Most effective way to buy a car with cash and no credit history?
August 28, 2011 6:32 PM Subscribe
I don't really know how car buying works, help please!
My grandparents just gave my brother and I a bunch of money to get cars (sort of an early partial inheritance thing). I'm planning on buying a new car, but I have no credit history. I'd strongly prefer to pay cash, but from what I've read, dealers don't like this because they won't make money on financing and it makes it harder to get a good deal.
What's the best strategy? I've seen people suggest hiding the fact that you're paying cash until you've settled on a price, but I don't understand how you lock the dealer into the agreement and then whip that out. In another thread someone said they got financing and immediately payed it off, which sounded like a good idea until I read about this (remember I have no credit history so my interest on a loan would be pretty sick). Should I just make a huge down payment? I live in Texas if that makes a difference.
Thanks!
My grandparents just gave my brother and I a bunch of money to get cars (sort of an early partial inheritance thing). I'm planning on buying a new car, but I have no credit history. I'd strongly prefer to pay cash, but from what I've read, dealers don't like this because they won't make money on financing and it makes it harder to get a good deal.
What's the best strategy? I've seen people suggest hiding the fact that you're paying cash until you've settled on a price, but I don't understand how you lock the dealer into the agreement and then whip that out. In another thread someone said they got financing and immediately payed it off, which sounded like a good idea until I read about this (remember I have no credit history so my interest on a loan would be pretty sick). Should I just make a huge down payment? I live in Texas if that makes a difference.
Thanks!
Where I live dealers are far more willing to negotiate the purchase price if you're paying cash than if you need financing. I asked a question here recently, but decided to buy used. I would have saved a couple of grand buying a new car with cash over the same vehicle financed.
Good luck with you search!
posted by iftheaccidentwill at 6:38 PM on August 28, 2011
Good luck with you search!
posted by iftheaccidentwill at 6:38 PM on August 28, 2011
Best answer: I don't understand how you lock the dealer into the agreement and then whip that out.
As I understand it, the dealers don't want you to know the financing and the car price are connected. It's more like, they offer you a good price on the car, but recoup their costs through financing. So if you refuse to discuss financing until you have been offered a reasonable price on the car, they are unlikely to turn around when you say you are paying cash and go, "Well in that case you have to pay $X more for the car". Sure, they COULD, but then you (and everyone else) would know that financing with them is not a good deal.
posted by lollusc at 6:38 PM on August 28, 2011
As I understand it, the dealers don't want you to know the financing and the car price are connected. It's more like, they offer you a good price on the car, but recoup their costs through financing. So if you refuse to discuss financing until you have been offered a reasonable price on the car, they are unlikely to turn around when you say you are paying cash and go, "Well in that case you have to pay $X more for the car". Sure, they COULD, but then you (and everyone else) would know that financing with them is not a good deal.
posted by lollusc at 6:38 PM on August 28, 2011
Consumer Reports is your best friend, and eminently worth the money.
In short, what you do is haggle by email, and not show your face at a dealership until you have nailed down your best price. You know, from CR, what the car cost the dealer, and what is the price you should shoot for. Then, you carefully minimize your exposure to car dealers, because they are better at negotiation than you, until you have that price. Then you go there and buy the car.
posted by pH Indicating Socks at 6:39 PM on August 28, 2011 [4 favorites]
In short, what you do is haggle by email, and not show your face at a dealership until you have nailed down your best price. You know, from CR, what the car cost the dealer, and what is the price you should shoot for. Then, you carefully minimize your exposure to car dealers, because they are better at negotiation than you, until you have that price. Then you go there and buy the car.
posted by pH Indicating Socks at 6:39 PM on August 28, 2011 [4 favorites]
I'd strongly prefer to pay cash, but from what I've read, dealers don't like this because they won't make money on financing and it makes it harder to get a good deal.
