How to Buy a New Car

I recently purchased a new car and want to share the process that I used to get a great price without haggling or stress at the dealership. The first step, of course, is to pick the model of car that you want. I will leave that up to you. After that, a common way to buy a new car is to go to a local dealership and negotiate back and forth with the sales staff, debating things like sticker price vs. invoice price vs. the dealer’s true cost. None of this is important, however. The only thing that matters is your alternative course of action if you do not get the deal that you want at the dealership. Usually, that alternative is to go to another dealership. You could spend your time going from dealer to dealer and seeing what prices you can negotiate, but there is a better way. Here is the process that I used:

  1. Choose the specific model of car that you want, including the colors and options. For this example, let’s say that you are interested in a 2012 Toyota Camry SE V6 with the Convenience Package in Super White.
  2. If you are a member of Costco, obtain a quote from the local Toyota dealer that participates in the Costco Auto Program.
  3. Make a list of all the Toyota dealers (other than the Costco dealer) within a 60 – 70 mile radius. This can be done easily on the Toyota website.
  4. Call each dealer and ask for the name and fax number of the fleet sales manager or internet sales manager. Most dealers have one these days. If not, ask for the name and fax number of the general sales manager.
  5. Create a one-page form letter that reads some like this. “I am in the market to purchase a new Toyota Camry. I am writing to Toyota dealers in the area to request sales offers on a new 2012 Toyota Camry SE V6 with the Convenience Package in Super White. If you have one or more Camrys in stock that fit these specifications, please fax your best offer to [fax number] by [3 days]. In your offer, please include the last four digits of the VIN, your offer price before taxes and fees, and your offer price after all taxes and fees. If you choose to fax me an offer, I will contact you to let you know whether or not I want to proceed with your offer. I reserve the right to decline your offer for any reason. Thank you.”
  6. Fax the one-page letter to all dealers on your list. Address each letter to the fleet/internet sales manager. I suggest using the mail merge function in your word processing program to create the letters and using an online fax provider to send the faxes and receive the offers. Some online fax providers offer a free trial.
  7. Once you receive the offers, arrange them by offer price from low to high, including the quote from the Costco dealer. Ask yourself whether you would be willing to purchase the car at the best offer price that you received. If so, proceed to the next step. If not, assess whether you should consider shopping for a less expensive model.
  8. Call the dealer offering the second lowest price and offer to purchase the car for some amount, say $200 – $300, lower than your best offer. If they accept, proceed with the deal. If they say “no” or try to negotiate with you, politely decline. Then, call the dealer offering the third lowest price and make the same offer. If they accept, proceed with the deal. If they say “no” or try to negotiate with you, politely decline. Then, contact the dealer offering the lowest price and proceed with the deal.
  9. After you purchase your new car, contact all the other dealers that sent you an offer to thank them for their offer and to let them know that you have purchased the car elsewhere.

So, how did this process work for me? I obtained a quote from the Costco dealer. Then, I faxed 28 other dealers requesting offers. I received faxed offers from eight dealers. Three of these offers were better than the Costco price. I made counteroffers to the second and third lowest price dealers but they both declined. Then, I went to the dealer that offered the lowest price and purchased the car at that offer price, which was about $1,400 below the invoice price.

I think this process works well because it allows you to obtain multiple offers without haggling at multiple dealerships. There are various car buying websites that will contact local dealers on your behalf and request quotes, but I believe that directly contacting dealers by fax works better. I think that sales managers take faxed letters more seriously than impersonal internet leads. Also, car dealers must compensate car buying websites, say around $300 per transaction, if they sell a car with the help of a third-party website. So, a dealer is more likely to offer you a better price if you help them avoid this additional cost by contacting them directly.