STICKY: Car Buying - Tips and Tricks
Target Audience: The information listed below is for those who want to learn how the car buying process works, and want to take the time to work on getting the best deal that they can on a new vehicle and best trade in value. If you are the type of person who just wants a contact for the lowest price, or go via unhaggle and pay more for the convenience of not having to deal with salespeople, this post is not for you. You will have to work to get a deal as there is no such thing as a free lunch.
Step 0 - Decide what vehicle to get
Before you decide what vehicle you should look at, take the time to consider the following factors in your vehicle purchase. Be sure you are looking at the timeline based on how long you plan on keeping the vehicle for (i.e. 3 years, 4 years, 10 years, etc.)
Fuel Costs – Does your vehicle require or recommend premium? If so, note that premium fuel costs about 25% more than regular unleaded gas. Some vehicles may run fine with regular fuel in the short term or if your driving style is easy. On other vehicles, running regular unleaded will damage the vehicle over time.
Insurance Costs – It is a good idea to get some quotes from your insurance company to see how much the list of vehicles that you are considering will cost to insure. The Insurance Bureau of Canada tracks this cost over a number of factors (i.e. Theft, personal injury, collision.). A detailed list of the factors as well as how vehicles are ranked can be found here: http://www.ibc.ca/on/auto/buying-auto-i ... measure-up
Maintenance Costs: When comparing the cost of maintenance between your vehicle choices, I suggest that you go to the manufacture website and download the vehicle owner's manual. You will find a maintenance section listed in it and I suggest that you contact several dealers to get the cost of service at the various scheduled intervals. You can also take the same schedule and get a quote from a trusted mechanic as well. Be sure to include wear items like batteries, brakes, tires, and other things that need changing. Keep in mind that if you are currently driving a Front Wheel Drive vehicle, moving to a 4WD type vehicle will mean additional costs (i.e. changing the differential fluid, faster brake pad replacement due to the additional weight/physics, etc.) Note that for Subaru vehicles with full-time AWD, if you need to replace the tires on the vehicle as a result of wear or road hazard, the manufacture recommends that you replace all 4 tires at the same time. This is to ensure that there is no damage to the AWD system. Tires with different tread depths will result in rotation variances which may damage the differential.
Depreciation: This seems the most overlooked cost that people never seem to consider. When considering a few vehicles, have a look at the buyback amounts after year 3 and year 4. You will find that vehicles that are similarly priced when new might have buyback differences of over $10K.
Step 1: Narrow down what vehicle and options/accessories you are looking for
Make a list of the items you want to add (dealer-installed accessories, warranties, etc.) BEFORE GOING TO THE DEALERSHIP as EVERYTHING IS NEGOTIABLE (except for taxes and government fees) by at least 20% if not more. Keep this in mind in the Finance Office where they will push just about every item to pad the deal.
Step 2: Timing - When to purchase vehicles:
Realistically, the best time to purchase a vehicle is when you really need it. If you can plan for this in advance, it is a good idea to always purchase vehicles close to the end of the month to take advantage of their monthly sales quotas. You would have a better chance of getting a deal this way. The same goes for Quarter End and Year-End.
Step 3: Obtain the Invoice Cost of the Vehicle:
You can obtain the vehicle Invoice cost information for a nominal fee from the likes of Car Cost Canada, APA, or Unhaggle.com. This will give you a general idea of the amount of profit that dealers claim to be made on a car. Keep in mind that this does not show Dealer Holdbacks. This is a portion of the factory invoice collected by some carmakers, which is refunded periodically to dealers as a sales incentive. How often the holdback comes into play varies from manufacturer to manufacturer and region to region. Don't expect dealers or carmakers to share this information. That being said, don't think that car sellers regularly have thousands in their back pockets to sweeten every deal. The dealer margin on a sale generally runs to 4 to 7 percent of the MSRP. On premium vehicles, the margin can be higher, but it can also be minuscule on an entry-level ride. Dealers need to cover sales commissions and their fixed overhead costs with that margin, then perhaps turn a final net profit on the sale.
Step 4: Get a written quote for your vehicle
I have bought a number of new vehicles by using the bidding approach. By this, I mean I email a bunch of dealers for the price of a car out the door (taxes, license, etc.). The information can be found on their website. Start with dealers that are the furthest that you are willing to travel to for a deal and then work to the one that is closest to you. This way if you get a quote from Dealer A that is 80 KM away which is much cheaper than Dealer B that was 5 Km away, you can message them to see what they can do with that price. At a minimum, dealers in your area should be able to match/beat their price (especially when you tell them that you will be bringing your vehicle for service and it would make sense that they try to sell you the car as well).
