How to pay less for a new car

BY JASON ALDERMAN

Late last year, my wife and I were in the unenviable position of needing to shop for a new car, since the used car lease I’d assumed was about to expire. I knew it would probably have to last until my kids were well into college, so I spent a long time investigating how to get the best deal on a reliable car I would love driving.

Because December – and great year-end deals – will be here before you know it, I want to share some of the strategies I learned in case you’re planning to buy a new car in the next few months:

The end of the year is a great time to buy. Dealerships are scrambling to meet annual sales goals that could boost manufacturer incentives and lower taxes on remaining inventory. Plus, salespeople trying to meet year-end sales quotas that trigger bigger bonuses are more likely negotiate in your favor.

I did tons of research and narrowed my selection to two models – Ford Fusion and Honda Accord. I did the requisite test drives and also convinced two dealerships to let me drive cars home so I could experience their handling during a real commute.

I knew that the manufacturer’s suggested retail price (MSRP) or “sticker price” you see in the showroom bears little relation to what the dealer’s true costs are. A more accurate starting figure for negotiations is the dealer’s invoice price.

You can research invoice prices at sites like Edmunds, CarsDirect and Kelley Blue Book. Just be aware that it’s generally higher than what the dealer actually pays, thanks to various manufacturer discounts and incentives that don’t appear on the invoice. It also doesn’t reflect consumer rebates, tax, title, license, advertising or registration fees.

Next I sent a comprehensive (albeit cut-and-paste) email to local Honda and Ford dealers, explaining exactly which features I wanted and asking them to send me a price. Once I got the lowest offer, I emailed all dealers and said, “Can you beat this?”

Probably the biggest challenge was getting dealers to negotiate by email rather than by phone or in person. I wanted to avoid hard sales pitches and, more importantly, I wanted written proof of their offers to present when I finally did go into the dealership. Several dealers dropped out immediately, while others came back with counter-offers on similar vehicles they had in stock.

I also contacted an online car brokerage to solicit their best deal. Turns out they couldn’t beat the price I’d already negotiated; but if you don’t have the time or patience for such exhaustive legwork, a broker might be worth the cost.

Make sure you’re being quoted the “out-the-door price.” That’s the purchase price minus any incentives and adding in all fees – tax, license and title can add thousands of dollars, depending on where you live. Also, pore over the sales contract carefully to make sure you’re not being charged for extras you don’t want.

In the end, I chose the Fusion. Ford was offering several year-end customer incentives that knocked $2,000 off the invoice price, plus 0 percent financing for 60 months. (Start watching now for such factory and dealer incentives.) Ultimately, I heard from a dealership an hour away that offered me the car I wanted for an additional $1,000 less.

Bottom line: Not everyone is willing to spend numerous hours researching and negotiating the best deal; but if you are, you can save thousands of dollars on a new car.

Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney.