Suppose I'm able and willing to buy the car outright in cash. Would that give me any advantage or disadvantage? If I'm willing to order my specific build and wait, would that give me any advantage or disadvantage?

It would be nice to confidently walk into the dealership and say, "I'll give you <insert lowest possible price>, paid in full right now," and leave with the car (or the order), no BSing around. Your thoughts?

 

First off, to the dealer "cash" is not a big deal because they will get the cash from you or from the loan(bank) so it doesn't do a lot for them. Now, when you are dealing in more expensive cars and you say you have cash, it does give them incentive to get the sale done and to work with you more on the price. The problem with these Honda Fits is that there is NO room to work on the price, oh maybe $100 here or there, but that is it. SO, in answer to your question, NO saying you can pay in cash is not going to do much of anything for you. Your next question, is ordering your car going to help you, NO it's not, there are only a couple trim levels and NO option packages. So, in what way would ordering a Fit help you, it wouldn't. Just find a dealer with the model and color and that's it. This car is pretty simple, there are like 3 trim levels and super low dealer mark up on the car. There just isn't a whole lot to haggle about, pick model and color, pay pretty much m.s.r.p. and deal is done. Now, if you were buying a $70,000 BMW with a million different options and packages, different color leathers and stiching, ect.. then I could see maybe ordering your "perfect" car, but it doesn't work that way with the fit.

 

Thanks for the response.

What about financing? If I can afford to buy the car but instead choose to let the dealership finance some of it (because they love to finance), is there any advantage there? Is there some magical scenario where we both win, where I get the car for close to—or below—invoice, and the dealer still profits sufficiently? How does ordering VS buying off the lot factor in?

Note: I'll be getting the 2016 model sometime next year.

 

IMO- you don't win by paying in cash. My 401k is auto invested in a crappy fund and that is earning over 7% right now. With car interest rates being fixed at 4% or more likely less if you have good credit, you are more than likely much better off keeping that cash and throwing it in a good mutual fund, etf, or investing with your financial advisor.

Of course no one can know your personal situation other than yourself.

 

My dad always buys with cash, and CASH makes the dealers go crazy.

 

I guess I'd already be doing that except I have terrible credit plus I'm not interested in making my taxes any more complicated.

But what do you mean by car interest rates being fixed at 4%? A google search doesn't bring up anything about that.

Care to explain why?

My intuition is telling me that it's not as cut and dry as fitnew says—obviously I'm not saying I'm right, but that's my intuition. Dealerships are like little investment houses, right? Like, they handle money in a million different forms, coming and going in a million different ways, complicated by their complex offers and government incentives and taxes and regulations. Maybe to them cash is different than a loan check. Maybe they have to pay less taxes on it or some bullshit. Maybe the individual salesman gets a better profit from straight cash than a loan check. I don't know... that's why I'm here asking lol.

People have always told me, "the more money you put down, the better." I've always just assumed they perceived cash differently than a loan check. Maybe I was wrong...

 

I just have to chime in JUST ALITTLE here. =) First off I sell cars. I've sold Nissans, Infiniti and Hyundais. I'm not super high up, but I know my fair share. First off it seems that you have ZERO trust in dealerships. FITNEW is spitting major truth here.

The reality is if you are responsible enough to pay monthly payments on time, you have a fair interest rate, you are better off putting as little down as possible.

 

If you have the money in cash but terrible credit, open a second account just for your car payment use the payments to (re)build your credit.

 

No not at all. I'm just doing my homework. That's why I said I want a win-win, I just want the best deal possible.

Anyway my credit is pretty abysmal at the moment which is why I'm saving cash for the 2016 model. I was really curious about what Amy was talking about "with car interest rates being fixed at 4%" because I'd happily take a loan for 4% right now just to, like 2poler said, build my credit -- since I'm saving the money anyway, might as well kill 2 birds with one stone. I'll probably kill 3 birds by waiting for the 2016 model which may have some kinks worked out (maybe even have Android Auto!!).

 

My experience shows there is a bit of room for negotiating. I had no trouble getting a deal on an EX for $18,591 (MSRP $19,025). I had another offer for $18,350 if I bought one they had in stock.

I did a fair amount of research to prepare to buy a car. I find 2 websites helpful:
Car Buying Guide for New and Used Vehicles | CarBuyingTips.com Negotiating to Buy a New Car; Tips and Strategies

I sold my old car (2003 Civic EX) to CarMax -- fair price, no haggling.
I arranged financing through Capital One - 2.14%

I picked the car I wanted (2015 Fit EX) - test drove it locally - and then used the internet/email to deal. This is what I sent to local dealers:

I'm planning to buy a new car in the next week. I'm looking for a car-buying experience that is quick and direct. My hope is to not waste your time and to not waste my time.

Here's how you can earn my business:

I'd like a price quote on a 2015 Fit EX automatic in Modern Steel Metallic.
I'd like a list of fees that your dealership charges on the purchase of this car.
I'd like a time frame of when you can have this car in stock. (I've been told no one in the area has it)

I'm making this offer to all Honda dealers in the area. Please be detailed, as I will likely not respond to follow-up questions.[/B]

2 dealers responded with direct answers, 5 others gave me the BS that means they didn't read my email/didn't believe I was serious.

I spoke with the dealers with direct answers and they explained that it might be several weeks before they could get the color I wanted. One of the salesmen insisted I needed to put a deposit down before they could begin to search for the car. I told both salesmen to let me know when they had the car in stock, and I'd buy it from them. Next came the daily phone calls, insisting that I'd miss out unless I put a deposit down. In other words, they were trying to sell me a car they didn't have.