DO NOT INCLUDE your phone number or else these guys will start calling you and telling you "come in and we can work something out".
When emailing people, please use an email that is not a temporary one. Having a Hotmail, Gmail, or Outlook is fine but junk email addresses may not make you look serious and can get flagged as junk. If you don't hear back from them, send another email again but this time to a higher person like a Dealer Principal (aka owner).
Make sure to email each dealership separately with the person's email. This will increase your chances of a reply.
Who to deal with:
Always deal with the New Car Manager or Fleet Manager. They get paid for the number of vehicles sold per month.
============================= SAMPLE EMAIL WRITE UP ============================
Hi <Insert name of person here>,
I’m shopping around for the best price on a <INSERT THE VEHICLE YOU ARE INTERESTED IN> in <INSERT YOUR COLOUR CHOICE HERE>. I’m interested in purchasing a new car by the end of the month.
I have obtained the Invoice Cost from <INSERT NAME OF THE SITE THAT YOU GOT THE INFO FROM> and it shows the following information.
<INSERT INVOICE COST HERE>
I would appreciate it if you could please provide me the out-the-door price (i.e. what I would be writing the cheque for) that is DETAILED with a breakdown of all fees. I also would like to be informed of any rebates or incentives that are available. Please note that the vehicle I mentioned with the options that it comes with are the only things that I am looking for. I would not be interested in paying for any additional dealer installed accessories.
I have not decided if I want to purchase the vehicle outright or finance it for <INSERT NUMBER OF MONTHS HERE> so please quote me the price for both.
Kindly let me know if you have the vehicle at your dealership now or if you will be doing a dealer swap as I want to keep the KM as low as possible (under 10 KM).
Thank you for your time and look forward to receiving your quote.
<INSERT EMAIL ADDRESS>
Step 5: Reviewing the quotes
Hopefully, you will receive a detailed quote with a number of fees that you may or may not recognize. Let's try to break these down.
MSRP (or Manufacturer’s Suggested Retail Price): The retail price of a car, as suggested by its manufacturer. Dealers can alter this amount at their discretion, which means that shoppers can always negotiate the amount. Keep in mind that the MSRP does not include the sales tax or any additional fees.
Incentive: A manufacturer-to-consumer discount that may or may not be listed (it will be if it is offered). Incentives tend to vary by brand, but stay the same among the dealers within each brand. They also vary from one payment option to another. The discounted amount changes each month and can be deducted before or after-tax, depending on the offer. Some incentives also exist as rebates, meaning that the buyer has to cover the deduction before receiving their money back. Keep in mind that some dealer quotes may not use the word “incentive” to describe this deduction, opting for words like “discount” or “rebate.”
Pre-tax total: The total price of a vehicle before the sales tax. It incorporates MSRP, pre-tax incentives, and additional fees.
Sales tax: A percentage of the total price that varies among the provinces and territories. It ranges from five to 15 percent.
After-tax total: The total price of a vehicle after the sales tax. It incorporates the MSRP, pre-tax/after-tax incentives, additional fees, and sales tax.
Mandatory Additional Fees
Freight: The price of shipping a vehicle from the location of production to its respective retail space. To determine this fee, manufacturers calculate the average cost of transporting a vehicle to a dealership in a specific country and then apply the amount to all of them, regardless of the vehicle model or dealership’s location in the country. This allows freight fees to be the same nationwide. Freight is often listed in combination with the PDIcharge as “Freight and PDI.”
PDI (or Pre-Delivery Inspection): The price of performing a maintenance check of a vehicle when it first arrives at a dealership. These checks are obligatory– to make sure each vehicle is road-ready. Unlike the freight fee, the amount is determined by the dealer. It is often listed in combination with the freight charge as “Freight and PDI.”
Air tax (or Federal Air Conditioner Excise Tax): A $100 fee that the government of Canada applies to all vehicles with air conditioning.
Tire tax: A provincial fee applied to any vehicle purchased at a dealership to fund the nationwide tire recycling program. The charge ranges from $20 to $30, depending on the province.
