Avoiding the Dreaded Haggling Process
Most people dislike buying a car because they
hate to negotiate. Use the Internet and you don't
have to negotiate! What's more, by avoiding the
bargaining process, you're likely to save yourself
quite a lot of money. Most of us are very bad
at negotiating for a new car, and most car salespeople
are quite good at it.
Car haggling. You remember it, don't you? You
sit around for hours trying to save some money
— and you're dealing with professional negotiators
who know lots of ways to wheel and deal. Don't
forget that car salespeople are usually outgoing
and personable and enjoy working with people.
They're often essentially quite nice. But they
have a job to do — a job to do on you.
Buyer's
remorse
Almost everyone drives off in their new car with
the nagging feeling that they could have saved
quite a bit of money if they'd been more shrewd,
been in less of a hurry, felt less sorry for the
salesperson, or otherwise negotiated better. They're
right. They probably could have saved hundreds,
if not thousands, of dollars.
Car
salespeople are often unfairly portrayed as only
slightly more wholesome and reliable than members
of Congress. Talk about defamation. Nonetheless,
the seller of vehicles is a direct descendant
of the horse trader.
In
our culture, we have few opportunities to practice
bargaining. We live in a sticker price society,
and most of us don't attempt to whittle down the
price of a TV any more than we would bicker with
the electric company to get a lower power rate.
We take a package of light bulbs up to the checkout
line and never think to offer the clerk 25 cents
less than the sales sticker price.
Most
of us are forced to bargain only on the big-ticket
prices. Because the cost of not bargaining for
the price of a house or car can be thousands of
dollars, most of us attempt to bargain for those
items. But we do a pretty poor job of it.
You
walk into a dealership and the salespeople begin
immediately to "qualify" you, as they
call it. Innocent questions such as "What
do you do?" are far from innocent. They're
figuring out how to maximize the sale. If you
seem stubborn about getting the lowest price for
the new car, they'll be a bit stub-born, but yield
if necessary. No problem; they can probably make
up that loss by jacking up the cost of your financing
and giving you a low-ball price for your trade-in.
On
the other hand, if you're one of those people
who has no idea what the dealer's cost is for
the car you're buying, but think that your trade-in
is worth a lot of cash, the salesperson can handle
you, too. If you focus on getting a high trade-in
price, they can slip in all kinds of unnecessary
costs like stripes, undercoating, "prep,"
upholstery guarding, rustproofing, you name it.
And they can also hike the finance costs. Get
it? They can raise whichever of the four main
costs of buying a new car you aren't emphasizing
in order to give you a "deal" on what
seems to pull your chain. The four main costs
are: trade-in, new car price, financing, and the
"extras" (undercoating and all the rest).
And
this kind of manipulation is only the tip of the
selling strategy iceberg. You haven't heard anything
yet!
Getting
a blank check
The greatest thing about buying your car online
is that you can avoid the negotiation phase of
purchasing the car. Before you set foot on the
dealer's lot, you've already researched the value
of your trade-in and decided the precise money
you'll pay for the new car (and the exact accessories
you want), and you even have a blank check in
your pocket because you got the loan from an online
finance company.
Where'd
this blank check come from? You fill in a small
form on the Internet, and the company sends you
an answer in minutes via e-mail. If you qualify
for the loan, the finance company sends you a
blank check — one of us got ours the next
morning via Air Express. The company tells you
to fill in the check for any amount up to a maximum
(it allowed several thousand more than we asked
for). The check is blank because you may want
to add a CD changer or something at the last minute.
And the loan rates are usually excellent.
Jump
In and Try Getting a Price Fast
Do you like the idea of a nice, crisp blank check
arriving at your house tomorrow morning? Want
to omit haggling from your next car purchase?
Then briefly visit a cyber salesroom.
Throughout
this section, you can find descriptions of various
popular and successful online "showrooms"
you can visit, with names like cars.com,
carsdirect.com,
autoweb.com,
CarPoint, and many others. To give you an idea
of what virtual salesland is like, go to carOrder
(www.carorder.corn)
for a few minutes. To get there, follow these
steps:
1.
Fire up your browser and type www.carorder.com
into the Address text box. (If you're using Netscape,
type it into the Location text box.)
2.
Press the Enter key. You arrive at the main entrance
to carOrder's site.
Notice
that this site offers several features on its
home page:
-
Financing
-
Research
-
Leasing rates
-
Insurance
-
Order tracking
-
A chat feature where you can interact with a live
person — so much more efficient than the
alternative
-
Testimonials
-
Saved specs (the "virtual garage")
-
A 360-degree Exorcist-cam where you can view the
entire interior of the car you're interested in
-
Purchasing
-
A toll-free number you can call, also presumably
featuring a live person
3.
Scroll down to the bottom of the home page (or
press the PgDn key).
4. Click the Build It link.
You see the first specifications page, where you
describe your location and the make, model, and
style of the car you want. Choose whatever car
you're interested in.
5.
Click the Configure link.
You see the invoice price, the MSRP (manufacturer's
suggested retail price), and the price you can
pay at carOrder. You also see how much your monthly
payment would be for a purchase or a lease.
On
this page, you can choose the interior and exterior
color schemes. You can also choose to save this
car to your "Virtual Garage" —
that way, everything you've done is stored so
that you can return to carOrder in the future
and resume where you left off. You don't have
to retype or reselect options when you visit the
site again.