Don't those two things sort of cancel out, though? If you're not paying for financing, that's a good deal.
posted by Sys Rq at 6:40 PM on August 28, 2011
Don't those two things sort of cancel out, though? If you're not paying for financing, that's a good deal.
posted by Sys Rq at 6:40 PM on August 28, 2011
Best answer: Read this comment, then read it again, and do what cebailey says:
http://ask.metafilter.com/37017/What-is-a-reasonable-offer-for-a-new-car#573706
My dad recently bought a car using a similar strategy, and said it was almost completely hassle-free. Know your price, play a couple of dealers off each other via email, then stick to your guns.
posted by chrisamiller at 6:41 PM on August 28, 2011 [1 favorite]
http://ask.metafilter.com/37017/What-is-a-reasonable-offer-for-a-new-car#573706
My dad recently bought a car using a similar strategy, and said it was almost completely hassle-free. Know your price, play a couple of dealers off each other via email, then stick to your guns.
posted by chrisamiller at 6:41 PM on August 28, 2011 [1 favorite]
Response by poster: Don't those two things sort of cancel out, though? If you're not paying for financing, that's a good deal.
Yeah, I meant hopefully I could get a price they would only offer under the pretense of financing since they assume they're making up the difference.
So many great answers already!
posted by p3on at 6:46 PM on August 28, 2011
Yeah, I meant hopefully I could get a price they would only offer under the pretense of financing since they assume they're making up the difference.
So many great answers already!
posted by p3on at 6:46 PM on August 28, 2011
Best answer: I agree with pH Indicating Socks about fixing a price beforehand and just going in and trading cash for a car. The dealer would like to finance but plenty of people walk in with cash - everyone who gets a loan from their bank/credit union, for example.
I just want to add - it's easy to get excited about buying a car; we all do. But there is a very good chance that the dealer is going to try something. They're going to have some story, and you are going to be sitting in a chair at the dealership drinking a cup of terrible coffee while they try to work some kind of game on you. I don't know exactly what that game is but I do not want you sitting in that chair drinking that crappy coffee. Walk into the dealership prepared to turn around and leave as soon as they start give you the story. Maybe have a friend with you who has some distance on the new-car-excitement.
posted by ftm at 6:47 PM on August 28, 2011 [2 favorites]
I just want to add - it's easy to get excited about buying a car; we all do. But there is a very good chance that the dealer is going to try something. They're going to have some story, and you are going to be sitting in a chair at the dealership drinking a cup of terrible coffee while they try to work some kind of game on you. I don't know exactly what that game is but I do not want you sitting in that chair drinking that crappy coffee. Walk into the dealership prepared to turn around and leave as soon as they start give you the story. Maybe have a friend with you who has some distance on the new-car-excitement.
posted by ftm at 6:47 PM on August 28, 2011 [2 favorites]
You can check out of there are certain deals for first-time buyers or for students. When I bought my car, there was a promotion where the dealer would make the first payment if you were a student or recent graduate. Of course, this meant that you had to finance. I financed my car for the shortest period possible to make the payments as large as possible, let the dealer make the first payment, then paid off the car right afterwards. If you can swing something like that, you could save yourself a chunk of money.
posted by Nightman at 6:49 PM on August 28, 2011
posted by Nightman at 6:49 PM on August 28, 2011
Just wanted to add: if you're a member of AAA, many dealers participate in their auto-buying program, which has a fixed price, generally around $500 above the invoice price.
posted by andrewcilento at 6:55 PM on August 28, 2011
posted by andrewcilento at 6:55 PM on August 28, 2011
Here's what I did on my last car. It was the best buying experience I ever had. It follows the general purchase outline from the previous askme linked above on the subject, but it also includes the process that I used to select a fairly specialized vehicle.
The back office negotiation was still a royal pain in the ass, although the sales manager relented somewhat when he realized that I wasn't buying what he was selling and that I was paying in cash, so they were really not making much off me - end of the month, end of the quarter - he was under pressure to get his sales closed.
posted by plinth at 7:16 PM on August 28, 2011
The back office negotiation was still a royal pain in the ass, although the sales manager relented somewhat when he realized that I wasn't buying what he was selling and that I was paying in cash, so they were really not making much off me - end of the month, end of the quarter - he was under pressure to get his sales closed.
posted by plinth at 7:16 PM on August 28, 2011
Just wanted to add: if you're a member of AAA, many dealers participate in their auto-buying program, which has a fixed price, generally around $500 above the invoice price.
If you or anybody in your family is a member of Costco, they also have a very similar program. This guarantees you a "good" price. Possibly not the best you're gonna get (especially if they're actively looking to get rid of that particular car), but never a bad deal. No negotiation required or allowed.
