How to outsmart your car dealer

And get the right car at the right price

I recently moved from NYC to LA, where you need a car to function as a honest member of society. So I went through the process of buying a car.

The first sales person I spoke with took a long look at my spreadsheet and slowly admitted, “I’ve been doing this for 15 years and have never seen anything this thorough before. I’ve gotta be honest with you, I pray you don’t make this public cause it’s gonna make my job a lot harder.”

Sorry dude. So this is how I think about buying a car…

Apples to apples

Unless you know exactly what make and model you are going to buy, you’re going to be comparing all sorts of options against each other. The best way to compare things is to use units that measure the same things.

For example, it’s not useful to compare the MSRP of a 2017 Toyota Camry to the MSRP of a 2017 Porsche 911 Turbo. Sure they are both cars, but one has 540 horsepower, can go 0–60 in 2.8 seconds, and looks a goddess.

Whatever vehicle you choose, it’s most basic use case is to get you from point A to B. So effectively comparing two vehicles means looking at how well they get you from point A to B.

For each vehicle, convert the price into a dollar per mile driven cost to own ($/mile). From there, you can compare how much it costs you to get from A to B. Now you’re comparing apples. This allows you to look at things like (1) gas mileage, (2) maintenance, (3) lifespan, and so on. You can incorporate all the variables associated with a given car into units that measure it’s relative value.

Variables you control

These are the most basic variables associated with choosing a vehicle that you have (at least some) control over:

1. Price to purchase or lease the vehicle
2. Gas mileage
3. Maintenance costs
4. Residual value of the vehicle when you no longer want it
5. Vehicle features (e.g. leather seats, premium sound system, etc.)
6. Number of miles you will drive the vehicle during the time you own it

With this information, you can easily get to a $/mile cost.

Variables the dealer controls

These are the pieces of the puzzle that the dealer controls and will try to manipulate to make things confusing for you:

1. Cash down (if you’re buying or leasing)
2. Financing rate (if you want to borrow money to buy)
3. Monthly payments (if you’re borrowing money or leasing)
4. Number of miles you’re allowed to drive the car for your lease period

These are also the variables that you will want to negotiate with the dealer on. We’ll discuss that in a little bit.

Measuring car value

Ok, so now you’ve got both the variables you can control by researching a vehicle and the ones the dealer will use to try to convince you you’re getting a screaming deal.

Now let’s talk about how to bring everything together and do some comparing.

There isn’t one right way to do this. You’re simply adding up all the costs associated with owning the vehicle and dividing that sum by the total number of miles you’ll be driving it. In the above spreadsheet, I wanted to look at gas mileage, government rebates, and fuel savings to see how they would effect overall value for leasing.

If you look closely you’ll see the Toyota Prius costs less (MSRP) than the Chevy Volt. As a result the dealer was asking for less cash down and a lower monthly lease payment. However, the Volt costs less to fuel (when you use the electric motor efficiently) and qualifies for a rebate program. When you factor paying less for gas and money back for owning an electric vehicle, the Volt winds up costing you less to drive as you can see in column Y.

This analysis can get as sophisticated as you’d like. For me, I tested different gas price ranges, factored in residual value at the end of my lease (in case I decide to purchase the car), and included insurance costs into the equation. I also looked at buying (instead of leasing) the same cars. In that case, I looked at maintenance costs, a 150,000 mile lifetime, financing rates, and so on.

With this you can walk into any dealership, plug their offer into your spreadsheet, and quickly see where that vehicle stacks up relative to your other options.

Negotiating the price you want

The advantage to this analysis is that you now have a firm understanding of relative value. If someone offers you “an amazing deal” on a Grand Cherokee for example, you can know it will cost you X per month in maintenance, resulting in a $/mile cost to own that’s higher than the Cadillac SRX.

You now can calculate the price the dealer needs to get to in order to actually offer you an amazing deal. You can ask them to beat an exact number and explain why.

Sit back and relax. Enjoy knowing that your dealer is processing the fact that they can’t mess with you. They’re realizing it’s time to cut the bullshit, go talk to their manager, and see if they can actually give you what you want.

Tips for going to a dealership

1. Know a little bit about the car you’re looking at and make that clear early. It cuts down on the time the dealer spends talking BS.
2. Have your spreadsheet ready to enter their offers. When they see you’ve done homework, it’s much easier to take control of the conversation.
3. When you are negotiating, have a $/mile amount you’d be willing to go with. Don’t let them ever think they have any wiggle room with you.
4. Get their best offer in writing. You can take that to a neighbor dealer and ask them to beat it. I did this multiple times.
5. Don’t be afraid to ask for exactly what you want. If you hear “that’s the best I can do”, don’t feel afraid to respond with “no it’s not.”

Finally, remember you don’t have to choose the lowest $/mile option. Some people just want the Porsche! But at least you’ll understand the premium you’re paying on an apples to apples basis.

Thats it! Go forth and own your dealer.

I hope this is helpful the next time you buy a vehicle. The idea of evaluating on a $/mile cost to own came from my father-in-law, who has perfected it over years of negotiating car dealerships out of their shoes and socks.