Tuesday, March 10, 2009

My experiences buying a car

It has been quite some time since I've blogged; I'll get into why in a later post.

In these tough economic times, the last thing you might want to do is to make a major purchase. On the other hand, sometimes you have no choice, or at least are headed that way, and you may feel relatively secure in your employment (after all, the unemployment rate is under 50% -- how's that for looking on the bright side?). And if you are thinking of such a purchase, such as buying a car, it is possible to get a better deal now than in more prosperous times. So, with that preface, join me as I recount a recent adventure my family had.

Until recently, we owned a 9.5 year old Dodge Grand Caravan with around 125,000 miles on it. I had taken to recording maintenance and mileage information in a spreadsheet and was watching as cost of ownership per mile started to climb. The minivan was also giving signs of potential major expenses to come. So, we were faced with a choice: pay whatever it takes to keep the minivan in working order, waiting for plug-in hybrids (like the Chevy Volt) to come out in about two years, or take advantage of the various special offers from manufacturers to buy a car now and figure on buying a second-generation plug in (figuring that there will be long waiting lists for the first-generation ones, with people paying more than sticker price for them). Anyway, it wouldn't hurt to look.

Web Resources

Compared with 9.5 years ago, car buyers have a wealth of information available. Of course, there are the manufacturer web sites. In addition, dealers often have their inventory on-line, which at least gives you an idea of what type of equipment they order for cars they will have in stock (which is what you'll get the best deals on). Here are some of the most useful sites we found:

Edmunds
This is the "canonical" web site for determining both sticker and approximate invoice prices for cars, including options. It also has reviews, comparisons, etc. Dealer invoice is an important first step towards figuring out what a reasonable purchase price is.
Real Car Tips
There are a lot of tips on this site. One of its nicest features is a user-entered database of recent car deals people were able to negotiate. This can help you get an idea of what is reasonable to expect. They've also got a process for attempting to solicit bids from dealers via email, get them to bid against each other, etc. I tried this approach (it's similar to a fax version I tried 9.5 years ago); I can't say I was very successful. For the most part, even the internet salespeople refused to bid. I was able to cut down a bit on driving, by finding out what models dealers had in stock and get some idea of how resistant they were to coming down in price.
Car Buying Tips.com
This site also has a lot of advice, links, and a consumer price database. But the best part of the site was a spreadsheet that allows you to organize the MSRP, invoice price, incentives, holdbacks, etc. It also calculates a fair profit for the dealer, and gives a final price. It was very useful to go into a dealership, put down the spreadsheet, show them the invoice price, show the incentives, etc. subtracted from that, your allowance for a reasonable profit, and then the bottom line price. Of course, then the salesperson would argue the invoice price was wrong, that there weren't any holdbacks, and so on. But it was a start, and it gives you additional information to help you determine if your price goal is unreasonable.

Psychology

Almost all factors favor the salespeople in the process. They have the advantage of information (you can get most of this on the web, but they will still try to discredit what you find, obfuscate things, and generally do whatever to restore the imbalance in their favor), experience, controlling the type of product available (for example, by only stocking fully-loaded cars, requiring you to special order less expensive ones which you won't get as good a deal on, thus reducing the cost advantage), and sheer experience. Plus the various games they'll play during negotiations. Your advantage is that you have the money, and they need to money more than you need the car. You need to work on your frame of mind to take maximum advantage of this, since the only way to use this is to be willing to walk out of the dealership.

Our approach to this was similar to what you might do when looking for a college: a safety car. Pick a late model used car that you'd be satisfied with, that you can get a deal on that won't leave you feeling too cheated, and that won't give you any trouble. We went in with the idea that, if we couldn't get what we considered a good deal on the cars we were looking for, we'd get a used Camry. If nothing else, it would be reliable, and there wasn't as much room in its price for us to get screwed (at least, not as badly as a more expensive car). So, armed with that idea, we proceeded to visit car dealerships.

Process

We first spent some time telling dealers we were collecting information and not ready to talk deal yet, taking test drives, collecting business cards, drinking some free coffee from the various automatic espresso machines they had. I think this was useful for a variety of reasons, making us more comfortable in the dealerships, of course giving us first-hand experience with the cars. We also were able to get list of the actual cars that the dealers had in stock, including exactly what their options were. This is critical, because it's not possible to prepare yourself well for negotiations without doing your homework and pricing the particular car you'll be talking about, using the spreadsheet mentioned above.

We brought our spreadsheet to the dealer with our top-choice car and told them we were ready to buy. We showed the salesman our bottom-line price, with all of the steps towards figuring it out. At one point, we pulled out a credit card and said that if he could close the gap between his price and ours, we'd make the deposit then and there (this was on a weekend, and we would have to go to the bank to arrange for full payment). In our case, we got a verbal agreement and then, when we asked the salesman to print it all up, he came back out from the back office saying that the sales manager misunderstood something and that the price was no good; he only would agree to a higher price (this was after several trips back to speak to the manager during the negotiations, as if the salesman didn't have the authority to negotiate deals). So, we said we needed to pick up our daughters at their cello lesson, gave the salesman our cell phone number, and told him to call if he could clear up the misunderstanding.

End Game

This is an important principle: you must be ready and willing to walk away, or be prepared to pay extra. We felt we were being jerked around and so we left. We were ready to either go to the dealer with our next choice, or go for the safety car and feel satisfied with a reliable car and less expense. In this case, the salesman called back in about a half hour, and we got our new car for not much more than what we paid for our minivan 9.5 years ago.

5 comments:

  1. Good tips, i also found some more articles containing tips for buying a new car please take a look.

    Tips for buying new car

    Car buying tips

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  2. You simply have to be able say 'no, thanks at that price' at least once to the dealer. This gives them a strong message that you are serious about your research.

    You should also bring a piece of paper to the dealership and make sure you do all the math of the finance calculations yourself. The point is not that they will do the math wrong. The point is you will see exactly how the deal is structured. Do not be afraid to take the time to do this or look like a fool for mapping out your car deal in the dealership.

    My dad swears by this process, http://tinyurl.com/nxutm2

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  3. Oh, thanks! I'll be bookmarking this page and those sites that you've shared and pass those links over to my friends. I want them to know that this is one of the most important and biggest purchases that they're going to make. Oh, thanks to the Anon and Ju, too.

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  4. Buy used car you can save much money. If you want used car we will be arrange all. To get more information visit www.buyrightcars.co.nz/

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  5. Nice Post.. All is interesting!!! Thank!!!
    TUTSOFT - INFO BLOG

    ReplyDelete