Jason Devitt

Last October Michael Arrington wrote about his experience buying a car with minimal exposure to car dealers. I learned a lot from that - not from the post itself, but from the comments, where many people pointed out that he could have done much better. Having just bought a car myself for the first time in my life, I humbly present my five-step process for painless auto purchase.

1. Decide exactly what you want.

All of the information you need is online. Find friends or colleagues who have bought the models that you are interested in, ask them whether they are satisfied, and see if they will let you test drive their car. (Thanks Ted and Rhiana!) Consider renting the models you like for a day or two. As a last resort, go to a dealer for a test drive. Do include the dealer when you are ready to price your car, but this is the extent of your moral obligation. Decide make, model, colors, and options, but do not get fixated on one particular combination. If there’s only one car in the world that you want, you can’t bargain for it.

2. Pay $15 for a new car buying kit from Consumer Reports.

You could spend a few weeks researching dealer incentives, holdbacks, and invoice prices for the models that you care about. Or you can trust Consumer Reports to figure it all out.

3. Wait until the last day of the month.

Seriously. Dealers have quotas to meet. Selling one more car to you - even for zero profit - may trigger bonuses for everyone on the lot. If you’re fixated on one combination of model, package, and color, they may not have it that day. But you are not.

4. Call four dealers and get the best price.

Bid the first dealer the Consumer Reports ‘bottom line price’ plus 2%. Take his best offer to the second dealer. Repeat.

In my case, the first dealer accepted my bid. The second beat it by $100. The third sounded genuinely surprised, and said he could not come close. The fourth matched the second and was nearer to our home, so we bought from him. I asked him to calculate the price including tax and registration over the phone so that there could be no ambiguity.

5. Buy the car.

Sign papers, listen patiently while they explain all optional extras, decline all optional extras, drive car off lot.

I can’t advise you on how to negotiate a lease, because we were fortunate enough to be able to pay cash. But the same principle applies: get at least two quotes. Ask your bank or credit union to pre-approve a loan for the amount that you expect the car to cost. If the dealer can offer better terms, fine.

What has this to do with starting a company?

The same basic rules apply to all negotiations, with new employees, investors, vendors, partners, and customers. Know exactly what you want and what you are prepared to compromise on. Always have an alternative and know what the terms are. Try to do deals when the other party is under pressure to close and not when you are. Never agree to anything that pops up at signing. And if there is no ongoing personal relationship, do not let a salesperson trick you into feeling obliged to do business with him or her.

This entry was posted on Thursday, May 10th, 2007 at 10:16 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.