We’ve done it! We’ve reached the last of my Annual Expenses posts and we’ve gotten through them all with just a few grains of sand left in the 2019 hourglass. I plan to do an aggregated, “year in review” style post that will pull together the highlights so be on the lookout for that in the coming weeks. My last expense category is vehicle depreciation and I spent an average of $2100 on it over 2017 and 2018. I believe a “bare minimum” budget number would be about $500.
When people talk about deciding between buying a new car or keeping the old one around a while longer, you will often hear phrases like “this one is paid off” or “I don’t want to have a car payment again.” Those statements come from a cashflow oriented viewpoint. But I prefer what one of my customers, a lifetime wheeler and dealer, likes to say: “You make money when you buy, not when you sell.” In reality, that “paid off” car still costs actual money each month, cash or not.
This expense is called depreciation. For a simple example, let’s say you purchase a car for $35k, roughly the average new car price today. You drive it for five years and then sell it for $15k. Your depreciation cost was $20k over the life of the car or $4k per year, regardless of your monthly note payment or when you paid it off.
So how can you reduce this expense? Exploit the depreciation curve, which starts out very steep but flattens quickly. Almost any car is going to lose roughly half of its value in the first five years. But most cars will only have 50-75k miles on them at that point and a good, well maintained one can go 100k or more relatively trouble free miles from there. This is reflected by the fact that the average car in the US is nearly twelve years old. The secret is out and that is the only reason the depreciation curve isn’t even steeper from the outset.
But it still makes sense to follow this principle and you can do it with two simple rules. One, only buy cars that are about five years old. That way, you will always pay half price at most. Two, only buy cars that have been taken care of well. If you aren’t personally mechanically inclined, insist on having someone who is inspect any car before you buy it. It shouldn’t cost you more than a hundred bucks or so, which is nothing compared to repairing even a single major issue if you wind up buying “someone else’s problem.” By following these two rules, you can buy almost any car within reason for $20k or less and run it long enough to keep your annual depreciation expense at $3k – or less.
But what if you want or need to keep the number much lower than that? It’s going to require more shopping around and more know how, but it can be done. You’re looking for something later in the depreciation curve, likely priced around $5k or less. In that price range, you’re going to be looking for higher mileage cars (100k+), cars that start out priced lower than most, or cars that depreciate faster than most. I would avoid that last category altogether, since there tends to be a good reason cars depreciate faster than average. Chrysler products, for example, are widely known to be unreliable. You’re not looking to lower your depreciation expense by simply increasing your maintenance expenses.
Instead, I would look for quality, high mileage cars in exceptional condition. They are out there and they don’t sell for all that much since most people aren’t willing to take chances on them and they are very difficult to get financed. One trick is to look for signs of mostly highway mileage, which puts a lot less wear and tear on a car than city mileage does. There are plenty of good guides on how to do this online, like this one. In this price range, inspecting the car thoroughly is crucial. Here is an excellent place to start learning how to do it, although if you’re uncomfortable with it, it’s well worth it to bring someone who is.
The payoff? If you buy a quality used car for $5k or less, it has already depreciated close to as much as it’s going to and you have a great chance of keeping your depreciation expense at $500 a year or even less. When I was a young lad, I bought my first handful of cars on the extreme end of the depreciation curve, all for less than $1k. In most cases, I drove them for about a year and ultimately sold them for within a few hundred dollars of what I had originally paid. I don’t need to do that today and I like to have something a little fancier to drive around in, but it’s nice to know I could if I needed to.
That’s about all for now. I provided links to a couple of great videos in this post. As for this blog, I wrote about which car brands are the best and worst here and about basic maintenance here. And the nice thing about the internet is that there is a whole universe of information out there at your disposal. If you don’t know much about cars, I recommend browsing around and doing some research until that has changed. The more effort you put in and the more you know, the better a position you will be in to score a huge win on your next car. Have a great Monday and a Merry Christmas!
A couple months ago, I replaced my car with a nicer, newer
one. Unfortunately, cars can have issues at any time – even early in life. And
on one recent morning, when I went out to the garage, my car wouldn’t start. In
fact, the dash wouldn’t even light up. The battery was 100% dead. Thankfully, I
have AAA, so I was able to get someone out there within about half an hour to
As anyone who has bought a battery for a late model car
already knows, batteries die all the time now. In a typical example of
“progress” in action, what had been a $50 purchase that would last roughly a
decade is now an often $150+ purchase that lasts about three years. The
warranty period, of course, has adjusted to reflect this new reality and in my
experience, batteries tend to survive just barely long enough to surpass it.
The culprit, of course, is our obsession with putting more and more electronic
crap in cars, including a significant amount that continues to draw when the
car is turned off. Today’s batteries are actually much more powerful than the
ones that used to cost so much less, but the demands on them are also much
Anyway, I priced out batteries while I was waiting for AAA
to show up and determined that NTB had the best offering for my car. Once the
car had been jump started, I drove straight there. It was less than a ten
minute drive, but interestingly enough, by the time I got there, the battery
tested perfectly fine. It was still a little low, but it had more than enough
juice to start the car. I discussed this with the manager, who ultimately
advised me to test it again after driving a further distance I had planned for
that day. He suspected that it may be the alternator. In the over 250k miles of
driving I’ve done in my still relatively young life, I’ve never once had an
alternator fail. And I would have been rather surprised to see it happen on a
five year old car with well under 50k miles, but testing is free and my AAA
membership would have taken care of me again if the battery died again, so I
went on my way.
I drove around for the rest of the day without incident. Of
course, this only deepened the mystery of how the battery had died. But that
very evening, I had a lucky break that led me to the answer. I happened to
leave something in the car after I had closed the garage so I went back out to
get it. To my surprise, when the door was open, I discovered that the
headlights were still on. Like any modern luxury car, my car has automatic
headlights. So while the battery mystery was immediately solved, it also gave
way to another one. Why weren’t the headlights turning off?
When trying to diagnose any car problem, you want to start
with the simplest possible explanation. In the case of an electrical problem,
that means checking any potentially applicable fuses, which I immediately did.
But none of them were bad. So I was back to square one, although at least for
the moment I knew I could keep the battery from dying by turning the headlights
on and off manually. But I had a lot of other stuff that had to get done so I
moved on from the car situation for the night.
The next morning, I thought more about the car as I sat in
the sauna. I had realized something had been different for a few days, but I
couldn’t put my finger on what. But in thinking about the automatic headlights
not turning off, I realized what it was. The dome lights, which are
inexplicably non LED and incredibly dim to begin with in this car, had not been
coming on. And that’s when it came to me. The automatic headlights were working
fine. The issue was that the car didn’t know the doors were being opened and
closed! When I thought about it, the automatic adjusting windows, which open slightly
when the doors are opened and then close when the doors are closed again,
hadn’t been functioning normally either. Clearly I had found the problem. But
how to fix it?
