I bought a new car recently. By a theory I don’t subscribe to, it’s actually an investment. Calling a Uber everywhere I go or renting from Hertz all year round would be much more expensive. So this theory says the return from this investment is very high.
Many people don’t like the car buying process. So much so businesses offer to help make it easier. Costco, AAA, AARP, Consumer Reports, and credit unions all offer car buying services. Supposedly they offer a negotiated price but they never show you what that negotiated price is before you give out your personal information, which they send to select dealerships. They are really a lead generation program for the dealerships. The participating dealerships pay a fee to Costco, AAA, AARP and what not for leads.
You get a price from the car buying program. For all we know the price you get may not be any different than the price the dealerships normally hand out to anyone else. They just call it a negotiated price to make you feel you are getting a good deal. If you just take that price, it’s very easy but the price may be much higher than you can get on your own if only you know where to shop.
TrueCar is the company behind many car buying programs. For the car I just bought, with the same options, TrueCar shows its average price for my area is $28,069. That’s $3,700 off MSRP, $1,500 under the invoice. Good price? No. I paid $2,000 less.
I didn’t have to bargain hard or endure the back-and-forth game in the showroom either. I also didn’t have a trade-in on which the dealership could make a profit. After I sent out my initial inquiries to the dealerships in the area, I received these quotes, sorted from low to high, rounded to the nearest $100:
- $5,200 under MSRP
- $4,800 under MSRP
- $4,300 under MSRP
- $3,800 under MSRP
- $3,700 under MSRP
- $2,400 under MSRP
- $1,000 under MSRP
Those were just the first quotes. If I didn’t do anything else and just took the lowest first quote, it would already beat the TrueCar average price by $1,500. When dealership number 2 sent a follow up, I told them their price was higher than the competition. They came back with a second quote at $5,500 under MSRP, with the condition that I buy the car before the end of the month. Meanwhile, dealership #1 advertised they would beat any competitor’s price by $300. So I just took dealership #2’s revised quote to them. They took off $300 and that was it. I paid $5,800 under MSRP, or $3,600 under the invoice.
All the quotes were sent by email and text. At the dealership, everything went as previously agreed. We just did the paperwork. There was no “talking to my manager” or any bait-and-switch. The new car sales people I dealt with offered great customer service. They were responsive by email and text day and night, even on days they were supposed to be off.
I think the game of playing tricks is over, at least at some dealerships. From the lowest first quote to the final price, I only improved the price by $600. But if I only requested quotes from dealerships #3 through #7, I probably wouldn’t have paid nearly as low. Where you shop has become more important than how you shop.
Instead of trying to squeeze a big profit for each sale, some dealerships offer a great price and go for a higher volume. When they hit the volume target, they get a large bonus from the manufacturer. The bonus will make up for the low margin on the individual sales. This episode 129 Cars of This American Life tells a great story about the frenzy at a dealership in its pursuit to hit the goal of selling 129 cars in that month. It starts all over again the following month.
The dealership I ended up with advertises themselves as the #1 volume dealer in the state. I read in an Internet forum some people flew in from 400 miles away to buy their car at this dealership because the low price made the air fare and the 400-mile drive back worth it. When you buy a new car, Google #1 volume dealer in your state for the make of the car you want. Get a quote there and have other dealership match or beat it.
Speaking of Internet forums, now almost every car model has an Internet forum for it. In addition to sharing information about problems and repairs, people often share their quotes and purchase prices in the forum. I learned in the forum that the manufacturer offers a $500 loyalty coupon for owners of the same make. You only have to call the 800 number and give them the VIN. Because the $500 coupon comes from the manufacturer, you can use it as cash against the lowest price offered by any dealership. Because we are replacing a car with the same make, just by visiting the Internet forum I saved another $500.
If you dread buying a new car, dread no more. It’s much easier than before if you shop at the right place. Engaging a third party hoping to make it easy can cost you $2,000 when it’s already very easy at the right place.
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Darren says
Dying to know what model of car you bought….
Harry Sit says
Subaru Outback 2.5i Premium with EyeSight package and Popular Package #2.
Sam says
Congratulations, Harry. What a savvy shopper. 2017 or 2018 model? EyeSight package is so cool for safety. What does Popular Package #2 give?
Harry Sit says
2018 model. Popular Package #2 includes exterior auto dimming mirror with approach lighting, LED map and dome lights, rear bumper cover, all weather floor liners, rear seatback protector, and splash guards. Almost all cars of this model in the area come with this factory installed package.
