I spend a great deal of time serving as a consultant to clients, friends and family members during the car buying process. In fact, just as I completed that sentence, I was interrupted by another call asking me for my opinion on which midsized sedan to buy
So in an effort to prevent another person from calling me, I’m publishing “Sammy’s Car Buying Tips.” By reading this simple primer, you’ll be in a position to make a smart, decision.
The key to this guide is to always give yourself many months to research, decide and complete the deal. If at any time you absolutely have to buy a car within a specific timeframe, you inevitably lose flexibility to get a vehicle you might want, as well as relinquish leverage against the dealer/seller.
Step 1: Narrow your search to appropriate vehicles
I can’t stress this enough: you should be focused on vehicles that fulfill ninety-percent of your needs, not the vehicle that delivers specialized capabilities for the once or twice per year activities. You wouldn’t believe how many people have come to me asking about which SUV or pickup truck to buy, and through simple (yet methodical) needs analysis concluded a sedan or minivan was the correct purchase.
So to get to the bottom of what you need, rather than what vehicle fits your desired image of your needs — ask yourself these questions based on prior years:
A good way to think about the different segments:
Step 2: Research
Buying a new (or new to you) vehicle is easier now than it ever has been. Quite simply, as much (if not more) information is available to the general consuming public as is available to the average car salesperson. This means that unlike in the past, a well informed buyer can know any vehicle’s positive and negative traits, its MSRP, the dealer’s actual cost, and what everyone else is paying.
And due to the sheer number of brands, models and trim levels, consumers have never had so many options. This remains true on all ends of the value/price spectrum.
So your first to-do is to read through Edmunds.com, MSN Autos, Road and Track, Autoweek and the dreaded Consumer Reports. These publications will give all the statistics, pricing, options, and opinion you’ll need to form a basic opinion about various vehicles.
Step 3: Go for a test
Go to the dealers and check out all the top-rated vehicles in the classes that interest you, irrespective of price. If you’re in the market for a small sedan, even if you can’t afford one, drive a BMW 3-series to make the faults of all other cars in the class stick out like sore thumbs. On the other hand, some expensive cars can also make less-expensive alternatives look even better. For instance, after driving a Mercedes S430 the Toyota Avalon will prove faster, more luxurious and more comfortable, despite being less than half the price.
Call the dealer to arrange to have cars ready for you to inspect. This is most important with newer or limited production models, but it also minimizes wasted time.
Get in the vehicle. Set the car’s seat to a comfortable position, then either get into the rear seat to see if it can seat any necessary passengers comfortably. If you have kids, bring them with their car seats. Car salespeople will tell you how large a Volvo XC90, Subaru Forrester, Honda Accord, Acura RL, BMW 5-series or Yukon Denali is inside, but I’ve personally proven that at 6’4” tall, a salesperson or child in a car seat can’t sit comfortably behind me if I’m driving in any of these.
Take the vehicle on a long enough test run to understand the pros and cons. If you plan to share this vehicle with a spouse, trade positions to get enough time in each seat. Keep in mind that passenger seats rarely have the same ability to adjust as the driver’s seat, so make sure both adults are comfortable in both seats.
After you’ve driven a vehicle, head directly to the next dealership. You want the feeling of one car fresh in your mind when you test the next one.
Step 4: Figure in safety
Safety is a big deal to some consumers, so instead of taking Madison Avenue’s word that Volvo builds the safest vehicles (statistically, they do not!) go out and do your own research. Don’t take the dealer’s word, either, because just having front airbags means very little these days. There are big differences between makes and models in terms of safety and reliability.
Visit the Insurance Institute for Highway Safety’s web site. Skip the meaningless static ratings, because when was the last time you got into an accident in a test lab? Go to two very important reports: Driver’s Death Rates by Make/Model at http://www.iihs.org/news/2005/iihs_sr_031505.pdf and Injury, Collision and Theft Losses by Make and Model at http://www.iihs.org/brochures/ictl/ictl.html. Both of these reports can be found by searching the IIHS site, and aggregate actual statistics reported to insurance and police. In other words, these reports show how the risk of death, injury, collision, and theft relative to other makes and models (normalized for the number of cars on the road) based on real world statistics.
