Bargaining chips for buying newish used car
June 27, 2013 7:53 AM   Subscribe

Is purchasing a used car outright with cash a bargaining chip for negotiations? What add-ons should I turn down from the dealership?

I'm a used-car-buying noob, at least in terms of negotiating at a dealership (I've previously bought no-haggle cars). I'm planning on purchasing a 2012 compact model at around $18,000.

Is buying the car outright in cash a bargaining chip for negotiating a better price? I know that dealerships make money off financing deals, but they also take a risk - so can I expect that my offer to pay in full will be appealing?

Also, since the car will be a recent model, it should still be under the manufacturer's warranty, right? So should I turn down any additional warranties from the dealer? What else can I expect they'll want me to purchase - and what should I turn down (is there anything I should accept)?

I know everyone has different comfort levels with what they should take and reject, so I'll just say I pretty comfortable with risk in terms of rejecting added warranties and such.
posted by Ms. Toad to Shopping (17 answers total) 5 users marked this as a favorite
Negotiate the lowest price and then spring the cash payment revelation bam! at the very last minute for a further cash discount. Be careful walking around the dealership and test driving with 18 large in your pocket. With very little to zero financing rates, it makes sense often to finance the car and put the 18 grand in an interest bearing account.
posted by Kruger5 at 7:59 AM on June 27, 2013 [1 favorite]

They do make money from the financing, so you may get a better price that way. If there is no prepayment penalty on the loan, you can take their financing and pay it off right away. However, this means extra red tape (credit inquiry, a loan on your credit report, the car will initially be titled to the bank, you may have to buy more expensive car insurance, etc.).

One thing you can try is to get quotes for the car from different dealerships online. Press them for their absolute best price; don't get into a back-and-forth. Get the out-the-door price guaranteed in writing before you go to the dealership to get the car.

Don't buy the additional warranty. Don't buy additional anything. And the harder they press you to take extras, the more that's a money maker for them (and thus a money-loser for you). If they refuse to budge on the price, you can ask them to throw in things you truly do want anyway (floor mats, alloy wheels, stuff like that).
posted by payoto at 8:18 AM on June 27, 2013 [1 favorite]

If you do your research, and know what a good price is for the car you want, you might have good luck going into the dealership with a firm price ceiling: I will pay $this much for $that car and not a penny more and I have cash to seal this deal right now. I did this a couple years ago for a 3-year-old Honda CRV and got it for about $2-3K less than the going price for that car in my area, and the whole deal was done in about an hour. You do have to be willing to walk if they say no. And do not buy anything extra. Just buy the car.
posted by rabbitrabbit at 8:25 AM on June 27, 2013 [1 favorite]

So, dumb question: should I bring actual cash? I was thinking of getting a money order or something when we're ready to pay.
posted by Ms. Toad at 8:30 AM on June 27, 2013

You can probably write them a check.
posted by COD at 8:35 AM on June 27, 2013 [4 favorites]

They can take a cashiers check or probably just a regular check, I believe they have a service (Telecheck) that lets them safely take a giant personal check.
posted by ftm at 8:36 AM on June 27, 2013 [3 favorites]

One weird add-on I ran into recently was the idea of an 'electronic rust inhibitor' thing. Bizarre. No.

rabbitrabbit's strategy worked great for me some years ago when I was buying a Civic and I would recommend it for any purchase of a similarly common make/model.
posted by kmennie at 8:44 AM on June 27, 2013

You don't have to bring cash. A cashiers check or wire transfer would be easier.

If you agree on an out-the-door price in advance, bring a cashiers check in exactly that amount. If they try to inflate the price, you can tell them honestly that you only have the exact amount you agreed to and you can't go any higher.
posted by payoto at 8:45 AM on June 27, 2013

I don't think paying cash is likely to make all that much difference. If you have that kind of cash, then you'd also likely qualify for a very low-interest loan, which wouldn't make the dealer much extra profit even if you got the loan from them. Money is cheap these days.

The most important thing to know is how to figure out what a good price really is. Sticker prices on used cars are usually highly inflated, so they can close a deal by offering you a big, special discount that still leaves them a big, special profit. Look up the trade-in value for the car, and that's probably pretty close to the car's wholesale value. The dealer is making money at any price that's noticeably above that value. Also, dealers have a lot more cash tied up in used cars than in new cars because they have to actually pay for used cars when they get them, whereas they don't fully pay for new cars until after they're sold. New car dealerships are highly motivated to move used cars off the lot and off their books. Knowing these things can give you some confidence when you're playing the game of chicken that is the purchase price negotiation. Because, as always, your bargaining power hinges on your willingness to walk away.
posted by jon1270 at 8:46 AM on June 27, 2013

I did a wire transfer. I did not take any extras.

I should have asked for new floor mats, though.
posted by nat at 8:46 AM on June 27, 2013

Tell them upfront that you don't need financing - that you'll pay in full. Let them give you a price first. Then counter with what you're willing to pay. What you're willing to pay should reflect some research about the fair market price of the car.

Don't bring cash. Negotiate the price with the the understanding that you won't need financing. Then ask them how to actually transfer the actual dollars. It'll be a bank transfer or cashier's check or something like that. They've done it before. I assume this is a dealership that also sells new cars, not a stereotypical used car lot.

Also - we're nearing the end of the 2013 model year. Dealers will start getting 2014's sometime between August and October. There's discounts to be had on brand new 2013 cars in the coming couple months. They'll be a little more expensive than a 2012 model, but they'll also have zero miles on all the wear items (tires, windshield wipers, etc) as well as perhaps a service agreement.

