Buying a New Car Using the Internet, a Telephone and a Fax Machine

Buying a new car is, for many of us, a dreaded experience, ranking a little lower than getting a root canal. When you pull into the dealers lot, the salesmen are all standing at the driveway like vultures waiting for something to die. They follow you around as you walk the lot looking at the vehicles. You can hardly think. “I can get you in this car for only $235 a month.” Yeah, for how many years. Then they want to talk about lease options and you are not yet even sure exactly what you want. There is a feeling of tension and pressure through the whole process. There’s got to be a better way. Well there is, but it took me a long time to figure it out. There are two keys: preparation using the web and negotiating over the telephone.

Shopping for automobiles on the web is nothing new. There are any number of sites with lots of information. I’d like to talk about how to use the information. I break the process into steps:

1. Determining Your Needs And Wants.
2. Researching The Market.
3. Narrowing The List.
4. Test Driving.
5. Determining The Price.
6. Finding The Financing.
7. Finding The Vehicle.
8. Finalizing The Deal.

1. Determining Your Needs And Wants
A car is primarily transportation. I know that for many people, the looks and style of the car determine how much fun it is to drive. For folks who feel that is important, by all means take that into consideration. On the other hand, you will be driving the car for several years. The longer you drive the same car, the more economical it is. I tend to drive a car as long as it stays reliable. So for me reliability is very important. You may have other priorities. Ask yourself: How many people do you plan to have riding with you? How about safety and gas mileage? Make a list of your needs.

2. Research The Market
There are many auto shopping services information websites. For this phase of your research I recommend using the “browse by body style” feature on or the “browse by category” feature at Most other auto research sites require you to screen by manufacturer right away. On the other hand these sites allow you to look at “five passenger sedans” made by several manufacturers at the same time. Unless you have very strong manufacturer loyalty, you want to look at the same type of car from many different manufacturers at the same time.

3. Narrow Your List
The great thing about the car market at the beginning of this century, is also the worst. You have so many (too many) choices. You can’t find out everything about all the vehicles available. After you have done a little research, start making a list of the cars you find most interesting. Price range is important but don’t sweat the pricing details yet. When you have a pretty good list, start weeding them out. Get your list down to around 3 to 5 cars. Do more intensive research until you have a list of no more than 3 cars.

4. Test Drive Your Short List
Go to your local dealers and test drive each of the cars. Are you comfortable in the seat? Does it handle well? Does it “suit” you? This is very subjective. Does it “feel” right? Remember, you will be driving your new car for a long time. If something annoys you, it will bother you for as long as you have the car.

This is the time to look at the styling. All the “net” research was just pictures. How does the real thing look? If at least one of the vehicles suits you, go to the next step. If not you may need to go back and do more research. While you are test driving, notice if the salesperson makes you comfortable. Listen but don’t talk much. Thank the salesperson after the test drive and say goodbye.

5. Determine the Price
When you made your short list, you included only vehicles in the right price range. Go online again and find the invoice price of your chosen vehicle. This is not the MSRP, this is invoice. Add in the price of the options that you want. Most options are in “packages”. The manufacturers bundle the most popular options into “packages”. Unless you are careful, this can cost you money. For instance, when I bought my truck I did not want power windows. Why? Because I’m too cheap to pay several hundred dollars when I can crank the windows up and down by myself for free. Also, they tend to wear out and fail in the down position at the most inopportune times, like 1500 miles away from home during a rain storm on vacation at Niagara Falls. (Yes folks, I’ve been there and done that.) I did, however, want anti-lock brakes. They were both in the same package. I can accept the fact that I need to pay for what I want, but it gripes my case that they try to get me to pay for what I don’t want.
Use the internet to price the options you want and no more. Look at incentives and rebates. There are several different types. Some rebates are advertised, often offering a choice of either cash back or a low interest rate. There are other “stealth” incentives that the dealers don’t want you to know about. has a good explanation. Essentially, the manufacturer offers a cash incentive to the dealers to sell certain cars. These are not advertised and give the dealer additional profits for the sale.

For right now, ignore the interest rate incentives. Add up the total vehicle price with options and subtract the rebates and cash back incentives for your 2 or 3 preferred cars. Now add $300 to give the dealer some profit. That is your target price. I consider this to be a fair price for the car. Now pick the car you want to buy.

Base Invoice Price $22,000
Invoice Price Option A + 497
Invoice Price Option B + 650
Invoice Price Option C + 1000
Subtotal $ 24,147
Un-advertised Dealer
Incentive – 1,500
Advertised “Cash Back”
Incentive – 1,000 (rather than the Lower Interest Rate)
Subtotal $ 21,647
Profit for Dealer + 300
Target Price $22,947

6. Find Your Financing
The best option is to pay cash. Most people are not able to do that. Check with your bank and/or credit union. See what terms you can get there. Using the target price you calculated in the last step (cash back incentives and rebates included) determine your monthly payments. Subtract your down payment. Calculate the monthly payments on the balance. (There are calculators on the web to help figure this) Multiply your monthly payments by the number of months you will pay. Write down that number. I call it the “real dollar cost”. Do this for all the banks and credit unions that you have access to. (Again, too many choices may require you to weed out the list of loan sources.)

