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Dr. Don Taylor, CFA, Bankrate.com advice columnistGetting a good deal on a car with cash

Dear Dr. Don,
My husband and I are planning on buying a car next summer. We should have about $15,000 to devote toward the purchase, and we plan to buy without financing. Knowing that we plan to pay cash, and that we also do not have a trade-in, what advice would you give us in dealing with car salesmen, in terms of getting the best deal? I know they will hold back special offers if we divulge the above information too soon. Thank you!
-- Lauren Limo

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Dear Lauren,
It's a nice change of pace to hear from a reader who is saving up to buy a car versus planning to finance the purchase through a loan or lease agreement. I'm assuming you're buying new, but most of what's written in my reply will also work if you're considering a used vehicle.

In one sense, you're right to be concerned about getting a good deal as a cash customer. The typical car buyer is negotiating three items: the price paid for the new car, the price received for the trade-in and the financing package. That gives the salesperson and the dealership three different ways to profit on your business -- as well as giving them a little flexibility on any one of the transactions.

Your cash-on-the-barrelhead, one-transaction deal keeps the dealer from making any additional profit on financing or a trade-in. You could try stringing that salesperson along about whether you'll be financing the vehicle, but if you go into the dealership as a well-informed consumer, you don't really need to play games to get a good price on your new car.

What's a well-informed consumer? Well, at a minimum, you should know the dealer invoice price on the vehicle, the amount of holdbacks paid to the dealer by the car manufacturer and any special promotions being offered by the car manufacturer.

From my experience, it's hard to beat the level of price information you can get from Consumer Reports. For $14 you can learn all the price information about the car you're considering. That's money well-spent. I had a salesperson in a dealership once tell me that the Consumer Reports numbers were all wrong, only to then have to eat crow when he pulled out his invoices and they matched the Consumer Reports numbers to the penny.

Take a look at some of the free sites, too. I like Edmunds.com, especially for its "True Cost to Own" feature that estimates what your annual expenses will be with the car over the next five years. The site provides invoice numbers, as well as a column listing "what others are paying" for that car. Kelley Blue Book is also worth a look and provides much of the same information.

Take these steps and you'll be able to spot value and know when you're getting a good deal. The auto channel on Bankrate also has a host of car-buying tips and features to get you comfortable with the whole process.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy -- Posted: May 30, 2006
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