Outsmart the Dealership: Save on Your Next Car
At WESCAP, we’re always interested in the best way to approach a market. This isn’t limited to financial assets. So today we’re going to talk about how to get the best price on a new car.
WESCAP’s Andy Edstrom has used this method to buy two new cars (a minivan and a mid-sized SUV) in recent years, and he has been very happy with the results.
He learned the method from a game theory book called The Predictioneer’s Game (2009). The book is mediocre, but the car-buying technique was worth a thousand times the price of the book in dollars saved, time saved, and aggravation avoided.
The premise is to shift as much power as possible from the seller (the dealer) to the buyer (you). We will summarize the key steps here and note that it may deviate slightly from the method presented in the book.
Preparation
First, you have to decide exactly what you’re buying. Choose the exact specifications of the vehicle: make, model, color, options package. Of course, this choice should be the result of adequate research, including a test drive of the vehicle at a dealer before you make your final decision.
Second, search the internet for dealer inventory in your city (admittedly, this method works best in larger markets and for vehicles that aren’t too rare). You now have some idea of how many dealers carry the vehicle you want, and how far you might have to drive to close your deal once you’ve negotiated the price.
Third, plan your purchase date. You will end up spending a few hours of your time on the date of purchase once you’ve chosen your vehicle. But much of it will be spent in the comfort of your home, and the time spent at the dealer will be minimal because you will have your deal negotiated before setting foot on the dealer’s premises. If you really want the best possible deal, make your move at the end of the month, or any other time that dealers are keen to move inventory. Andy recently made his purchase on the Wednesday after a 3-day-weekend sale, which allowed him to pick off inventory that dealers had wanted to sell but had failed to.
Game Day
On your purchase day, search the internet again for available inventory. Then contact each of the sales team for each dealer (either via email or phone call) and let them know the following.
“Hello, my name is [your name] and today I’ll be buying a [make model, color options package]. I see you have the vehicle I’m going to buy in stock. Please email me your best out-the-door price, including any and all taxes, fees, expenses or anything that I have to pay.”
It might take more than one overture or conversation to get them to commit to emailing you their out-the-door price. Once you get a price from one of them, you can shop it to other dealers.
Suffice it to say this method creates an auction dynamic. But instead of you competing against lots of other bidders, the power is placed in your hands since you get the dealers to compete with each other.
Results
Andy used this method to purchase a car four years ago and again just two months ago. Results of the most recent purchase were as follows.
Andy bought a dark red Hyundai Kona Limited (His wife needed a new commuter car and preferred this color). The MSRP was $33,195, and the sticker price at the dealership he ultimately bought from was $33,630.
After executing the method described earlier, the total “out the door” price Andy paid for the car was $33,241. I.e. he ended up paying a total price approximately equal to MSRP and sticker. But remember that the out-the-door price has to include any/all fees that the dealer imposes and sales tax, which is 9.5% where Andy lives. Given that level of sales tax and assuming that any fees/expenses might have added a few more percentage points, the price of the car ended up being at least a 10% discount to both sticker price and MSRP.
Moreover, Andy avoided the tedious process of spending time at the dealer or haggling over price. He spent a grand total of 1 hour at the dealer from which he bought the car. And he spent perhaps 2 hours contacting dealers and soliciting their best prices earlier in the day.
The result was less time spent and a great price. Results will vary, but we hope your next car purchase results in the same.