How to Buy a Car Part 4: Negotiation
Part four of my series on buying a car, how to buy a car. Probably should go back and look at one, two, and three if you haven't. But this is about the fun part, negotiations. And this is based on all the research, and if you looked at the other videos, you know that you're in an asymmetric situation, so you have to do a lot of research before you go into the dealership. And generally, when I negotiate with anybody, I like to do it from a friendly manner, respectful manner, and always trying to make friends. That's how I approach all negotiations. I just don't like people go in, "I'm gonna win, win, win." No. It's got to be... They have to make money too. They gotta pay their bills, they have this great car you're gonna buy and the sales guy has kids and all that. But the problem with dealing with when buying a car is that if you're not prepared, they will take advantage of you in most cases, unfortunately. So, you've got to keep that in the back of your mind. And if it gets nasty, you leave. But we're gonna go through this and discuss some negotiation.
So, now remember, we've done our research. We picked out a Dodge 2020, Ram 1500 based on our research. We did lots of research. We looked at edmunds.com, we looked at truecar.com, we looked at Consumer Reports, which was our primary source. We also looked at Autotrader, we've looked at the dealer websites, maybe we've went into a couple dealerships and drove the car around, that kind of stuff. We know that we can only afford to pay 20% of our take-home pay. And we did in a calculation on a spreadsheet in part three, where we figured out what we could afford to pay, and we're gonna have to finance it because, obviously, this is gonna be $45,000 purchase. We know what the down payment is. We already have financing set up. So, we're going into the dealership. We have our deposit, we have our financing set up, we know the car we want, we know all the options. So we go in to the dealership at this point. And like I said, you should know pretty much everything you can, and remember, we did a lot of planning here. Our plans are not gonna work out 100%, but it should help us at least deal with some of the asymmetric information they know about the car that we don't.
Keep it uncomplicated. Because the more complicated it gets, the worse your situation. Because like I said, they sell 40, 50, or 100 cars a week. You buy one car every five years. Keep it uncomplicated. Don't talk about leases if you don't want to lease, don't talk about used cars, don't talk about trading, don't talk about financing. We already have our financing. We already know what our used car... If our used car is good, we're gonna sell it to a family member or somebody else. If the used car is a piece of junk, we'll use it as a trade-in. Okay? And we already know what it costs, because we did the research on that. But you walk into the dealership, all you want to do is buy a car. You don't need to talk about anything else. Uncomplicate it.
Be respectful. Look to make a friend. Remember, these salespeople have family and friends just like you do. And why not be nice to them and joke around and have a good time? I can negotiate with the best in the world, but I don't really want to have a drag-out, I don't want to be disrespectful. I wanna make a friend. And if it's not good, I'll walk out and you can buy a car somewhere else.
Make sure you know how to use your calculator. You bring paper and pencil. When you go into a dealership, you'll never see a calculator on a desk. You'll never see paper or a pencil. I wonder why. And that's why I said, even though we're gonna be friendly, this is negotiation. Because they don't have that stuff, it's telling you that they wanna get as much money as they can out of you. So, you need to understand how to use your calculator. If you have a tablet, you can even do spreadsheets like I showed you in part three. A pencil, a pen, paper. You have it in your little briefcase, you pull it out when it comes time to negotiate.
Go to the dealership when they're not busy. I usually like the end of the month, a Monday, Tuesday, or Wednesday late in the day, when they're just sitting there doing nothing. You walk in, you say, "I'm buying a car today." Well, they weren't planning on selling a car, but maybe they need to made a quota for the end of the month. Or maybe there's sales bonuses that are gonna be based on who sold the most cars. So, you don't know what, again, you don't know what to deal. Maybe they would give you the car for $5,000 less than they would normally sell, but that's when you go in. If it's crowded, don't go there. Come back another day. You wanna go there when there's a salesman sitting at the desk doing nothing. Sometimes on a beautiful Saturday, late in the... The salesman's there all by himself, but you've got to go there when you can actually talk. You walk in, "I'm buying a car today. I know what I wanna buy." Maybe you've already checked... Like in our situation, we already know the dealership we're gonna use. We know they have the truck there. We're gonna go buy it.
Okay. So, again, let them know. If the price is right, always if the price is right. There's only... Listen, you don't have unlimited resources no matter who you are. So, once you negotiate the price, you negotiate the after sale items, such as tire insurance and stuff. Now, I know people talk about when you buy a car, negotiation is done. And then they'll say, "Oh, well, here's some other options you may consider." Lifetime car washes and all this stuff. Most of the time it's their big profit items for the dealership, you don't wanna do them. But I know when I bought a car, I knew that the tires on the car had issues. And I live in New Jersey, which is, the roads are like tank traps here. So I knew I'd blow maybe seven or eight tires in three or four year period. You're going 80 miles an hour down a freeway, down the turnpike, and you hit a pothole this deep, the tires are blown. So, I said, "Well, do you have a tire insurance?" And they said yes. It was like $400 or $500 for five years. And I knew to fix a tire on this car was $800 each. And I blew I think 10 of them.
So, if you have an understanding of these after sale items... Let's say you're in the dealership, you have the car, the price, and you ask to say, "Listen, this is the total price. I wanna see what all your costs are. I want everything and I wanna know what the total price is, walk out price." And you can go through and you have a calculator, you check everything. You check all the stuff on there and you ask questions about it. There's a new license plate, there's this. What's this prep fee? I don't need that. Anything that sounds a little, say, "This is BS. The car is clean as it is. I want it now." So you go through and make sure there's not too much in there. They're gonna get away with some things, $100 for this, so if it is, and say, "Okay. I'm not doing it for this. I'm done. $200 to prep the car. You know what, I'll go get it somewhere else." But what you could say is, "I wanna see the after sale items that you guys have. What options do you have?
So let's say they put a $500 fee for prep or something like that and you don't wanna pay it. But you look at these options and you see that there's lifetime oil changes, there's a tire insurance program, there's some kind of extended warranty, which usually they're not that good. You'll say, "Okay. You know what we'll do? You give me this, this, and this for free, I'll buy the car." And they get their $500 and you get this other tire insurance or something. Or maybe car washes or free oil. I have free oil change for the life of the car. So, the negotiation is over at that point. Hopefully, you guys are friends, and this way when you go there, and I always like to get my car serviced at the dealership, because you know the people and when you do have a situation, they'll probably help you out, especially if you've been good to them and you bought the car there.
So, listen, guys. This is part four. If you guys have any questions, just leave it in my YouTube channel below. Subscribe to my channel. We're always putting up kinds of stuff. This is a little bit different than what we normally do. It's because we think there's a big problem out there in buying cars. People just don't do the research. And a lot of what people talk about buying used cars, buying a lease car, using dealer financing, not getting all that stuff set up is just really, really bad. Not doing... It basically comes down to doing your planning, doing your homework. Really appreciate you guys listening to this. Thanks a lot. Bye.