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Should you use a car-buying service?

Car-buying services will find and negotiate the purchase of your next new car, sometimes free of charge. They'll definitely save you time and might save you money.

By MSN Money Partner Aug 16, 2013 1:13PM

This post comes from Michael Koretzky at partner site Money Talks News. 


MoneyTalksNews logoThe last two new cars I've bought, I never spoke to a salesman.


I bought my current vehicle in 2004 after emailing every dealer within a 50-mile radius of my house. I haggled via email with a half-dozen of them -- probably spending about the same amount of time it would have taken to visit a couple of showrooms.


My car before that, a brand-new 1996 Oldsmobile, was an easier experience. I simply hired a car broker I learned about from a co-worker. 

The broker called me, asked what I was looking for, discussed prices and options, and went on his merry way. A week later, he found the perfect car at a near-perfect price. He even had it delivered to the parking lot at my office building.


Best I can tell, I saved a couple thousand buying a car online, and slightly less buying a car through a broker. Whether either option is right for you depends on several factors.

If you want to try a new way to buy a car, here are six things you need to know first:


1. Not all services are the same

The broker I hired didn't cost me a dime. He made his money by charging the dealer. (Some brokers charge the customer a fee instead.) Brokers often have close relationships with a handful of dealers in the area who are willing to give them a discounted price because of the volume of sales.


I could've gone to a car concierge, who does the same thing. However, concierges generally charge customers a flat fee or a percentage of the savings they generate for the buyer. So what's the advantage? Generally, a concierge scores deals by casting a wider net. As the name implies, concierges excel at buying luxury or harder-to-find vehicles.


Finally, there are club car-buying services available through membership organizations, such as the AAA Auto Buying Service and the Costco Auto Program. Many credit unions also offer this service. It's a free perk of membership, but these services are limited to the dealers that sign up with the organization.


Which service you select should depend on the answers to two questions:

  • How is the service paid? If the service is getting paid by the dealership, what gives it the incentive to find you the best possible price?
  • What services are included? Will the contract be ready for your signature? Will the car be delivered to you? Is the service simply introducing you to potential sellers? What else is involved?

2. Try selling your old car on your own

In my case, the car broker offered to include my old car in the deal for a new one. But I quickly figured out I could sell my ancient, no-frills Nissan hatchback on my own for a few hundred more. Then I had a change of heart and let the broker handle the trade-in. Why? Because I was willing to lose some value if I could gain some free time.


Do this math for yourself. If you're willing to put in the hours, sell your trade-in and pocket the cash. If it's too much hassle -- and if you live in a small town where your customer base may be limited -- consider doing what I did.


A young man buying a new car © i love images, Cultura, Getty Images3. Do your own research

A broker, concierge or buying service can save you legwork, but you still need to do your homework. Spend some time online studying what vehicle you want, with the particular options you both crave and could do without. You want to give the service as much detail as possible.


In my case, the broker said I would save both time and money if I didn't care what color my Oldsmobile was. So I ended up with a red car, which was fine with me.


4. Line up your financing in advance

Shop around and find the best interest rate you can get. There's no point in shopping for a car, or anything else, until you know you have the money to buy it. Shopping for a car before securing the loan is like stepping on the gas before you're in gear: You may make a lot of noise, but you're not going anywhere.


5. Ask what happens afterward

What happens if you get a lemon? What if you just don't like the car when you show up on the lot or it's delivered to your door?


Also, if you want to keep it maintained by a dealership, where's the nearest one that services your make?


Besides the potential savings, a major advantage to embracing one of these services is sparing you time and hassle. If you don't ask these questions upfront, you could be facing complications and demands on your time after the sale.


6. Decide what your time is worth

If I had to do it all over again, would I use another broker or buy on my own? At the time I called the broker, I was starting a new job, so it was invaluable to me to have someone else handle the purchase -- even worth forgoing a few hundred dollars on the sale of my old car -- so I could focus on proving my value at work. And I ended up getting a great deal on the car.


Also, there wasn't the Internet we have today, so hunting down the best deals on a new car and selling my old car would have been a time-sucking task. By 2004, that situation had changed. If you're willing to put in the time online, you can save more -- especially if you're buying a popular, mid-priced model that many dealers have stacked on their lots.


As for me, after talking to Money Talks News founder Stacy Johnson, who's wealthy and has never bought a new car in his life, I think I'm going to buy "pre-owned" next time.


Have you used a car-buying service?

 

More on Money Talks News:

3Comments
Aug 16, 2013 10:16PM
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I bought a 2011 Nissan Xterra through a local dealership using Truecar.com and saved about $8,000. My trade in was total trash and they still gave me a respectable figure. This was the first time in 40+ years of buying cars that I had fun, enjoyed the entire operation and was more than willing to tell my friends about the folks at this dealership and my experience.
Aug 19, 2013 9:40AM
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Anyone stupid and/or lazy enough to use a car broker (Wow, they'll do it for free? Is this like a charitable organization?) deserves what they get. Anyone who thinks they can save as much as $8000 dollars buying a new car via one method vs. another is also totally off their rocker. Anyone who would spend their time e-mailing 50 dealerships is an idiot. The truth is that if you take the time to do a little research before you shop you won't spend anymore than 100-300 difference between one dealership or another. Also, if you establish a relationship with the local dealership of the brand you prefer, I guarantee he will meet or beat any price you have from anyone else - just ask them. Sorry Money, please pay your junior reporters to do something than repeat BS that you recycle every 6 months.
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