First, I went back to the fuses again, this time looking for any door specific ones. But again, none were bad. So I started looking very closely at the doors, checking to see if any wires looked damaged, etc. Everything looked ok. But there was one thing slightly – and I mean SLIGHTLY – out of place. This little guy.
It was just slightly loose when I touched it. I didn’t know what it was, but I figured it had to be related to the door somehow due to its location in the door jamb. I tightened it up and VOILA! Suddenly everything worked correctly again. Apparently, the little thing is a sensor that compresses when the door is opened and decompresses when it is closed. And apparently it is very sensitive. So what lessons are there in this experience?
First and most importantly, don’t make assumptions with
cars. There are way too many mechanics out there who will just start replacing
parts that might solve the problem rather than first finding the exact
diagnosis. This can be simple inexperience, but it can also be more sinister.
After all, the more work they do, and the more marked up parts they replace,
the more money they make. And there is really no way of holding them
accountable for doing that aside from not coming back. Had I taken that
approach in this case, I would have replaced a perfectly good battery for about
$150 and been no better off than when I started. Then, when that didn’t work, I
may even have replaced an alternator for considerably more than that. Thankfully,
most auto parts stores are happy to help you with testing and even some advice,
as the friendly folks at NTB were in my case.
Second, know your car and pay attention to it. While I am no
electrician, had I been more observant, I could still have solved this pretty
easily. I would have noticed the dome lights not coming on and the automatic
adjusting windows not adjusting. At that point, I would already have known what
the problem was and could have skipped straight to the last step of the process
I just finished describing. Sadly, with as much as I have going on in my life,
someone in a clown suit could probably be riding a giraffe through the parking
lot of my apartment complex as I walked out to the garage and I’d say there’s
at least a decent chance I wouldn’t notice anything unusual. In today’s world,
I’m guessing I’m not alone in that.
Third, even in a world of incredibly complex cars with
numerous computer modules and miles of wiring, the simplest solution is usually
the right one. Yes, a bad battery would have been an easy explanation in this
case – but not the correct one. That was in doubt as soon as I got to the auto
parts store. In the end, it turned out to be a part so simple that cars have
probably had them for as long as they’ve had dome lights that turn off when the
doors open. And it wasn’t even bad – just slightly loose.
Happy Tuesday, Folks! I took yesterday off since it was Columbus Day and I’ve decided to do more to make holidays special, even the more dubious ones. This post has been a long time in coming, since it happened about a month ago now, but after months of researching and deliberating, I bought my next car. As the picture shows, I replaced my 2014 Hyundai Sonata 2.0T Limited with a 2015 Infiniti Q60S. This was pretty out of character for me since I ended up buying a totally different car than I had planned to and I committed some car buying sins I never would have previously considered in the process. But at least so far, I’m very happy with my decision. I’ve been buying cars for almost two decades now, and while some aspects stay the same, every purchase is also a little different. So here are the specifics from this time.
What stayed the same?
I did a ton of research before I even stepped foot on a
In this case, I found what I thought was the perfect car for
me – on paper. I was going to buy a 2015 Lexus ES 350. In addition to having
the usual bulletproof Toyota reliability, it has a venerable, naturally
aspirated engine, meaning none of the turbo related issues so many of the cars
being sold today are likely to suffer from somewhere down the line. The gas
mileage is a solid 21/31 and it doesn’t require premium gas like most luxury
cars do. It is a big, smooth, comfortable car, which is important for someone
who drives a lot as I do. The main compromise I felt I would have to make is
that like most cars today, it is not very pretty. But that’s not terribly
important and other than that, the car checked all the boxes.
Doing the research is crucial. You need to know everything
about the car you’re looking at – the fair market value, the long term
reliability, any specific problems the year/make/model is known for, the
features in different trim packages, etc. Most salesman suck at their jobs and
will not know a lot of these things, especially with used cars. This doesn’t
mean they won’t answer any questions you have; it just means you shouldn’t rely
on the answers they give you. Keep their motivation in mind and go in armed
with information from unbiased sources.
I also had financing lined up before I went to any
I decided to finance this car instead of paying cash because my credit score has suffered some since I paid off my last car years ago as a result of having no current installment debt on it and I want it back where it was. No, there isn’t much practical difference between the mid 800s and the low 800s. But this stuff is literally what I do and yes, there is also some ego element to it. Anyway, another reason I got a loan is that at today’s interest rates, a small one (just over $10k in this case) costs basically nothing. I had a sub 3% rate ready to go at a local credit union.
I walked away from
two potential cars because the deal I wanted wasn’t there.
This is extremely important. Car salesmen know how to toy
with your emotions and if you aren’t careful, they will have you feeling that
you MUST have THIS car. Or that they’re such nice people that you owe them something.
Or any number of other psychological tricks that they might play depending on
what you respond to. Any time you start feeling yourself having an emotional
response to anything involving money, it is a good practice to walk away until
it has passed. And when buying a car, if you sense that you’re at the
salesman’s limit and the numbers aren’t where you want them, that is the
perfect time to walk away anyway. If he lets you leave, you know it really was
the best he had to offer. And don’t believe any bullshit he gives you about this
being “a one time, today only offer!” I promise he’s lying. And even if he’s
not, if he was willing to give it to you, someone else will be too. If you
remember nothing else, remember this: you will never lose money by not spending
it. Think about it.
Like many of my previous car purchases, I bought a late model used car and saved a ton.
My Sonata was actually the one new car I’ve bought so far. I only bought that one because it was a demo model (6000 miles or less on it but still legally a new car) and it was selling for about an $8k discount off of its retail price of $31k. But even though I got a deal that good on that “new” car, and even though this latest car was significantly more expensive when it was new, I still paid less for this one. With options, the Infiniti retailed at just shy of $50k. But five years old and with only about 30k miles on it, I got it for $21k. I wasn’t concerned about the year/mileage imbalance affecting my resale value since I put on a ton of miles and will quickly reverse it anyway. Considering this car has a long proven, naturally aspirated engine and the Hyundai had a turbo, you could make the argument that this car’s powertrain probably has as many trouble free miles in it as the Hyundai’s did when I bought it – but this powertrain is in a considerably nicer car. And in case you think this particular model depreciates unusually quickly, there were plenty of available ES 350 options at right around $20k for that same vintage as well. Keep in mind that the secret has been out on Lexus for some time so they depreciate slower than almost anything on the road. But even there, the late model used discount is alive and well.
What was different about this purchase?
I bought my car from a “no haggle” dealership.
