Paying Cash for a Car

[scribega]

Our van was totalled last month in an accident and we received some money from the loss. We are planning on paying cash for our next car, but this is the first time we have done this.

What are some of your tips in how to handle this? How should we approach it if we are at a dealership? If we have a budget of $6k, should we be looking at cars that are $8k or $7k and negotiating down to $6k?

TIA for your help.

Scott

 

[Cheshire Figment]

I would suggest do not tell them you are planning to pay cash. Many dealerships will make money on the financing. So go all the way through discussing rebates and everything with the assumption that you will put about a 10% down payment. Then when you get to the Closer and they do the actual contract, and you have all the numbers firmly in hand, change your mind and pull out your checkbook. You will look at the sum of two amounts, the down playment and the amount to be financed. That is the total price before the interest for financing is added.

 

[jmartinez1895]

Just as Cheshire Figment said , they make ther money on the interst, not the car. Don't be afraid to tell them no. If they come at you with a price that is still more than you want to pay, tell them something along the lines of " Well thats not the deal I was looking for and the XYZ dealer seems like he really wanted to work with me, so I'm gong to go back and see what they can offer" Most of the time they will all of a sudden recall a special or a rebate, if not then go on down the street and see what the other guy can offer.

 

[Carl Fredricksen]

First off, sorry to hear about the accident and hope everyone was okay.

I used to work for a company that serves auto dealers from the back side, so I have a little experience with them. You will not get your best deal at a first tier dealership IMO. In fact you will get ripped off more times than you know. The price point you are at (if buying from a first tier dealer) is not going to produce a car that will replace your van, and be in reasonable condition IMO.

First tier Dealers (Chevy, Ford, etc.) do not like cash sales, as they make money on financing as mentioned earlier. Plus a dealer is selling you the car at a 40% markup from what they paid for the trade in, and the used car salesman is commissioned on that so they usually don't like to deal on the price like they do on a new car. The reason some will deal on a new car, is because of manufacturer and finance company kickbacks they get that you don't even know about.

Second tier dealers (non manufacturer dealers, small side of the road lots), get most of their cars from auto auctions where the sell repo's, first tier dealer vehicles that did not sell quickly, etc. They love cash sales as it free's up their cash flow quickly, and financing is usually more of a hassle for them than it is worth. They are usually not a whole lot worse than buying from an individual as long as YOU DO YOUR HOMEWORK FIRST. If there was something wrong with the car when they got it, they may not have done the best job of fixing it, so if you find a car from them, you will want to have a independent mechanic that you trust check it out for $50 or so..

Find a good car from a private owner or second tier dealer, spend $25 for a Carfax, $50 for a mechanic inspection, and check out carsurvey.org for user reviews of thousands of vehicles to see if there is anything you need to look for. MSN autos is great for user reviews as well. Do the research before you go to look at it. Also check the private owner pricing on Kelly Blue Book (kbb.com) and Edmunds.com. That will give you a good idea on whether the asking price is reasonable for the car.

You will get more car for your buck by doing a little homework, and using classifieds, craigslist, etc. Plus dealing with an individual is far less hassle. If buying from an individual, just make sure you pick the car up during BMV business hours, so you and the seller can go get the title change filed right away.

Most of all TAKE YOUR TIME. This is a decision you will have to live with for awhile. Anyone who is pushing you to make a fast decision, be it dealer or individual is looking to rip you off somehow. You can find a good deal for your $6k budget, but you need to do the legwork to make sure you don't get someone else's problems. Either a first tier or second tier dealer are trying to make money off of you, so they are not your friend. And many private owners are trying to get rid of a problem, so they may not be your friend either. Make sure in any case you budget for the Carfax, mechanic visit, and most of all do not buy a car the first day you see it. Go home, talk it over, spend some time online to see what experiences other have had, then go back and drive it again. Crawl underneath and see if there are any goofy fluid leaks. You'll do okay, but you are the customer, so you are in control.