Regulatory charges: Government-imposed fees administered by OMIVC (Ontario Motor Vehicle Industry Council) or AMVIC (Alberta Motor Vehicle Industry Council) in their respective provinces. The OMVIC charge is $10, while the AMVIC fee is $6.25.
Non-Mandatory Additional Fees
The following are fees dealers add to the quote to pad the deal.
Admin fee: The amount dealers charge to cover expenses such as licensing, arranging insurance documentation, processing a loan or lease with a financial institution as well as activation of satellite radio, Bluetooth, and other in-car services. This fee applies to luxury vehicles only (and sometimes non-luxury vehicles at luxury dealerships), but it is optional in every other instance. Try to keep this fee as low as possible.
Extended warranty: An extension to the standard warranty that dealers sometimes offer before a vehicle is purchased. It is possible to buy an extended warranty at any time, which means that car buyers are not obligated to do so right away. If you want to get the warranty, start with a MINIMUM of 40% discount on the warranty and work your way down. This is a big moneymaker for the dealership Finance Department.
Block heater installation: A fee for installing a block heater, the purpose of which is to keep a car’s engine warm in cold climates to make sure it starts. Installing block heaters is a requirement in areas where temperatures are continuously below 0°C. Try to get this waived if possible.
Rust protection: A fee for applying some form of rustproofing. While this service can be beneficial, it is NOT required. Most vehicles have factory rustproofing warranties that come with the car. If you keep your car clean and get an underbody car wash in the winter, you should not see rust forming on the vehicle for several years. Note that Rust protection rarely covers stone chip or other damage so read the limitations of the coverage fully.
Nitrogen-filled tires: The cost of adding nitrogen to a vehicle’s tires. This service is required only if you are purchasing a sports car because nitrogen improves drivability, safety, and fuel efficiency when driving at high speeds. Personally, I believe this is a cash grab. Invest in a good tire gauge and check your tire air pressure monthly. According to Consumer Reports who did a test on this, it is just not worth it: https://www.consumerreports.org/tire-bu ... car-tires/
Wheel Locks - Some cars come with this as it is factory installed. To verify, you can go to the manufacture site and build your vehicle. If wheel locks are not listed on the site or in the detailed car info, it is a dealer add-on. I try to get rid of this as I find it more of a nuisance than a benefit. Over time, you will have the wheel lock get rusted, the key can be lost or damaged and it is a pain to remove. On my cars, I got rid of the locks and opted for a basic bolt which makes changing a flat easier. Unless it comes with the car, or you have a high end rim that you need to protect, I would pass on this option. The dealership will say it is for your safety, but it obviously did not prevent these guys to steal all the tires/rim off the new cars recently at Brampton Honda: https://torontosun.com/news/crime/bramp ... g-covid-19
VIN etching: The cost of imprinting a vehicle’s VIN onto its windows, the purpose of which is to reduce the vehicle’s value to potential thieves. It is an anti-theft measure that no one is obligated to purchase unless they really need it. This is a HUGE scam fee in my opinion. CBC Marketplace did an article about this several years ago and it is worth reading: https://www.cbc.ca/news/canada/car-thef ... -1.1317649
There may be several other fees that you might come across as dealers love to make stuff up to pad the deal. If you don't recognize the fee, ask about it, and research it before discussing it further. chances are it is just a cash grab and only benefiting the dealership with added profits and not you.
Step 6 - Going to the Dealership
Now that you have received the quotes, you will have to schedule some time to meet with the person to move ahead with the purchase. I would suggest that you bring a friend with you and tell him or her that you are to be the BAD COP. Their job is to support you, help you not feel intimidated, and if the dealership comes back with high fees while you are there, have them say that we should leave. Remember, the dealership WANTS your business and if they don't treat you seriously and with respect, WALK AWAY. Remember that one of the most powerful phrases that the salesperson can hear is " I am sorry, but I don't think this is a fair deal for me. Thank you for your time, but I think I am going to shop around and look for a better deal."
Step 7 Negotiate, Negotiate, Negotiate
This is where "the game" is played and when you need to use all the skills you have to get a decent price. Here are some suggestions on how to avoid the big pitfalls:
NEVER tell the salesperson about a monthly payment amount. This opens the door to having them plug all sorts of charges in it to make it to the number you want. Instead, work on the OUT THE DOOR price of the vehicle as most manufacturers have a calculator on their website where you can enter in values and get monthly payments.