Also, strongly consider looking at very new used cars. Thanks to the economy, the deals here aren't as fantastic as they used to be, but you can still, say, buy a year-old Camry for the price of a new Corolla. Although this might not seem like a decent tradeoff, considering that you have somewhat less input into the buying process (ie. you can't be as picky about color, etc), many car companies offer extended warranties and free service plans on their certified-pre-owned cars that sometimes even stack on top of the car's original warranty (which won't yet have expired). In the long-run, this can save you a ridiculous amount of money. In many ways, this offers a better value and more worry-free experience than a brand-new car. It's an especially good value if the specific car you're looking at hasn't undergone a considerable redesign in the past year or two.
posted by schmod at 7:17 PM on August 28, 2011 [1 favorite]
If you or anybody in your family is a member of Costco, they also have a very similar program. This guarantees you a "good" price. Possibly not the best you're gonna get (especially if they're actively looking to get rid of that particular car), but never a bad deal. No negotiation required or allowed.
Also, strongly consider looking at very new used cars. Thanks to the economy, the deals here aren't as fantastic as they used to be, but you can still, say, buy a year-old Camry for the price of a new Corolla. Although this might not seem like a decent tradeoff, considering that you have somewhat less input into the buying process (ie. you can't be as picky about color, etc), many car companies offer extended warranties and free service plans on their certified-pre-owned cars that sometimes even stack on top of the car's original warranty (which won't yet have expired). In the long-run, this can save you a ridiculous amount of money. In many ways, this offers a better value and more worry-free experience than a brand-new car. It's an especially good value if the specific car you're looking at hasn't undergone a considerable redesign in the past year or two.
posted by schmod at 7:17 PM on August 28, 2011 [1 favorite]
The method chrisamiller links to is pretty much a version of a method developed by the Motley Fool in the 90s. Here's the original.
posted by dobbs at 7:28 PM on August 28, 2011
posted by dobbs at 7:28 PM on August 28, 2011
Just remember you can always walk away from the dealer. Don't put up with any BS or pressure. There's always another car or dealer.
posted by ShooBoo at 8:18 PM on August 28, 2011
posted by ShooBoo at 8:18 PM on August 28, 2011
I haven't got a chance to read this yet. But heard it's a very good book.
http://www.amazon.com/Dont-Get-Taken-Every-Time/dp/0141001496/
posted by WizKid at 8:19 AM on August 29, 2011
http://www.amazon.com/Dont-Get-Taken-Every-Time/dp/0141001496/
posted by WizKid at 8:19 AM on August 29, 2011
(remember I have no credit history so my interest on a loan would be pretty sick)
If you chose to pay off the loan pretty much immediately, you'd only be paying a few days worth of interest, a month at worst, as opposed to 4 - 6 years worth. The interest accrued would be negligible. The positive credit history may be worth it, although I don't know what difference, if any, it would make that you pay the loan off immediately instead of over time.
Were I in your shoes, I would do the pre-negotiating by email for a price on a car you know you want(test drive it elsewhere beforehand if you've never driven that model), then roll in to buy with cash. My wife and I did this, except we had pre-arranged financing, not cash. The dealer we went with not only gave us a fantastic deal on the car we wanted, they were patient while we decided to take a quick gander at their used lot(and test drive a few, even) and ended up beating the rate on the financing we brought with us. Win-win-win. We'll probably be going back to them for our next vehicle.
posted by owtytrof at 2:46 PM on August 29, 2011 [1 favorite]
If you chose to pay off the loan pretty much immediately, you'd only be paying a few days worth of interest, a month at worst, as opposed to 4 - 6 years worth. The interest accrued would be negligible. The positive credit history may be worth it, although I don't know what difference, if any, it would make that you pay the loan off immediately instead of over time.
Were I in your shoes, I would do the pre-negotiating by email for a price on a car you know you want(test drive it elsewhere beforehand if you've never driven that model), then roll in to buy with cash. My wife and I did this, except we had pre-arranged financing, not cash. The dealer we went with not only gave us a fantastic deal on the car we wanted, they were patient while we decided to take a quick gander at their used lot(and test drive a few, even) and ended up beating the rate on the financing we brought with us. Win-win-win. We'll probably be going back to them for our next vehicle.
posted by owtytrof at 2:46 PM on August 29, 2011 [1 favorite]
This thread is closed to new comments.
Determine what car you want, make, model, options, etc. Then call a number of dealers to find the best price.
I believe you're over-thinking this.
Have fun!
posted by tomswift at 6:35 PM on August 28, 2011 [1 favorite]