Guide to Buying a New Car

When I was younger, I worked as a new car salesman for about 2 years. I worked at an AutoNation dealership. Currently, AutoNation owns over 350 new car dealerships in 16 states. I’m about to teach you how a new car is sold to you and how to get the best deal possible. This information is not just good for AutoNation dealerships, the car sales process is the same everywhere (no matter how they say it’s different.) Here’s what you will learn in this Insider’s Guide to Buying a New Car:

  1. Exactly what car salesmen do to “get over” on you.
  2. The four parts of a car deal and how to use them to your advantage.
  3. The “right way” to buy a new car.
  4. One simple trick that will make it so you don’t have to pay your last five car payments.

What does this have to do with homesteading? Homesteaders buy cars too! I, personally, only buy cheap used cars, but many homesteaders both want and need a new car or truck to accomplish their lifestyle goals. Homesteading is about being smart, frugal, and independent. What’s more smart, frugal, and independent than getting the best out of your next car deal?

Turning Your Head Into a Glass of Marbles

The first job of any car salesman is to fill your head with marbles. Everyone goes to the car dealership with a head full of ideas and plans. Imagine this as a glass of water. The salesman’s job is to fill the glass with marbles, thereby displacing all the water (your plans) out of your head. How does he do that? It’s called “The Walk-Around.”

Once you show interest in a vehicle, the salesman (if he’s good and property trained) will start talking about all the functions and features of the car. He will start at the driver’s side fender and work his way around the car.

“This car went through a seven-layer electrostatic paint-process to ensure the paint is perfect. The frame is hydraulically-molded laminate steel. The all-wheel 7” disk brakes are vented for heat dissipation and use a special gripping factor on the brake pads. Now let me tell you about the accident-avoidance system.” This goes on and on for about 30 minutes.

By the time you have worked your way around the car back to the driver’s door he has plopped you into the seat, shut the door, and you’re ready for a test drive. The process has one purpose, to fill your head with massive amounts of information that displaces all your ideas and plans. To fill your head with marbles so you forget your own ideas.

Every New Car Is Better Than Your Existing Car

No matter what new car you test drive it will be better than the car you currently own. The tires are new, the engine mounts are fresh, the dog has never thrown up in the back seat, it’s clean and shiny.

I once took my wife’s six-year-old car for the day. When I brought it home she said, “Oh my God, it’s like a brand new car!” What had I done? Detailed it, tuned it up, installed new engine mounts and front tires, put pretty seat covers on it and adjusted the equalizer on the radio. The entire process cost about $400 and took most of a day. It saved her wanting to buy a new car.

The test drive will be nice. They are all nice. Don’t let the fact that THIS new car is better than yours mean you have to buy THIS car. All new cars are nice.

The Salesman’s Job Is To Ignore Everything You Say

“Hey there! Welcome to Happytime Ford, what can I help you folks find today?”

“I’m looking for an affordable car. It can’t be red, I don’t want another red car. I can only afford $350 per month for my car payment… I’m serious, don’t even show me a car over $350 a month.”

“Absolutely! I have exactly what you need right over here.” Two hours later they leave in a red pickup truck and a $525 per month payment. If salespeople listened to car buyers then no one would ever buy a car, because customers don’t know what they are talking about. (At least that’s what salespeople think.)

This happens all the time. Why? Because the guy actually loves red cars. Every car he’s ever owned has been red. He didn’t really want a car. He wanted a truck, but he couldn’t tell his wife that. And “if you just quit smoking, you wanted to quit smoking anyway didn’t you, it’s a horribly unhealthy habit, then you will have an extra $200 a month to put toward the perfect truck you always wanted.”

That’s the salesman’s job. The sales manager’s job is to ignore everything the salesman says. So when you tell the salesman, “You tell your manager… blah blah…” it makes no difference. Managers don’t listen to salespeople. To a sales manager, the salesperson is just a drone.

