The Slickdeals Approach to Negotiating the Price of a New Car (Updated July 22, 2010)
By: Alex Craig (SD User: thelnel52)
Preface: There have been numerous threads in the past (on this site and on others) that have dealt with the topic of buying a new car. The approach that follows is the author's (who worked as a car salesman for all of a summer) suggestion, based on personal experience, advice from elsewhere on the web, and basic econ theory. We plan to update this article periodically if users have suggestions for improvement. Although it is a work in progress, it has been verified to work and is more effective than what the majority of new car shoppers end up doing. Also, stay tuned, as more "Slickdeals Approach to..." posts are coming, covering other auto topics (selling/buying a used car, financing a car) as well as other general financial topics...
Updated July 22, 2010
NOTE: The article originally featured carsdirect.com as the first source for information. A user pointed out that truecar.com actually does a better job- I gave the site a try and found that (1) the prices seem to be lower for a number of different cars and (2) there is much more information, including holdbacks, average prices paid, etc. That's why, in the update, I changed the links. Also, I reached out to TrueCar.com and a representative of the company will be here, in this thread, starting Friday the 23rd of July to answer any questions that you guys might have about TrueCar specifically or car buying in general.
Some people know offhand how many lb-ft. of torque a Mustang GT has and how long the Prius' battery is under warranty. Without even thinking, they know the tissue on a 3-series, what a money factor of .00015 translates to in terms of APR, and when the Hyundai Genesis is due for a redesign. They know how to find if a dealer is close to a volume bonus or if he's struggling to pay his lease, and they know how to figure out how many days a particular car has been on the lot. Armed with this information (and tons more), these people can walk into a dealership, stare into the dealer's soul, and get the absolute best price. If you're one of these people, skip to the end of this post, because it will bore you, but please stay around to answer some questions below.
For the rest of us, the Slickdeals approach to negotiating the price of a car, although not as effective as the soul-reading approach, is beautiful in its simplicity. I worked as a car salesman, and about 95% of the people who bought from me could have done better if they had followed the approach outlined below. The overriding goal is to get the dealers competing with one another for your business; there are only three steps.
1. Find a Starting Point
Once you know the model and the options you desire, go to www.truecar.com, build the car, and SAVE THE PRINTOUT (this will be handy for the rest of the negotiation)
2. Get Them Bidding
Send a message to every dealer of that make within a 100-mile radius (this can be done by going to the brand's website and searching, most of the time there is a "contact us" button) that includes:
a salutation (better if you can find a specific name, but "Fleet Sales Manager" is ok)
the specific model and options you desire,
the date you will purchase the car,
an indication that you are soliciting "bids" for two days
an indication that bids should not include taxes or dmv fees, but should include everything from the dealership (including destination charges, etc.)
the TrueCar price,
your phone number and email address,
(use the letter below as a guide):
Dear Fleet Sales Manager,
I am planning on purchasing a new '10 Ford Edsel EX, with the comfort package. I am indifferent to the color. For the next two days, I am taking bids- please contact me with your price for this car, with these options, inclusive of the all fees except for tax and dmv fees. If you have the lowest bid, I will come in on Monday morning at 11:00 to take delivery. As a starting point, I have a bid from TrueCar of $21,324 on a car with an MSRP of $24,333, including destination charges.
I can be reached at 909.234.5678 or by responding to this email.
3. Declare a Winner
Wait two days- Save emails, and if a dealer calls, be polite, but as direct as possible. Ask "what is your bid and what is the MSRP of that particular car?" and write the numbers down. Next, ask "what is your name and do you have a direct number?"- write that information down, too. Also note the time and date that the call took place.
Once all of the bids are in, hopefully there's one clear winner. If no one could beat TrueCar, then just go with TrueCar dealer. If you end up going with a dealer, email the fleet manager and say "Your offer of x for y with z options was the lowest. Please let me know the VIN and I would like to come in Monday to take delivery". When you come in, make sure to have a copy of this email and his response (or your notes from the phone conversation), just in case there's a "misunderstanding".
Note 1: The 100 mile radius suggestion is applicable if you life in an area that isn't particularly densely populated, such as the central valley of California. If you live in an area with car dealers every five miles, then you can probably reduce that number. If you live in North Dakota, then you might expand it to 250 miles.
Note 2: You can also include more than one make/model with your note. In fact, it's preferable that you do. Just think- if you're buying a 52" LCD tv, you don't just go out looking only at Samsungs. You probably find prices for a Samsung, a Sony, a Panasonic, an LG, and a Vizio. It's tough to tell what the best deal is until you know what the prices are relative to one another.
If you have a better method, or suggestions to make this method better, please post below.
Thank you Andy Newson for the image above
Image: Andy Newson / FreeDigitalPhotos.net
His name is Lee Morrel, and he has been in the automotive industry for over 18 years in a number of different capacities- retail, PR, media, etc. Obviously, he has an agenda (promoting truecar.com), but I think that having someone who really knows what he's talking about will be interesting for all of us.