Not to hijack, but I actually had a dealer get mad at me for taking about an hour crawling under, over, etc this car we were looking at. He kept trying to push me for a decision, and everytime he did so, I promised myself silently that I would spend 10 more minutes checking the car for problems, just to irrate him. Eventually, I found why he was pushing me. The axle boot on the front end was leaking grease, and after I called him on it, he refused to fix it. I left as quick as I could.

Not that I am trying to guide your decision, but when I was in the market for a minivan in about the same price range, the best one I came up with was the Mazda MPV. They seem to last for a very long time with minimal maintenance, and we drove one and even DW liked it (and she hates minivans). There are a couple in the Atlanta area on Craigslist well within your budget.

http://atlanta.craigslist.org/atl/cto/1648747141.html

http://atlanta.craigslist.org/eat/ctd/1651541475.html

http://atlanta.craigslist.org/eat/ctd/1649783790.html


Good luck with your purchase, and report back to let us know how it turns out!

 

[BridgetBordeaux]

Carl, Cheshire,

You need to copy and paste your reponses for future use. They provide an insight to the business that few know about. I hope this thread gets reponded to for quite a while so it stays on the first page or two.

At the 6k price range, the dealer paid about 3-4k for the vehicle.

At 8K, they paid about 4-5K. If you can get the 8K vehicle for 6k, that should be a good value, but you absolutely must do your homework

 

[TnTWalter]

what you can get for your budget. Know what model and features etc.

I love Edmunds for research on pricing, etc. and through Edmunds you can link to Autotrader to find the cars for sale in your area.

We bought a new van [new to us] for cash last summer.

I actually searched online for the van. We negotiated for several over phone and email that didn't work out. I started going to dealers that had vans listed to check them out.

Finally a dealer had just gotten a model in that I was considering; while there I spotted another van that was newer and learned that it had been sitting there for a while.

We were working with a good guy so it wasn't hard to negotiate a price that made them and us happy. Then hubby said 'do you take checks?' And we wrote a check for our van. Such a great moment for us!

Sorry about the circumstance but have fun shopping.

 

[dzneelvr]

I agree. We never use financing for our vehicles but don't mention that until they launch into their diatrabe about seeing the Finance department....However, we do one final negotiation to lower the price somewhat--whether its the tax or special package equivalent. The dealership is walking away with the full amount so they can afford to give us a break on something else. Always ask for any and all discounts available. When we did the Cash for Clunkers last summer, one of the discounts available was if you were a member of a Credit Union so we put $25 in a new account and received a $250 rebate. It's also a good thing to look at last years models that have been on the lot. The end of the month and the end of a quarter are times when the dealership has to post revenue and inventory figures, so those are excellent windows to close deals. We picked up a fully loaded Aveo $19000+ for $14000. Not Bad

 

[MrsPete]

Ditto on the "don't tell them you're paying cash". The dealers know that they'll make money from financing, so refuse to discuss that ahead of time. THey like to talk about loads of different numbers - but you don't have to play nicely. Here are some typical questions/answers:

Will you be financing?
I haven't decided yet. I just want to talk about total, out-the-door price today. My budget is ______.

How much per month are you looking to spend?
I only want to talk about the total, out-the-door price today.

How much do you have to put down?
I only want to talk about the total, out the door price.

We really need to decide whether you're going to finance. We ought to start pre-approval so we can move you through the process faster.
Time isn't important to me. I only care about the total, out the door price.


Keep only one number in your mind: Your total cost. If you allow them to distract you from that number, you'll end up paying more.

 

[tinatark]

We recently bought a car for our son in that price range - actually, 2 cars, for the first one we were looking at $5-6k, we got such a great deal, when it was totaled 3 weeks later, the budget for the next was $8k - we found the best deals on craigslist. We took both of them (2002 Solara, 2004 Solara) to the local Toyota dealership for a purchase inspection - both were very thorough and well worth the $100 charged by the dealerships.