Keep options open for Financing and Cash Deals. Dealerships make more money on Financing so they are likely to give you better deals if you Finance. You can even ask about how do you pay down the vehicle early if there is any penalty. This way, you can get a great deal on the vehicle and next month pay the damn thing off if you choose to.
Bring a calculator with you and DOUBLE CHECK all the numbers on the invoice to see if it adds up. I have seen at a Honda dealership that their quote system has the ability to have the salesperson enter any value they want and the numbers don't add up. When I double-checked the numbers, they were off by $280.
When you are negotiating for the best price and they are adding additional fees, you can tell them "for every additional fee you add, I want an equal discount plus the taxes of the amount of that fee in your service department. This is a win/win for both parties. I get my vehicle serviced at your dealership and you can build a long-term relationship with me which means additional revenue for you for the foreseeable future". Keep in mind that the Sales Department, Finance and Insurance, the Service Department are 3 different profit centres. Sales only make about 20% of the revenue for the dealership, whereas F&I and Service are where they REALLY make the $$. Full disclosure: I have not tried this approach (the dealerships I got my cars from were 80 km to 100 km away from me), but I have had 2 friends try this with success (i.e. they added a $395 Admin fee, and issued a $395 + tax credit for the Service Dept).
The Finance Office
This is the office where they will take you once you have agreed to purchase the vehicle. Here, you will be introduced to the Financing person who really is a very skilled salesperson. They will try to sell you just about anything they can think of to pad the profit for the dealer as you just beat them up trying to get a good deal.
Here is just a sample of things that they will try to sell you: https://www.findthebestcarprice.com/car ... ed_Options
My take is to avoid extended warranties, maintenance plans, tire/paint/leather protection, and other BS items. If you are the type that buys a reliable vehicle and follows the maintenance schedule, chances are that you won't need the extended warranty. In most cases, when you read the details, they don't cover common wear items. My approach for these has been to take the $$ that one would spend on these things and open a TFSA low fee trading account and buy some stocks. You would make $$ on the stock and earn dividend income. If you ever need the $$, you can always withdraw it TAX-FREE.
Sometimes dealers may not have the vehicle you want and can do a dealer vehicle swap. If possible, try to find out who has the vehicle in their dealership so that you can work with them for the best price. Generally, when you email enough dealers, some will say that they have the vehicle in stock and can even provide you the VIN number. You can ask to look at the vehicle and see the odometer for the number of KM on it.
Step 8 - Whatever they say, get it in Writing or Record it:
Make sure that you put a recording app on your phone and set your phone on mute while in the office. This way if you need to take any pictures of the invoice or anything, or record the conversation, you won't hear any noises. Salespeople love to promise you the world and if they say anything about what they can do, record it and HAVE THEM PUT IT ON THE SALES INVOICE. This way they can't weasel their way out of things.
Don't believe a word of what sales guy say about contracts, warranties, etc. without reading the fine print. Look at RFD for the number of times someone has posted that "sales guy said warranty is refundable and it is not" or something to that like. They are not your friends even though they want to flirt/suck up/befriend you so that they get their commission. Be smart and don't fall for this tactic. I remember a sales guy at C&C Motors years ago who said that he was laid off by GM, wore a GM wristwatch with logo, and is now selling Subaru's and had pictures of his wife and kids. He painted me a very sad story. I didn't buy the car but helped another friend out at that dealership only to find out that this guy never worked at GM, was never married, and the pictures of the kids came with the photo album!
Step 9 - Existing Vehicle Trade In
In many situations, you will be considering to trade your own vehicle in and take advantage of the tax break. This is helpful as you will pay tax on the difference between the new vehicle price and the trade-in value. I would STRONGLY RECOMMEND that you keep the new car and the trade-in amounts separate to get the most value.
The way I do this is to get quotes from other companies like Auto Showplace car trade-in feature or the Autotrader trade-in service as they will give you an online quote for your vehicle. You can then schedule a visit for these places to have them do a proper appraisal and give you a quote.
I would take these quotes with you and then once you have agreed to the price of the car, you can tell the salesperson that you would like them to make you an offer for your existing vehicle. If they come back upset asking why you didn't mention this ahead of time, you can tell them that you have already had offers for it so you didn't think it really mattered. That being said, if you can offer me a good price on my car, I would consider selling it to you.