Next, I expanded my internet search to further away cities. I found 3 of the cars I was looking for within 4 hours drive, contacted those dealers, and made the same offer to them. One of them agreed, and we had a deal. We agreed on details (specified the VIN, price, fees, taxes) and I drove over and picked up my new Fit later that week - deal done!

I don't know if this will work for everyone, but I wanted to share my experience. I found that if I was willing to think a little outside the box, I could get what I wanted, when I wanted it, at a price that was a win-win for myself and the dealer.

 

Great story! You're essentially screening the dealers this way...stating your terms up front and seeing who plays nicely. Looks like you got a hit!

 

If your credit is bad, you won't get a good rate, you're going to get a very high apr. Dealers make more money off financing than a cash transaction, and will work with you more if you're financing the car.

Some cars have lots of wiggle room and mark up, but Honda Fits are not one of them. The dollar is weak right now and Honda had to hold back on the amount of Fits coming into the US when they were made in Japan. Part of the reason for the Mexico factory is to up their profit on the car and bring more in to the country.

You are incorrect that the dealer will work more for cash. I was researching the same thing because I am going to be paying in cash, and was surprised to find that this was not the case.

Fitnew is absolutely correct.

 

Good to know. Better to bite the bullet and ask a dumb question online than to be unprepared and put myself at a disadvantage in negotiating. Thanks for the input!

 

I applaud you for going this route. Cash is the best way to by a car to avoid risking the greedy banks taking back your car if you default.

Having said that, just be confident and walk in there and say here is what I want, ask for invoice price, leave your contact info and if the say no, easily walk out from where you came in telling them there are other Honda dealers to shop around. You'd be surprised how many of them will accept your offer. If they say no at first, they might just call you to come back in. I bought mine at invoice as well, saving myself lots of money.

 

Good advice!
What you found is typical. Some dealers really are not interested in making deals and will not even respond to someone who is looking for a deal. They are waiting for someone, who is not well educated about the vehicle, prices or financing to walk into the showroom and then they start the, "confuse them until they sign" game. While, some will respond with a reasonable offer when they see that the buyer is educated and knows what they want and they have it on their lot to sell.

I am curious about what dealer fees you might have been quoted and what you paid. I have found dealer tacking on anywhere from $149 to $749 in fees described as Doc fee, processing fee, or delivery fee. So when someone posts that that got $500 off of MSRP, I am always wondering, did they just give that back in an inflated doc fee?

 

I like Freddy Fit's approach. At least it separates the dealers who actually want to deal via the internet from the ones that see the internet as a way to lure bodies into the store so they can manipulate them.

One thing that I won't do is give them a phone number. The last time I went through this yielded salesmen calling me for months! Giving them a phone number gives them an exemption to the "Do Not Call" list and boy do they use it!

One other advantage to paying cash is that it reduces the opportunity for the dealer to play "shell games" in the finance department. The more numbers floating around the more likely it is that they will slip something in on you.

People have walked out thinking that they got a fair deal then later found that the term of the loan was longer than they had been verbally promised! The number was buried in the fine print, but it was the paper they signed and it was binding.

An advantage to paying in full is that you can ask simply "What number will I have to write on the check?" It will obviously be higher than the numbers they are advertising but asking for that final number at least reduces the opportunity to play games and gives you a solid basis for comparison.

 

Sorry, my wording could have been more precise. I mean car loan rates are a fixed rate. The average people are getting is somewhere around 4%, obviously depends on your credit. The interest does not compound on what you owe like revolving credit card debt does.

So that's why I mentioned that my point is *if you have good enough credit to get a decent rate. In other words, if you can earn say 8% market returns by investing in a safe mutual fund, etf, index fund, or whatever and you get approved for a 4% car loan, it is more than likely a better financial decision to take more loan and less money down which you would immediately invest.

Obviously all theoretical but my 401k automatic fund that I don't get to select is earning 7 1/2 % percent return, so if I get approved for a 3 1/2 % loan which I expect to, I will take the loan and not pay a bunch of cash but instead invest it.

 

That makes total sense. Thanks for clarifying.

On the topic of loans, I've watched several videos and tried to read some articles (not really anyone in my life that can explain this stuff to me), but I'm still finding it difficult to wrap my mind around.

Suppose I go to the bank for a car loan, and they approve something simple for the sake of easy math, say $10000 with 10% interest (simple interest, since it's my understanding that's common for car loans). Does that mean that they're lending me 10,000 and expecting 11,000 in return, to be payed over the course of the loan? Or does the 10% do something else, perhaps at some regular intervals? Or am I confused altogether...?

 

It is good you are doing your research in advance. From some finance courses I've taken and experience with loans I will give you my opinion but I'm NOT an expert.

I don't know many loans that use simple interest. It's all APR which means average percentage rate or something like that? Simple interest is a good way to get the idea of how interest is working though. I don't want to get into premium tables and calculating the interest, haha.

The BEST way to tell what you are paying in interest is to look at a payment breakdown or ask the finance guy to show you. Each payment has some principal (car price including taxes and fees) and interest (charge you are paying for borrowing money.) To see a total just multiply all the payments out x number of months in the loan.. Then subtract out the cost of the car and taxes AKA the financed amount. This is the interest you are paying spread out over the time of the loan.

 

My 2009 I financed from my bank, which was a decent rate but a pia to get done. My 2012 I financed with Honda at 1.9 and it was way easier to get done. All in house, no running around. Pay online each month, super easy. My opinion is, don't be cash poor. I'd rather have a 5 year loan and keep the money liquid. If you can afford to buy for cash, you can certainly afford 500 or so in interest over the life of the loan. Sometimes cash makes the most sense, sometimes it doesn't. Think it through.