As you might guess, the 30,000-foot view of the reports indicate that big sedans are the safest, while small coupes and SUVs are the most dangerous. Cheaply built economy cars don’t fare as well as well-engineered luxury vehicles. And while the statistics aren’t quite in yet, allow me to predict that the current trend of putting third-row seats in midsized crossover vehicles and SUVs will prove very dangerous. As I’ve mentioned in my columns before, a Ford Explorer has a third row seat, despite being exactly the same length as a Honda Accord and Toyota Camry. Would you have your child ride in the trunk of an Accord? I certainly wouldn’t!!!
No matter what vehicle you consider, you should be getting one with side-impact airbags and stability control. Side-impact airbags increase survivability in t-bone crashes by such a huge margin that they should be mandatory on all vehicles. For an average cost of $500 to add as an option, it’s the best money you can spend.
Similarly, stability control should be a no-brainer to add to your new vehicle. Stability control (aka yaw control, active handling, stability management,) monitors the rotation of the car compared to the input on the steering wheel. If the computer senses the car is not going in the intended direction, it will apply any single brake to bring the car back under control. In other words, it does what a human cannot – choose one wheel to brake. Stability control will prevent spins and roll-overs.
If the vehicle you’re looking at doesn’t offer stability control or side airbags, you have to ask yourself if it’s worth buying a car that doesn’t care to offer the two best technologies to keep occupants safe. In other words, the car you’re looking at probably is built cheaply for people who don’t know better – so go look at something else!
Step 5: Consider reliability
Reliability has a different meaning now than it did a few decades ago. In the past, bad build quality was blamed on lazy or poorly trained line workers. Since the majority of lines are automated with robots, reliability is now almost entirely based on the quality of engineering and parts. In other words, faults are either engineered in or not engineered out. Manufacturers have a pretty good idea of the probability of failure of most components in their cars. (The exception to this are the computer software elements, which often surprise the automakers with bugs, hence why Mercedes and BMW (mostly the computer-intensive 7 series) have had terrible times with reliability.)
Domestic automakers are notorious for not engineering out problems and using parts that are known to be cheaper at the cost of reliability. Good examples are the leaky plastic intakes on 3800 GM V6 engines, C5 Corvette’s failure-prone column lock, Ford Expedition’s coolant hoses that run too close to the cylinder bank and are prone to leaking , and Chrysler’s premature transmission failure throughout the 1980s and 1990s.
There are two reliability reports to consider as the gold-standard. The first is JD Power’s Vehicle Dependability Study, which ranks actual consumer complaints per 100 vehicles over a three-year period. (This can be found at http://www.jdpower.com/corporate/news/releases/pressrelease.asp?ID=2006133 .) Don’t place too much credibility on JD Powers’ IQS (Initial Quality Study), because it simply looks at the first three months of ownership, when most people don’t want to admit the car they just spent an arm and leg on has problems.
The other is Consumer Reports Most Reliable list. Over 500,000 CR subscribers are surveyed regarding their car ownership experiences to get statistically relevant results covering almost all models. The report delivers best and worst in each vehicle category.
From these two lists, one can establish some serious trends. Firstly, cars are more reliable than they ever have been. Secondly, there’s still a big difference between the leaders and the rest of the pack.
Quite simply, if you want a car that won’t be a problem, go for a Toyota/Lexus or Honda/Acura. As established by JD Power, the industry average is 227 problems per 100 vehicles. Lexus is the best with 136 and Land Rover is worst with 438. Think Germans make good cars? Only BMW beat the average! Volvo? How about 27th place? Koreans as good as Japanese now? Not even close with Hyundai at 253 and Kia ranking fourth from last with 410 problems per 100 vehicles. All DaimlerChrysler brands were below average, showing that Chrysler products continue to place more importance on the looks of its cars than on the materials and engineering of them.
Reliability translates to how often you’ll be at the dealership for repairs, plus there’s a resale value component. Of course, Porsches are below average, but with such great dealer customer service and fantastic brand image, owners are willing to put up with problems. On the other hand, Suzuki’s horrible reliability coupled with inept dealers mean you’ll have better luck curing herpes than selling a six-year-old Grand Vitara.
Step 6: Rank ‘em
You need to start with creating a list of the traits that are important to you: size, comfort, luxury, looks, affordability, acceleration, handling, image, ease of service, long-term value, and anything else you can think of. Then rank all the cars you drove.
