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Jeruba's avatar

Some advice on car buying? (Question 1)

Asked by Jeruba (52203points) August 7th, 2012

I’ve been kind of casually shopping for a car for a year or more. Now I’m getting a little more serious, and I have questions for knowledgeable buyers.

I’m leaning toward the moderately priced compact hybrids. I don’t need a big car, but I do want a dependable four-door with good mileage and one that feels nice and stable on the road.

Question 1. Am I better off financing or writing a check for the full amount? Which will get me a better deal? I’ve set aside enough to make a single payment, but do dealers prefer to see financing? And—in that case, do I lose by paying off the total as the first and only installment?

(Question 2. Question 3.)

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19 Answers

YARNLADY's avatar

Oh, I get to be first. Do not finance if you don’t have to. Full payment up front always gets the best deal.

JLeslie's avatar

Full payment should get you the best deal. Although, logically if you finance not with the dealer and bring them cash it should be the same difference, but in my opinion that is more complicated and not worth the complication.

If they know you will pay cash it avoids all the horrific BS about payments, how much can you afford per month, and more ridiculous back and forth. I can’t stand all that.

A lot of dealers do their best to torture you with keeping you in the dealership until you finally sign on the dotted line. If you have a couple dealerships who sell the same car near you, if you want to bother to try to work the price a little, get them to give you their best price, work them against each other a little, and then buy it.

If you go in alone you can say you are looking and then going to bring your husband back for the one you like best. That will avoid a lot of the sales talk you are not interested in, and then you can still write the check on the spot if you feel ready anyway.

YARNLADY's avatar

@JLeslie Yes, that is one tactic we use a lot. I go alone, and look at several dealers.

jerv's avatar

Zero interest is always a better deal, so cash is ideal.

And, sadly, many dealerships are a little sexist and some women are naive, especially about cars.

Jeruba's avatar

@jerv, I sure am, and I can’t possibly hide it. Any way to make that work to my advantage?

jerv's avatar

I have found that the only ways to beat a salesperson are to either be a better salesperson (unlikely unless you’ve done it successfully for years), know more about the product than them (easy for me, but not for everybody), or bring someone who fits one of those two categories.

My mother is fun in a dealership or garage; she used to be a VW mechanic, much to the chagrin of many would-be fast-talkers.

gailcalled's avatar

@Jeruba; Inform yourself, arm yourself and show up with a big smile, head up and an air of “I am just as smart as you, buddy.”

Dont’ sign anything on the first visit. Get all the financial info, and choices, and go home and brood.

Unless your husband is equally interested, you don’t need him.

FutureMemory's avatar

If you’re able to pay for the car outright, I would think you could seriously haggle on the price. For example, “I’m interested in this $25,000 car, and if you lower the price to $22,500 I could pay the entire amount today, in cash” sorta thing.

I agree with those that said dealerships will take advantage of you if you lack experience. Better to have an experienced car buyer accompany you, preferably a man. (ugh I know, but you’re entering their territory).

CWOTUS's avatar

You probably know a lot about the type of car that you want, as I would expect that you’ve done your shopping by looking at cars, either in lots or online or talking to friends. Now it’s time to inform yourself about car salesmen.

No matter how much you know about the car you’re looking for, you won’t know as much as the person trying to sell you one. So don’t even try to outsmart a salesman. But do check them out for honesty by asking some questions that you already know the answer to, and if you have a referral from a friend or relative, do mention that. Referrals carry a lot of weight with sales people. They won’t want to damage the relationships that are giving them referrals, so try to have one when you walk on the lot, even if it’s from someone you don’t know particularly well.

Other than that, if you can deduct the car expenses as part of a business tax write-off, a lease is probably the best way to go: lower up-front cost, up to 100% deductible (depending on how much of the operation is “business” use), and known cost from start to end of the lease.

On the other hand, if you can afford to pay cash for the car, and if it’s only for personal use, then that’s going to be the lowest-cost option otherwise. In fact, even though dealerships make good money from financing (GMAC, the financing arm of GM, has often outperformed the parent company), the salesman wants to make a sale. That means he doesn’t want to have to fool around trying to arrange financing for unqualified buyers; if you have cash and he knows that, and you’re obviously in the market, you are hot. He should treat you right. Obviously, he should treat you right anyway, but if he knows that you have your qualification in your purse and all he needs is a pen, then you’re gold to him.

