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The Slickdeals Approach to Negotiating the Price of a New Car (Updated July 22, 2010)

thelnel52 2,541 March 26, 2010 at 02:29 PM
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Last Edited by thelnel52 July 22, 2010 at 12:44 PM
<p style="text-align: center;"><a title="car-photo" href="/blog/wp-content/uploads/2010/03/car-photo.jpg"><img class="attachment wp-att-1232 centered" src="/blog/wp-content/uploads/2010/03/car-photo.thumbnail.jpg" alt="car-photo" width="500" height="332" /></a></p>
By: Alex Craig (SD User: thelnel52)

<em>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...</em>
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<del datetime="2010-07-22T18:35:55+00:00"><strong>March 26, 2010</strong></del>
Updated <strong>July 22, 2010</strong>

<em>NOTE: The article originally featured <a href="http://www.carsdirect.com">carsdirect.com</a> as the first source for information. A user pointed out that <a href="http://www.truecar.com">truecar.com</a> 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.</em>

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.

<strong>1. Find a Starting Point</strong>
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)

<strong>2. Get Them Bidding</strong>
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,
your name
(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.

Sincerely,

Mr. Slickdeals

<strong>3. Declare a Winner</strong>
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

<a href="http://www.freedigitalphotos.net/images/view_photog.php?photogid=5">Image: Andy Newson / FreeDigitalPhotos.net</a>

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#31
Quote from vyahoo View Post :
Thanks. Your article was very good. But, can you share some inside stories of the dealerships ? What does a dealership feel when you use smartbuying techniques like these ? Is the salesman getting squeezed out ? Also, if you guys have noticed, the invoice prices and MSRPs are getting close to each other for many cars. Earlier, they used to be a good 2K apart. Nowadays, it is just around 1k. That is obviously some design there.

Invoice price is no holy grail.. it is just the dealer's list price. One would never know what the true cost of the car for the dealer was. Is there any trick to know that ? As a salesman, what were the numbers you were exposed to ?

The Dealerships/sales force - they got to eat too. Somtimes, I do feel sorry for them. But for too long, they have held the aces, pretty much mistreating the customers.

If you are trying to buy a car in Florida - there is a ridiculous fee of around $800 per car - DEALER ADMIN FEE!!!!.. And it applies for used cars too... That is the most absurd thing I have ever heard...
I wasn't high enough in the food chain to know any super-secret info. I can say that salespeople got what's called a "mini" (at my dealership it was $200). Commission was calculated as ((price paid) - (invoice))/4, with a floor of $200. So, if you paid invoice + $300, I get $200. if you pay invoice + $800, I would get $200. Invoice + 804 = $201 for me. I think that practice is relatively standard.

Used cars in a dealership are a totally different animal, and the incentives there are all screwed up, b/c there the commission is (price - (cost at auction or trade-in + $1k))/4. So there, if someone else paid too much for the trade in (almost certainly to get more for the new car), then that car would yield a smaller commission when you finally sold it.

As for the sticker being so close to the invoice, I think what's happening is that the invoice doesn't reflect a holdback or any sort of volume bonus (numbers that no one who isn't a manager at a car dealership really knows). Since it's so easy to find the invoice, the dealers obviously want the easy-to-find number to be as high as possible. If they can get someonel to come in and pay "invoice +200" and still make $3k on the car, that's a pretty good deal.

Not to go off on a tangent, but that's part of the reason I don't like the "negotiate from invoice up" strategy for negotiation- the invoice is just as meaningless as MSRP, and if you're going "up" instead of "down", you're going in the wrong direction.
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#32
I would like to mention the site www.fightingchance.com. I used the "package" to purchase my Hyundai Santa Fe and couldn't be happier with the result. The approach mentioned in the article is very similar to the one described by Fighting Chance but it also comes with a ton of other information including how well the model is selling, pricing, what secret factory to dealer incentives are occurring (no, they are not all on Edmunds), a ton of articles on car and warranty purchasing, and hands on help if you need it and if you are leasing they will also look over the lease to make sure everything looks ship shape. Hope this helps. No I am not a paid commenter just a very satisfied customer!
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#33
hangtime,

thanks for the link, I'll check that site out.
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#34
Quote from thelnel52 View Post :
I wasn't high enough in the food chain to know any super-secret info. I can say that salespeople got what's called a "mini" (at my dealership it was $200). Commission was calculated as ((price paid) - (invoice))/4, with a floor of $200. So, if you paid invoice + $300, I get $200. if you pay invoice + $800, I would get $200. Invoice + 804 = $201 for me. I think that practice is relatively standard.

Used cars in a dealership are a totally different animal, and the incentives there are all screwed up, b/c there the commission is (price - (cost at auction or trade-in + $1k))/4. So there, if someone else paid too much for the trade in (almost certainly to get more for the new car), then that car would yield a smaller commission when you finally sold it.

