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How to Get the Best Price on a Car

Corey —  January 19, 2013 — 3 Comments

Cars are expensive, that’s pretty much a given. Whether you buy a brand new $60,000 car or a used $5,000 car, it will most likely put some kind of a dent in your wallet. Getting the best deal is key when searching for a new car for yourself. The best deal doesn’t just apply to the dollar amount, you also want the best value and something that will not break in a couple of weeks.

Now that my fiance is a sales consultant, I feel like I know all about cars and all of the tactics that can be used. Not all salesmen are bad people! I will say that now. This is something that I believed before he became one, but now that I personally know one, I feel like I know how a dealership runs.

And while I will say that most of these will probably work for you, I also want to say that most car dealership are not making a lot of money off of your actual car purchase. Most of the time his dealership takes a loss on cars when selling them to customers, and that’s because customers these days seem to research the car buying process so much (hopefully like you!).

Car dealerships are mainly shooting for repeat business, such as with you coming back to the service department for routine maintenance and repairs.

Below are some tips so that you can get your best deal and value when buying a new car.

Plan your visit

This is a important step in the car buying process. Just going into a dealership with no plan will usually result in you leaving with an expensive car that you most likely could have bought for cheaper.

Usually at the end of the month, dealerships are trying to beat their goals and therefore will try and give you the best deals in order to get there.

Also, most believe that they should wait until the beginning of the year so that they don’t have to pay sales tax twice, however, most dealerships will take that property tax total off your car purchase if you buy in December anyways if you just ask and explain to them that if they can’t give you an equivalent discount, then you’d rather just wait until January.  And since December tends to be one of the slowest months because of the misconception of extra property tax payments, they will also most likely give you a big discount in order to get you to drive off the lot in their car.

Also, in December most car dealerships tend to try to clear their old inventory. Some car dealerships are not allowed to place the new year’s cars (such as when it’s 2013 and there are still 2012 cars on the lot) until ALL of the old cars are gone. Therefore they will most likely give you a good deal so that they can start placing new inventory on the lot.

Just ask

Now, I’m not going to say that car dealerships NEVER make any money from selling new cars, because they obviously do every now and then or they would rather just operate as mechanics and an auto body shop. However, sometimes people go into dealerships and just take the price as is and don’t even try to haggle.

One time a customer came in and was telling my fiance that she wasn’t sure about the car because of the price. He then said “well ask me for a discount and then I can ask my manager.” She said “oh really you can do that?” He then explained that unless she asks, he’s not allowed to ask for anything lower of course. So he then went and asked and she got a discount.

The only thing bad that could happen when asking for a discount is a simple no, but most of the time they will say yes and counter with SOMETHING. Something is better than nothing right?

How did you get the best price on your car?

       I pulled this out of our mail the other day:

PA Lottery Coupons

       Seriously? Someone at the Pennsylvania Lottery must be playing a joke. Big Savings? Let me get this straight. You’re going to use a coupon to buy a lottery ticket, and that’s going to bring you big savings? Let’s think about this just a bit.

What Are Your Chances of Winning?

       Let’s use the September coupon for our example. This coupon gives you one $2 Mega Millions with MegaPlier ticket for free if you buy one $2 Powerball with Power Play ticket. Basically, this is just one set of numbers because a regular ticket costs $1 for one play and the Power Play (or MegaPlier) doubles the cost of the ticket.

       The Pennsylvania Lottery’s website says your overall chances of winning a prize with a Powerball ticket are 1 in 35.11.

       We can figure out your chances for winning any of the specific prizes with some simple math. If your chances of winning a prize are 1 in 35.11, that means you have a 2.8482% chance ((1/35.11)*100) of winning every time you play Powerball. (Not very good, huh?) Basically, you can only expect to win something once out of every 35 tickets you buy. But that doesn’t tell us how much the ticket is really worth because your prize can range from $3 to $14,000,000 (or $6 to $14,000,000 if you buy the Power Play option) given the current jackpot. To figure out the value of your ticket, we’ll need to do a little more math.

What’s Your Ticket Really Worth?

