Our purchase did not go as expected. Despite our experience in negotiating home prices, our ideas and strategies didn’t really translate to the auto world all that well.
As Amy has pointed out in past posts, cars are different than houses. Different dealers can carry the exact same car (or at least nearly the same – close enough). So once a buyer decides which car they want, they can get it anywhere. We picked out the car we wanted and then started calling around to find out how much the different dealers would sell it for. It was initially difficult to make apples-to-apples comparisons, but once we pressed dealers on the costs beyond the purchase price we were able to evaluate the final prices.
In real estate, when there are multiple buyers interested in a single property, we set a deadline and ask all the bidders to give their “highest and best offer.” The idea is that everyone puts together their best offer – which includes both price and other terms – and then the seller picks the most attractive.
We decided to try this with the dealers. We were a motivated buyer ready, willing, and able to do a deal, and there were a handful of dealers with acceptable cars on their lot. We called around and asked them each to give us their best deal – and told them that we would be buying a car the following day.
They really didn’t get it. And in retrospect it was just too big a shift from the way they usually do business. One dealer basically just put their (weak) initial offer in writing. Another told me that he would beat anyone else’s price even though he would be taking a loss on the deal. I made the mistake of asking why he would do a deal for a loss (a pointless discussion) when I should have just made up a price for him to beat.
Apparently the standard operating procedure for car negotiations is to just keep going back and forth between dealers telling them the other guy offered a lower price until you get bored or they stop lowering the price. We didn’t do this, so I’m not sure how long it would take to get to the bottom. And I probably don’t have the patience to do it since they would most likely pitch a bigger fit each round.
After the failed “highest and best offer” strategy, we decided to cut the process short by going into one dealer and just getting the best price we could.
I called the “I’m taking a loss” guy to tell him we were on our way, and that we were basically fine with the price he quoted. He told us that the car was no longer available, that someone had put a deposit on it, but that we should come out anyway and we could work something out. Whether it was true or not, it struck both Amy and me as a tactic – that he was BS-ing. Since he only had one car on the lot that met our needs, and it was now supposedly under deposit, we decided to just do the deal with someone else.
He called a number of times throughout the day to keep me posted on the car’s status. First he learned that the customer who put down the deposit preferred a different color, so I told him which dealer had the exact car he was looking for. Then his manager called to say they could find the exact one I wanted, without changing the price. Finally he called the next day to say the customer decided they wanted a completely different car and that the original vehicle was available again. It was actually kind of amusing; but I digress.
We ended up going to the place that put their first offer in writing when we said we wanted their best price. Since they didn’t really get our “highest and best offer” strategy, we had no choice but to play their game. The “negotiation” was that we were ready to buy a car right now, that we wanted one of the cars on their lot (they had about 10 that were acceptable), and we wanted them to match the price of the other dealer, which was quite a bit less than their offer. The salesman made some exaggerated faces to show us that our offer was really low, but that he would try to get the sales manager to accept. Amusing, and definitely some Jim Carrey influences. They accepted our price, so we did the paperwork.
I think we paid a fair price for the car (based on internet research), but we probably could have pushed it lower if we had gone back and forth between dealers. The major signs of us leaving money on the table were…
– The “loss on the deal” salesman’s continued interest in us despite the aforementioned loss.
– The dealer we bought from accepting our first offer.
– The salesman we bought from complementing our negotiating skills.
The one additional thing we haven’t mentioned is that the internet sales managers seem like the way to go. They’re more comfortable dealing with people over the phone, which saves a lot of time. And they’re apparently (according to “the internet”) compensated based on units sold rather than traditional commission, which means they are more willing to negotiate price.
Definitely some good lessons for next time. When we’re ready for the next car (hopefully not soon) we’ll be prepared to play by their rules from the start.