The Car Deal Is Actually 3 Deals… And That’s How They Get Ya!

Most car purchases are actually THREE separate transactions.

  1. You are buying a car.
  2. You are selling a car (your trade-in).
  3. You are negotiating a loan.

Selling cars is easy. Think of holding a long, thin balloon in your hands. Imagine a balloon that’s about two feet long as you hold it in both hands. If you squeeze one end of the balloon where does the air go? To the other end! If you squeeze both ends where does the air go? To the middle!

No matter how you squeeze the air just moves. That’s how easy it is to sell a car.

If you want a lower price on the new car… “No Problem!” the profit gets shifted to the financing and the trade-in. Want to ensure you get zero percent interest? “Easy as Pie…” the profit shifts to the trade-in and the car price.

Because you are actually performing three different financial transactions, you never know where the money is going. It’s a game of Three Card Monte. It’s how cars are sold. Everyone wants to buy a car “at invoice” get “top dollar” for their trade and pay “zero interest.” Do you think car dealerships would stay in business if they did that?

I will show you how to use the Three Card Monte to your benefit.

How to Flip the Script on the Car Dealership

First, bring a “3rd wheel.” The 3rd wheel is another person who seems uninterested but is actually monitoring what’s going on. Your spouse or a friend. They should act bored and play with their phone the entire time. This will put 100% of the salesperson’s attention on you. The whole time your 3rd wheel is doing analysis on their phone apps. Doing The Math!

The 3rd wheel should not talk about the car deal out loud in the salesperson’s presence. At any point the 3rd wheel can say, “I’m cold” “I’m hot” “I’m hungry” and pull you out of the salesman’s office to talk. Or they can simply text you as you both sit in the salesperson’s office. When your phone goes BEEP, just say, “Kids” or “Work” and you can text your answers back. The 3rd wheel’s job is to look bored but be active.

Don’t tell them your life story. If you have access to outside financing, NEVER say so. Don’t act smart, but be smart. Remember the salesperson is just a conduit of information about you to the sales manager (who is really doing the deal). Don’t tell them what your trade-in is worth, but KNOW what your trade-in is worth. Don’t tell them how much money you can put down, say, “Zero.”

Many buyers come in proclaiming how “in control” they will be, but it’s just information for the dealership to use against you.

You should already know exactly WHAT car you are going to buy, HOW MUCH it costs, WHAT the dealer discounts are, HOW MUCH your trade is worth (Kelly Blue Book trade-in value), and what INTEREST rate you can get before you show up. But you should act dumb or, at least, neutral.

Having Power Means Having Your Own Financing

If you have good credit, then you should have your own financing through your credit union. Join a credit union, they often give better loan rates than banks. If you can get a 3.5% car loan from your credit union, then you might want to take the Manufacturer Discount instead of Zero Interest.

The Zero Interest Rate and the Rebate have the SAME VALUE. So if a car says $3,000 Rebate OR Zero Percent for 60 months, know that the cost for paying the interest is around $3,000. They are equal. You don’t get both. Pick the one with the most value to you. Have your 3rd wheel do the math!

Having Power Means Being Able to Sell Your Car Instead of Trading It In

The used-car manager is the person making a trade-in offer on your car. His job is to buy a used car that’s worth $7,000 for $4,500 and to sell the same car for $9,500. That’s his job. His job is not to help the NEW car manager sell a car. They have nothing to do with each other. Often they HATE each other. They can’t work together. That’s why one is in New Cars and the other is in Used Cars. They can’t even be in the same building.

The used-car manager knows exactly what he can buy your car for at The Auction. Every week, or month, he goes to a big used car auction where thousands of cars are bought and sold by dealerships to each other. So he knows what he can get your car for at the auction and has no interest in overpaying for it. You will be getting the auction price as your trade-in.