Most people know that Carmax is a fantastic ripoff by now. If you still don’t, compare any car on their lot with other comparable options in your area. Even without factoring in that most dealers will negotiate some on their advertised pricing, thus making it even lower, Carmax is going to be at least 10% higher than the best available options on nearly anything. They make it simple for you…to pay them an enormous premium for a car. This time around, I found a lot of dealers that appeared to be copying that business model. However, upon further inspection, I noticed something surprising. Many of their prices are actually pretty competitive and some are even exceptional. The dealership I wound up going with happened to have the exact car I wanted at the lowest price available for hundreds of miles. Could I have found a similar car for a thousand or two less somewhere else? Possibly. But it probably wouldn’t have been worth the time and effort. I only buy black cars with black leather interiors and the Q60S is a fairly rare car to begin with. This is a preference that always costs me money but one that makes me happy and thus, that I’m willing to pay a little for.
Anyway, I ended up getting a pretty decent deal on the car without the fun of negotiating, which normal people don’t seem to enjoy anyway. So don’t ignore all the “no haggle” dealerships; not all of them are ripoffs. I will, however, note that this was not one of those “delivered to your door” dealerships. I would NEVER buy a car I couldn’t inspect in person first, whether new or used, although it is significantly more important with a used one. And yes, I know they offer return policies, albeit for very short time/mileage windows. Do you want to try returning a car? I can’t imagine any scenario where that would go smoothly. For example, there will already be a loan in your name. That will have to be zeroed out or paid off. I can’t imagine that will report cleanly on your credit report. The titling process will already have been started. Do you think they refund that money? Do you think you won’t also be paying to title the second vehicle? Those are just a couple of issues off the top of my head. If you can’t inspect a car in person, don’t buy it. These aren’t tv sets; no two are alike.
I actually wound up financing through the dealer.
This particular dealer only dealt with a selected group of finance companies. Ever the cynic, I figured this meant they were going to add one or more points into my deal, which is a very common practice at dealerships and one of the main reasons to line up financing before you go. Had they tried to do that, I would have simply bought the car with cash or walked away. However, they wound up getting me a loan within a quarter point of the one I had already lined up. And with a loan as small as the one I took, I will pay basically nothing in interest anyway and a rate difference that small means nothing. Why did I take such a small loan?
I actually wound up trading my car in.
I have always sold my own cars in the past and have been very successful with it. In my experience, I’ve gotten anywhere from 20 to a whopping 50% more than dealerships were offering by doing things this way. But in this case, the dealership actually made me a pretty fair offer. I know because I did my research in advance. If I had sold the car myself, I would most likely have gotten $1-3k more for it. However, that would have involved spending time I simply don’t have and dealing with at least some people I absolutely don’t want to deal with. When you’re dealing with the public, you’re usually going to meet some assholes, some weirdos, etc. But the bigger issue was the time factor. For me, at this stage of my life, I decided it wasn’t worth squeezing every last dollar out of my car. Plus, the $10k I got for it by trading reduced my sales tax by $625 (you are only taxed on the sale price that’s in excess of your trade and the rate is 6.25% here), further reducing my motivation to sell the car on my own.
I threw my research in the trash and started over.
Like I said above, the 2015 Lexus ES 350 would have been a
nearly perfect car in my situation. So why didn’t I buy one? Because I test
drove one. I can honestly say I have never been so disappointed with a car in
my life. The car was, in fact, nearly perfect – except for one little problem.
It was the most sterile driving experience I’ve ever had. Although the stats
were pretty similar to my existing car, the performance didn’t feel like it was.
And even if it had been, it wouldn’t have mattered. I could have been in a car
as fast as the heavily modified Supra I had back in the day (you know, when they
weren’t just BMWs marketed as Supras), but so what? I couldn’t feel anything.
It was like someone set out to create a car that felt like you were floating in
it rather than driving. The car is extremely good at what it does and I thought
I would like it. But I absolutely didn’t.
By the by, this is also a strong selling point for the Hyundai. I wanted to get out of that car for two reasons – the mediocre build quality (don’t get me wrong – it wasn’t a Chrysler product or anything, but it was starting to creak and groan way too much for a car its age) and the turbo engine that would inevitably start costing me money well before I wanted to get rid of the car. I drove a car that is significantly more expensive and objectively better in almost every way and yet, it didn’t feel like much of an upgrade at all. For anyone looking for a lower priced car that still offers an awful lot, you could do a lot worse than a Hyundai. And if you get a maxed out one like mine was, you might have a harder time noticing the differences between it and a luxury car than you would expect.
Anyway, after that colossal disappointment, I decided I’m at the point in life where I can compromise a little more between financial optimization and enjoyment. I do have to drive this thing after all. The car I bought is significantly faster, sportier, and more fun in every way than the Lexus. It will not be quite as reliable over time, although it should still hold up decently, especially for being a sports car. And while the gas mileage will rarely be north of 30, again, it’s not terrible for a car this fun to drive at 19/27. And like with most cars, I’ve already been finding that it does a little better than its EPA rating in real life since I don’t beat on it. So far I’m averaging a little north of 27 with probably 75% highway driving.
And I actually love the car. It is a few years “behind the
times” in terms of technology, but I think that’s great since I want a car, not
a computer. The reason I was looking at a 2015 Lexus in the first place instead
of a 2016 or newer is that after 2015, they started adding more and more of the
self driving features I have zero interest in, at least until further notice.
In the case of the Infiniti, 2015 was also my year because Nissan caved to the
turbo trend in the next model year. It’s no race car, but it’s a sporty, fun
little car with a very nice interior and everything I want in it. I’ll do
another post on the cost of ownership between the three cars (the Hyundai, the
Lexus, and this one) but for now, suffice it to say, while this one is the most
expensive of the three, I still consider it a reasonable compromise compared to
something very sporty like a Corvette. It is certainly well within my means and
as long as you stay there, at the end of the day, I think it’s ok to enjoy
yourself a little every now and again.
Happy Monday, folks! As I mentioned on Friday, I bought a car last week. So for the next few weeks, I’m going to be peppering in some posts about that process – both my general philosophy/methodology and how this latest purchase played out. Today I’m going to talk about why I like to buy used cars. The biggest reason to buy a used car versus a new one is obviously cost. But if you do it right, you can go beyond that and follow my core financial philosophy of keeping costs down WITHOUT sacrificing quality. When you think about cars, you want to think about the total cost per year. That includes, and typically in this order from largest to smallest, depreciation, gas, insurance, and maintenance/repairs.
Depreciation is your largest, most important cost. And the
larger your acquisition cost, the more you’re going to pay in depreciation in
most cases. But the depreciation curve almost always behaves in a fairly
predictable way. For example, a typical $40k car will lose about $20k of its
value in five years. But in the next five years, it will probably only lose
another $10k. And in the next five, probably only $5k. Obviously different years,
makes, models, etc depreciate differently. But that is the general pattern.
