Save 50% on Buying a Car (Kind Of, But Not Quite)

Here's part six of our coverage of Smart Money's piece on how to save 50% on everything. In this post they give ideas on how to save 50% on buying a car. They start with a piece of interesting "news":

While new-car sales account for 60% of the average dealership's revenue, they contribute only 15% of the profits, down from 26% in 2001. So where do dealers make it up? From selling warranties, parts and repair services to their happy new-car customers.

Wow -- I didn't know it was this bad. I would have said 50% from the sales of cars and 50% from everything else. 15% just seems ridiculously low. My, what things have come to.

I certainly know that they charge a ton more for service than most other garages. If I didn't have a credit card that saves me tons on my service and if the dealership didn't save me a ton of time, I wouldn't use them. And I NEVER buy the extended warranty -- I just buy a highly reliable car in the first place.

They then offer some ideas on how to save when buying a car -- but nothing close to saving 50% -- at least from what I can see. They do detail the method I used to get my past two cars at rock-bottom prices:

Hot cars aside, many dealerships will accept the invoice rate — the upfront price it paid for the car — plus a few hundred bucks. Sometimes you can pay even less. Obviously, that means taking advantage of buyer cash-rebate incentives, but in some cases, the dealer also gets its own kickbacks from the manufacturer. Edmunds.com lists these rebates as "marketing support" on its Current Incentives & Rebates page.

I simply found out what their cost was, what rebates/kick-backs they were getting, and offered them a couple hundred bucks above this "true cost." I also did it at the end of the month when they were desperate to make their sales numbers, so it worked quite well. ;-)

For more thoughts on saving on cars, see Save on Buying a Car: Four Steps to a Bargain on Wheels (tons of links at the end).

Click here to read part 7 of this series.

Click here to read part 1 of this series.

Comments

[annab]

I did the same thing -- offered very near the true price. They accepted it, but then I made a mistake and bought an extended warrantee (headslap!) It was a waste, and added 3 months to the loan time of my car. :(

I would think the best way to save close to 50% would be to only buy cars that about 3 years old ... buying new cars has to be one of worst financial moves anyone can make ... IMHO

[RPT]

After searching FMF, I can't seem to find the best place to post this question, so please forgive if I just overlooked the right post.

I want to sell a car I have and purchase a different one.

The one I have now is worth $20k, I owe $10k on it and can pay it off today if I want.

The car I need to get is for a family need we now have, and I plan to pay cash for it ($17k - it is used).

My question is, how should I unload the car I have? It's worth more than the one I plan to buy, so I don't plan to trade it in. Should I pay it off and then just sell it by owner, or is there a better way financially to do this?

Thanks for any help!