How to Buy a Car

I never thought I’d own a car.

I’ve always lived in cities and had access to public transportation and ridesharing, so historically this has been relatively easy. I prided myself on not having a car given its economic rationality and the slight sense of moral superiority I got by not risking others’ lives in getting behind the wheel.

Then COVID hit, and quarantining in a one-bedroom apartment highlighted all of the negatives of living in New York City that I previously was able to overlook. So I left New York, bought a car, and started driving it around the country.

Buying a car was the worst consumer experience of my life by an order of magnitude.

For my entire life, people had told me how awful the experience of purchasing a car is. I didn’t believe them: I’m a good negotiator and can handle high-pressure sales tactics. What I neglected to consider, however, was how different negotiation is in one-shot vs. repeated games. You need to approach a negotiation where you’ll never see your counterparty again (e.g., car-buying) in a fundamentally different manner than one in which you want to have a good future working relationship with your counterparty (e.g., salary negotiation). But I’m getting ahead of myself.

I wrote this guide in the hopes that others will have an easier experience than I did.^[1]

Research

The first step of the process is to determine the exact make, model, and trim of car that you want.

You’ll have to determine what the most important factors are for you in a vehicle. Safety? Reliability and warranty? Off-road capabilities? Ability to transport heavy-duty machinery? Being competitive in the Cannonball Run?

You’ll also need to set a budget. A car is pure consumption: don’t view it as an investment.

With these factors in mind, you should be able to determine the class of car that you want: truck, SUV, sedan, etc. From there, look up the rankings for your given class of car. Consumer Reports is a good resource – you may be able to get a free subscription from your local public library. Kelley Blue Book and other sites also compile car reviews from professionals and consumers.

When I started this process, I didn’t realize that the exact same make and model of car can vary in price by $10,000+ depending on the color and any options added on (trim). Look at the difference between the different trims and determine which features (if any) are worth paying for. Personally, I just wanted an affordable car that got me from Point A to Point B reliably and safely, so I chose the base trim.

Once you land on a 1-3 cars that fit your criteria, visit a dealership and give them a test drive. If you have exactly one car in mind, this is to ensure that there are no red flags and that you like it inside and out. If you are choosing between a couple, this can be the factor that separates one from the rest.

Secure Financing

At this point, you know the exact make, model, and trim of car that you want. You need to determine how you will pay for the car before you go to the dealership.

If you have the cash on hand to buy the car, great. You may need a cashier’s check from your bank. It is doubtful that the dealership will take a personal check or allow you to put the majority of your car purchase on a credit card.

Likely, you’ll finance your car purchase. Assuming you have decent credit, you can get a loan from any bank. I plugged my information into a few banks’ car loan portals (Bank of America, Chase, etc.). As a very rough estimate of the car price to plug into the site, take the MSRP of the car you’ve researched + 10%. You should end up paying much less than this.

Given current interest and inflation rates, it may make sense to take out a car loan, even if you can afford to pay in cash. For context, in June 2020 I was able to get a 48-month car loan at a 3.19% APR (with a 0% down payment) from Bank of America.

The result of your work will be a form that you'll take to the dealership that shows you have a loan lined up for the vehicle.

You’ll also need insurance. Luckily, I was able to use my parents’ insurance agent to handle this process, so I don’t have much to add on this topic. Again, Reddit is your friend here.

Contact Dealerships

With a car in mind and funding secured, you’re ready to start negotiations.

Am considering taking Tesla private at $420. Funding secured.

— Elon Musk, the 2nd (@elonmusk) August 7, 2018

Visit individual dealerships’ websites to look at the pricing for the exact car that you want. The pricing on the website may be directionally accurate, but in my experience it is completely divorced from reality. Often, the listed prices will be inclusive of all discounts and rebates (which you may or may not qualify for) and will not include not only tax, title, and license, but $1,000+ charges that the dealership will try to add to your bill when you get there.

You care about the “out-the-door” price. This is the amount that will be on the check that you deliver to the dealership: the price of the car (inclusive of all eligible rebates and offers), plus tax, title, and license.

Email dealerships asking for the out-the-door price of the car. Many will say that they can’t give you a written quote and will try to call you or tell you to come into the dealership. Ignore this – insist on a quote via email.^[2] You may have to go back and forth a few times. A good script that worked for me is:

Hi – I am interested in the red 2020 Kia Soul LX listed on your site (VIN XYZ). I am buying with cash and want to make a purchase today based on price alone. What is the best out-the-door price that you can offer?

Obviously, insert the exact color, make, model, trim, and VIN that you have determined in your research. To the dealership, you’re paying in cash since you have financing secured from a bank already.

Email a few dealerships, get their lowest offers, then email them all back to see if they can go any lower. Make them compete against one another for your business. You should let them know that you have a better offer – a line that worked well for me was:

My current best offer is $X out-the-door. If you can beat that, I will come in today to buy.

Note that $X may be your actual best offer, or it might be a couple hundred dollars below that number. 😉

For context, I negotiated a $17,663 out-the-door price for a 2020 Kia Soul whose MSRP was $20,355.