My favorite way to exploit this is to buy cars at about the five year mark, drive them another five to ten years, and take good care of them. You can usually still find one that age with 50k miles or less on it and with today’s cars, assuming the previous owner has taken care of a car reasonably well, that is basically the same as new. Just about any car, besides the crappy brands I simply don’t advise you to buy at all (I posted about the best and worst brands here), is going to go around 200k miles if it’s maintained decently and not driven excessively hard. And furthermore, I’ve done very little besides regular maintenance on vehicles with 50-150k miles on them. So to me, that is the range I want to own a vehicle for. By buying and selling when I do, instead of paying roughly $30k over 100k relatively trouble free miles for that $40k car, I pay half that for the same.
So by taking advantage of the differences between the depreciation
cost curve and the maintenance/repair cost curve, I save a ton of money and get
to drive essentially the same cars I otherwise would. But in order for that to
work, I have to be very confident I’m starting with a good car. That requires
first doing the proper research and then knowing and identifying the signs of a
car that has been taken care of versus a car that hasn’t been. I’ll get into
that plenty more before my series of car posts is complete. But that’s enough
for today. Stay tuned for more of these posts and I’ll work my way through the
entire process. And get your week off to a great start!
I’ve been thinking about doing some car posts lately and I
certainly will soon. But I’ve been watching Scotty’s videos for years and I
promise you, the man is legit. In fact, he knows a hell of a lot more about
cars than I do. And to top it all off, he is damn entertaining. So I figured
the most effective post I could write is one that directs people to him. Check
out his channel now and thank me later. That’s all for today. Have a wonderful
Happy Monday, everyone! Here is the latest post in my Annual Expenses series. If you didn’t see the introduction post that summarizes all of my expenses, you can check it out here. I’ve been going into detail on one category each Monday. Over 2017 and 2018, I spent an average of $2800 on gas. This is largely because I drive a ton for work and for my other business activities. However, if I drove a typical number of miles in a year, I believe I could reasonably cut this expense down to about $1200. Are you spending more than that? Here are some ways you can improve the situation, form most effective to least.
1. Drive a fuel efficient
Yes, this one is pretty obvious. But it’s the biggest reason
most people overspend on gas. How many pickup truck owners do you know who do
almost nothing but drive to work in them? How many SUV owners do you know who
rarely have more than one or two passengers? These people are spending a
fortune owning these vehicles – in many more ways than simply filling their gas
tanks. I’ve been without my truck for almost two years now and guess what? I’ve
managed to find ways to get by without it in most cases and when that hasn’t
been possible, well, that’s why Uhaul and their ilk exist. Even some home improvement
stores have trucks available to rent now. Renting a truck even ten times a year
is much, much cheaper than owning one. So my advice is to think long and hard
about why you’re driving what you are and whether you really need a vehicle
that size. If you can’t get at least 30mpg on the highway and there isn’t a
very good, consistent reason for it, you’re wasting a lot of money. In my case,
I get roughly 30mpg on AVERAGE and drive a car with just shy of 300hp.
Automotive technology has come a long way and compromise isn’t nearly as
painful as it was years ago.
2. Keep your driving
There are lots of ways to do this. Carpool, combine multiple
trips into single ones with multiple stops, skip going to things you didn’t
really want to do anyway, etc.
3. Maintain your
There is a good chance a poorly maintained vehicle will get correspondingly poor gas mileage. This is one way that a fair portion of your maintenance costs will literally pay for themselves. And that’s not to mention the money you’ll save in depreciation since a car that’s maintained ages more gracefully and is worth more money. Here is a post I wrote about basic vehicle maintenance.
4. Drive gently. If
you’re adventurous, try some hypermiling techniques.
I’m not going to go into the extreme stuff here, although
you should know there are people who can get literally double the EPA rating
out of some cars. You can improve your gas mileage quite a bit just by accelerating
gently, maintaining a good following distance, minimizing brake use (which is
strongly related to following distance), etc. Driving your car like you’re on
an imaginary race track isn’t going to save you much time anyway since you will
still have to deal with the same (often horribly timed) stoplights and idiots
going the speed limit in the left lane that everyone else does. And besides,
any time saved will get eaten up pretty quickly when some revenue generator
asshole traffic cop lights you up or you get into an accident. Driving
aggressively really isn’t worth it and it has a devastating effect on your gas
5. Buy the cheapest
gas you can find.
I wrote a post with some more tips about this recently so
check it out here if you missed it. Gas is the ultimate commodity item and yes,
provided you’re doing an apples to apples comparison in terms of octane rating,
it’s the same no matter what station you buy it from. I can’t believe how many
people swear by the opposite. If you don’t believe me, drive by your local
distribution center (likely in the middle of nowhere) and check out how many
different logos are on the sides of the tankers – which are all lined up to be
loaded with the EXACT SAME GAS.
6. Use credit card
rewards to your advantage.
There are multiple credit cards that pay 3% on gas.
Additionally, “category cards” like Chase Freedom occasionally pay 5%. This is
free money, people. But if you don’t want it, no problem. That’s just more for
7. Go to your
furthest away destination first.
While you’re planning your multiple errand trip after
reading point number two above, consider this. Cars run most efficiently when
they’re fully warmed up and this takes some time, depending on your climate.
This is why if you live in a place with hellish winters, your winter gas
mileage is substantially worse than in the summer time; it takes cars longer to
warm up. Anyway, if you drive to your first destination a few miles away, then
a few more miles, then a few more, etc, and turn your car off each time, it may
never get fully warmed up and you may be losing tons of gas mileage. Contrast
this with driving twenty miles to the furthest destination, completely warming
up your engine in the process, then making your way back towards home. You want
to be driving the highest possible percentage of your miles with your car
running as efficiently as possible. Another way to plan out your trips is to
avoid rush hour like the plague. Stop and go driving is bad for both your gas
mileage and your car’s longevity. Few of us live in a perfect world, but most
of us still have some options available that can make a big difference with
things like this.
8. Regardless of
climate, DO NOT leave your car “warming up” in your driveway.
I don’t know what they were doing thirty years ago because I’m
not that damn old. But I do know that today’s cars are designed to run right
away and also that idling is bad for them and should be kept to a minimum. I
know it gets inhumanely cold in some places – for example, Wisconsin. But if
you punish your car for that by leaving it sitting idling, you’re going to take
a ton of life out of it in the long term and waste a ton of gas in the short.
My job involves a lot of driving. How much? Over the last three years of doing it, I’ve put on well over 100k miles. So I know a thing or two about this stuff. Today I’m going to throw out some random tips that I use to make life on the road a little safer, more efficient, and generally better.
Take care of your
vehicle and it will take care of you.
This is an easy one. I’ve written about basic maintenance before. Whether you do it yourself or you have it done at a shop you trust, make sure it gets done.