Disclosing Accidents on a Trade-In Vehicle
During the trade in process, they will ask you to sign a document that states that the vehicle has not been in an accident. Please note that you are responsible to disclose if the vehicle was in an accident. If you hide this info and detailed inspection is done after the fact, you could be sued for fraud by the dealership and taken to court. If you disclose that the vehicle was in an accident, make sure that this info is documented somewhere and if any paperwork was signed, make sure you get a photocopy of it, or take a picture of the paper (both front and back) before signing anything.
Do these strategies work for all vehicles?
The suggestions listed above work for vehicles that are not collector cars. If they are limited production vehicles, you would be hard-pressed to get much of a discount if any and might even have to pay above MSRP.
Another thing that dictates how much wiggle room you have at price, is the popularity of a vehicle. Most car dealers refer to this as Days On The Lot. If a vehicle is sold very quickly, chances are that the dealers won't give you much of a break as the car will be sold in a short period of time. If you are looking at a vehicle that is not sold as often and sits on the lot for 30 days, 60 days, 90 days, or greater, you should be able to get a good deal on it. Most car dealers purchase new vehicle inventory and they don't have to pay the bank carrying charges to the bank until the past 30 days. After that, they are paying money to the bank and the longer it sits, the more it costs them.
To get an idea of what vehicles are most popular in Canada, you can check out https://www.goodcarbadcar.net/2020-cana ... -by-model/. To find out the days on the lot, you would have to subscribe to car dealer sales information which can be costly and not easily accessible.
Volume Dealerships - The Key to getting a good price
As you will find in your research, there would be a number of dealerships in your area for a specific brand (i.e. Toyota, Honda, Kia, etc.). I have found that you could get some great deals on cars from the dealerships that are known as being the volume dealer in the province. Many manufacturers offer dealers a rebate paid to them for every car sold per month. This is commonly known in the industry as a stair-step or tiered approach. For example, if you sold 100 vehicles in a month, you could get $500 back on every car of that type sold per month (i.e. Nissan Rogue). If they sold 110 cars, they would get $700 back per month. While we may never find what incentives Manufacturers give to their Dealerships, finding a dealer that sells the most cars may net you some additional discounts that the other smaller dealerships may not be able to match.
One thing I would like to point out is that although you are getting a good deal on a specific model of vehicle, this can in the long term cause a drop in resale value which is based on MSRP. For example, if a vehicle is sold with an MSRP of $35000, and there is a factory to dealer incentive of $5000, the real MSRP is $30000 on which you could still get additional discounts based on invoice costs. Chrysler is famous for having its Dodge Minivans with big incentives and an artificially inflated MSRP. When you go to sell your vehicle several years from now, the resale value compared to the MSRP will be awful.
Another issue with the factory to dealer incentives is that cheapens the brand. If an Audi with all the discounts for a specific brand is within a few $1000 of a Toyota, the panache of owning a luxury brand won't be there when everyone can get it for a cheap price. Brand Quality and price is a very important thing in cars and other high-end items. For example, you may get 20% or 30% off an Omega watch, but you will be hard-pressed to get 5% off of a Rolex.
Remember that Canada's Unemployment rate is the highest it has been in over a decade. People are not rushing out to make big-ticket purchases when they are unsure about their own job security. To those who have the means for a new or used vehicle, it means that you have more say into purchases than you may have had in the past and you hold the cards. Car dealerships (i.e. those who have adjusted their thinking to the current reality) realize this and are more likely to work out a deal and sell products on their lot vs. having to pay carrying charges to the banks for unsold inventory. Be polite, realistic but firm in your demands and don't sway from them.
Keep in mind that this is a fairly aggressive approach and that you need to be prepared for the Finance backend office to be very aggressive in trying to get you to add other items. Just stick to your guns and don't purchase anything you don't need to.
Videos and Articles for Reference:
The following are links from Sales Guys who want to share some tips/tricks on how to shop for vehicles:
Link #1 is from a Sales guy with 40 years in the business: https://www.youtube.com/channel/UCzGxSa ... e4RgJ99sfA
Link #2 is another sales guy with some very interesting information: https://www.youtube.com/channel/UCL_v4t ... ytV1_eEVSg
Here is a recent article for reference: https://www.autotrader.ca/newsfeatures/ ... -beat-them
Unhaggle which is a car buying service has some great suggestions and step by step approach that is a good read: https://unhaggle.com/the-complete-guide ... -buyers/s/
Please add any suggestions to this thread so that we can help the RFD community with their vehicle purchases.
Car Buying Tips & Tricks
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