Adam says
I used this approach about 8 years ago when we bought our last car and it worked out great. The only issue I ran into was that the dealer we selected had installed some “accessories” on the car but hadn’t mentioned them in the email negotiations. When we arrived at the dealership, they wanted to charge us an extra $500 or so for the pinstripes and special wheel covers they had added. I told them they could take those accessories off the car, give them to us for free, or we would walk away (my wife was mortified that I actually stood up and walked toward the door). In the end, they left the accessories on the car but didn’t charge us a dime for them.
Terry says
What distance from your city did you limit your search to?
That is a lot of Subaru dealerships.
Harry Sit says
50 miles. I was lucky the #1 volume dealer in the state was one of them. It’s the farthest of the bunch.
Ray says
Kinda had to chuckle at this article. It’s exactly how we bought a new car in October. First new one in 15 years. Gave the old one to a grandson, ergo, no trade-in. Solicited quotes from all dealers in a 50 mile radius. Took the lowest even though they were 25 miles away.
They had just received the exact model and color we wanted. A whole 6 miles on it. Could not have been easier. Wish our adult kids would learn. They always buy/lease something they end up unhappy with and then repeat every few years. Can’t seem to get through to them. Sigh…
East Coast says
Hi. How do you find out the MSRP? And wondering why you bought new instead of used, depreciation and all……. Thanks.
Harry Sit says
The manufacturer’s website shows the MSRP. We don’t know much about cars. We just prefer to buy new so we can take care of it from the very beginning. I think for mainstream cars the depreciation in the first few years isn’t as steep as before.
Sam says
Harry, would you please write on how you sold your old car on your own, so you didn’t have to do a trade-in when buying this new car? Thanks.
TJ says
Great article – thanks for sharing. Planning on buying a new car in the next 2 years, I’ll be sure to bookmark this page.
Walt says
Harry, what about the test drive? We’re you able to leave the dealership without a hard sell? This was an unexpected part of the process when I bought my new car.
Harry Sit says
I just went to a nearby dealership for test drive. At that stage they understand you haven’t decided on which make or model. The salesperson only handed out business cards. No hard sell.
Gus says
I wonder how much the number of competing dealers affects this process. A lot of people would have to go more than 50 miles to find even one Subaru dealer, and wouldn’t find many dealers for any one brand within that radius. I think only very large cities would have the kind of dealer density you mention.
Ray says
Ok, I’m not Harry, but I will say that if a significant discount from list price is attractive enough, I would drive perhaps 75 miles to score that deal. Of course, I’m retired, on a fixed income, and have the time. YMMV.
I hope we all understand, even if we buy from a distant dealership, we never HAVE to return there for any service.
Harry Sit says
I don’t think it’s a matter of the number of dealers rather than the right dealer, one that goes for volume more than the price. People who flew in from 400 miles away had a large number of dealers in their area but those dealers didn’t offer prices as low.
Vikas says
There was a time when people used to buy car in tax free state like Delaware and get it to NJ. But that loophole was plugged when resident state assessed tax based on NADA values when you registered in that state. But i have used the same technique as mentioned – get a quote from all dealers that you can physically reach and them pitch one against the other.
I had bought 2010 Corolla for less than 15K and then sold it after 2.5 years for 14K. Got lucky then.
Harry – is there a particular time of the year when you have noticed car prices can be negotiated more? or like a particular holiday sale – like July 4.
Harry Sit says
I don’t know because I only requested quotes this once in over 10 years. If we go by the theory of hitting the sales target, closer to the month end, quarter end, and year end should be good times.
Mark says
Please suggest the words to use when requesting a price quote to minimize the add-ons you only discover after arriving at the dealer (delivery fees, dealer prep., paint and fabric protector, floor mats, etc.).
jd says
Ask for the “out the door” price on the EXACT vehicle you want.
JSA says
I did this exact process when I bought a new car last year, worked out great. The only hangup on the day of purchase was trying to see what kind of financing I could get, when I was willing and ready to pay cash. Big mistake. That process alone took an additional few hours and I ended up paying cash anyway.
Rahul Sharma says
Nice Choice and great article!
lpc123 says
How did you find that many dealers who had the same car, color, features?
Harry Sit says
The manufacturer created standard trims and option packages. The colors don’t matter for the purpose of pricing. Dealers #3 through #7 didn’t contribute anything anyway. If I had known which dealers are the low-price high-volume ones I could’ve requested quotes from only those two dealers.
Ben says
Harry, your piece is well written and clearly demonstrates an authentic experience searching, pursuing and obtaining an excellent deal. The numerous responses and your replies are also extremely informative. I live in the Greater Miami/Ft. Lauderdale region. The advantage is that there are multiple large dealerships for practically every auto maker. The problem is that most of them claim to be the #1 volume dealer. Google searches have proved elusive. How does one determine who legitimately is a large volume dealer?
