Episode Summary: How To Make Buying A Car Less Miserable
Podcast: Am I Doing It Wrong?
Hosts: Raj Panjabi Johnson & Noah Michaelson
Guest: Jessica Caldwell, Executive Director of Insights at Edmunds.com
Release Date: November 28, 2024
Introduction
In this episode of Am I Doing It Wrong?, hosts Raj Panjabi Johnson and Noah Michaelson delve into the often daunting process of buying a new car. Recognizing the anxiety many face during this significant purchase, they invite Jessica Caldwell from Edmunds.com to share expert insights and practical strategies to make the experience more manageable and less stressful.
Optimal Timing for Purchasing a Car
End of the Month Myth (04:08)
A common belief is that the end of the month is the best time to buy a new car due to dealerships' sales quotas. However, Jessica Caldwell debunks this myth:
"You should start the negotiation and the process earlier. You're not trying to do everything in 12 hours because you can't walk away." – Jessica Caldwell [04:08]
She emphasizes that waiting until the last moment can lead to frustration and missed incentives, advising buyers to approach negotiations with ample time.
End of the Year and Model Year Sell-Down (05:20)
Caldwell explains that the period when new models are introduced, typically starting in the summer, is another strategic time to purchase. This "model year sell-down" allows buyers to take advantage of deals on outgoing models. However, recent supply chain issues like the chip shortage have affected inventory levels, making timing crucial.
"They call it like model year sell down... it is starting to come back. And it's not necessarily across the board." – Jessica Caldwell [05:28]
Understanding the Chip Shortage (06:16)
Raj seeks clarification on the term "chip shortage," leading Caldwell to explain its impact on the automotive industry:
"Each car has a ton of chips, and that caused a lot of the inventory shortage to happen." – Jessica Caldwell [06:24]
This shortage resulted from pandemic-related disruptions, prioritizing industries like computing over automotive manufacturing, thereby limiting car availability.
Preparation Before Visiting a Dealership
Research and Budgeting (07:10)
Caldwell advises buyers to prioritize affordability over other factors like safety or size:
"Actually, you probably need a car that you can afford. That's sadly step one." – Jessica Caldwell [07:10]
She highlights the importance of understanding loan terms and what one can realistically afford to prevent financial strain.
Securing Financing Outside the Dealership (08:13)
The hosts discuss the benefits of obtaining financing from banks or credit unions before approaching dealerships. Caldwell emphasizes the substantial interest costs over the life of a loan and urges shoppers to shop around for the best rates.
"The average interest that people are paying over the life of their loan is just about $9,000." – Jessica Caldwell [08:20]
She warns against the pressure environments within dealership financing offices, where high-interest rates can lead to unaffordable monthly payments.
Negotiation Strategies
Allowing Dealerships to Make the First Offer (20:30)
Caldwell recommends letting the salesperson present their initial offer to gain insight into their negotiation stance.
"Let them give you a... what's the best deal you're going to give me?" – Jessica Caldwell [20:51]
Using Credit as Leverage (21:05)
She advises buyers with good credit to have their credit run early in the negotiation, establishing themselves as ideal customers deserving of better deals.
"Run my credit. I love that you're serious." – Jessica Caldwell [22:20]
Walking Away as a Negotiation Tool (40:03)
Emphasizing the power of walking away, Caldwell explains that it signals to dealerships that buyers are willing to seek better offers elsewhere, often prompting improved deals.
"Walking away is the most powerful tool you have as a consumer." – Jessica Caldwell [40:03]
Dealing with Dealership Dynamics
Managing Add-Ons and Additional Offers (09:56)
Caldwell highlights how dealerships often introduce add-ons like extended warranties and alarm systems, which can overwhelm buyers. She recommends being prepared to decline unnecessary extras to maintain focus on the primary purchase.
"They have so much technology on them... they're just trying to sell window tinting or alarm systems or everything else." – Jessica Caldwell [11:25]
Assessing Dealership Reputation (14:58)
To choose a reputable dealership, Caldwell suggests reading online reviews, seeking recommendations from friends and family, and evaluating the responsiveness and knowledge of dealership staff.
"Talk to family, friends... read the three-star reviews because oftentimes the five-star and the one star are going to be so emotionally triggered." – Jessica Caldwell [14:21]
Special Considerations for Diverse Buyers
Experience for Women and Non-Macho Buyers (33:21)
A listener question addresses the challenges women and non-traditional buyers face in masculine dealership environments. Caldwell reassures that many dealerships prioritize customer satisfaction due to sales satisfaction surveys influencing their compensation. She encourages buyers to seek respectful interactions and walk away if they feel undervalued.
"If they treat you poorly, walk away like you don't need to give up your business." – Jessica Caldwell [34:33]
Final Tips and Takeaways
Double-Checking Contracts (46:45)
Before signing, Caldwell advises buyers to meticulously review contracts for accurate purchase prices, interest rates, loan terms, and trade-in values to avoid hidden costs and unfavorable terms.
"Make sure you are signing up for a seven-year loan term because a lot of people don't even keep their cars for seven years." – Jessica Caldwell [46:45]
Bringing a Knowledgeable Companion (46:29)
Having a friend or family member accompany you can provide a second set of eyes, helping to navigate the complexities of the negotiation and ensuring no crucial details are overlooked.
"Take a buddy with me when I'm doing big life stuff like this." – Raj Panjabi Johnson [46:29]
Top Five Takeaways (48:59)
- Research Thoroughly: Identify the exact car model, necessary add-ons, and establish a clear budget before visiting a dealership.
- Secure Financing in Advance: Compare loan rates from banks, credit unions, and other sources to find the most favorable terms.
- Let the Salesperson Speak First: Allow them to present their offer to understand their starting point in negotiations.
- Use the Power of Walking Away: Don’t hesitate to leave if the deal doesn’t meet your expectations; often, dealerships will follow up with better offers.
- Consider Online Purchases for Convenience: If in-person negotiations are too stressful, online platforms like Carvana offer a more streamlined but potentially pricier alternative.
Conclusion
By implementing these strategies and maintaining a well-informed approach, buyers can significantly reduce the stress associated with purchasing a new car. Jessica Caldwell’s expertise provides a roadmap to navigate the complexities of automotive negotiations, ensuring a more satisfying and financially sound car-buying experience.
"Everything will be competitive, but if you do turn up in person and you have a trade-in... show that you're serious." – Jessica Caldwell [22:24]
Final Thoughts from Hosts
Raj and Noah reflect on their newfound confidence and readiness to assist others in navigating the car-buying process, emphasizing the importance of preparation and informed decision-making.
Note: This summary excludes all advertisements, intros, outros, and non-content sections to focus solely on the valuable discussions and expert advice provided during the episode.