You will now need to calculate the “real dollar cost” using the dealer’s incentive interest rates. Go back to the target price you calculated in step 5. Revise the target price by adding the cash back incentives back into the price. Subract your down payment to find the amount being financed. Now determine the monthly payments using the dealer’s incentive interest rates. Multiply the monthly payments by the number of months you will make payments. Add to this number the amount of the down payment. This is the real dollar cost.

Find the financing option with the lowest real dollar cost. This is your target real dollar cost. If the best option is the bank or credit union, call them and arrange the financing.

Bank Credit Union Dealer
Target Price $22,947 $22,947 $22,947
Down Payment – 2,000 – 2,000 – 2,000
Subtotal $20,947 $20,947 $20,947
Add cost of
Interest Rate
Incentive 0 0 + 1,000
Balance $20,947 $20,947 $21,947
Interest Rate 6.9% 6.2% 4.9%
Months 30 36 60
Payment $762.18 $639.14 $413.16
Loan Cost $22,865 $23,009 $24,789
Down Payment + 2,000 + 2,000 + 2,000
Real Dollar
Cost $24,865 $25,865 $26,789

Figure Offer Price
If you opt to use bank or credit union financing or strictly cash the Target Price = the Offer Price
If you decide to use the dealers incentive low interest loan, add the cost of the interest rate incentive to the Target Price to get the Offer Price. $22,947 + $1,000 = $23.947.

7. Find Your Car
You have decided which car you want, which options you want, your price and financing. Now you need to find that car. Not a car like it, but that car. Call all the dealers within driving distance and ask if they have that exact car. They probably don’t. If not, what you want to do is order your car. You have now talked to a number of dealers. Pick the salesman that you felt most comfortable talking with. Call him/her and tell them you want to order a car. Some sales people will tell you that they can’t get delivery on an ordered car for several months. Politely tell them thank you and hang up. Keep calling until you find a salesman/dealer that can get you delivery within about 6 weeks. Describe your exact car. You may want to fax him/her the model, options, color etc. to make sure there are no misunderstandings.

8. Finalizing the Deal
If you want to use the dealer to provide the loan, tell him/her how many months you want to pay and the amount of your downpayment. If you want to use your bank, credit union or cash; tell them you are paying cash. Either way, don’t discuss the financing right now except for the number of months and downpayment.. It will get too confusing. At this point they may mention a price. If not, ask for one. Get them to fax you the quote and exact description of the car and terms of the loan if applicable. Now politely end the call. Make sure you have the salesperson’s name and extension number.
Look at the Fax. If the quote is no more than about 2% above your offer price, call the salesman back, accept the offer and tell them to order the car.

Call the salesperson and tell them you are making an offer. Tell him/her you will fax it to them. If they want to know what the offer is you can tell them, but don’t haggle. They make their living confusing people during the haggling process. Fax them the offer. Now wait a while. If you don’t hear back pretty soon, call to confirm that they received the fax.

Continue this process but never offer more than about 2% over your target. If the deal comes together, great. If not, continue until you get tired of dealing with them.

If a deal doesn’t come together, bag it for the day, and start the process with a new dealer tomorrow.

Be aware that ordering a car may not be possible during certain times of the year. This is because the new model year’s cars begin production around April and do not ship until the fall. The best time to order is probably around December or January.
I have not mentioned trade-ins. This of course adds a whole new dimension to the process. Use the Kelley Blue Book or NADA to determine its trade-in value. Be realistic. Subtract the trade-in value from your target price when making your calculations.. The dealer will probably need to see the trade-in vehicle before making or accepting an offer. They may be willing to give you a value over the telephone, sight unseen, but don’t expect it.

If you take the car to the dealer for a trade-in price, let them see it but don’t haggle in person. Tell them you need to think about it and leave. Start the telephone process within the next day or two. Be careful not to let yourself get confused. They will be throwing around a lot of numbers. Make your offers in terms of “My trade-in vehicle plus X dollars.

This is the least stressful way I know to get a fair deal on a new car. There may be other ways to get a better deal. If the other methods don’t drive you to distraction, go for it. If you do things this way, you can be fairly sure you didn’t get “taken”. You my be able to get a better price by starting your offers at $300 less than your target price, but it will probably take longer to come to an agreement. Doing all your negotiating on the telephone takes away a lot of stress. You can always just hang up and start again with a different dealer tomorrow.

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