Other than that, buy a used car. Certified used cars are a fraction of the cost of new, don’t lose tremendous value at the point of re-sale (to you), since that has already happened with the first owner, and should still be trouble-free for upwards of 100,000 miles.

marinelife's avatar

” Buyers’ experiences from one dealer to another vary widely, but I think paying cash can actually hurt your chances of getting the lowest possible purchase price.

Dealers may be willing to give low prices to customers who are getting loans through their in-house finance companies. This is because they can offer finance terms that increase the dealer’s profit by a wider margin than would be possible by simply raising the transaction price. Indeed, numbers from Power Information Network show that the transaction price is lower with financed purchases.”

Wall Street Journal

jerv's avatar

@marinelife That is why price should be discussed before financing. Hell, I’ve had a couple of dealers didn’t even list prices on their cars and then offer me a low-sounding price with 19.9% “Simple interest” financing (basically, there is no way to reduce interest payments by paying down the principal; you will pay double the amount financed no matter what). Needless to say, I never dealt with them again.

IMO, if they are offering fake discounts like that WSJ article outlines, I wouldn’t deal with them either. I know that dealers have to make a profit and all, but I am used to the old school where they did it by satisfying customers well enough to turn every buyer into a continuous revenue stream. Wouldn’t you be willing to take a hit on a sale if they came back to you for all of their maintenance and repair needs?

augustlan's avatar

Don’t even worry about getting a better deal… it’s often a ‘six of one and a half dozen of another’ thing, so any little money you save probably won’t be worth the aggravation.

Know what a reasonable price to pay for the car is, go in and offer to pay that amount, in full, immediately. Project confidence and a no-nonsense attitude.

hearkat's avatar

I’m with Auggie… educate yourself. Sites like will tell you what the dealer paid for the car plus whatever options you want. You also want to negotiate free oil changes for life and other service deals that many dealers offer nowadays – just make sure it’s in writing somewhere.

I worked for a couple car dealers back in the day, and was married to a mechanic… it is possible to outsmart the salesperson, and even intimidate them. Don’t hesitate to print out information and bring it with you, and pull it out and ask questions.

As for cash vs. financing, I’ve always negotiated on total price regardless of how I was paying.

gailcalled's avatar

Is there consensus here? If so, what is it? I am having trouble codifying the answers.

Buttonstc's avatar

If you know which make and model of car you want, you can skip all the angst and haggling.

There are several online services (Consumer reports is one, I believe,) which pits dealers in your geographical area to bid against one another for the lowest price because they want the sale.

All the details and price are all worked out and all you have to do is show up at the dealership which offered the best deal, fill out the paperwork, pay for the car and drive off.

Especially if you’re paying cash this could easily work to your advantage because the assumption is that they can make up a little on the interest rate of the financing since so few people do pay cash.

Buttonstc's avatar

if you are a Costco member, they also have this service and they have negotiated special members only prices.

For Consumer Reports it’s only necessary for one to be a subscriber. Small price to pay for their negotiating clout and savvy. Plus you’ll be getting a years worth of the magazine also.

That’s what I would do, personally speaking, (if I were in a position to afford a new car :)

Check out their websites for the full details and see if this method appeals to you.

Ciaolucedelsole's avatar

I recently looked into purchasing a car. In the market now days, it’s actually cheaper to buy certain makes BRAND NEW. Everyone is looking for used so new cars have been hard to sell…in turn they offer lower prices, more flexibility & amazing rebates to move the cars off the lot. :D

Go for payments if you want to increase your credit rating, otherwise pay cash (cheaper) & save yourself a couple hundred a month on insurance by purchasing liability instead of full coverage.

Bellatrix's avatar

I don’t know if this applies to car loans, but here companies selling goods are often paid money for organising finance deals. Consequently, their profit is coming more from the finance deal than the sale of the item. If that were the case and you could negotiate a deal where you were not penalised for paying off the loan almost immediately, you might get a cheaper deal. I don’t know if things work the same way in the US and obviously, you would have to read the finance terms carefully to ensure any benefit isn’t lost because you are forced to keep the loan for a set period and pay interest.

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