Save tons of money on your next car purchase – guaranteed!

Buying a brand new car can be a significant decision for many of us financially, but most folks don’t do the groundwork required to get the car of their choice at the lowest possible price. Through this article, I will empower you to dictate terms in the purchase process and avoid leaving money on the table – just like I recently did while purchasing a new vehicle for 15% below the asking price.

If you rigorously follow the steps I’ve outlined, I guarantee that you’ll put upwards of $4,000 back in your pocket!

Step 1: Narrow your car choices down to a maximum of two in the same price band. If you can narrow it down to a single make and model, you’re golden!

Step 2: Approach a local credit union to become a pre-approved buyer. Avoid the big banks, because they don’t offer the low interest rates credit unions do. If you have a decent credit score (700+), and choose a moderate repayment term (e.g. 3 years), you could score an incredible interest rate of 1.75%. A brief call with a loan representative will generate a cash buyer’s check, which you can collect from any branch. This is like carrying cash once you sign the check (so don’t pre-sign it), but until then it’s worthless – so don’t worry! Also, the amount you actually use can be lower than the approved number - this is decided once the dealership connects with the credit union after the sale is closed.

Step 3: Visit local dealerships that sell your preferred vehicle to get to know the staff. Ask if they’ll let you keep a test vehicle for a week, and also make a mental note of the inventory they have. At certain times of the year, like late August, manufacturers will start pushing out the subsequent year’s models. Thus, dealerships with a high inventory from the current year are more likely to sell those cars at lower prices to make room for the new inventory. They don’t want to pay taxes on inventory that is hard to sell. You can exploit this to your advantage, knowing that there is virtually no difference in the quality and performance of a 2016 model of the car versus the 2017 model. Do NOT be enticed into buying a car on this visit, NO MATTER WHAT. Shrewd salesmen can smell vulnerability within a minute! Gather your information and contacts, and politely leave. Feel free to let the dealership know that you are a cash buyer due to your pre-approval, which tells them that you are serious, and an instant source of considerable cash; however, never disclose the maximum amount you’re pre-approved for.

Step 4: Visit kbb.com to get price ranges for the vehicle, and find out your fair market range. You should aim to close the deal at the lowest possible amount in this range.

Step 5: MSRP stands for Manufacturer’s Suggested Retail Price and knowing this makes those pricing labels on the cars’ windows mean NOTHING to you. The dealer wants to negotiate downwards from this price to make you look like a tough negotiator and convince you that you’re getting a good deal. In reality – and this is key – you want to negotiate upwards from a magic number and take complete control of the negotiation. That magic number is called the “factory invoice price” - the amount the dealership paid the manufacturer to get the car delivered to the lot.

Ask dealerships to scan a copy of the factory invoice price to your email. Though this catches them off guard, there should not be pushback because they think you can procure this from a competitor.

Step 6: Voila! The power is in your hands. You’ve converted a top-down negotiation into a bottom-up one. You should try to negotiate your offer as close as possible to this factory invoice price. Start a bidding war with dealerships in a fifty-mile radius, primarily to drive down the price at the dealership nearest to you. You’ll be surprised at how quickly prices drop if you only ask. With a bit of luck, a dealer will even sell the car at or below the invoice value (although this didn’t happen to me personally). Why would they sell at such low values? See the reasons below:

(a)   It is better to make $50 on the car than lose your business to a rival and not turn the inventory over. By keeping the deal alive, the dealer at least has a chance to pitch lifetime warranty, spare parts and accessories, financing options, and make some money. By the way, please decline all of the above when offered. Really.

(b)   The sales guy has two incentives: He makes a fixed amount for having sold you a car, and a variable amount for how profitably he sells you the car. He is better off selling two cars in a day at rock bottom price, than trying to chase one highly profitable sale. That’s a better bang for his buck, too.

(c)    The dealership hopes that you will come back for maintenance, which is a bigger profit pool for them. This is very similar to the printer-ink cartridge or razor-razorblade model. (In their defense, they are truly differentiated in that space due to authentic factory parts, and certified technicians who work mostly on that particular brand. They also keep an electronic-record of all maintenance on your vehicle that can be pulled up and edited at any dealership across the country.)

(d)   Dealers are given kickbacks by manufacturers for selling higher numbers of cars - a fact they never disclose to car buyers. Thus, a dealer can still make a profit on the car itself, despite selling it at invoice value.

Step 7: Are we done? Not yet! You’ve secretly been eyeing a higher trim of the vehicle, but don’t enjoy the prospect of blowing your budget after so much hard work to squeeze the deal. But you’re also a champion negotiator at this point, so casually ask the dealer if you could have that higher trim by paying half of the difference between the two levels. Like me, you just might get the nod!

Step 8: Keep calm and drive away in your new car. Don’t forget that free full tank of gas before you pull out of the dealership!