Finally - I know this isn't part of your question but just in case - generally, cars with low-levels of options are often better and cheaper, not just off the lot but over the long term, too. For example, a car with the "supreme" package has 17" wheels, leather seats, nav, and a v6, whereas the same car with the "basic" package has 15" wheels, cloth seats, no nav, and a 4-cylinder. The basic car is cheaper out the door, and the tires are cheaper to replace because they're smaller, the 4-cylinder is more efficient, the cloth seats wear better than the leather, and there's no nav to go on the fritz.

Best of luck
posted by everythings_interrelated at 8:49 AM on June 27, 2013 [1 favorite]

So should I turn down any additional warranties from the dealer?

Yes. Those add-on extended warranties are almost universally not worth the money. Also avoid undercoating, rustproofing, paint protection, upholstery treatments, alarms, etc.

I would also double-check on the transferability of the original manufacturer's warranty. Most of them are transferable to a second owner, but some of them also restrict the terms. For instance, VW used to do this, where the warranty mileage and time limits were much lower for the second owner.
posted by Thorzdad at 8:56 AM on June 27, 2013

I just negotiated two new cars and it really helps to know what's on offer at the dealership.

First, are there dealer incentives? Cashback? Etc? I like for this. (this is new, and look into it, in some cases it's CHEAPER to buy new than used.)

You can do some negotiating in advance, most dealerships have an internet salesperson. I did all the financing stuff, selling our old cars, etc all ahead of time. I had to grind them a bit, but we eventually got it done to our mutual satisfaction.

Also, if you come in wanting to get two new cars at the same time, you command a bit of attention.

You can pay with your regular check, they're perfectly okay with that. I'm sure they don't want 18 large sitting in their dealership anymore than you want to carry it around.

Skip the warrantees and add ons. If you want them, get them direct.

Other than that, find a dealership that you like and buy away.
posted by Ruthless Bunny at 8:59 AM on June 27, 2013 [1 favorite]

They'll take a personal check --- I bought my current car 50% down, and paid that with a check.
posted by easily confused at 10:52 AM on June 27, 2013

The dealer and the finance person will likely both get a payment from the bank that ends up with your loan, but it will be smaller than the incentive from the manufacturer if you purchase a new car. The total kickback they will get is likely in the ballpark in what you will pay in interest for the first month. Some manufacturers will offer both you and the dealer an incentive to finance with them for a new car, but not likely for used. If you are on the fence about whether to finance or pay cash, it is better for you to get pre approved for the loan at a bank. That way you know what rate you will qualify for. Somebody mentioned zero or near zero financing, but those deals are always for new cars, not used. And those offers are usually options like 0% for 60 months or $x000 cash rebate. Notice the "or." You will actually be paying that cashback amount as interest, it is just hidden and you have paid it upfront so it is like you will be penalized if you pay back early.

If you are preapproved for a loan, I would be upfront about it and tell them you can pay cash, finance through them or through your bank, whichever works out best for you.

About the warranty, your car will likely have some type of warranty left, depending on the mileage, but keep in mind most things are stepped and some items may be bound to the original owner. A 2012 can be up to 2 years old now, so ask to see the warranty information for that vehicle for its original purchase date. Some items like paint, tires, etc may have only been for one year, so keep this in mind. Most people thing a 2 year old car is mostly new, but there are substantial cost for things like tires that might need to be replaced in 6 months to factor in when comparing to the cost of a new car. Check Edmunds for the invoice price of the 2013 model and compare this to the purchase price of the 2012, plus an extended warranty to give you the same coverage(even though you probably won't want it), plus the maintenance cost for the next year or so to give a good comparison of this "newish" car to a new one. As others have said, in the next few months the 2013's will likely drop in price with incentives close to the invoice price or lower.
posted by Yorrick at 10:53 AM on June 27, 2013

I know that dealerships make money off financing deals, but they also take a risk - so can I expect that my offer to pay in full will be appealing?

They make money off financing deals because the banks that underwrite the loans pay the dealership. The dealership take zero risk in the deal.

That said, it doesn't really make a big difference either way. If are going to pay cash, feel free to ask them how they want to handle it. When I was selling cars, we'd have asked for a $100 deposit via personal check, then we would have worked up a buyer's contract to seal the deal and give you an exact number with all the taxes and fees included less your deposit and then send you to your bank to get a cashier's check for that amount.

Absolutely everything involved with a car deal is negotiable. That includes the interest rate on the loan (so feel free to check with your bank/credit union to see what rate you can get and let the dealer try to beat it), the price for the extended warranty/service contract, and any other add-on they might try to sell you. I'd skip all the add-ons except for maybe the extended warranty but it really depends on the car you're buying and the price you can get them down to. I almost always skip it.

The single best way to get a good deal is to be a motivated buyer. The more you want to buy the car, the more the dealer wants to stretch the numbers to sell it to you. Do your research, know what you're willing to pay and then feel free to tell the dealer, "If you can sell that car for $X, I'll buy it right now."

There is plenty more advice in other similar questions that I've answered. Feel free to post here or me-mail me if you have more questions.
posted by VTX at 2:05 PM on June 27, 2013

Definitely not actual cash. They probably have to go through the IRS reporting for significant cash. It's a security risk, etc. Cashiers check or whatever they want.

They make money on financing, negotiate the cost with no mention of monthly payments or paying cash.
posted by TheAdamist at 2:41 PM on June 27, 2013

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