I’ve read about hypermiling techniques that allow people to
get some pretty insane gas mileage. A lot of it isn’t necessarily practical for
every day driving but the most important concept is; drive gently. Accelerate
gradually, maintain plenty of following distance, and avoid abrupt braking. Not
only will you save gas, your car will last longer and you will be much less
likely to get into an accident. This can easily save you thousands of dollars over
the life of a car.
Google Maps is pretty
I don’t even use the in car GPS systems anymore because
Google Maps is way better. In addition to basic navigation, it allows you to
search for gas stations and see many of their prices on the fly. It doesn’t
have prices for every station, but it at least gives you a good idea of what
area you’re likely to find the best prices in. And for anyone who doesn’t know,
no matter where you buy your gas, it is exactly the same stuff. I talk to oil
industry people all the time and that has been confirmed time and time again.
So this is a commodity item and that means price wins.
But my favorite Google Maps feature is definitely the speed
trap notifications. It isn’t a perfect system, but it is more effective than a
traditional radar/laser detector in my opinion for two reasons. One, the range
is much better. You can see speed traps miles away on the map. Two, there are
far fewer false positives – a huge problem with even the best detectors. But
the system is only as good as the data it has so please, let’s all be good
citizens and put the word out whenever a revenue generation agent police
officer is spotted trying to ruin someone’s day. Disclaimer: I support police
most of the time and believe they provide a valuable service. But in this
particular area, I believe Google is providing a much more valuable service
than they are. To report a speed trap, click the little plus button on the
right side of the screen in Google Maps. We need as many people doing this as
I tried an app called
Upside and well, not everything works out.
The app supposedly pays a rebate whenever you buy gas. But
you have to take a picture of your receipt every time and that’s a pain – even if
the pump isn’t out of receipt paper, which is often the case. And in my
experience, after the teaser rate on the first fill up, it was almost always
one cent per gallon. Also, usually only the more expensive gas stations in the
area were available on the app. A one cent per gallon rebate isn’t worth much
if you’re paying ten cents more per gallon to begin with. There was also a
restaurant option available that paid much better, but the selection was atrocious.
I did, however, use that to buy enough chicken sandwiches at Burger King, which
are surprisingly decent now, to get over the $10 cash out threshold and make
the whole thing at least pay off a little.
As usual, Costco
If you can get your gas there, you will likely save at least
ten cents a gallon versus the next cheapest station in the area.
Speaking of gas, if
you’re getting less than 3% back on it, you’re leaving money on the table.
AAA is a pretty worthwhile
service if you drive long distances often.
Peace of mind is worth a lot when you’re in a strange place.
If something happens, it’s nice to know you’re a phone call away from getting
help and that in many cases, you won’t even have to pay for it. In a lot of
places, especially in the more rural areas, the tow truck business is quite a
racket. With AAA, even if you do end up having to pay, you will at least be
dealing with one of the more reputable options in the area (or at least one
that likely doesn’t want to risk losing its AAA business by pissing off
customers) without having to do the research on your own.
If Discount Tire is
available where you live, you’d be a fool not to buy your tires from them. And
yes, I know that my favorite store sells tires. Even Costco isn’t the best at
These guys have the tire business down to a science. They
have great selection, the best prices, and great service. They check/correct
your pressure whenever you want and free rotation is included with your tires.
But the best part is their warranty. 99% of the time I am not a warranty
advocate. But Discount Tire is an exception. For about twenty bucks a tire,
they will repair or replace any tire you have any issue with during the
warranty period. This is all fresh in my mind because on a recent trip to the
oil country, it was so hot that one of my tires exploded as I was driving.
Thankfully, I wasn’t far from the nearest town when it happened. I did have to
wait a day for the specific tire I had to get there (to be fair, they did have
another option available, but I didn’t want mismatched tires so I opted to
wait), but given how far out in the middle of nowhere oil country is, that was
actually impressive in my opinion. And rather than having to pay $200+ for a
replacement tire (high performance, 18 inch, low profile tires are expensive
anywhere you go; Discount Tire’s price is still easily the best), I only had to
pay the twenty bucks to renew the warranty on the tire that was being replaced
for free. With tire prices being what they are these days, and with roads being
as bad as they are in many places, this warranty is a no brainer and has
already paid off more than double for me with about half the life of the three
remaining tires left to go.
Have a great Wednesday, folks! And be safe out there!
Happy Monday Everyone! This is the very first post in my Annual Expenses series. If you didn’t see the introduction post that summarizes all of my expenses, check it out here. I plan to go into detail on every category with a post on one each Monday. Over 2017 and 2018, I spent an average of $1300 per year on auto maintenance and repairs and I believe I could spend a bare minimum of $500 per year if I had to. This, in particular, is an expense I am able to spend a lot less than I otherwise would on because I do as much of my own work as possible. I try to only do that in areas of life where it is worth my time and with most shops charging at least $70-80 an hour for labor alone, not including marking up parts, this is definitely one of those. Here come the details.
First off, that $1300 number would be significantly lower if
I hadn’t done what I consider a minor overhaul on the truck I had until near
the end of 2017. At a total cost of roughly $1500, I replaced all four sets of
brakes (pads and rotors on the front and all drum components on the back), the
two front wheel hub assemblies, and most of the steering and suspension parts. This
would likely have cost at least two to three times that figure if I’d had a
shop do the work. That said, there would have been some cost savings since
there was a lot of overlap in the labor. That was why I did all that at one
time; not everything needed to be done right away but it made sense to do it
all as long as I was going to have everything apart. Whether you do your own
work or pay someone else to do it, this is something I recommend you think
about. It usually won’t make sense on a newer vehicle, but on an old dog like
my truck, it certainly did since anything that wasn’t already bad was
definitely likely to be before long.
I wasn’t able to do all of it myself, mind you. When doing
steering and suspension work, an alignment is usually required when you’re
finished and that requires expensive equipment and know how. But by doing most
of the work myself, I got basically everything done that my high mileage truck
would need to keep running reliably for at least a few more years, aside from
basic maintenance. I’m not a mechanical genius by any stretch but with auto
repair work, you can find instructional videos on just about any repair for
your specific vehicle on youtube. If you are at least a little bit mechanically
inclined, have a basic set of tools, and particularly if the repair is on the
less complicated end, like brakes for example, I highly recommend this route to
learn a new skill and save a ton of money.
What do I do in a normal year? I spend roughly $200 on oil changes with what I believe is the best oil money can buy (Amsoil), I clean and lubricate my performance/reusable K&N air filter and cabin air filter for free, I have the tires rotated every 5k miles or so (done for free at Discount Tire, the best tire store I’ve ever found), and that’s about it for routine stuff. I also spend money on other maintenance items like brakes, coolant, transmission fluid, etc, but none of that has to be done every year. I went into detail about those kinds of items here. I highly recommend you keep all the basic maintenance up to date on your vehicles. It will cost you some money and time on the front end but in the long run, it will save you tons of both. While your costs will vary based on which additional maintenance items need to be done in a given year, if you keep up with it, your average annual cost should be around $500. Note that this is for one regular vehicle. If you have a truck or SUV it will be more and if you have a giant diesel truck or you buy a vehicle that is known for mechanical issues (avoid that by checking out this post), it will be a lot more.