Bob says
What about the process of registering the vehicle and obtaining plates, (tags) for it?.. I have found that dealers will charge a fee of $200 for this process.
Harry Sit says
I don’t know who mandated it, the state or the manufacturer, but all Subaru dealers in my area charge the same $80 doc fee.
Keith says
I did something similar when we bought my wife’s Impreza last year. I went to each dealer’s website within a couple of hundred miles and checked their inventory for one that matched our desires. Then I emailed each one asking about the specific car and for their best offer. I don’t recall the specific number, but I was below True Car projected cost as well.
Steve says
Last time I bought a car, 7 years ago, I emailed five dealers and only got two quotes. The other three only said useless things like “Come in and we’ll talk about it.” Even one place where I had been working with a specific salesperson, said “If I give you a price over email I’ll lose the deal.” Why, because it will be too high? Of course by refusing to give me any price he took himself out of the running. ANYWAYS my point is, I did end up with a car, but the tactic didn’t save me much.
I don’t know if there are 10 dealers within 50 miles of me, but it seems likely. I’ll cast a wider net next time.
Keith says
That was also 7 years ago. Things may have changed in your area. Or, like you said, cast a wider net.
theFinanceBuffReader says
I am in agreement with Harry and others – the is the most optimal way to purchase a car. I first did this process when looking for a Subaru and then changed my mind and did it again to purchase a Honda. Several thoughts…
– While its far easier and superior to haggling with dealers in person, there is a time component to the online communication. Dealers can be intentionally obtuse and provide you with subtotal price quotes. You then have to repeat your question to receive the out the door price, sometimes several times.
– Every single dealer started their introductory email with the “We will not be undersold/ We will price match any legitimate offer”. Spoiler alert – they lie!
– When I did this approach for the three Subaru dealers in my area, it turned out, unbeknownst to me, that only one Subaru dealer had a car with the exact specs that I was looking for. When the other dealers responded to me, they put in a car transfer request to the dealer with the car.
A couple days after sending out the requests, the dealer with the car sent me an email, “Are you still interested in the car, we got two other dealers interested in selling this same car. Curious if you put in price quote with these other dealers?”.
– When I went to pick up my car, I noticed the car salesman who sold me the car had won a whole bunch of ‘top seller of the month’ awards. I found the large volume seller. He had won the award every month for the past two years save for one month. I joked with him, “I am disappointed you didn’t win the award for “XX XXXX”. He laughed and responded, “I was out of the country on vacation that month”
Thomas Bradford says
Just used this same strategy on an Outback Limited. Took a week but eventually whittled it down to 1 dealer.
Bill in NC says
Did you get at least 16% off MSRP?
https://forum.leasehackr.com/t/2018-subaru-outback-3-6r-limited-293-month-with-tax/27265
Harry Sit says
I got 18.5% off MSRP for the 2.5i Premium model.
Paul says
I wish there were a similar approach for selling the old car. I don’t want to have folks coming to my home.
I echo the earlier comment that searches for the #1 volume dealer (toyota) in Florida did not reveal any useful information.
Harry Sit says
Just from Google search I see Toyota of Hollywood (FL) claims they were “#1 based on total retails sales of New Toyotas in the Southeast Region for 2014, 2015, and 2016 per Southeast Toyota Distributors.” If multiple dealers claim they are #1, ask them to prove it or just include all of them in your hit list.
M says
Thanks for this helpful anecdote, Harry. When you replied to dealership number 2’s follow-up stating their price was higher than the competition, did you supply to them the specific quote of the competitor so they could beat it?
Also, I noted from your earlier comment that you purchased a 2018 Subaru. Did you specifically request that model year in your initial e-mail quote, or did you provide a range of potential model years?
Harry Sit says
I gave them an approximate number, “low $26k.” I did request that specific model year and specific trim and the option packages.
Andy says
This is great advice. I used a similar technique (but without your #1 volume refinements) to play a couple of dealerships off against each other. I think one of the biggest advantages is you being at home instead of on their lot. They have to entice you off your couch into their dealership. You have no time invested. If you walk onto their lot, on the other hand, now, you’ve invested time and gasoline into arriving there. You’d rather walk away with a car than not, so they don’t have to give you as good a price. They have the advantage. That is the way they expect it, are used to it, and like it. Home shoppers are turning the tables on them and forcing them to state their best price.
Abdul H says
Harry love your website and your book. Any updates to this advice based on the way car prices are in today’s market after Covid? Thanks.
Harry Sit says
I haven’t tried buying a car since the pandemic. I’m waiting for this wave of shortages and pricing at or over MSRP to subside.