Some things that may help lower the cost:

1. Buy a common car. The Kia Soul is not a luxury vehicle – you have much more power to negotiate on a car where dealers are looking to move volume.
2. Be flexible with trim and color. I would have preferred a burnt orange or yellow Soul. Was I willing to pay $2,000 more for that? Hell no.
3. Buy at the end of the year. (Or buy last year’s model.) I bought my 2020 Soul just two weeks before the 2021 model came out, meaning the dealer wanted to move the 2020 inventory.
4. Buy at the end of the month. Some car dealerships get a monthly volume bonus from the manufacturer based on the number of cars that they sell. If they are close to the sale threshold to receive that bonus, they may be willing to give you a better deal on your car.^[3]

Be the Hammer, Not the Nail

The car dealership will likely try to fuck you. I visited several dealerships where salespeople didn’t honor negotiated prices, intentionally ganged up on me, and tried to confuse, berate, and belittle me into purchasing a vehicle. Here is your game plan to avoid as much angst as possible.

Walk into the dealership with:

1. A friend
2. Your financing letter
3. Your negotiated price in hand (a printed out version of the email with your final price circled).

At this point, you hand your email to the salesperson and say:

I’ve negotiated the price with your internet salesperson for a red 2020 Kia Soul LX (insert relevant color, year, make, model, and trim here). I am ready to buy. Let me know if you will honor this negotiated price (pointing at the price) and I will purchase the car today. If not, tell me now so that I can walk out the door.

This is aggressive! But you need to be aggressive in this situation so as not to be taken advantage of.

At this point, the salesperson will likely hem and haw that the price you’ve negotiated is for “well-qualified buyers” who are eligible for all rebates or some such nonsense. Insist on the price that you’ve negotiated – you have already established the price you’ll pay based on your exact qualifications in your email exchange, which is conveniently printed out and now sitting in the salesperson’s hand.

Now, the salesperson will either (begrudgingly) agree to sell you the car for this price, or will not honor your written agreement – in which case you’ll walk out the door. When they start to draw up the paperwork, take the car for a test drive to make sure that there are no issues or surprises with the exact car that you’re purchasing.

Remember that you are in an adversarial interaction in enemy territory! You brought your friend to keep a clear head and pull you out of the situation if the sale begins to go poorly.

Assuming there are no issues with the car, the dealership will likely try to get you to finance through them. You can entertain this offer – it may be lower that what you’ve negotiated with the bank. Make sure that there are no hidden fees associated and that you are comparing the APRs of the offers, not only the monthly payments.

I ended up keeping my Bank of America financing because it was cheaper than what the dealership could offer. At this point, you will need to sign a bunch of paperwork to get your car, as well as prove that you have insurance. You will probably need to call the loan officer listed on your financing letter and get them to send a check to the dealership. This will happen either before they give you the car, or within 1-2 days of you receiving the keys. I found the loan officer to be incredibly helpful – a notable contrast with the car salespeople.

Make sure that everything looks right on the paperwork before signing. The final cost should match what you agreed upon via email. If anything looks or feels off during your visit to the dealership, slow down, talk to your friend, and don't be afraid to walk out the door.

Here are some tricks that various Kia dealerships and salespeople tried on me:

• Told me with a straight face that the total amount that I’d be paying was $18,000, when in fact the paperwork indicated it was $23,000 ($18,000 financed plus a $5,000 down payment today). When I pointed out this fact, they told me that since I’d be paying $5,000 today, that portion “Didn’t count”.
• The same salesman told me that the price indicated on the website only applied if you lease a car (this made absolutely no sense).
• Tried to add $2,500 to the final sale price for absolutely no services rendered because “This is a standard charge for all of the cars that we sell”.
• Took the printed email with the final out-the-door price circled and gave it to the financing manager who spent two hours shuffling papers in the office doing absolutely nothing (I watched). The financing manager then charged me $200 more than he should have on the final paperwork hoping that I was worn down and wouldn’t notice.^[4]

Hopefully, you avoid the majority of these issues by negotiating your final out-the-door price via email. Again, if the dealer tries to do anything shady or if anything seems off, slow down and talk to your friend to get a second opinion, stand up for yourself, and walk out the door if necessary.

Congratulations

You’ve purchased a new car without excessive wailing and gnashing of teeth. Hold on to it as long as you can so that you can put off this awful process for as long as possible.

Or, just buy a Tesla. I’ve got my eyes on the Cybertruck.

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1. I bought a new car – this guide assumes that you are doing the same. Many of my learnings were drawn from this great Reddit post. ↩︎

2. I made the mistake of getting a price via phone, then having a dealership try to charge me $1,000 more than the agreed-upon price when I came to buy in person. I walked out the door, but it was a huge waste of time. ↩︎

3. See also: the dealer’s true cost, how car dealerships really make money. ↩︎

4. This ended up being the car that I bought – of course I also had the email exchange on my phone and sent him back to get the negotiated price. ↩︎