warranties are not yet allowed in California, but I had no idea that the fax attack would work that well. It is possible to work in extras that you would otherwise have to buy after-market. Who knows, maybe I could have negotiated for my regular CD player to be switched out for a MP3/WMA enabled player. I ended up not getting the extended warranty, which would have been an extra $1700 for a paltry 7 years/70,000 miles policy - remember, all new cars come with a factory warranty for 3 years. More on the pros and cons of extended warranties here.

Go Get ‘Em!

I hope you can see how to turn the playing field upside down to your own advantage when shopping for a car. The key is having the dealers compete against each other for your business. For the vast majority of vehicles and in most metropolitan areas, especially in southern California, supply exceeds demand. Be secure in that knowledge, and make them truly “earn your business,” as the industry tagline goes. Happy shopping!