He may give himself $500 or $1000 wiggle room by lowballing the first offer, but he will not be overpaying for your trade-in. Anything more than the used-car dealer is willing to offer is coming out of the new car manager’s profit margin.

Most people trade in their car before it is paid off. This is a recipe for disaster. You are trapped. You will not only get lowballed, but the negative equity will go onto your new car loan. So you will be DEEPER underwater on your new car from day one.

Having POWER Means Being Able To Say “No, Thank You” While Staying Patient

Car deals take HOURS. If you show up and say, “I only have forty minutes” the salesperson is going to say “No problem! We have the fastest sales process in town.” Three hours later you will still be there. If you are going to actually buy a car, plan on it taking four hours and use the time to your advantage.

I once negotiated with a guy so long that we had lunch together and would take designated smoke breaks. Being in a hurry will only cost you money. Don’t show up early in the day to buy a car. Show up three hours before the dealership is going to close. Everyone wants to “Go home on time” and the finance department will start pushing the sales manager to make a deal when closing time approaches. Why? Because it will take an hour for the finance guy to do his part of the deal. He wants to be out of there by 10 pm. If you’re still negotiating at 9 pm, he’s going to get antsy.

It’s All About the Payment

Deals are made on a thing called a “Foursquare.” It factors 4 things:

  1. The car price
  2. The trade-in
  3. The down payment
  4. The monthly payment amount and number of months

Buyers concentrate on the monthly payment when they should be concentrating on everything else.

The Car costs what the car costs. Truly, there are not giant margins in new cars. You will get the manufacturer rebates/discounts automatically. That costs the dealership nothing. Getting more than that? Maybe $1,000 off the sticker price unless it’s a very expensive car. If a car dealership offers unrealistic discounts, it is because they either will not have the car they advertised OR they add a bunch of non-negotiable dealer options to the car like Tint, Bed Liner (for trucks), Fabric Treatment, etc. to push the price back up.

Your Trade is going to be lowballed because the used-car manager can buy it at the auction. If you want full price for your trade then sell it yourself. They will pretend it’s dangerous and crazy to try to sell your car yourself, “Do you want anybody just coming over to your house? That’s dangerous!” No, it isn’t. You can arrange to meet a buyer in a public place.

Your Down Payment is where they make their money because they will make you give them as much money as possible, while not changing the monthly payment as much as it should change. If they can get you to pay an extra $20 per month for 72 months then they pocket $1,400 in profit. So if I can get you to give me $1,500 down and make it look like I give you a lower payment by pushing your payments out six months, then I made money (as a car salesman).

This is what that looks like: Your payments for 60 months will be $550, but if you can give me $1,500 down then I can get that down to $495. So you commit to $1,500 down and I (as the salesman) come back with “Congratulations I got your payment where you wanted it… $495 for 66 months… Sign right here and I’ll get you to finance.”

Notice There Is No “Square” For Interest Rate

That’s because dealerships make their money from bumping up interest rates. The sales manager gets a rate of 3.5% from the bank so they calculate your car deal at 5.5% and they WON’T BUDGE. This is one area where the new-car manager will not give an inch. Why? Because it’s pure profit and pure commissions for him to the tune of $1,500 – $2,000. This is where he makes all his money. It’s OK because there’s a trick for that!


Whatever happened, happened… you have signed on the offer… you are sitting in the waiting room ready to go to the finance department. The deal is done! NOT SO FAST!

The deal is not done yet, by a long shot. First, they are going to try to pump you for more money, and second, you have one last shot to save THOUSANDS on your car payments.

The Old Switcharoo

First, if you have access to outside financing (remember, you didn’t tell them that!) now is the time to compare using the dealership to finance your car vs. using your outside financing. If you decide to use outside financing you will tell the finance guy NOT the salesman.

Remember that the sales manager makes his money by screwing with your interest rate? If you LET HIM do that, then you can get a break on the price of the car. Remember the balloon. Squeeze on the price and on the trade-in so that he will give a little there and put the extra air in the interest rate. Then you can switch to outside financing and get a better rate. SWITCHAROO!