Following is post from MrBlackpcs2 from FW thread
MSRP= Sticker(includes Dest. Charge)
Invoice= Can be found on Edmunds.com(include options)
Rebates= Can be found on Edmunds.com
Holdback= Can be found on Edmunds.com
Est Tru invoice= Invoice - Rebates - Holdback
tax= ?% x True Invoice
Tags= whatever your states charges
Low ball offer= True Invoice + tax/tags - $2,000
Target Price= MSRP - rebate or Sale price - Low ball offer / 2 + low ball offer(this is basically the formula I use)
Confidence is your biggest asset! If you dont believe you are going to pay invoice they will smell your fear like a pack of wild dogs. The car business is hurting right now. Dealers are happy with their "holdback". Its the salesman that are starving. STOP NEGOTIATING WITH THE SALESMAN! Its a fact that the average car salesman only sales 8-10 cars per month. Its also a fact that a "flat", the money a salesman is going to make on a new car sales with no profit(invoice) is $50-$100. So do the math thats only $800-$1000 in commission per month. Thats why dealer are always hiring salesman. Its also why salesman are constantly getting fired.
GET THE SALESMAN ON YOUR SIDE! Tell him up front he's not gonna make any money on you, this will be an invoice deal. Tell him you'll slip him a $100 after the deal if you get your price. So when he goes up to the "salesdesk", he's fighting for you. When the salesman comes back to you with numbers on the paper, they call it an "a" sheet. Cross it out with a big "X", flip it over right your number on the back, next to it write "T/T out the door", then underline it. The first number you write should be at least $2000k below invoice. His manager will either send someone over or come his self. This is a good sign it shows that you werent talking to a "closer". He might even write a note, asking where r you getting your numbers. If this happends, write "I was thinking the same thing about you numbers".
Typically his second number will be $2000 above invoice. If it is, you write," Split the difference, with T/T, out the door" They usually will jump at it.
What I am telling you is based on 5 years in the business and personal purchases.
DONT BE SCARED TO WALK AWAY.
CONFIDENCE IS KEY.
DONT DRIVE THE VEHICLE FROM THE DEALER YOU ARE BUYING FROM.
DONT DISCUSS CREDIT, FINANCE, INTEREST RATE, ETC BEFORE YOU GET INVOICE PRICING.
(THESE ARE BUYING SIGNALS, THEY WILL SMELL IT LIKE BLOOD TO A SHARK)
DONT LISTEN TO YOUR FRIENDS. EVERYBODY CLAIMS THE GOT A GOOD PRICE. MOST DONT KNOW WHAT INVOICE IS.
DONT ANSWER ANY QUESTIONS DURING NEGOTIATING FOR INVOICE.
(YOU MAY GIVE AWAY A BUYING SIGNAL WITHOUT KNOWING)
SHOPPING DURING THE LATTER PART OF THE MONTH CAN WORK TO YOUR ADAVNTAGE.
(DEALERS HAVE A PROJECTED SALES IN UNITS THEY NEED TO MEET, SO DO BANKS. THEY TYPICALLY WILL WORK BETTER DEALS AT THIS TIME TO MAKE THEIR MONTH)
IF YOU SUBMIT YOUR EMAIL ADDRESS TO A DEALERS WEBSITE LET THEM KNOW "NOT TO CALL YOU, NOT TO NEGOTIATE, YOU WILL ONLY ACCEPT INVOICE W/TAX&TAGS, IF THEY DO CALL YOU, YOU WILL NOT DEAL WITH THEIR DEALERSHIP, IF THE EMAIL YOU ANYTHING OTHER THAN INVOICE, YOU WILL NOT DEAL WITH THEIR DEALERSHIP" THIS IS THE MOST EFFECTIVE WAY TO NEGOTIATE, AS OPPOSE TO IN PERSON.
THEY KNOW IF YOU NEGOTIATING THIS WAY YOU ARE A SERIOUS BUYER.
THEY WANT YOU IN THE DEALERSHIP SO THEY PLAT THE "GAME" WITH YOU. ITS SET UP TO WORK AGAINST YOU. LIKE A CASINO THE HOUSE ALWAYS WINS.
MOST DEALERS HAVE THE "NEGOTIATING" TABLES IN THE MIDDLE OF THE DEALERSHIP OR OPEN OFFICES.
(THIS CREATES A "BUYING FRENZY")
IT HELPS TO HAVE YOUR FINANCING ALREADY DONE BEFORE YOU SHOP FOR THE CAR.
*THIS IS SERIOUS PEOPLE. READ THE THREADS FULLY BEFORE YOU POST TO THIS THREAD. IT REALLY SHOWS WHEN YOU POST WITHOUT READING THE THREAD FULLY.*
Quote from ilikebtmoney_from_fatwallet :
Ok, this is assuming this is sent to dealers two days prior to expected closing date.
I have decided that I would like to purchase the following car:
2010 Hyundai Genesis 4.6L
05 - Technology package
CT - Cargo tray
IC - iPod cable
Black Noir Pearl
Of these features, the only ones I would be willing to accept a purchase without is the cargo tray. Otherwise, please be sure you have, or can obtain this car quickly through a dealer trade.
My zip code is 12345 for pricing calculations, and I will be paying cash for the car. Please provide me with an out the door quote today as I will be purchasing the car by tomorrow to obtain the $1,500 Valued Owner Coupon that is offered, and to give you enough time to ensure a dealer trade if it is necessary on your part.
Also please provide me with your phone number so I can call you once I receive the quote. To be fair, I am requesting pricing from various dealers so please be sure to obtain authorization from your manager if required before quoting a price. I do not wish to waste anyone's time and I would appreciate a confirmed offer on your part as well.
If necessary, you may reach me at the following number.
Thank you, and good luck!