I do spend a little extra keeping my vehicles clean and
waxed/polished because I can, because I like the look of a clean car, and
because keeping the paint looking good will keep the resale value as high as
possible. In my case, this costs me $20 per month on unlimited, high quality
car washes, and maybe $5-10 per year on wax and polish. These aren’t things you
would absolutely have to do for a car to operate properly, but if your car looks
nice now, keeping it that way will most likely more than pay for itself when
you end up selling it.
That’s about it. If you have any questions or comments,
please leave them below or send me an email at firstname.lastname@example.org. Next
week, Monday, I’m going to be covering my Cash Donations category in this
series of posts.
Holy cow are we in some suddenly dark days! I’m seeing some genuinely good people and businesses getting hurt and some being taken down altogether and it is all happening so quickly. And this, of course, only intensifies my problems. I’ve seen this recession coming on paper (or at least screens, the 2019 equivalent) for a couple of years now and while I may have made some early calls, I would much rather have been early than late. And more importantly, I believe we are now almost definitely in it. I see more real world signs of it every day and I hear similar reports from my contacts all over the country. If you haven’t started preparing yet, I strongly recommend doing so right now because you won’t get a better opportunity. Anyway, mercifully, another Friday is upon us and here are some random observations and anecdotes from the week.
Don’t Let Car Dealerships Take
Advantage of You Because You’re Lazy
In spite of
what I wrote above, I have been quietly watching the market for my next vehicle
for a while. I’m not saying I will pull the trigger any time soon, but as I
believe I’ve mentioned before, I typically watch the market for months before I
so much as set foot on a dealer’s lot. I don’t just want to take the internet’s
word for it; I want to know for a fact whether a price is good or not. Plus, I
predict some amazing recession discounts on cars this time around. Plus, I
enjoy the research. Yes, because I’m weird like that.
Anyway, I’ve noticed that these “no haggle” dealerships have gotten very popular. I’ve also noticed something else; their prices are absurdly high! I’m talking 10-15% higher than average in most cases! After doing a little googling and perusing some forum posts, I’ve confirmed that this is exactly what it appears to be – another example on the long and growing list of times American companies have had the balls to fairly openly exploit laziness for profit – and succeeded at it. Two quick notes on this.
One – and I
know this doesn’t apply to all of them, but only some of the very most millennial-ly
ones that may as well be throwing in a year’s supply of avocado toast with their
overpriced cars – but any dealership that will not let you inspect a car in
person first at a minimum, needs to be avoided at all costs. Cars, particularly
used ones, are not commodity items. If you aren’t going to test drive one
before you buy it, you deserve whatever you get. And if you’re not willing to
spend a hundred bucks or so to have a qualified mechanic check a used car out,
you’re taking an awfully huge risk. Sure, you may get lucky. But you could also
wind up out thousands and thousands of dollars. And sure, some of these “dealerships”
allow returns. But do you really want to stake that kind of money on these
policies being honored? Better you than me if you do. But then, I’m just a car
freak who has done extremely well with car purchases over the years. Not only
have I had to do almost zero repairs beyond preventative maintenance, I have
even pulled off the seemingly impossible feat of selling one car for a profit
after driving it over a year and another for exactly what I paid after driving
it for several months. But then, I don’t like to toot my own horn…
dealers literally believe they can overcharge people by thousands of dollars
because the average person either doesn’t even have the courage to sit and talk
to a salesman (or woman), or is too lazy to do so. Are you really willing to
validate that theory for them? For the sake of all of us, I hope not. But based
on the fact that some of these companies appear to be extraordinarily
successful, it would appear the mob has already spoken. In any case, at the
risk of sounding like your parents, do you want to get ripped off just because
a million other people have been?
Aldi Now Accepts Credit Cards
This could be old news, I don’t know. I stopped going to these stores years ago because I didn’t like playing roulette with the possibility of getting stuck waiting in line for fifteen minutes because there was one employee in the entire store. Also because I don’t do business with anyone who doesn’t accept credit cards outside of incredibly rare, possibly life threatening circumstances. Anyway, I stopped in to an Aldi for the hell of it recently and was pleasantly surprised to learn that the company has joined the rest of the civilized world in accepting credit cards. Someone must have had a eureka moment and realized that not accepting by far the most popular payment method on earth to save a few nickels per order, which could easily be accounted for in the pricing of everything (again, like the rest of the civilized world does it), might not be quite the brilliant business tactic they had once thought it was. No, no sarcasm here at all. And by the way, speaking of spare change, I genuinely believe the quarter deposit thing they do with their carts is brilliant. I don’t know if I’ve ever seen one freely roaming a parking lot en route to damaging someone’s several thousand dollar vehicle because someone else is a lazy, entitled asshole. My goodness, I’m in an interesting mood today. But I promise this is happy, if cynical. Remember, Friday.
line thing still happened. As it turned out, the only employee in the store was
in the bathroom. There was a line about half the length of the building when he
came out. I probably won’t repeat this experiment anytime soon. But if you’re
looking for absolute bottom line grocery prices, this store may be worth a
visit for you – especially now that you don’t lose out on 3% of the
purchase price (it’s actually 5% until the end of June with Chase Freedom)
because management doesn’t believe in pricing its products according to the
costs of doing business with the vast majority of all possible customers. Seriously,
charging credit card users extra is basically like installing pay toilets in
the bathrooms since a few people may have a phobia of using public bathrooms or
something. Or in the case of shady gas stations, who tend to discount their
cash prices by several times anything approaching a possible credit card
merchant rate, putting up a giant “IRS, please audit me!” sign outside one’s
place of business. And not accepting them at all? Well, it’s their business,
not mine. Yes, as old fashioned as I can be, I get incredibly irritated when
people fail to adapt to the overwhelming convention of the times in this
particular area. We are all hypocrites; the only difference is that some of us
are at least willing to admit it. Anyway…
Time to Make a Dietary Change
Sugar is the devil. We all know it deep within our sad little souls and just in case we’re intentionally ignorant anyway, there are about forty million studies rightly screaming it. Recently, I finally accepted that I’m weaker than I need to be at standing up to its cocaine-esque charms. So I’m cutting it out. No, not all of it. We all have to find a balance that works for us in life. In this case, I need to be somewhere between excessive, gluttonous consumption at will, where I have been for much of my life, and eating only what I grow on my isolated, non GMO (if that is even possible given the selective breeding that has gone on with just about all crops for hundreds, if not thousands of years – but I digress), 100% organic farm in the middle of some God forsaken backwater town no one ever visited, let alone lived in, on purpose.
