A Car-Buying Pro Speaks
Get a Bargain on Your Dreamboat
A car-buying pro reveals how to get the best deal in town
No-dicker auto dealerships are increasingly common today, thanks to the one-price-fits-all success of General Motor’s Saturn division and a growing number of other dealerships. But if the deals at such showrooms are fair, they are seldom great, say experts. And 85 percent of all new car purchases are still negotiated. But there’s no reason why your neighbors the Joneses should get a better deal than you. Here, W. James Bragg, author of In the Driver’s Seat : The New Car Buyer’s Negotiating Bible (Random House, 1993) and founder of the car buying information service, Fighting Chance, outlines what you need to know to push a dealer eager to negotiate to the limit.
Know the real cost of the car you like before walking into the showroom: forget the sticker price. The dealer invoice represents what the dealer really paid the manufacturer for the car. In addition, you need to know if there are any factory-to-dealer incentives – to dealers to get them to push a particular model. Dealers can hide incentives from the consumer and use the on promotions, or they can pass them along as discounts. The average range for factory-to-dealer cash on a vehicle is $500 to $1,000. Then there are “holdbacks.” This is extra profit that most manufacturers keep from the dealer until the car is sold, ranging from 2 percent of the base invoice to 3 percent of the full sticker price. “Once you know those three things,” says Bragg, “you are as close to nirvana as you’re ever going to be.”
Show the salesmen you know what they know: Bragg suggests making a worksheet with all your pricing information and taking it with you. “Tell the salesperson,” Bragg says, “that you know what your dealer invoice is and you know about this incentive. You expect him to make a profit, but you’re not going to send him on his next trip to Hawaii.” To calculate the price you should be offering, subtract any manufacturer incentives from the dealer invoice then add back the manufacturer’s price for any options or accessories. To allow fr dealer profit, Bragg then adds to this price about $200 to $600 for cars retailing from $10,000 to about $27,000. For cars in the high twenties to $40,000, hr adds $500 to $1,200. For a luxury car retailing for around $50,000, he adds $2,000 to $3,000.
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| Broadway. Photo by Elena |
Offer your price, and then bite your tongue: Let the salesman have the next word. “If you talk next,” says Bragg, “it shows you’re uncertain or insecure.” And if the dealer doesn’t like the price, give him your phone number and leave. Frequently, the salesman will stop you before you get in your car. Be prepared form him to ask. “How do you expect me to make any money?” Counter this tactic by reminding him that you know about the profit hidden in the holdback.
Know the supply and demand for the car you want: The industry trade magazine, Automative News, found at most libraries, carries sales figures for different makes and models. Knowing that a dealer desperately needs you to buy his cars can be a real confidence builder. You should tell the salesman when you know a model is not moving from the lot. Bragg says: “His mouth will hit the chair, because he is not aware of this. He’s just trying to figure out how he can hustle you.”Sometimes this information is not helpful, however. The demand for a Chevy Suburban is so intense that you literally have to wait in line and pay what the dealer asks, he says.
Work two or three dealers for the same car: Let each know that they are competing for your business. Bragg knows of people who have priced cars by fax and phone. He claims 40 to 60 percent of the dealers will respond to an offer given in this manner. The bottom line, he says, is who wants to sell cars this month or who wants to play games.
Negotiate the price before discussing financing and trade-ins: If you bargain on the price of your trade-in too early, the dealer may give you a great deal on the used car. But, Bragg says, the salesperson is trained to get this money back on the price of the new car.
Shop for cash and then the car: On average, a dealer makes more money from financing a car than selling a car. Bragg encourages car buyers to check on financing terms with their banks or credit unions so they can be sure that the dealer has put together a good financing package.
Research insurance prices: Knowing how much you are going to pay in insurance premiums can really help you determine the true price of a car.
Leave your checkbook and credit cards at home: This will help you avoid making an impulse buy. Also, be wary of giving dealers too much information. They may ask for your name, address, Social Security number, and driver’s license number. If you take a test drive, the dealer has the right to see your license. But he doesn’t have the right to photocopy it. The right information allows the dealer to run a credit report, which may divulge who else has requested one. If they don’t see any other car dealers on the report, they will think that you are not making the car buying competitive.
Don’t let sales teams play good cop, bad cop: Many times the salesperson will act as if he is on your side, competing with the sales manager to secure the best price. He leaves to discuss your offer with the manager and then comes back with sleeves rolled up, saying that he did his best but that the manager need a few hundred bucks more. Don’t let this back-and-forth routine continue. The object is to wear you down and keep you from buying a car from somebody else.
Instead, ask to speak directly with someone who can negotiate the price, or tell the salesperson that you know his game and to stop wasting your time. If it continues, tell him you will shop elsewhere. Typically, you can avoid these games if you reveal that you are an educated customer. In fact, they would rather sell you a car and get you the hell out of there, so you don’t contaminate their other customers.
Avoid being taken at the end of the deal: Here’s where the dealer tries to sell you extra undercoating, corrosion protection, and fabric protectant. You need this stuff like a moose needs a hat rack.
The same is true of extended warranties. Plan to drive your new car until its wheels fall off. If you decide to buy an extended warranty, only buy one that is sponsored by the manufacturer. You should offer no more than half the retail price and pay no more than two-thirds.
The extended service contract scam
They’re sometimes called service contracts and at other times extended service warranties. But by whatever name, long-term protection for a new car against future repair costs is almost always a bad decision. That’s because most new cars today are reliable and many come with manufacturer’s warranties that cover most major service problems you’re likely to encounter in a car’s early years.
But if you worry about buying a lemon, find the very prospect of maintaining a car daunting, or expect to be driving your new vehicle well into the years to come, find out what that extended service contract covers before signing on. You need to know not only how much more the extended warranty covers over the manufacturer’s basic warranty but also where you are allowed to get your repairs done and how the shop will be paid.
Even if you want an extended service contract, you don’t have to buy it where you buy your car. You should shop competitively. The price on an identical service contract is known to differ three or more times at one dealer’s comparing it with another dealer’s down the street. Even so, the average payout on a contract may be less than the dealers offers. Many studies indicate that companies offering extended service contracts spend only 4 to 15 cents on service for every dollar they charge for coverage. When it comes to extended service contracts, you generally don’t get what you paid for.
Let others do the dickering
If you hate negotiating with dealers let those who love it help you
Fed up with high-pressure sales tactics and unsure they are getting the best prices, many new car shoppers are turning to buying services. A few researches found that more than 1 in 20 new car buyers purchased a car through such a service, and most said they would do so again.
Working with a pool of dealers, the services try to secure the best possible deals they can for their clients. It is hard to track how much such services save consumers, but the best of them promise to return all fees if the customer finds a better price on the same model. Some services, however, receive financial benefits from dealers. They should, of course, be avoided.
CarBargains, on the other hand, is entirely nonprofit. Sponsored by the Center for the Study of Services in Washington, D.C., the group wll seek bids from dealers in your area and send you their quote sheets, showing how much above or below the factory invoice each dealer has agreed to sell. To close the deal, however, the customer must visit the lot to work out with the sales manager such details as the value of the trade-in. The service costs some money. They will deliver the car right to your driveway. Dealers take advantage of showroom visits to sell needless extras such as extended warranties and underbody protection. AutoAdvisor also believes in getting his customers the best prices and in helping them choose the right car. While this advice comes with a price, it can save a lot of time, the average car buyer with a college degree spends at least 16 hours shopping.
Where to get a fix on prices
Invoice prices can be found in different annuals, such as The Complete Car Cost Guide (IntelliChoice, Inc) or Edmund’s New Car Price Guide (Edmund Publications), etc.
