10/21/2011 9:48 PM ET|
Take the hassle out of car buying
For those who wish to avoid haggling on a dealership lot, car-buying services offer an alternative, if not always an ideal one. Still, some can have real advantages.
Some people are born hagglers. They love to match wits with car salespeople, hoping to wring out a jaw-dropping deal that they can brag about to their friends.
The rest of us -- well, many of us would rather have a tooth pulled than haggle over a car.
We can try to teach ourselves to be better bargainers. We can arm ourselves with Consumer Reports ratings, Kelley Blue Book values and Edmunds.com pricing guides. We can educate ourselves on the "four square," holdbacks and dealer cash.
Or we can just outsource the whole mess to a car-buying service.
Car-buying services come in several flavors, but the basic idea is the same: They do most or all of the work to connect you with the vehicle you want and present you with what's supposed to be a fixed price.
"I used the service offered by my credit union," wrote Monica Gruber of Sunrise, Fla. "I gave the rep all of the things I was looking for (car itself, finances, etc.). A week later she gave me a call and said she had a car lined up for me. The next day, I had my car. No pressure, no BS sales pitches, very convenient. I will definitely use the service next time I'm in the market for a car."
Laurie Prentice Perkins of Juneau, Alaska, bought two cars in quick succession -- one in a deal that she negotiated herself and the second that she had outsourced to USAA.
"I enjoyed the USAA experience MUCH more," Perkins wrote. "It's not too hard to find what the dealership pays and add $500 and make that your final. But dealerships will make you earn that price with all the theatrics. It was soooo nice to have USAA cut through all that and come up with the same bottom line."
Not everyone has had a great experience. Some readers complained that the car-buying services they used served mostly as a marketing service for dealerships. Some wound up in the exact position they wanted to avoid -- down at the lot, haggling over a price they thought was fixed.
Ideally, you'd want a car service that offers:
- Decent prices. It may not be that rock-bottom figure your brother-in-law insists he can get, but it's likely to be significantly less than you'd pay if you wandered onto a typical car lot without much preparation -- which is how many, if not most, people buy cars, said Phil Reed, the senior consumer-advice editor for Edmunds.com.
- Decent treatment. Dealerships want to preserve their good relationship with car-buying services, because of the promise of repeat business. So they have more incentive to treat you well than if you were a one-off customer, Reed said. That usually means no hard sell. The expensive add-ons that tend to drive up your price -- security systems and weatherproofing you may be able to find elsewhere for less -- are offered, rather than pushed, he said. Some car-buying services will deliver the vehicle to your door and pick up your trade-in, and you never have to set foot on the lot.
There are several types of car-buying services available. One is the car broker -- typically a small, independent business, often run by former car salespeople, that negotiates with a network of dealers. Some car brokers get a fee from those dealerships, which raises conflict-of-interest issues. If you want a truly independent advocate, you may want to look for someone compensated only by the fees you pay.
Alan Granger of Spokane, Wash., turned to a car broker after getting kicked off two dealership lots.
"I looked at cars at a dozen dealers or so and quickly grew familiar with lot sales techniques and found them universally insulting to my intelligence," Granger said. "And because the scripts they used in each lot were almost word-for-word identical, I started to get more and more angry at a mere hint of a deceptive line. My response usually involved expletives, which caused the two dismissals."
The car broker he found charged a $500 fee to search for the car he wanted and to arrange the deal.
"Within four business days she had located a suitable vehicle and called to verify that I was OK with the price she could get it for," Granger said. "In the end, I had a car at a comparable price to what I could have negotiated myself, but in a fraction of the time and while dealing with someone truly working on my behalf instead of as my adversary."
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I sell cars. I hear of horror stories about ohter experiences daily. What I find is that many of us , yes US , I am a consumer too, do not go prepared to purchase a vehicle or really any big ticket itme.
I would rather deal with someone who knows what they want, what they have BUDGETED ,what their credit score is, what they think the vehicle that meets the WANTS and NEEDS should cost. Have this information and it is simple and easier .
Tell the saleperson YOU want to sit down and go over YOUR requirements before they start running you around the lot trying to sell you what they want to. Check out the vehicles on line and the dealership reputation.
DO NOT go over your set budget just to get a "want" , get what you "need" and can afford .
Figure insurance , fuel and maintenance BEFORE you buy a vehicle.