We looked at dealerships - they don't really deal with cars within that price range. The roadside, second tier dealers cars were pretty beat up, or those guys were looking for their own financing $$'s IMO. They were also very overpriced.

If you are looking for a car for $6k max, I would look at private owner cars for sale between 6500-7500. Also, on craigslist, you can do a search by car and gauge how long it has been listed, and look for past price drops. Be careful of scams via craigslist - if it looks too good to be true it probably is - also, you can subscribe to a title service (autocheck, carfax) to check the VIN for history. You can do a monthly subscription for around $40.

Consumer reports has a used car guide, which of course lists Honda/Toyota as best buys, but it also breaks down the cars by make/model - shows standard/optional feature packages and historical data by make/model. One thing also helpful is that it shows major redesign model years - you can usually get a better price on the last model of the "old" design.

You can also look at local classifieds on ebay.

 

[EKW]

You can go to ConsumerReports.com and find the fair market price for your vehicle...that is, the price that the sticker should start at.

When I bought my current car, I went in with it and they told me there was NO way they could match that. Okay, let's move thru the process...then, when they finally handed me the itemized price list, I went thru line by line and crossed off all their HUGE mark-ups.

There was a whole page of "ad-ons" that were "optional". Floor mats for $100. Underbody coating for $1500. By the time I got done crossing out, they were furious and I'd taken over $3000 off the sticker price.

I ended up getting the car for a few hundred less than the fair market price!

I should add...I ended up getting the products I crossed off...what were they going to do with an extra set of floor mats, etc? All that was just an attempt on their part to run up the cost. If you didn't look closely at the contract you would never have realized those costs were "optional"!

Did they love me? Nope. Did I care? Not at all, lol!

 

[Luv Bunnies]

Ditto on the "don't tell them you're paying cash". The dealers know that they'll make money from financing, so refuse to discuss that ahead of time. THey like to talk about loads of different numbers - but you don't have to play nicely. Here are some typical questions/answers:

Will you be financing?
I haven't decided yet. I just want to talk about total, out-the-door price today. My budget is ______.

How much per month are you looking to spend?
I only want to talk about the total, out-the-door price today.

How much do you have to put down?
I only want to talk about the total, out the door price.

We really need to decide whether you're going to finance. We ought to start pre-approval so we can move you through the process faster.
Time isn't important to me. I only care about the total, out the door price.


Keep only one number in your mind: Your total cost. If you allow them to distract you from that number, you'll end up paying more.

I would even go a step futher and not tell them what your budget is. If they know how much you have to spend they won't let you out of there for anything less.

We always pay cash but never let on until the last moment. We just say, "Tell us how much the car costs and then we'll decide how we're going to pay for it." As soon as the total price is written down, we whip out the checkbook! Make sure it's in writing first or they'll try to add to it.

 

[madge]

SO glad to see this thread .. we're shopping for a new to us van now, and we're paying cash. I wasn't quite sure what to do outside of not telling them we're not financing. I did know that much. LOL.

If I understand correctly, if our budget is $10K, we should be looking at vans up to $11K?

 

[balletmom97]

Take your time! Whatever your budget, people will try to tell you that "you can't possibly get X for that"...not just dealers, but friends and family, too!

A few years ago, we were looking at replacing a car and I had $10k cash that I felt comfortable spending, so that was our budget. Everyone (DH) said it couldn't be done.

Then, our second vehicle was totaled....we were suddenly in the market for TWO cars and I still only wanted to spend $10k.

I found two vehicles that fit our needs and had change left over. Best thing...5 years later, they are still running with no real problems!

Stick to your budget FIRMLY...otherwise people tend to rationalize "just a bit more" and before you know it, you are $2-3k over your budget!

I also second what PP said about Mazda MPV's. We are on our second one (both purchased used) and I LOVE it. They can really take a beating and just last forever. The first was totaled with about 160k miles on it, the second has 180k miles and is still going strong...

