How A Little Preparation And One Question Saved Me Over $1,000

by Hank Coleman

I refinanced my car loan and love it!Recently my wife and I bought a new car. I hate buying a new car because I always feel like the deck is stacked against me. As much as I try to be prepared, I feel like the car salesman has more information than I do and subsequently the better hand in negotiation. But, there were a few things that I had going for me this time. Here is how a little preparation and one simple question he me save money buying a new car.

A Little Preparation Goes A Long Way

Besides doing your homework and trying to figure out exactly what the dealership purchase the vehicle for at wholesale, there are a few things that you can do in order to save you money on buying a new car. One of the biggest ways to get the most bang for your buck is to sell your car yourself. Don’t trade it in to the car dealership. This is almost a guaranteed way that you will not get the most money that you possibly can for your trade in.

Another thing you need to do before you step foot on the car lot is to secure your financing from your own bank. Apply for a loan from your bank and know how much you have been approved for and at what rate. That gives you great bargaining power and a number on the wall that the dealership has to beat. You will save time and money by already having a check or authorization from your bank before you head to the dealership. The car dealer I bought my new car from tried to wear us down by keeping us waiting for hours. In the end, they hoped that we would just settle for their financing offer to get out of there quickly. They even told me, “If you have to call your bank to try and beat our rate, it will be at least another hour unless you have a preapproved purchase authorization.” The smug look on his face dropped when I held up my preapproved loan paperwork with a killer interest rate.

A Simple Question Saved Hundreds

The dealership quickly matched the interest rate of my bank’s car loan thanks to my wife and my excellent credit score. But, simply matching it is not good enough. They were flabbergasted when I told them no and that I would use my bank. They had researched my credit report and saw that I have never financed a car through my bank because the dealership typically handily beats their quote. They asked me why I would use them this time for the first time. I love my bank, but I also love saving money. I simply asked the car dealership to do better. I asked them to beat my bank’s rate. After a few minutes in the back room pretending to sweat about it, they readily agree and beat my bank’s rate by almost half a point. You may be wondering why I didn’t call my bank to try and get them to beat the new car dealership rate. That’s a great idea, and I tried that last time. But, alas, my bank has a policy not to get in a rate war. Their one rate they offer based on credit score, loan amount, and other factors is all they will do.

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While I often feel like I get beat up on the final sticker price and how much money the dealership actually paid the manufacturer, I know that I did everything I possibly could to win the battle for a good trade in price and low car loan rate.

What about you? Are you like me and always feel taken advantage of when buying a new car?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 581 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 13 comments… read them below or add one }

Jai Catalano

I brought a tough guy with me who talked so fast we all were just ready to give me a deal. In the end they forgot to take my deposit and let me walk out with a car. I never ended up having to pay the deposit.

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Modest Money

Buying a car can be an intimidating process. They like to put all kinds of pressure and sales tactics to use in an attempt to get you to overspend or rush into the decision. When I got my last car I just went through the dealerships financing since they were going to shop around between different banks to get the best rate. I probably would’ve saved a lot of money if I had been smart enough to get different dealerships competing for my business. Instead I rushed into the decision and it probably cost me a lot of money.

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John @ Married (with Debt)

I hate it too. Even though I know what I’m supposed to do, I always feel like I got tricked somehow. I’ve heard of people pretending like they are going to get financing through the dealership, because they will often go even lower on the price if they think you will get a loan with them. After the negotiation, then you tell them you have already lined up outside financing, then watch that smug look disappear.

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Big Dave

Rules for buying a new car
1 NEVER buy a new car. It depreciates the minute you drive it off the lot.
2 Buy a one-year old used car with low mileage. Let the original owner pay the depreciation cost.
3 ALWAYS have financing before you walk onto the used car lot.
4 Used car managers have a LOT more room to work on the price, because they lowballed the guy they bought it from. Seriously, used car managers will NEVER pay you a fair price for your car.
5 If you don’t like the price – walk away. I guarantee you, they will call before you even get to the next dealer, with a better price.
6 Shop the last week of the month. Dealers borrow money to buy cars, just like you do. If they don’t sell a particular car by the end of the month, they pay another month’s interest … Money they can slice off the price to get you to buy. Or, if your salesman is close to a bonus goal, he/she may actually drop their commission to get to that bonus.
7 Know BEFORE you go in exactly what you want and what it’s worth to you. Be at peace in your own mind. Forget what a deal your brother-in-law got. What is a good deal to you?
8 Once you buy … STOP LOOKING. Nothing ruins your day faster than finding the car you just bought for $1200.00 less. You will go into a deep depression when you see this. You will stop shaving, bathing, and going to work. You will lose your job. Your wife will leave you. Your dog will run away. So, just shut your eyes and drive happy.

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Nunzio Bruno

I liked BigDave’s rules. I’ve had the same car for the last 6+ years I’m thinking it might be time for a change in the coming years if the financial plan allows for it. Regardless the financial decision I think it’s always important to do a good amount of research. I thought it was especially great that you already came in with some leverage. Plus as a consumer we have all the power – if anyone is ever feeling bullied walking away is really the best thing you can do. Since cars a pretty fixed commodity forcing sellers to compete on price is our biggest weapon 🙂

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Kevin @ SpringCoin

Hank, your negotiation tactics are superb! I know that feeling, car salesmen are one of the greatest salespeople.

Just out of curiosity, have you ever tried to buy a used car @ an auction? I hear a lot of great things about it but it’s important to have an experienced agent with you.

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krantcents

I use questions to negotiate. It is amazing how easy it is to just ask for it and they usually give it to you.

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Dannielle @ Odd Cents

You beat them at their own game and won hands down. Haha. I love it.

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Paul @ The Frugal Toad

Don’t forget to get a copy of the dealer invoice from Consumers Report. It shows you dealer cost not only for the vehicle but even for most of the options. What I liked is knowing what the holdback (amount manufacturer gives dealer when car is sold) from the manufacturer was. Makes negotiation a simple process.

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Money Beagle

That’s great. Last time I financed a car, I did the same thing. The dealership offered to match it and I told them no thanks, that had they come in originally a rate around what my bank had agreed to provide, I might have done it, but since they started off way too high, they lost me.

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Financial Conflict Coach

I’ll admit- I’m strange. I really enjoy the car buying process. I even offer to go with friends and family to help them negotiate a good deal, too.

Interestingly, the salesperson who sold us our most recent car quit a few days after our negotiations. I’d like to think it wasn’t because of me, but a few comments the “new” salesperson made when she called to introduce herself makes me wonder.

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Car Negotiation Coach

Hey Hank, I love that you negotiate interest rates! Most people have no idea they should do this. I always bring a print out of my credit score and at least one bank offer with me to show as proof in the Finance Office.

The other thing I like to do is put as much of downpayment as they will allow on a rewards credit card for the points! (of course, I only suggest this if you plan to pay it in full immediately).

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Brent Pittman

I dread buying a car, new or used. Have you ever tried emailing for quotes? I remember reading some book where they faxed dealers asking for quotes.

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