Although this post has nothing to do with real estate it’s still about saving money – one of my favorite past times. Most people dread buying a new car. I love it because I get to see just what kind of a deal I can get. As you know, I hate to see people overpay for a product or service.
Over the years I’ve used a variety of tricks to get the best price on a new car with great success:
- Wait until the end of December to buy when the dealership is trying to hit their targets.
- Wait until the end of the model year when the dealer is trying to get rid of their “old” new cars. Maybe the manufacturer has special incentives in place then also.
- Buy the demo model and get an extra discount
- Decide what I want with minimal sales person involvement. Then call the sales manager directly and negotiate over the phone with the promise that I will immediately drive over there to sign the paperwork.
- Keep the trade-in discussion separate so you don’t confuse the negotiation
My wife just bought a new car so the plan was for her to figure out what she wanted and then wait until the middle of December for me to negotiate the best price and close the deal. Since the last time I bought a new car the available tools have changed a bit so I had to revise my modus operandi. Also, since my wife had spent some time with a particular salesperson I felt obligated to handicap that dealer – i.e. there’s a good chance I could have shaved another $400 off the deal but I wasn’t willing to screw the sales person.
The two main Web sites I used were Edmunds.com and TrueCar.com, both of which offer “price transparency” – manufacturer’s suggested retail price, dealer’s invoice, and what other people are actually paying for the car you want. For the vehicle we wanted the MSRP was around $30,600 and the dealer’s invoice was around $28,800. Normally the average price paid is higher than the invoice but for some reason Edmund’s True Market Value (average price paid) came in around $28,100 while TrueCar’s price came in around $28,700.
Now, the last time I bought a new car (7 years ago) I used the invoice as the basis of my negotiation and might have ended up paying slightly more than invoice. But back then the invoice was 10 – 15% below the MSRP. This invoice was only 6% below, which I find suspicious. Maybe the manufacturer’s have since padded their invoices so that dealer’s can get higher prices. The truth is that there is so much funny money floating back and forth between the dealer and the manufacturer that you don’t know what the real prices are. That’s why it’s nice to know what other people are paying.
However, Edmund’s also has a feature that allows you to painlessly send off a price quote request and in doing that I discovered that one dealer claimed to be able to do this deal for $25,800, after I told them their pricing sucked, and another claimed they could do it for $26,200. I had managed to get our dealer down to $26,200 also so I felt pretty good about that pricing and that’s where we did the deal.
Note that this price was well below the average prices paid, which causes me to wonder what kind of lag there might be in reporting those averages. In other words, if a manufacturer drops a price or starts offering new incentives how long is it before that shows up in the averages?
One thing that surprised me during this negotiation was that, unlike in real estate, the dealers actually prefer you get a loan. The reason for that is they get some kind of credit for originating the loan and if the buyer keeps the loan outstanding for more than 6 months the dealer can sell the loan for a profit. In order to help them out I agreed to getting the loan at a really low interest rate but I notified them up front that I would pay off the loan the first chance I got. They still wanted to originate the loan because somehow it made them look good with the manufacturer’s finance arm.
As I said earlier, if I wanted to be ruthless about this there is a good chance that I could have cut another $400 from the purchase price. But that would have required more work on my part and I would have had to screw the salesperson. Being in a commission-based business myself I was sympathetic to the salesperson’s situation.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.