The logical choice seems simple. I’m not going to try to police every gram of sugar out of my life. Cutting out only the stuff that is primarily sugar (cookies, my beloved Nutella, my even more beloved Freddy’s chocolate custard concrete mixers with various mix ins, etc) will amount to a major improvement for me. I recall reading somewhere that habits take seven weeks to form so I’m going to do two months for good measure. I started on Tuesday so that means I’m going until July 28. I’m hoping that by then I won’t even want the stuff anymore. But we’ll see how it goes.
If you had asked me to write this post ten years ago, I would have refused to do it since advising anyone to buy a new car would have been a huge disservice. Why buy new when that same car will cost a quarter less in a year and about half in four or five? However, since then, prices have skyrocketed (but so have incentives), people have largely caught on to both that trend and how generally undervalued used cars had been, and depreciation has slowed considerably as a result to the point that today, buying a new car makes sense in some, but still not all cases. But under no circumstances does it make sense to go in uninformed and let some car salesman hit a home run off of you. So let’s see what we can do about that. This is only one of many perspectives on the matter but it should at least give you a good start. The dealership model, much like that of credit cards, is set up to screw customers en masse. However, just as with credit cards, the rules of that exact same game can be turned around and exploited by a savvy customer as well. Let’s get you on your way to being one!
Much like in any sport, preparation is a huge part of
winning. Don’t ever go to a dealership without having done your homework. How
do you know if you’re ready? Before you ever step foot in a dealership, you
should know all of the following things: which make and model you want, the
differences between different model years if there are multiple new model years
available (for example, today you could buy a 2020, a 2019, or a 2018 in
certain cases) which options you want and don’t want, which packages you need
to buy or avoid in order to accomplish that, what those packages cost, the
average pricing (what people are actually paying) of any car you want, what
your current car is worth, and what the terms of your financing approval are.
Yes, that is a lot. It usually takes me a month or so, chipping away an hour or
two at a time.
There are tons of research sites available now. Edmunds.com
and KBB.com are two of the best and most venerable but countless competitors
have popped up in recent years. Most of the information you need is widely
available so the important thing isn’t so much where you choose to get yours as
that you get it somewhere and verify it somewhere else. I recommend working
through the process on multiple sites until you basically have everything
memorized. But don’t be afraid to make yourself a cheat sheet of key figures to
take with you. Your mind can do funny things in the heat of the moment.
Whatever you do, do not rely on a salesman to educate you about cars, pricing,
or especially finance. Why not? First, there is a very low barrier to entry in
the job and many of them are awful at it and incapable of doing so. By
educating yourself, you will ensure that weakness on the part of a salesman can
only get you a better deal and will cost you nothing. Second, information is
power, plain and simple. If the salesman knows more than you do about any of
the items I listed above, he has an advantage that he can capitalize on from
the word go all the way through the signing of a deal – and that’s going to
cost you thousands of dollars.
You also need to know about your end of the transaction
going in. KBB.com will give you a pretty good idea what your current car is
worth, especially if you cross reference craigslist, autotrader, etc to see
what cars like yours are actually being listed for. Pay attention to the type
of valuation you’re getting. Private party (if you sell the car yourself) is
almost certainly going to be higher than trade in. But know the difference
between these numbers because it will be important. Keep in mind that in most
states, you’re not going to pay sales tax on the trade in portion of the deal.
So weigh things out. For example, if your state charges 5% sales tax and your
car is worth $5k private party and $3800 as a trade, you would be better off by
$1010 if you sold it yourself ($3800 + 190 less tax liability = 3990, 5000 –
3990 = 1010). However, if the dealer ultimately ups his offer to $4800, and you
are confident in the $5000 figure, you are now better off trading ($4800 + 240
= 5040, 5000 – 5040 = -40). However, watch out for over allowance here. This is
when a dealer offers more than your trade is worth but then juices the hell out
of the sale price of the new car to more than make up for it. Remember, “there
is no free lunch.” And also keep in mind that selling a car usually involves
investing your time into dealing with at least some “interesting” people so you
have to decide what that is worth to you as well and factor it in.
Finally, there’s financing. Some hardliners will say you should
never finance a vehicle because it’s a depreciating asset. I would say that
technically they’re right in most cases, but that the declining pace of
depreciation and still nearly historically low interest rates have made things
a lot less definitive than they used to be. For example, I took a car loan in
2014 at a rate of 2.9%. Cash wasn’t worth that much at the time but investments
were worth a hell of a lot more. So since I was confident I would be able to
cashflow the loan for the life of the term, I feel I was making a pretty good
choice. I still recommend sticking to a 36 month term or shorter, just like I
would never advise anyone to take out a mortgage with a term over 15 years.
Why? The term becomes a limiting mechanism against both paying excessive interest
and buying more than you can afford. As long as you can cashflow the payments
at 36 months or less, you are pretty unlikely to get hurt. Are you dooming
yourself with a 60 month term on a car loan? No, but you are stretching
yourself thinner than I would prefer if you genuinely need a term that long to
afford the payments.
Whatever you do with the financing, do not make it into yet
another profit item for the dealership. Get your best approval option directly
from a lender prior to ever looking at any cars. Credit unions usually offer
the best rates. This part will involve a little more legwork but there are two
big payoffs. One, the dealership finance manager isn’t going to mark your
quoted rate up by a point (or three). And yes, if you don’t find the financing
for yourself, that is exactly what will happen. The exception would be when the
dealer or manufacturer gives you a subsidized rate. However, keep in mind that
in those cases, you can usually have either the subsidized rate or the
incentives on the car but not both and you are usually much better off taking
the incentives, which have ballooned more and more along with the pricing in
general. So you are always better off knowing what the best available
non-subsidized deal is at a minimum. Two, you will spend a lot less time in a
room with that same finance manager – and make no mistake, he is the smartest and
most ruthless guy on the payroll or they wouldn’t force almost every customer
to go through him before leaving with a new car. He is probably going to try to
push extended warranties and other bullshit whether you finance through him or
not, but if you take the financing out of his hands, you’ve taken away his best
weapon. He loves to say things like “we can give you all this additional
coverage and it will only cost you x per month” because it puts thousands of
dollars in his pocket without some people even realizing what he’s doing.
Before you walk into that office, remind yourself that the only way to walk out
without losing money is to say no repeatedly until the finance manager accepts
that you’re not a rube and gives up.
That brings me to another key point. Any time anyone tries
to talk about monthly payments, stop them in their tracks by telling them
you’ll be basing any and all decisions on the total sale price only. As a
finance guy, I can tell you that from your perspective as a customer, nothing
good can come from conversing in the language of monthly payments. If you are a
lion in an epic struggle for survival with a crocodile, this would be the part
of the program where the crocodile tries to pull you off of the river bank and
into the water, where you go from having a fighting chance to virtually none.
