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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