6.
Click the Pick My Options link.
On this page you can register yourself if
you want. If you choose to register, you'll go
through several pages, then resume with Step 7
when you've finished the registration process.
7.
Click the Continue button.
You're asked to fill in contact information (name,
password, e-mail address, and ZIP code). The ZIP
code is used to figure out local taxes and fees
like vehicle registration.
8.
Fill in your contact information and click Create
my Account.
A new page pops up asking you to specify your
city and county.
9.
Choose your location and then click the Save these
changes link.
You're sent an e-mail message confirming your
account. You also see the page where options are
listed, taxes and any rebates are described, and
the cost of such things as the destination charge
or title certificate is disclosed.
You're
now registered, and you can return to the site
any time you want and pick up where you left off.
The car prices quoted are guaranteed for a week,
but you can always return to the "garage"
or "showroom" and change your specs
or start a new purchase.
Congratulations;
you've just cybershopped for a new car! In a matter
of minutes, you can receive a price quote. Try
doing that in the real world of dealerships made
from brick and mortar. Nothing against salespeople
— many of them are personable, outgoing,
even charming. But they do have a job to do, and
it generally doesn't involve giving you a final
price quickly or offering a particularly low price,
either.
What's
Down the Line Online?
One of the best things about buying and selling
things on the Internet is that you can eliminate
the middleman (and the money the middleman adds
to th cost).
This
can mean that: a factory outlet is actually the
factory (not some mall that calls itself a factory
outlet); that a warehouse sale actually sells
stuff from a warehouse; and that "wholesale
direct" is just what it says.
When
buying a new car on the Internet, the middleman
you eliminate is the car dealership.
Local dealers providing
online quotes
Of course, there's a big difference between buying
a book or shirt online and buying a truck. For
one thing, the truck can't be sent by overnight
FedEx.
However, the problem of distribution is being
solved in several ways. Most online car-purchasing
services function as dealer-referral services.
You describe your wants on the Internet, and then
one (or several) local dealers make offers —
either sending you e-mail with price quotes or
getting in touch with you over the phone.
The important differences between this approach
and the traditional car purchase process are that
you get price offers without having to drive around
to visit different dealers and you don't have
to haggle.
Dot-com
distribution down the road?
Another tactic that may have a big impact in the
near future is the possibility that dot-corn car-selling
sites may create their own network of dealerships
around the country. Several online organizations
are currently reported to be contacting automobile
manufacturers requesting approval of dealership
acquisitions. The owners of some dealerships have
apparently already agreed to sell to Internet
companies. Online companies face few problems
raising financing — many dot-com companies
are awash with cash. We wouldn't have imagined
that AOL could buy Time-Warner!
Clearly,
this trend toward online companies' ownership
of local dealerships, if it develops, would shake
the long-established auto sales industry to its
foundations. However, the Internet has a way of
reshaping almost every commercial venture —
from travel agencies to booksellers. Only a couple
of years ago, many people were regretting the
trend where local bookstores were being put out
of business by mega-stores such as Borders and
Books-a-Million. Now the mega-stores tremble as
online book sales increasingly eat into their
bottom line. Where, oh where, will it all end?
As
a result of the empowerment we customers are now
getting from information we can gather on the
Internet, many car dealership owners have, as
the English put it, their pants in a twist.
Naturally,
classic dealerships often seriously resent the
intrusion of the Internet into their tried-and-true
sales systems. Buyers walking into a car showroom
knowing what the dealer paid or, worse, already
having received a firm price have removed one
of the important points of negotiation that traditionally
favored the dealer. In the past, salespeople could
use the price of the new car as a useful selling
point. Increasingly, though, the selling price
is no longer a variable that can be fiddled with
during the sale.
Now
the very ownership of car showrooms is perhaps
in doubt. Manufacturers can refuse to award a
dealership for reasons ranging from inexperience
selling autos to inadequate financial backing.
Manufacturers have always had broad discretion
in the awarding of dealerships.
Why
resist reality?
As someone wise once said, it's impractical to
resist reality. And all signs point to the Internet
as the wave of the future. If one or more online
car-selling sites manages to set up a dealership
network, you could arrange your financing, the
car price, and every other element of the car
purchase entirely online. If you're like most
people, you would prefer not to have to undergo
the tedium and strain of the sales struggle at
the dealership.
The
car dealership of the future may well resemble
a simple warehouse rather than the glass-and-gloss
showrooms of today. Here are the steps that direct
online dealers can take to drive down the cost
of a new car:
-
Eliminate salespeople and their commissions
-
Drop newspaper advertising (it costs around $300
per car!)
-
Set up a warehouse in a low-cost rural area
-
Avoid having to build a fancy showroom
-
Stock cars on an as-needed basis (a car sitting
on a dealer's lot runs up around $300 per car
in finance payments before it's sold, on average)
All
these moves cut the cost of a car. Choose a car
online and it's driven to your door from that
low-rent country warehouse sitting out there between
your town and the next town. Of course, this system
of cybersales does leave out the important test
drive, where you see if you are actually comfortable
in the real-world vehicle. But there are ways
around this limitation: perhaps a trial period
to see if you feel right or a simple trip down
to the local traditional dealership to kick the
tires and take a test drive around town.
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