Monday, February 28, 2011

Getting A Good Deal Buying A New Car - Part 3 of 3

In Part 1 of this series, I revealed that my wife and I decided to get a new car and decided to engage in a competitive bidding process with several local dealers.  In Part 2 of this series, I described how the bidding process worked out in practice.  In this final Part, I'll tell you about something that blew my mind about the purchasing process, as well as some last-minute pressure from dealers and some bottom line thoughts!

Different Dealers - Same Car

Here's another thing that absolutely amazed me - during the bidding process, I found out that several of the dealers were actually bidding to sell me the same car - and at different costs!!!  I had an image when I contacted the dealers that they would be bidding based out of their own inventory on the lot.  It turns out that is not the case.  It seems like the first thing that they do is just take my desired car and plug it into an automated system to see if any of the dealers in the area have a car that I might be interested in - and all of the dealers in the region freely share their cars!

I kind of caught on when the third dealership offered me the same alternate car in a different color with a very specific and rare set of options, and I asked them for an explanation.  Later, with regard to other dealers, I used the little bit of information that I had to get further information about the process.  The dealers were not even going out and checking their lots - what they had on the lot was irrelevant - it was just for show!  They had a master listing of all cars in the region, regardless of dealer, and they were just finding a match and giving me their specific quote on it.  It seemed like they actually had software at each dealership that calculated all of the various manufacturer programs and dealer-specific margins for that dealer and output the lowest price that the dealer would pay.

The upshot is that for the same car - not just the same model, but the actual same car - the dealers bid anywhere from $2500 under invoice to $700 under invoice.  Same car - different prices depending on who I would buy it from.

The other thing that blew my mind was to consider this from the dealer's angle.  Depending on the specific manufacturer program that the dealer who sold me the car was operating under, selling me the same car might reap two different dealers two different profits!  Initially, this just seems bizarre.  However, I suppose that they must sell more cars this way.

The Purchase
After getting the "winning bid" from the ballsy salesman, I shopped it around to other dealers.  As I mentioned above, the ones that previously promised to match my best offer backed out - all of them (there were about 3 or 4).  Further, most of the losing dealers claimed that it was impossible to sell the car to me at that price and that the bid was bad (either I was wrong or BS-ing them or the dealer making the bid had made a mistake) or that the dealer that made the lowest bid was just going to get me into the dealership and then raise his price.  They asked me whether I instead wanted to deal with an "honest" bid up front and go with them.

After getting the same message from several dealers, I admit that I was a little nervous.  However, I figured I would just drive out to the winning dealer and if he tried anything I would go with dealer #2.  I met with the ballsy salesman and he noticed that I was somewhat cautious and wanted to go over everything very thoroughly.  He kind of laughed and mentioned that "the other dealers probably told you that I was going to run off with your money, right?"  I admitted some concern to which he asked if I was aware that manufacturers have different programs based on volume.  I agreed that I was aware (not that I knew the specifics, but it seemed like those who sell more cars get them from the manufacturer at a lower price) to which he responded that his dealership has been concentrating on Internet sales for years and has about 5 times the volume of a typical dealership.  I nodded politely, not quite believing it, but willing to go forward.  However, I did note that in the approximately 30 minutes I was there filling out paperwork, at least 3 other Internet sales came in.

I signed the paperwork, made sure I got everything that I wanted in writing, left a small deposit, and agreed to return for the car in 48 hours.  When I returned, they had the car.  I checked it out as thoroughly as I could and it seemed great - and it has been great for 3+ years.

A few of the other dealerships did follow up with me a couple days after the sale just to see if the sale had gone through, but everything was great with my new car.

Bottom Line
The process that I used worked great - even better than I hoped for - and I highly recommend it.  Further, like I mentioned above, I leaned from this process that new car pricing is so utterly non-transparent that unless you take competitive bids you really have no idea whether you are getting a good deal or not.  I will absolutely be bidding it out like this the next time I want to buy a new car.  Also, giving the gift card to the salesman that spent time with us really let me appreciate my great deal without feeling like I was ripping anyone off - that felt like $50 well spent - and it was extremely minimal compared to how much I saved.

Finally, The Millionaire Next Door has paid for itself about 1000 times over - AGAIN!  I still highly recommend the book - here's a link if you want to buy it for yourself.

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