Negotiate very little. Make your offer ( but PLEASE, be realistic. Know if you are a 600 score or under you probably WON'T qualify for the rates advertised), but understand the salesperson NEEDS the sale to get a check so YOU are in control.
If you aren't ready to buy today, don't go on the lot until they are closed. We HAVE to go meet you , it is our job and the manager /owner spends alot to get people on the lot to sell to.
ASK someone that has a temporary plate on how they liked the dealership and who the salesperson was and how it was.
Ask yourself WHY you would pay someone else to get you a vehicle . Will THEY help you if soemthing goes wrong?
Some customers want to haggle. I want a fair deal for them ,myself and my owner. If you get kicked off a lot like Mr. Granger , you may want to look in the mirror and give partial blame to your self.
Here is the real issue: if car delerships all go to a one price system, then prices will climb for the majority of car buyers. In a former life, I was deeply involved in the car business. Many of you won't believe this, but roughly 20% of the car buying public pays full price, and often more, when they buy a car. The profits made on these borrowers are often more than the profits made on the other 80% of the buyers. If dealerships had to sell EVERY car at a few hundred dollars above cost, then the whole dealership system would crash. Average margins need to be higher to just cover costs. As a matter of fact, the new vehicle department in most dealerships is very often a break-even proposition, and sometimes a perenial money loser. Dealerships survive on used car sales and service department income primarily.
Setting a low non-negotiable price for everyone would necessitate a higher price for the majority of the borrowers. No hassle, one price dealerships will come and go, but they very rarely will work. When the smart shopper sees the 'low' no hassle price, he knows that he can beat the deal by haggling elsewhere. All the no-haggle dealership accomplishes is to reduce his new car sales, thereby reducing the availablity of quality used cars to sell, and reducing his service related income. That model has always been a recipe for disaster.
The only way for a one price deal to work is to have all the dealerships in a market collude on setting the low posted price. Do we really want this to happen?
As a guy who's been in car sales for ten plus years. I know its going get to the point where the salesperson is going be a thing of the past. Then you'll get clerks making 9 bucks a hour that don't know anything about cars kind of like best buy. Prices will be set in stone and you'll pay more. The amount of money a dealer makes on a new car is 0 if they are lucky. People talk about hold back and dealer cash. The dealers are giving all that up to the buy to make the deal these days in hope of hitting their goal so they can get cash back from the manufacturer. Then you hope to make a little money on a used car but with the internet tell you the car retails for x amount and wholesales for y amount people come in wanting x amount for their trade and to give use y amount of ours.
I just bought a car 2 months ago, so it's a good time to weigh in with my 2 cents. I always enjoy the back and forth haggling - I consider the whole experience a challenge. There are many things I have learned over the years. Many of them are mentioned throughout this thread. But to summarize:
Many new cars are sold below invoice. The dealers do not make all of their profit from you. They get a certain amount of dealer holdback on every car. It behooves them to sell cars quickly.
As many have pointed out, most dealers make the majority of their profit on service, parts, and the amount they make on a trade in. Most people don't realize it but they get screwed more on what they receive on their trade in from a dealer. Most people can make an extra thousand by selling the used car themselves.
Like many businesses over the last few years, from restaurants, appliance stores, mortgage brokers, margins are becoming slimmer and slimmer and many dealers are being or have been forced out of business. As in any business, the most successful are surviving.
When you buy a car, arm yourself with all of the information you need. DON'T tell the salesperson what you want your payment to be. They will give you 60 month financing instead of 48 and you will be spending too much. First, you negotiate the price of the car you want to buy. If you must trade in a car, negotiate that first.
Once you agree on a price, realize that the dealer makes huge profits on their extended warranties, and often on their financing. Remember that the negotiating does not end until you have the keys in your hand. I have almost always declined the extended warrantiy, but this time, I took it because we were buying a very clean used car but with 60,000 miles on it. So at an extra 250 per year for 4 years of coverage, it was a pretty good deal.
Shop for financing. If you have good credit, spend some time and do an internet search for rates. I knocked my 5.9% down to 1.9% for 60 months (yes, on the used car with 60,000 miles) just by finding a good deal on the internet - which the dealer's bank matched. That alone saved $1300 over the life of the loan.
And always be prepared to walk away. Don't fall in love with the car. There are plenty of cars available for sale and if a dealer won't budge on the one you like, the odds are you can find it somewhere else, maybe newer, maybe cheaper, maybe with better options.