 

[madge]

I also second what PP said about Mazda MPV's. We are on our second one (both purchased used) and I LOVE it. They can really take a beating and just last forever. The first was totaled with about 160k miles on it, the second has 180k miles and is still going strong...

you are the third person I've heard this week singing the praises of the MPV. I added it to our list of van choices!

 

[scribega]

Thanks for all the great responses. This has been a huge help.

Glad to see that this might help some others as well.

 

[Carl Fredricksen]

Carl, Cheshire,

You need to copy and paste your reponses for future use. They provide an insight to the business that few know about. I hope this thread gets reponded to for quite a while so it stays on the first page or two.

At the 6k price range, the dealer paid about 3-4k for the vehicle.

At 8K, they paid about 4-5K. If you can get the 8K vehicle for 6k, that should be a good value, but you absolutely must do your homework

I would agree with this. Any dealer first or second tier has marked the car up about 40% over what they paid to get it on the lot, and I am confident that is a good number to work with. Of course, they have to make something on the car, but I would agree if you find an 8k car that you can get for 6k, the dealer is probably netting about 1000-1200 on the deal, and you are doing better than most. Of course, they are going to tack on tax and title, so keep an eye on the small print when they write the purchase order, because they may bury some stuff in there to add another $100 or so to the final price.

I did purchase a used car recently, and through patience, research (carsurvey.org, Kelly Blue Book, Edmunds, Consumer Reports, MSN Autos), and endless arguing with the dealer (including putting my coat on while he was in mid sentence), I got a car that was listed at 12k on all of sites for 8700 plus tax and title. I also made them do $300 worth of work to the car before I took it home. To this day, I have checked on autotrader, etc. and have not been able to come close to what I paid for this car, so it can be done.

One last thing, someone mentioned earlier that if you are working with a dealer, the best time to buy is in the last 5 days of the month, because they are trying to make their quota. A few years ago we got my wife's Saturn knocked down 2k below what I though I could get on my best deal (which was low anyway). The reason we did is because we showed up at the dealership 2 hours before close on the last day of the month. I looked at the sales board in the Sales Manager's office while our sales guy was out doing something, and saw they were down on their quota. We drove the car, and came back 20 minutes before they were ready to close. We told them we would think about it and put our coats on to leave, and of course they gave me the "what can we do to get you to buy today?". I told them there was nothing they could do, and of course the Sales Manager tracked us down at the door. We really did like the car, and it only had 9000 miles on it (so with the warranty still in tact I figured we were okay without a mechanic visit), but of course we didn't let them know that. So while he was brow beating me (this is after their closing time on a Sunday at this point, so all other customers are gone), I gave him the number that was 2 grand less than what I figure my best deal was. They obviously had made some money on someone else that day, because they took the deal. I am confident that they made $0 on our sale, but the Sales Manager saved his backside by adding one more sale to his monthly totals.

Anyway, sorry for the long diatribe, but just wanted to give you as much ammo as possible. I personally hate shopping for cars, and it ranks right up there with a dentist visit IMO. So good luck, and post back to let us know what happened!

 

[sameyeyam]

Just my opinion, but a really good way to raise your credit score is to finance a vehicle.

We did the cash for clunkers this summer and bought our daughter a new car. Although we had the cash to pay for it, we decided to make 7 payments of $1,000 each. That way it helps raise our credit score, yet we pay very little in interest.

The wonderful thing about financing a vehicle is there is not normally a pre-payment penalty. Go ahead and use the dealership financing. Plus, if your credit union or bank is having a special (like ours did one year), use it to your advantage. We transferred our loan there after a couple of months. They gave us $50 as a cash bonus to transfer our loan. That more then covered the interest for 6 months.

 

[Nayan]

I find this is a must read for anyone going to a dealership:

http://consumerist.com/2010/03/beat-the-four-square-dealership-ripoff.html