Photo: David HilowitzOur minivan is ten years old, so we went out to buy a new one this weekend.
In Freakonomics and SuperFreakonomics, we write a lot about how the Internet has changed markets in which there are information asymmetries.? Buying a new car gave me the chance to see first-hand these forces at work in the new car market.
I was not disappointed.? We already knew what kind of minivan we wanted.? Within 15 minutes and at no cost, using sites like TrueCar and Edmunds, we not only had a good idea of a fair price to pay for the car, but also were able to notify some local car dealerships that we were interested in quotes.? Just a few minutes later, one car dealership offered to sell us the car at $1,300 under invoice.? That seemed like a good place to start, but before we could even round the kids up to drag them to the dealership, another dealership called, and when they heard the offer from the first dealership, they beat that offer by a few hundred dollars.? I called the first dealership back and got voice mail, so we headed off to the second one.? I figured we were still far away from a final price, but we were off to a good start without even leaving our house.
I learned a lot about buying cars the last time we bought one – the various lies that dealerships tell with respect to invoice prices, the ridiculous game of cat and mouse with the salesperson trotting off to talk to the manager, etc.? I abhorred the process the last time we needed a car, but this time, thinking about it more intellectually, I was eager to take part in the elaborate ritual associated with buying a new car.
(Perhaps my willingness to haggle stemmed from my unlikely triumph the last time around.? I had gotten an estimate faxed to me — this was pre-internet — of what a fair price was to pay for the car.? Stupidly, I left the sheet of paper with the estimate at home, but I thought I remembered what it was.? I fought hard for that price: threatening repeatedly to leave, back and forth and back and forth, and finally I got the dealer within a few hundred dollars of the price I remembered.? When I got home, I realized that I had transposed two digits, and the true fair price was two thousand dollars higher than the one I had managed to bargain.? Had I known the true number, I would have gladly accepted it…leaving that fax at home was worth thousands of dollars.)
So we got to the car dealership and we sat down to bargain.? He explained to me that the price they were offering was well below invoice, discreetly showing me some pricing documents stamped “confidential,” emphasizing how much money they were going to lose on the car.? I replied that he knew as well as I did that the invoice price he was quoting me was not what the dealership paid for the car.? I asked him to simply give me his best offer.? He disappeared for a while, ostensibly to talk to his boss, but probably to catch up on who was winning the baseball game.
He was gone just long enough for a third dealership to email me a price quote.? This one was $1,500 lower than the current best offer from the dealership where I was sitting.? He came back and said the best he could do would be to go $200 lower.? I said, “That’s not going to work because another dealer just offered to beat that price by over $1,000.”? I handed over my phone to show him the email.? He disparaged the other dealership for a while, and then he went and found the boss.? The boss assured me that their last offer was the very best they could do – it was a generous offer for a dozen different reasons.
I said, “That’s all fine, but if you don’t do better, I’m going to walk out of here and go to the other dealership.”
By my estimation, we were now about halfway through the mating ritual.? In about 15 minutes, after a lot of huffing and puffing, we would get the car for the price the third dealership had offered.? That would still probably be paying way too much, but I was willing to accept that outcome.
“So I’m going to walk out,” I reiterated.
“Okay,” the manager said.? “If it doesn’t work out at that other dealership, come back and we will sell you the car at the price we offered before.”
I stood up and began to gather the kids, all part of the tough bargaining act.? They simply watched me, as if they had forgotten that this was all part of the ritual.? Even if they had forgotten their lines, I still remembered mine.? “We both know that if I walk out of here today, I am never coming back.”
To which the guy simply said, “We’re willing to take our chances on that.”
And we walked out.
I was shocked.? This dealership had sent me a price over the internet, come down only $200, and then smiled as we left to buy a car from another place.? I figured we must be getting a good offer from that third dealership if these guys weren’t interested in matching it.? I called the third dealership on the phone, but?I was so disappointed that the first dealership abandoned our mating ritual that I didn’t have the energy to start a new dance.
I accepted their offer without bargaining.? We pick the car up on Tuesday.
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any reason you decided to buy new? We always buy used, usually cars that are a year or two old and are being sold off by car rental companies. They have to update their fleet every year or two anyway, and they offer a good price and the cars are usually in great condition.
As mentioned Truecar is a great resource.
I used to drive a Mercedes 190 2.3, which I was getting a little tired of, I went down to the Buick dealer to see about buying a Buick.
With the help of an eager young salesman I finally found a car to fall in love with. An almost new white Riviera with a blonde leather interior…a repo, so it was a deal. It was $18,000 which I could well have afforded if I were to get a fair trade-in on my Mercedes Blue-booked at $9,000.
The young and eager salesman asked me to bring the Mercedes around to the lot and then turned me over to his “closer”, who appeared from a back room and glared at me.
I said, “If you can give me a fair trade-in on my Mercedes, I would like to buy that white Riviera over there.”
He took the cold stump of a cigar out from between his teeth, stared through me and snarled, “Get out of here…you’re wasting my time!”
I was so taken aback by this that I thought he hadn’t heard me. I looked around to see if he might have been talking to someone else, then repeated what I had said, “Ah sir, if you can give me a decent trade-in on my Mercedes, I would like to buy that white Riviera over there.”
He again glared at me in a threatening way spat out a piece of cigar and snarled, ” You wanna deal…or don’t you?” I softly said the same general thing about a trade-in and wanting the white Riviera, and he growled back, “get off my lot….you’re just wasting my time….”, And turned around and left.
That’s what I did too: Turned around and left. When I bought the Infiniti, the dealer sent a dozen long-stemmed red roses to my house.
I would have thought that this was a unique experience but a couple of months later my boss told be that the same general thing happened to his sister and brother-in-law. Somebody at Bill Murphy Buick threw them out of the showroom when they wanted to buy a Skylark. Some kind of unique salesmanship I guess.
I think that you lost by purchasing a new car rather than fixing up and keeping the old one. I have a 12 year old Chrysler minivan with over 170k miles on it. It has been far cheaper to pay for the maintenance (which has been minimal so far) than to shell out ten of thousands of dollars for a new one.
Especially with kids, it doesn’t pay to have a new car.
Email haggling has made car buying amazing! I canvased over 10 dealers throughout the state and got exactly what I wanted at the best price (and down the street). You know you are close when the dealers start saying “If anyone gives you a better deal than this you should take it”
+1 to gpo from comment #3. If you physically go into a dealership without a deal already hammered out via email, you aren’t doing it right. Also, search wide (which is easy via email); contact a minimum of 5 dealerships. Some will be price competitive (usually those located inner city); some will not be (usually those located in/near the wealthier suburbs). In my experience.
@Drill-baby-drill Drill Team
The cars do have a sticker price. If you don’t want to haggle, just pay that price. For some people, the aggravation of haggling is with the hundreds of dollars saved, for some it’s not. Of course, the non-hagglers are just subsidizing the hagglers.
Take this simplified example. It’s the same as shopping at a Best Buy store vs online. Best Buy is simple, with a fixed price. To buy online takes time (both to find a seller and to receive the product) and has hassle, but results in a lower price. The only difference with haggling is that it’s the store offering the different buying experiences and prices, rather than a collection of stores.
Auto retail is the only business where you can sell a $40,000 product and the dealerships nets $500. I couldn’t run my business that way. I know they make a ton on service, parts and preowned but I actually feel badly for the ritual sales process that has evolved with car dealers.