Buying a Car

BUYING A CAR
Testing your negotiation skills against the best (or worst) in the business

The basics
 Every few years, the game changes
 Easier and easier access to information drives new processes
 Invoice prices used to be hard to get, now they are commonplace  Incentives have moved to “Dealer Holdback” and “Factory to Dealer Incentives”

 First, analyze your sources of power relative to the dealer’s

Your interests
 Options, Price, Service, Relationship  RULE #1: The more things on the table to negotiate, the harder it is to get a good deal
 Leasing, Financing, Trade-ins, Extras  “Payment per month” takes your attention away from the value of the good  As much as possible, focus ONLY on the purchase price
 This may mean taking a loan separately to pay for the car  Dealers often make more on the extras than the car

Seller’s interests
 Quotas
 Dealership interested in overall profit and moving old inventory off the lot
 Dealers get financing and new cars based on quarterly sales

 Individual salesperson interested in quotabased bonus (typically monthly)
 Self-interest usually wins out

 Commission  Service Form Responses  Future purchases (somewhat)

Timing strategy
 Rule #2: Certain dates are more likely “hits” for you in terms of their needs…pay attention to the calendar!!
 Last day of the month  July-September: new inventory is arriving  Dec. 31st (end of month, quarter, AND year)
 Plus, dealerships are likely to be empty  Plus, cars have low “curb appeal” when covered in snow!

Your Target and BATNA
 Your goal will change your strategy:
 Best car possible for certain price? Or…  Best price possible for certain car?

 BATNA
 Other dealership  Other cars
 Are you willing to consider many types of cars?
 The more you have to have THAT car, the lower your BATNA  BMW sees themselves in a perpetual seller’s market for this reason

Their BATNA
 Most often, they have none:
 Their ideal option is you AND another buyer, not you OR another buyer…they want to sell to both of you!

Reservation Price
YOURS:
 Most people do not have a fixed r.p. when they buy a car, but YOU SHOULD
 Invoice and “true market value” (TMV)
 In a very few cases, this is above MSRP

 Other offers / reasonable comparables
 Use internet options for communicating with dealers

THEIRS:
 Cost minus any special incentives  They will try to convince you that your research (invoice pricing) leaves out some of their “costs”, but you will be close

Anchors and Pricing
 Rule #3:
 DON’T LOOK AT THE STICKER, and DON’T TALK ABOUT THE STICKER PRICE AT ALL!

 Present your research on invoice pricing as your anchor
 (if the salesperson doesn’t start there initially)

 Ask questions about special incentives

YOU are the powerful party: Use it to your advantage
 You have enough information and enough competition to create an effective negotiated outcome for yourself  You can invoke ratification
 Leave someone at home you need to check with
 (Dealer ratification is so overused it is now transparent and therefore powerless)

 Use time, and excitement, to YOUR advantage
 “You can get me out of here fast if you…”  “I’m prepared to drive this home today but only at a fair price”

Summary: Don’t leave home without these four things
1. Dealer invoices from various websites
 Edmunds.com, carsdirect.com, kbb.com, autobytel.com, etc. (also look at carbuyingtips.com)

2. Multiple quotes for same automobile
 Can also collect these via internet / fax / phone

3. Lists of other types / models you are interested in; pricing info. for these 4. A payment plan
 One check made out for your offer  A credit card  A loan from the bank