If performance is more important than reliability, then BMW or Audi might be a good choice. Reliability and resale value the keys? Toyota or Honda! Want the best bang for the buck, but don’t care at all about reliability or image? Hyundai. All about image over reliability, price or content? Mercedes. Oh, and if you rank buying American highly, check where the car is built! You’ll find more Japanese cars actually being designed and built in America now than “domestic” cars, which are predominantly built in Canada and Mexico!
Okay, this is the time where I tell you what I’d buy in each segment:
Avoid like the plague – Land Rover/Range Rover, Ford Explorer, any “small” SUV, the Jeep brand, VW Tuareg
Avoid: Cadillac or Honda image trucks. If you’re considering these – you don’t need a truck in the first place.
Avoid: Volvo, VW and Audi, because quality stinks.
You need to go into the dealer knowing exactly what you want and how much you’re willing to pay. This needs to be based only on the dealer’s actual cost. To get the actual cost, subtract the dealer holdback from the invoice price (and add in destination fee and advertising cost, a non-negotiable item if the dealer participates in regional advertising.) Invoice and dealer holdback are available on Edmunds.com.
Essentially, a savvy buyer will walk in, offer the dealer a fair amount of profit (like $500-$1500.) Know that the amount of success will be based on the availability and demand for the vehicle. Paying $1500 over cost for a Camry or Accord is reasonable. Paying $250 over cost for a Saturn Ion is reasonable. Getting $1500 off MSRP is a good hit on a Lexus LS.
You can ALWAYS get money off MSRP. Usually the trick is to find a dealer who can’t move the stock of a car they have. In August 2001 almost every local dealer had $10,000 second stickers 2002 Corvette Convertibles. I bought mine for invoice price, when no Corvette enthusiast thought one could be bought for less than $1500 of MSRP. I just sent an email to the second largest Corvette dealer in the country who at the time was choking on 50 allocations each month. My local dealer’s Corvette allocation? One per year!
Negotiate the deal separately from a trade in or financing, if possible. Know that it is worthless to try to negotiate a deal unless you are planning to buy that minute. Statistics say that if you walk out the door, you’re never coming back.
Furthermore, set a time limit for the deal to be done, like 30 minutes. Tell the dealer you have to be somewhere, and that you won’t have time to come back. If you can’t come to a deal in the time allotted, simply stand-up, thank them for the time, and walk away. Go to another dealer. The reason is that the longer the dealer keeps you in the chair, the more likely they’ll sell it for a higher price. If your salesman walks away to get an “okay” or “sign-off” on a deal, follow them. Explain that you don’t have time to talk to anyone other than the decision maker. This is basic negotiations – deal with the dealmaker. The last thing a dealership wants is for you to waste the sales manager’s time, but they like the sales associate wasting your time. Turn the table, and you hold the power.
What about leases? Two reasons for a lease: 1) you want a more expensive car than you can afford and/or 2)you want a new car every two or three years. If you don’t fall into one of these camps, just say no to a lease.
Always be nice, courteous and down-to-earth. If the dealer senses arrogance, or feels you are too demanding and inflexible, they’ll kick you out to the curb. Realize you have to give them something to get something in return, so build it into your negotiation strategy.
Most importantly, realize that you hold ALL the power. Vehicles are commodities. The same one can be purchased at many dealers. Be ready to walk if you’re not treated with respect or the dealer is unwilling to negotiate in good faith.
I once spoke with a second-generation dealership owner about car salesmen. He made the comment that most dealerships look for salesmen of unquestionable loyalty, who “weren’t particularly bright.” The reason for this was that the sales managers (who he considered shrewd and very bright) wanted people on the floor who would tell the customers anything and believe it themselves. According to this owner, the sales manager wanted to be able to teach the sales staff to tell the customers the sky was red, and have them communicate it and defend it even if the customers knew the sky was blue. In other words, dealership sales managers want sales associates to lie, b.s., and misrepresent product, yet have full faith that they are telling the truth…
…so be better informed than the sales associate!
In closing, take your time, be critical and be very honest about how you really plan to utilize a new vehicle. Armed with the right information, you can’t go wrong.
Of course, you might still have questions…so feel free to contact me. Everyone else does!