As for the sticker being so close to the invoice, I think what's happening is that the invoice doesn't reflect a holdback or any sort of volume bonus (numbers that no one who isn't a manager at a car dealership really knows). Since it's so easy to find the invoice, the dealers obviously want the easy-to-find number to be as high as possible. If they can get someonel to come in and pay "invoice +200" and still make $3k on the car, that's a pretty good deal.

Not to go off on a tangent, but that's part of the reason I don't like the "negotiate from invoice up" strategy for negotiation- the invoice is just as meaningless as MSRP, and if you're going "up" instead of "down", you're going in the wrong direction.
Totally agreed. That the invoice price has become meaningless, is more than obvious. I too never negotiate based on invoice prices. The dealers are glad to sell you at invoice most of the time.

How true is the computer print out they bring out to show some sheet full of prices they supposedly paid ?
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#35
Quote from hangtime79 View Post :
I would like to mention the site www.fightingchance.com. I used the "package" to purchase my Hyundai Santa Fe and couldn't be happier with the result. The approach mentioned in the article is very similar to the one described by Fighting Chance but it also comes with a ton of other information including how well the model is selling, pricing, what secret factory to dealer incentives are occurring (no, they are not all on Edmunds), a ton of articles on car and warranty purchasing, and hands on help if you need it and if you are leasing they will also look over the lease to make sure everything looks ship shape. Hope this helps. No I am not a paid commenter just a very satisfied customer!
HANGtime : Gr8. Can you share with us the model/yr/trim/options and the price you paid ?
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#36
Quote :
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.
dang
I was actually hoping this would be discussed in the article Frown

thanks for writing that up! I'll be buying a car soon so this will be helpful...I've never even considered doing a tactic like this
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#37
I'd also like to suggest Edmunds' Confessions of a Car Salesman: http://www.edmunds.com/advice/buy...ticle.html

It's a good read. Smilie
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#38
In a PM, someone asked about the Costco auto program. At the dealership I worked at, they had a "Costco price" that was the same thing as a couple others. (AAA maybe? I don't really remember) The Costco price was better than average, but not the lowest I saw people pay. In one case it was like "Invoice + $500", but I honestly don't know if it's model specific.
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#39
Quote from thelnel52 View Post :
In a PM, someone asked about the Costco auto program. At the dealership I worked at, they had a "Costco price" that was the same thing as a couple others. (AAA maybe? I don't really remember) The Costco price was better than average, but not the lowest I saw people pay. In one case it was like "Invoice + $500", but I honestly don't know if it's model specific.
Yeah, the Costco program isn't going to get you the best price, but then you have to consider the value of your time. It may be the best time/price combo available.
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#40
Quote from redmaxx View Post :
Yeah, the Costco program isn't going to get you the best price, but then you have to consider the value of your time. It may be the best time/price combo available.
That's a good point. If any of the other approaches are too intimidating, at least the Costco program ensures that you won't get ripped off.
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#41
How little above dealership cost have you seen cars go for?

Obviously you can't shoot for breakeven or breakeven plus $20. But, how much exactly above dealership cost?
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#42
Quote from Hawk2007 View Post :
How little above dealership cost have you seen cars go for?

Obviously you can't shoot for breakeven or breakeven plus $20. But, how much exactly above dealership cost?
Hawk,

I don't think there's a really good answer to that question, due to supply and demand. When gas was $4/gallon, you couldn't buy a Prius for MSRP; you could get a Suburban for far below invoice without even trying.
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#43
Has anyone tried this site: amexnetwork.zag.com, i saw some cars below the invoice price
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#44
Quote from SkyyPunk View Post :
Similar to the aiming for the end of a quarter...if you dont know when their quarter ends, or just want a new car sooner, buying as close to the end of the month is best since they will usually offer a little more incentive to help make their monthly goals.
I concur with this suggestion 100%. Every sales person and sales manager at every dealer wants to raise his or her sales number before the month ends. At the end of the month, they want to close a deal more urgently than you need to buy a car right then. And that gives you more power. You just have to be prepared to take delivery before the end of the month. The only thing standing in the way of closing the sale must be their willingness to meet your price.
Last edited by Steeldeals March 31, 2010 at 11:30 AM
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#45
I always buy off of the car newspaper ads that come out. They are the loss leaders. I always call first and make sure they have the exact model still in stock and make sure they don't have dealer add ons. I just recently bought a Ford Focus for $11,900 that had a MSRP of $17,800. I bought an F-150 for $19,900 a few years back off of an ad with an MSRP of $32,400. I sold it after driving it for 3.5 years and 38,000 miles for $17,900. All of these cars are new.
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