Monday, July 12, 2010

When buying a new car, use all the tools available to you

It sounds obvious but so many people will still go to a car dealer and pay what the dealer asks for their new vehicle. It doesn't have to be that way. There are plenty of tools around nowadays to help you strike a deal. In America for example, we have the Consumer Reports new car report. (Consumer Reports is like Which? in England). For $14 you can buy a pricing report that breaks down the actual cost of the car to the dealer. Why is this important? Well once you're armed with that information, 9 times out of 10 you can drive the dealer way down on price. I recently bought a new VW Tiguan (nice car by the way) and using a pricing report I was able to get $2100 off the sticker price. How? The pricing report will show you what the dealer actually paid to get the vehicle on his lot. Not the "invoice" price they'll readily show you - that doesn't include incentives and the manufacturer holdback. (When a dealer shows you an invoice and tells you he's making no money by offering you invoice price, he's lying.) The report also shows you the cost to the dealer of any options as well as the cost to you - again so you can see if the markup is correct or not.

My new VW for example was on the lot with a sticker price of $31,125. The pricing report showed me that the dealer would get a $594 holdback from VW corporate. That's money they make irrespective of the price you pay for the car. Every dealer and sales network has this and again, if they tell you they don't, they're lying.
That, combined with a couple of other nuggets of information (like a local $1000 sales incentive - again - money they get just for selling the car) meant I was able to argue the price down to $29,000. IF my dealer paid the normal going rate to VW to get the car on his lot, he only made $568 profit on that vehicle. I got a good deal, the dealer made a profit and was also paid $1,594 from VW in incentives.

A lot of people don't like haggling on prices, especially for something like a car, but you just need to be strong-willed. If they won't come to a price you can accept, walk out. I walked out twice - it took three days to get the price down for me, with a lot of negotiation taking part on email and over the phone. That's another tip - if you can do the deal by email, it's a far better way of working because they can't pressure you and you're not subject to sitting in a showroom full of new car smell.

Of course, if you're armed beforehand with a pricing report and the dealer starts blatantly lying to you, you always have the option of going elsewhere. Gone are the days when the consumer could be treated as a cash cow - dealers need to understand that and treat the buyers with more courtesy and a more grown-up attitude. A lot of them do, but there's still those out there who won't budge from the sticker price and they need to be given a wide berth.

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