Don’t get ripped off – how to buy a car in America

So I bought a 2nd hand VW Jetta from a dealer. 1st time ever from a dealer let alone one in America. In Australia I always bought cars from private sellers. I don’t believe in buying new cars since cars are a depreciatable liability, not an asset. I believe that if you want a new car you should lease. Better still, if you have a business structure with profits, run it through that.

The good news – cars are cheap in the USA. Dirt cheap. So is petrol, or should I say “gas” as the American’s call it.

My experience

I’ll be upfront about this, I don’t trust dealers. They are nice just to get you to sign that purchase paper work and then forget about you. That’s commission selling. Get used to it. Remember, they are not your friend, your pal, or someone who is on your side. They want to make money. It’s that simple. Keeping this in mind should help you stop from falling into their “nice guy” charm and help you stay focused on your goal, to get a car for as little as possible.

Dealer or Private?

I went with a dealer. I didn’t need to, I never have in my life, so why now? Because I needed to get a loan to build credit history in the USA. I recommend you read my post on building credit history to understand the ins-and-out of this approach. A car loan is by far the quickest way to build credit history.

I could have also gone private but the hassle of connecting the buyer to my bank to get part loan sorted would have been a nightmare. Also it’s far easier to get a loan from a bank if you are buying the car from a dealer.

Dealer it was.

Remember that:

  • The dealer is a person like you but with a different need. You want to get a good car for a bargain price and the dealer wants to sell you a car while maximizing his profits.
  • A good dealer will not waste time with you if you are “playing the game” – the game of haggling. So make sure you know what is a reasonable value of the car you want to purchase and tell him straight where you stand and what you want to offer. Know what you want and ask for it when the time comes.
  • Always go for a test drive. You just never know, the car you may be looking at drives like crap or you do not like how it handles and it’s not worth your time pursuing it any further.
  • If you are not buying on the day of inspection make it clear that you are researching around without any intent to purchase. Leave your business card with the dealer if you feel you may want to connect with them later. Check out my post on your privacy using free online tools so that you can protect your privacy.
  • If the dealer offers you a great deal on a car remember that this great deal is good but there are others out there who can do better. Never buy without sleeping on your decision. Compulsive buying due to fear of loosing on a deal leads to long-term withdrawal and regret as you subconsciously try to align your conscious reasoning with the subconscious decision.

Your accent – they know you are a foreigner

So if you are from Australia (like me) or England, you will stand out like a sore thumb when you speak. The seller will know you are a foreigner. As much as we want to believe it that we live in a perfect world where everyone is treated fairly, you are wrong. Some people will take advantage of you if they can gain something from this interaction. So be prepared, show that you know how the law works in this country, you understand the ins and outs of buying a car and know your car details. All of this comes from research… and this blog is here to help you.

The car – inspect it

So you found the car you want, what next?

  • If you are using a 3rd party dealer get the car inspected by an authorized workshop. Do not opt in for someone the dealer knows. Find your own workshop using YELP.com and pay the $150 to get the inspection done properly. This makes sure you do not buy a lemon. There is a California lemon law which protects buyers from shonky dealers having sold a lemon (bad vehicle).
  • If you are buying through an authorized name dealer like Volkswagen then make sure the car is “Certified Pre-Owned“. This means they dealer has done a 200 point inspection by 2 different mechanics and has certified the car to be in perfect condition – like brand new. Expect to pay $1-2K extra for a certified vehicle.
  • Find out what type of warranty the vehicle comes with. Don’t settle for anything without at least 50% coverage and 100K miles or 2 years. This means you pay 50% to get the vehicle fixed and the rest goes under the warranty.
  • I have crafted a wonderful checklist based on my learning’s from this adventure which I recommend you print and use when making your vehicle purchase. Click here to go to the post where this checklist is located.

Let’s buy it – you got the deal and now what

Here’s how it went down for me considering that I was doing a 50% car loan and 50% down right payment for the vehicle.

  1. If the vehicle inspection came back with minor faults get the dealer to fix them before you make the purchase. Fill out paperwork which specifies what the dealer has to fix at no charge.
  2. Tell the dealer you are going to pay half in cash and half using a loan.
  3. You will pay the 50% by bank cheque. The other half (the loan) will need to come from the bank as a deposit cheque. Make sure you have this pre approved from the bank or at least in the works so that your purchase isn’t delayed.
  4. Fill out all these paperwork:
    1. Paying fee is bullshit. These are the hidden gems dealers use to get extra cash from you. Make sure you speak up and get them to waive it.
  5. Make sure you have purchased vehicle insurance. The dealer will not hand you the keys unless this is done. Read about the common types of vehicle insurance here.

Finally drive away and enjoy your new car!

Online resources

Here is a bunch of great websites which have helped me in my quest to get the “right car”.

Similar to (Australia): http://www.redbook.com.au

Purpose: Great resource for New Cars, Used Cars, Blue Book Values & Car Prices. Use it as a comparison guide to make sure you are not being taken for a ride.

Also check out http://autos.yahoo.com/ and http://sfbay.craigslist.org/ to get an idea about car prices and what’s on the market.

Purpose: Allows you to get a detailed vehicle history report from a nationwide database. All your need is the vehicle VIN number.

However be aware that this is not a full record history. Not all service centers record service history into this nationwide database. If there is no record history, be suspicious and ask questions why. Check the log books and if there is nothing there either you know something isn’t right.

Purpose: Review of a lot of businesses in USA. Great resource to see people’s experience in all business services inc. car dealers. Just don’t forget that majority of people only ever review a business when they have something to complain about or are ecstatic about a service. Nether less, great resource to get an idea.

Check list

I have crafted a wonderful checklist based on my learning’s from this adventure which I recommend you print and use when making your vehicle purchase. Click here to go to the post where this checklist is located.

Most of all, have fun. Remember that a mistake has a companion, learning. Something learnt is worth sharing with the rest of the world. Please use the comments field below to do just that. However it’s always best to learn from others mistakes so you don’t have to make them yourself. This is why this checklist and blog exists, to help you learn from my adventures in Silicon Valley. Have fun!

Ernest

Author: Ernest W. Semerda

Veryfi cofounder (#YC W17 cohort) ~ mobile automation software designed for the construction workforce. GSDfaster founder ~ be more productive. Follow me on Twitter: @ernestsemerda