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Cracking the car buying code — online

/ Source: TODAY

With talk of a recession and consumers tightening their purse strings, car makers and dealers are doing whatever they can to "keep the metal moving." It might be one of the best times in recent history to pick up a good deal on a new or used vehicle. But you still have to do your homework before you fire up the engine. Making some key moves online could save you thousands.

Log on before you hit the lotIt pays to click around before buying. Shoppers who use the web spend about one hour and 20 mins less time circling the dealer lot and less time negotiating a sales price.  Plus, they pay about 5 percent less for cars. In what is often the second biggest purchase for most consumers — after their home — that's big bucks.Show me the money Cash back incentives or 0 percent financing (it's usually one or the other — not both), sounds great, but the advertising is more subtle these days and consumers are doing their online homework vs. responding to the in-your-face "low, low!" aggressive ads. We're over the hype. We want to know the math.  Dealers understand this.  We spoke with one salesperson who said that on a percentage basis, he's more likely to convert an Internet lead into a sale compared to getting a sale from someone who just shows up on the lot.  It's all about qualified leads.  If you're a qualified & well-informed buyer ready to make a decision, it's a win/win for you and the dealer.

Location mattersKeep in mind, car deals often vary regionally, so when you're doing your online research, it's a good idea to type in multiple zip code (maybe an hour away or one state over).  Could be worth the drive if the incentives are better. The real math
It's estimated there's $1,500-$3,000 difference between the "invoice" and " sticker" price on a $20,000 vehicle. The numbers go up for higher priced vehicles.  If you negotiate, you should end up somewhere in between those two prices.  The goal is to work your way UP from the invoice price vs. down from the sticker price. 

A a lot of people don't know this, but dealers sometimes get additional cash back paid to them directly from manufacturers for moving/selling certain models. Those are the cars you can really get a deal on, since the dealer may be able to sell you the car at/below invoice price and still make decent money from the sale.

This valuable information is available online — it's usually listed as dealer marketing support, which describes manufacturer to dealer programs specifically designed to assist dealers in marketing their vehicles.

The most common program is in the form of cash credit to the dealers, who may or may not choose to pass some part of this money on to their customers.  70 percent to 90 percent of customer rebates from car manufacturers trickle down as discounts to car buyers, while only 30 percent to 40 percent of dealer rebates from manufacturers are passed through to buyers by dealers. That equates to a difference of about $500 for a typical promotion and is caused by the fact that consumers often don't know about dealer rebates.

At the end of the day, sometimes you hear about the latest incentives, such as cash back, 0 percent financing, etc., but it's often the incentive you don't hear about — the ones between manufacturers & dealers — that matter most.

Run the numbers (know the total cost of owning the car) (National Automobile Dealers Association) The math doesn't stop when you get the keys.  A lot of people learn this the hard way.  There are sites to help you know what you're really getting into by calculating the TOTAL cost of ownership. gives car buyers a detailed overview of the estimated Cost of Ownership to own a vehicle over the course of five years, including depreciation, fees & taxes, insurance, fuel, maintenance, opportunity cost, and repairs.  A five year summary of all associated costs specific to a particular make and model is very telling!  Some brand maintain their value and some are more reliable — it all factors into the overall math. Make sure you're comparing apples to applesThere's a record-breaking 2.5 million used cars listed on alone — from dealers and private sellers. The trick is comparing apples to apples and narrowing down the choices in a methodical, sensible way. You're in the driver seat by fine tuning the search criteria.  Here's where using online search tools really beats roaming dealer lots and scanning the paper.

Type in the make & model you're after; your price range; and zip code.  You'll quickly get comprehensive results you can tailor even further.  Two of the biggest factors in price are the year of and mileage on the vehicle.  Make adjustments using the prompted criteria to narrow down your choices.  Once you get down to a handful of available options, you can check the often  free CARFAX report vehicle history report, detailing things like: Has the car ever had flood damage or odometer fraud?  How many people have owned the car?   Is the title is clear? 

E-haggle (anonymously for a no obligation quote)
You can actually negotiate price anonymously, without having to step foot into a dealership. It's referred to as "e-haggling." You might wonder: Why would a dealer negotiate with someone that they've never met? Well, they know 75 percent of car buyers are starting their search online. Dealers have staffed up their Internet departments accordingly and won't be surprised when you ask for a price quote via e-mail.

When they write you back, you might say — if your research has indicated you're in the ballpark, "That seems a bit high. Am waiting on several other incoming dealer emails. So far, think can do better."  They'll likely write you back. Again, they want you to come to the lot. And now, you might be arriving with a discounted offer in hand. You're already ahead of the curve whether you're buying a new or used vehicle. You've talked — or in this case — typed them down.

Going the eBay routewww.motors.ebay.comOnline auctions/bidding on a car can be another way to score a deal on a used car. eBay Motors just announced the 3 millionth vehicle was sold on their site. Currently, a vehicle is being sold on eBay every 56 seconds. If you're looking for a steal on a car with a lot of miles or a clunker you're willing to fix up (they also sell a lot of parts), the deals can be terrific.

Many buyers feel like they're paying about $1800 less than the official Kelley Blue Book value of the vehicle (the industry standard for the going-rate of any given vehicle). Keep in mind the bids are binding — if you're bidding over $15,000, you'll have to secure the bid with a credit card (the card is not charged) or you may need to be pre-approved. You're also likely to be responsible for picking the vehicle up. They have deals with shipping companies and can give you an estimate, so you know what this variable will be.As is always the case with eBay, the sellers reputation (their "rating") is key. If the seller has a very high customer satisfaction rating, you're probably in good hands. In addition, eBay has really beefed up it's VPP (vehicle protection program), so the risk of buying a car site unseen (though there are tons of photos for each vehicle) is significantly minimized. It's worth a look and a shot if you have a specific price limit in mind regarding what you consider a good deal — and only bid up until that point.  So, do all the online homework we've suggested. Then, bid low and see if you can do even better going this route.

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