And of course, I will be happy to take $500 from anyone who wants me to go do their car buying for them!
Wow Mike, you sound a little bitter (work in car sales perhaps?). Getting dealers to compete against each other to offer me the best deal? Sounds like a company I want working for me! Got any links or references to back up your allegations about dealers "dumping out in droves", dishonesty and racketeering? I would gladly pay USAA or anyone $500 "profit" if they can save me from paying $1000 or more for the dealer's "profit" plus the B.S. of dealing with a salesman who has to "ask his manager" if he can wipe his own a$$. Their pricing will continue to be honored because that's what free markets are all about. If the dealers were losing money they wouldn't make the deal...Further you claim soon no one will honor their pricing because nobody cares what they think. Well mike I'm a customer parting with my hard earned cash...I care and value such a service. If dealers want my money, they'll adapt or I'll buy elsewhere...go find another line of work...
Wow..... Another article that makes all car dealers "scum" and the general public "wise" to how the car business works. (Yes there are some dealers that are bad...... Are there bad bankers, lawyers, insurance agents, real estate agents, politicians, etc???)
Do you know how many hard working men and women work at these places? (Yes... they work 6 - 7 days a week... 10-13 hour days). And oh.. By the way... They despise every "occupy wall street" freeloader that thinks the government should give them a lifestyle for free. (True hard working Americans).
The next time you pay $1000 for a pair of Prada shoe's.... Remember somebody... is making more than what a dealer makes (in most cases) on a economy car. I am sure the person writing this article... Doesn't even think twice about that one. (And that poor salesperson.. That you ran around for 4 hours on a Saturday... Probably called and emailed 3-4 times the week before you came in... They may make a $100).
Here are some real documented facts. (I'll use the high numbers).
An average salesman sells 8 - 10 cars a month.
The average commission per sale is $250.
That makes a monthly income on a high side of $2500. (Before taxes, insurance, etc..).
And you wonder why.. Things become unethical?
If you want some good advice.... Throw out KBB, NADA, Consumer Reports, and every other "guide" that tells you what they think your car is worth or what the dealers car is worth....
These companies have no accuracy responsibilities.... AND THEY USE THE CAR BUSINESS FOR PROFIT. They only care about the advertising dollars they can generate!!!! There is never a button to push on their website... That prints you out a check and somebody magically comes and picks up your car. Here is the real deal...... Dealers offer you real money for your car... Either take it or leave it.
By the way... Have a great week!
Costco offers a car buying service. I gave them all my requirements and would likes. A week passed before I was called and told my auto was on the lot. I never did find out where the disconnect came from but even the color was wrong. I refused the car, the lot guy said I couldn't, it was mine. I turned and left the lot and found my car elsewhere.
The Costco just said OH when I called to report the mess. I may use a buying service in the future but not the one offered by Costco. For every thing but autos, Costco is great.
You, the author, are a buffoon. The dealership I purchased my car from beat my so called great credit union rate. The extended warranty I purchased covered 5000 components not 1000 like the one my credit union offered. It saved me $2800 on a computer failure and I still have 40,000 miles coverage remaining. And the price I paid was more than fair. Why don't you people give me some advise on how I can save money on medical supplies or jewelry or furniture? Now THAT would be helpful!
Please find something else to write about! Is this what you write about when you have run out of things to say? This is so done. How many articles need to be written on how to buy a car? Buying services cost the client money as the client pays for the service to do the work for them. There is nothing wrong with that and a good idea if you want to avoid the negotiating process. It does not mean that you will pay less than you would if you did it on your own. The buying services that are free, still require you to show up at the dealership with a printed out copy of the price quote. The dealer then still has the right to say no to the offer. We say no to USAA offers every week. At least 50% of those customers still by the car from us at the higher price! Why? Because no dealer will sell it to them for the price on that sheet! Of course there are times where the price is fair for the customer and dealer and we take the deal. In our dealership we have gone to a one price for all structure. No negotiating, because the dealer hates the back and forth as much as the customer does. The bottom line is, someday, every dealership will sell cars for set price. That set price will include fair profit for the dealer so that he can stay in business and service the customer in the future. Carmax has proven it can work and they sell cars above market value. You are paying more for the experience. Please find another industry to write about. You, like most writers on the subject, truley have no idea what you are talking about. 14 years in the business/large Honda dealer/General Sales Manager
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