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The Art of the Deal

Updated on May 31, 2010

"Car salesmen have a reputation for being suit-wearing thieves just waiting to sweet-talk you out of every last dollar."

That's not true, of course. There are some crooks, but for the most part car dealers are simply expert salesmen. They'll work you over for maximum profit, but until you sign on the dotted line they have no power over you whatsoever. And that's the key to negotiating a good car deal: Never be afraid to walk. There's always another deal someplace else.

To get an idea of what constitutes a good deal, it's worth checking out the on-line versions of the Blue Books. There you'll find not only the retail price for every new model in the U.S., but also the invoice price — what the dealer probably paid for the car. Begin your bargaining at the invoice price — or even below it (dealers often receive monetary incentives from automakers on some models, so they may actually have paid considerably less than the invoice price). And don't be afraid to shop around. Remain composed and resolute, and you'll get the deal you're after.

Once you've settled on a price, don't let the dealer jack up the final sticker with extras. Just say "no" to such dealer add-ons as rustproofing (most modern cars are well sealed at the factory) and extended warranties (most cars are covered for the first three years, and if you treat yours well it should run fine far beyond that).

Finally, beware of the age-old "bait and switch" ploy. The dealer may advertise a certain model at a very low price, but when you come in he'll try to sell you a different one — or even the same one — at higher cost. If so, you know what to do: Hit the bricks.

Should You Lease or Buy?

To lease or to buy: That's the $32,000 question. Leasing has become increasingly popular in recent years even though some larger players like GM and Chrysler effectively bowed out of the market. Is it a smart choice? The answer is probably "yes" if the following conditions apply to you:

  • You want to drive a premium model (today's average new car costs nearly $30,000) but want to keep your cash outlay to a minimum. Because you're not paying for the entire car, but only for the difference between its new price and its value at the end of the lease, your down payment (if any at all) and monthly installments will be far less than if you buy.
  • You don't put a lot of miles on your car. Leases typically allow a maximum of 15,000 miles per year (even less for some luxury and sport-utility models) and charge up to 25 cents per mile once over that limit.
  • You like driving a new car every two or three years. Leases allow you simply to hand over your car at the end of the term, with no further obligation. But beware: There can be stiff penalties for ending a lease early.
  • You take good care of your car. Anything other than "normal wear and tear" (such as a seat belt gnawed by your dog) will cost you at the end of a lease.

You use your car for business. Leasing can offer greater tax advantages than buying. On the other hand, buying probably makes sense if:

  • You plan to keep your car for years, want to build equity, and like the idea of eventually owning your car with no further payments.
  • You'd like to accessorize your car (lease cars cannot be modified).
  • You want the flexibility of being able to sell your car whenever you wish.

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