Don’t let it happen. Fight the enemy on your terms only. Negotiate on total
sale price only!
Now let’s get to that most fun part! What? Negotiating isn’t
fun for you? I get it. You’re a normal person and you don’t like awkward, high
pressure situations. But unless you want to donate at least a few thousand
dollars to some “no haggle” (in other words, “take the easy road and just pay
us a lot more”) dealership, this is a necessary evil. First off, shop at the
right time. There is no one best part of the year although there are several
good ones. Late summer is good because business tends to be slow and
dealerships are hungry. Different parts of fall and winter are good for a
variety of reasons. But by far the most important timing related factor is to
shop when it’s good for you. This means you have a functioning vehicle and are
under zero pressure to buy anything now. This is crucial because indifference
is your best weapon.
Only visit a
dealership if you are 100% ready and willing to drive away in the same vehicle
that got you there. I can’t stress this point enough. The heart of the
negotiation process is the power struggle. If a salesman (and by extension, the
finance manager, who you are actually negotiating with through the conduit of
the salesman) has any reason to believe you are not going to leave without
buying something, you are going to get soaked. This is not to say you can’t let
him think you’re serious about buying a car. But make sure he has no illusions
about you being unable or unwilling to walk away. Bottom line, if he gets you
to the point where you have to have his car, he wins. If you get him to the
point where he is ready to let you walk away, you win. And that is exactly the
metric I use to determine if I’ve pushed the deal to the limit.
The battle is usually going to rage for hours. Go in
mentally prepared. Like it or not, you’re in the game and if you want to win,
you have to want it more than your opponent. The salesman will use whatever his
favorite tactics are, often just lowbrow emotional manipulation, but the
structure is usually about the same; he first tries to build up the value of
the car and your desire for it. Ideally, he will succeed in making you feel
that this is not a negotiable situation and he’ll have you paying premium
prices for both the car and every bullshit add on that has ever been dreamed
up. But of course you don’t let that happen and say you want a lower price so
it goes into the negotiation phase. He goes to visit his manager, who coaches
him on his performance, talks to him about a sports team they both like, ogles
that hot new receptionist, whatever. This is a game, after all. But you can
play too. If the salesman is gone too long, you can smile as say something to
the effect of “if you’re gone that long again, I think I’ll go see what kind of
deal the guys across the street are offering while I’m waiting.” Bonus points
for a sarcastic wink at the end of it. The manager visits will usually yield a
few hundred dollars or so each on the total sale price – assuming you’ve been
smart enough to force the conversation to stay focused on it. Keep in mind that
they want to toss in other things – undercoating, extended warranties at
reduced prices, various subscription packages to all the tech bullshit the cars
are loaded with now, and anything else that costs them a fraction of what yet
another of those expensive price reductions will. Think of it like you’re
trying to dig a hole and every manager visit is another time pulling the shovel
up and dumping it. You want that shovel to be full of dirt every time or it’s
going to take you forever to get the job done.
The forever part is the dealership’s goal. The longer it
takes you to get them down on the total price, the more likely you are to just
give up and settle. Have fun with the process. Engage in whatever mental
warfare amuses you. The key is to send the message that you’re here for the
long haul and that doesn’t bother you in the slightest. If you do it right,
they may just give up and make a big cut in the hopes of convincing you it’s
their bottom line. But remember, my metric is whether the salesman will allow
me to leave. If he says something is the best he can do, thank him for the information,
tell him you will compare his numbers to some other dealerships you’re going to
be visiting (it helps if you know which competitors are nearby so you can
mention a name and make the threat more real), and act as though you’re
preparing to leave. Gauge the reaction. He may say “this offer is only good if
you sign now.” That’s bullshit. You can easily come back and renegotiate it
anytime you want – maybe even a better deal. Keep moving. He may say “let me go
talk to my manager and see if there is anything else I can do.” You’ve just
caught him lying since he already said it was the best he could do. The
negotiation phase isn’t over and you would have left money on the table if you
had believed what he said just moments ago. Or maybe, just maybe, he’ll have
nothing to say for the first time all day. If that’s the case, it means he
actually has done all he can do.
Now this doesn’t mean you immediately change your mind and
take the deal. Remember all that research you did? As part of that, you will
undoubtedly know what the average person is paying for this particular car.
Some sites even give you a range from low to high. So all this time, you will
have that in your back pocket and be well aware of whether or not what’s in
front of you is actually a good deal. So when the salesman bows his head in
apparent defeat, it’s time for you to make a decision. Are you at or near the
bottom of the range? Or below it? You should probably have a change of heart
about leaving and sign the deal. If you aren’t where you want to be, it’s
possible that this dealership is just particularly greedy and you’d get a
better deal elsewhere. You’d certainly be more effective at the negotiation
process with this one just recently under your belt.
One other fairly new phenomenon is the internet price. There
are sites where you can choose exactly the car you want down to the particular
trim, options, and even color. Use an email address you’re ok with getting
spammed at, of course, because the next step is that area dealers will spam you
with quotes. It will keep coming, and coming, and coming. But last time I tried
this, I noticed something interesting. Some of the dealers’ offers improved over
time. When I got one that looked almost too good to pass up, I went in. Of
course, I’m a crazy person, so I worked the whole negotiation process without
telling anyone I had the internet offer in my back pocket. When I got pretty
close to it and the salesman seemed unwilling to move any further, I pulled the
offer up on my phone and told him it had made me think it might be worth coming
in since it was “in the ballpark.” The salesman was pissed. But after one last
conference with his manager, he came back with a slightly better offer than the
internet one and an assurance that he would go no further. My leaving ploy
confirmed it and so did various websites.
So the internet price was pretty dynamite in that case as I
was only able to get a little bit lower through negotiating. And my final price
was almost off the chart in terms of the range of prices being paid on the
websites. But I never would have known that if I hadn’t verified it by working
to arrive at it another way. And just because that one internet price was good,
it’s no guarantee that any others are. Dealerships aren’t suddenly going to
stop wanting to make as much money as possible because the internet is here.
I’m sure they will continue to innovate.
I see by the word count that this has been a longer journey
than I had planned on. But I believe everything I’ve said has been necessary
and probably still didn’t cover absolutely everything. A successful car
negotiation often takes several hours (although I did have a very quick one
once) and although it may seem very straightforward at times, there is actually
a lot going on. I will leave you with two more general tips to keep in mind.
One, the salesman is only going to present options that benefit him. Don’t
assume they are the only ones that exist. Two, you are not in this to make
friends. The salesman and finance manager will most likely get very frustrated
if you are well prepared to get an extremely good deal and it may very well
come out in some sort of emotional response. In this narrow context, being
their friends means paying them thousands of dollars more than you have to. I
don’t know about you, but those are the kind of friends I can do without.