Don’t have outside Financing? Don’t worry! There is another switcharoo you can pull in the finance department. It’s actually a double switcharoo. The finance person is going to push the Extended Warranty, and possibly Maintenance, and GAP insurance. First, if you are getting GAP insurance it is best to get it from the dealership at the time of purchase. Many insurance companies do not offer after-market GAP insurance. So, if you want it, sign up for it at the time of purchase. Second, NEVER take the maintenance agreement. It’s a two-way trap. First, it’s expensive and makes you pay it as part of your car payment. Second, car service-departments run on commissions so they will make you do all sorts of unnecessary stuff. DO take the Extended Warranty. The most expensive one they have!

The extended warranty is an insurance product, and INSURANCE products are REFUNDABLE in most states (check yours, I live in Texas). That means, if you cancel it, then you get the balance refunded to you. Technically you are buying a 4-year INSURANCE product and paying all the payments upfront (through your loan). So if you CANCEL it after the sale then all those unused payments have to be refunded. They cannot be refunded to you in cash (because it’s on the loan) so the money gets refunded TO THE LOAN BALANCE.

So, if the finance department offers a $2,500 extended warranty say, “I love it! BUT I don’t want getting it to change either my payment or the length of my loan.”

Let’s say you have a payment of $495 for 66 months. How can the finance person stuff another $2,500 into that deal? The answer is he will DROP YOUR INTEREST RATE by 2%. Remember how the sales manager wouldn’t budge on that because he gets the commission? Well, the finance person makes his big commission off extended warranties, so he will absolutely screw the sales manager over by dropping the rate back to the actual bank rate and putting the money into the extended warranty.

The deal is done. “But wait, didn’t I just pay $2,500 for an extended warranty that I don’t really want?” Yes, but after the deal is done… wait about 30 days.. Then call the extended warranty company and cancel the extended warranty. The extended warranty is an “Insurance” product. So the balance, $2,470 or whatever, will get applied to your outstanding car-loan balance.

What is $2,470 divided by $495? The answer is 5. That means doing this trick will cut the last five months off your car payment without changing anything else. $2,470 will come off your loan balance when they refund it to your deal which means you won’t have to make the last FIVE car payments.

If you are the type of person who WANTS an extended warranty, then you just got it for free. If you are the type of person who doesn’t want one (like me) then you just saved five payments off your car loan.

You just turned a 66-month payment plan into a 61-month payment plan. You got the best deal possible on the car. You turned the tables on the dealership. And you can sleep happy. Enjoy!


  1. Post Note from the Author:

    In August of 2020 I actually purchased a new Hybrid Corolla. FIRST, I used TrueCar to find the car I wanted to buy. This limits the dealerships that will make an offer to the ones who use Truecar, but that’s Ok. I allowed me to pick the EXACT CAR I was going to buy. When I say exact I mean that I knew the stock number of the car on the lot. When I showed up I told the salesperson to get me that exact car. SECOND, I knew the exact price I was getting on the car. I got the rebates plus $1,300 off the price. This was part of the “true deal” offer that the dealership was willing to make…. Remember the deal has 3 parts, so the discount can always be made up by the dealership in other ways. THIRD, I secured outside financing at a better rate than the dealership would offer me. FINALLY, I was NOT trading in my car. I was keeping it and selling it to one of my kids. This all means I had 100% control over the entire process. I couldn’t do the end “swicharoo” deal with the extended warranty because there was ZERO fat left in the deal for the finance manager to work with. So, that’s it. The deal was done. I got the best price, the best interest rate and the fastest experience. Once the sales manager realized I had already pre-negotiated everything including my loan he just sent me back to finance. I spent 20 minutes with the salesperson… not 2 hours. So that’s what I actually did with my last new car deal (the first new car I’ve bought in 10 years).

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