Your Money_ The Missing Manual - J. D. Roth [84]
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To see how much your car is likely to lose in value, check out this vehicle depreciation calculator: http://tinyurl.com/depreciation-calc.
Financially, the best car-buying decision is almost always not to buy one. If you made your decision purely based on depreciation, it'd make more sense to walk, take the bus, or try to coax a little more life out of your current car than buying a new one. Basically, you're better off doing whatever you can to put off buying a new car. (As you'll see on Sell your old car separately, buying a decent used car can take some of the bite out of depreciation.)
But even knowing all that, most of us aren't ready to give up our vehicles. For better or worse, we live in a car-centric culture: We want to be able to drive where we want, when we want. If you can't shake the new-car itch, you can at least save money at the dealership by being smart.
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In Stop Acting Rich (Wiley, 2009), Thomas Stanley writes, "There is no significant correlation between the make of motor vehicle you drive and your level of happiness with life." So buy a car for transportation—not as a status symbol.
While many honest, hard-working car salespeople do their best to provide their customers with great service at a fair price, there are also plenty who use slimy high-pressure tactics to make you part with as much money as possible. The next few pages will arm you with the info you need to resist such tactics and get yourself a great deal on your new ride.
The Wrong Way to Buy a Car
Recently, I saw that a local dealer had a used Mini Cooper on the lot, so I stopped to take a look. I took a test drive and told the salesman how much I liked the car's sportiness and handling. I admitted that I'd been saving for 2 years to buy a Mini, and now had enough to pay this car's sticker price ($17,000).
When we got back to the showroom, we negotiated. I talked the salesman down to $15,000. I was patting myself on the back when the "closer"—a more experienced, higher-pressure salesman—sat down at the table. Armed with the info I'd told the first guy—that I had $17,000 to spend, was willing to pay at least $15,000, and really liked the car—he spent an hour talking me up to $15,600. I could (and should) have walked away, but I'd become emotionally invested: I wanted to drive that car home.
In the end, I paid $15,600—and I traded in my old car for much less than it was worth. That's exactly the wrong way to buy a car, yet nearly everyone does the same thing. We get emotionally attached to a vehicle and convince ourselves we have to buy today, so the dealer gets to call the shots. Fortunately, there are smarter ways to buy.
Tip
It's important to keep your emotions out of a negotiation. In his book You Can Negotiate Anything (Bantam, 1982), Herb Cohen writes, "When you feel you have to have something, you always pay top dollar. You put yourself in a position where the other party can manipulate you with ease."
The Right Way to Buy a Car
Over a decade ago, my wife decided to buy a new car. She wanted a Honda Civic but didn't care much about anything else. Together, we drafted a letter that read something like this:
Dear Car Dealer: We're in the market for a new Honda Civic. We don't care what color it is, but it needs to have features X, Y, and Z. We have $5,000 for a down payment and would like to drive the car home on Saturday afternoon. We're sending this letter to all the Honda dealers in the area. If you give us the lowest price, we'll buy from you.
We faxed the letter to a dozen Honda dealers in nearby cities. Half of them didn't bother to reply, and three tried to convince us to visit them today because they couldn't quote a price over the phone. But three of the dealers gave us prices, and two actually bid for our business.
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