       By using the odds given for each specific prize level, we can figure out the average prize for a winning ticket. Overall, you have a 2.8482% chance to win on any given ticket. You can use the same process to figure out your chances of winning a given prize. For example, the Pennsylvania Lottery website says you have a 1 in 61.73 chance of winning the lowest prize of $3. That’s a 1.61996% chance ((1/61.73)*100) of winning $3 on any given ticket. Since you have a 2.8482% chance of winning any prize, you’d expect a little more than half of your winning tickets to have a $3 prize. (The math is simple: 1.61996/2.8482 = 0.568766 * 100 = 56.8766%.)

       Continuing this process for each prize level, we can figure out your chances of winning a specific prize any time you have a winning ticket. This table shows those chances for a regular Powerball winning ticket.

Match Prize Chance of Winning This Prize on a Winning Ticket
5 Numbers + Powerball Jackpot (currently $14,000,000) 0.000018%
5 Numbers $200,000 0.0006833%
4 Numbers + Powerball $10,000 0.0048552%
4 Numbers $100 0.1845%
3 Numbers + Powerball $100 0.2573%
3 Numbers $7 9.7787%
2 Numbers + Powerball $7 4.4604%
1 Number + Powerball $4 28.4363%
Powerball Only $3 56.8772%

       Now we can figure out the value of a winning ticket simply by multiplying the prize by your chance of getting that prize on any given winner. Doing that tells us that the average winning ticket for regular Powerball is worth $7.65 ($8.65 – $1.00 for playing). Adding the Power Play to the mix changes the prize values, so the average winning ticket for Powerball plus Power Play is worth $24.04 ($26.04 – $2 for playing). (And technically, it would be worth a little less than that because there’s always the chance you might have to split the jackpot with someone else. But I don’t feel like finding the stats on that or doing the math.)

       That leads us to the next question. If the average winning ticket is worth $7.65 (or $24.04 for Power Play), then what is the average ticket worth? You only have a 2.8482% chance of winning that $7.65 (or $24.04). We need to take into account the cost of your losing tickets, which you’ll have 97.1518% of the time. Remember, you have to buy 35.11 tickets before you can expect to have a winning ticket (based on the odds). That leaves you with 34.11 losing tickets. If you’re playing regular Powerball, you’ll need to spend (that is, lose) $34.11 to win $7.65. If you’re playing Powerball with Power Play, you’re looking at a cost of $68.22 to win $24.04.

       Our last bit of math will tell us the average value of any given ticket. Let’s check regular Powerball first. On average, you’ll spend $34.11 to win $7.65 leaving you with an overall loss of $26.46. Divide that by the total number of tickets you had to buy (35.11) and you’ll find that the average regular Powerball ticket is worth -$0.75. To put it another way, instead of buying a $1 Powerball ticket you might as well throw three quarters in the trash. (Oh wait, I forgot…the Pennsylvania lottery benefits older residents – every day. So maybe you should just donate the three quarters instead.)

       What about Powerball plus Power Play? It certainly looks like a more attractive value proposition at first glance since the average winning ticket is worth so much more. On average, you’ll spend $68.22 to win $24.04 leaving you with an overall loss of $44.18. So that means the average Powerball plus Power Play ticket is worth -$1.26. This time, instead of donating three quarters rather than buy a Powerball plus Power Play ticket you should donate five quarters! In terms of absolute dollars, you lose more with Power Play but the % loss is better than regular Powerball. (In regular Powerball, you lose 75% of your money forever. With Power Play, it’s “only” 63%. Granted, it starts looking a little better when the jackpot is very large, but your chances of splitting the prize increase as more people buy tickets. This means the lottery is always going to be a losing bet.)

       Let’s put this all into a little perspective. Buying a Powerball lottery ticket would be the equivalent of getting a $10,000 gift, going out into your back yard, and then proceeding to burn $7,500 of it for “fun”. Big Fun – according to the Pennsylvania Lottery.

You Want Big Savings? I’ll Show You Big Savings.

       I’m not going to take the time to prove that the lottery (in any form) is a waste of your money. You can simply look at the July 2009 – June 2010 annual income and expense report from the Pennsylvania Lottery to see that they only end up paying out about 61% of their total sales to winners. Talk about a great business! I’d take a 30% net profit margin any day. (The other 9% goes to other expenses.)

       Looking at those numbers from the other end, we see that lottery players as a whole are buying something with a guaranteed return of -39%! You want big savings? Here’s a thought. Stop paying the poor people’s tax.

Don’t play the lottery!