Best Car Buying Tips

Beautiful Life

CNN reports that car sales in US in 2013 has reached pre-recession levels.  Early September, I did not think I would be one of them.  I have been resisting family encouragement to purchase a newer car because my car (a nice red coupe) is 14 years old, running fine until early this month.  A quote of the repair from my auto mechanics is about $500. But the blue book value of the car is only $2000.  I started writing a check list to help us on the car buying process.


Q1: What type of car ?

• We own two 2-door coupes.  We know this time it must be a 4-door SUV, preferably All-wheel-drive (AWD or 4WD), minimum 200 horsepower.

Q2: What brand and model of SUV?

• Our favorites are BMW, Mercedes and Volvo.  We check out the dealer websites for pricing and features of BMW X3 and Volve C60, to get a good picture about pricing.  Mercedes is a nice-to-have, not this time though.  From the past, pricing negotiation helped us to reach a 8% discount on the MSRP.  The final price is then close to the invoice price.
• We also checked Toyota Rav4, Highlander, Lexus SUV.  Highlander is large and expensive. Rav4 is not powerful enough. Lexus SUV except the newest model tends to be common among real-estate agents.  The newest Lexus SUV model looks great, but similar price to BMW X5
• A friend of ours with similar financial background to ours purchased a 2013 Acura MDX last year.  We called him up for his feedback.

Q3: Should we buy a new, used or leased SUV?

• Our objective is to own a low-maintenance and fun SUV, because we already have two home mortgages.  We forecasted the cost of ownership (purchase + maintenance) over the next 10 years, in order to have a good idea about our monthly expense. It is important to ensure that there is still (net) surplus money to be saved up monthly to reach financial independence.
• BMW or Volvo SUVs are $5K more with the accessories that we want.
• Throw in Acura RDX or MDX with all-wheel-drive, new or used, because our friend gave a rave review.
• No leased SUV.

Q4: Which SUV is, conduct test drive

• We remembered our neighbor is an Acura salesperson, so tested drive both RDX and MDX, new and used.  pre-2014 Acura MDX runs 21 mpg whereas 2014 Acura MDX and RDX runs 27 mpg.
• Tested driving RDX was great.  MDX is $5K more expensive than RDX, can sit 7 people.
• Acura offers 0.9% for 2-years financing or 1.9% for 5-years financing, available for new RDX.  This interest rate is even lower than the lowest offered by Bank of America, 2.38%, which is the lowest posted in Bankrate.com.  This plays an important factor in my decision-making.

Answer: I made the car model decision this time because it is my car replacement, per Isa's suggestion. Next car would be Isa's.  I selected low-maintenance 2014 RDX all-wheel drive, 273 hp, with technology package, with first 100,000 miles no-tune up required, free unlimited car-wash anytime.  The salesperson neighbor offered us a "so-called" friendship price.

Q5: How to negotiate the lowest price for the car?

• Identify the lowest recent price other 2014 RDX buyers successfully offered via reading Edmunds.com Forum. Official Kelley Blue Book is also a great source, but this time, I prefer pricing info from community source.
• Email Dealers listed via Edmunds.com RDX, about price, model availability courteously.  Not all dealers would respond.  In my case, the dealer located in a rich neighborhood did not respond to my email. :)

• If you do not want to broadcast emails to dealers asking about their lowest pricing, Costco member pricing gives a good picture. (Enter "autosave" in Costco.com website search).

Costco autosave program

One dealer responded immediately to us with likely a template answer.

2014 Acura RDX AWD with Technology Package Includes Maint. Package($1,200) value!* MSRP: $40,515 *Your Smart Choice Price:             $37,795

All prices include destination fee and exclude government fees, taxes, finance charges, dealer documentation preparation charge ($80) and any emission testing charge. Price valid on "in stock" units within 72 hours.  *Must have above average credit to qualify for special rates expiring11/04/2013.  Prices may be combined with all factory financing offers except "0 down lease".  *Call for maintenance details.  

$37,795 is similar to Costco's $38,045.  Our salesperson friend's price is slightly lower than these two prices.  We paid $2,500 maximum allowable using credit card for down payment, with the remaining cost paid within 60 months in 1.9% interest rate.

Take-aways about buying a car

• Have a good idea about possible lowest price for the car - Use Costco.com to find out the invoice price of the car.  Use Edmunds.com forum to identify recent best sale price for the car you like, should be close to invoice price, not MSRP.
• Allocate 2 weeks time to exchange emails with local dealers - Be precise about what you are looking. Otherwise, dealers may email you information about many alternatives and offerings.  Sometimes, a pre-certified demo car may be available for sale with extended warranty.
• Print out the final email and take it to the dealer who said can sell you a car with that price. The dealer may change his mind during the last minute, yet dealers have no incentive to irritate potential customers.  They want car buyer money.
• Intangible value - happiness and satisfaction adds value to the car. Like buying a house, buy a car which is both affordable, and bring pleasure to driving and ownership experience.  

First fun trip, Napa !

• Feel free to say no - dealers may present "offerings" that you may never have heard of.  Stick with the final email agreement.
• Check each item listed in the final written buyer agreement - verbal agreement has little legal binding power.  In addition to agreed car sales price, there is local sales tax (based on your residence address, not where you buy the car), title fee, documentation fee (should be less than $100).  There may be extended warranty available.  Price varies.  Always say no with courtesy first.  Then the dealer may come back with better price.  
• Car loan rate - financial incentive offering by the dealers always beat any bank offerings. When the interest is low, owning a car would have lower cost of ownership over a period of 5 years, compared to leasing a car.  Regarding bank car loan rate, Bank of America seems to offer the lowest auto loan rate, currently 2.34%. Unlike a house mortgage interest, car loan interest is not tax-deductible.  So it makes sense to pay off car loan, rather than home mortgage first.