Monday, May 28, 2007

Buy a New Car Without Haggling and Save

There’s a way to buy a new car without negotiating and get a price that might be better than what you could get from hours of old-fashioned haggling. Try purchasing your new car through the dealership’s Internet department.

Here’s the process. If you know what vehicle you want, contact the dealer by e-mail and describe what you’re interested in. If they have it in stock, they’ll get back to you. The prices they quote may be surprisingly low. Word has it that Internet departments are compensated based on the volume of vehicles they sell, rather than the markup on each sale. By contrast, the salesperson on the showroom floor is paid a commission, so the dealership will be less enthusiastic about discounting a vehicle you buy through the showroom floor.

If you want to try the Internet route, start by researching the makes and models you’re interested in. Consider features, capabilities, mileage, safety, insurance costs and resale value. Decide what you want, preferably in detail. Your chances of getting a good deal are better if you can specify the make, model, features, colors and even the frilly options. Okay, a DVD player for the second row seats isn’t a frill; it’s a necessity when you have hyperactive kids. But you know what we mean.

Then, research prices. Go to sites like (free, with ads) or Consumer Reports (no ads, but you need to subscribe) to get an idea of the dealer’s costs and what other buyers have been paying for the same vehicle in your zip code. Be sure to research total costs of ownership as well as sales prices. (Total cost of ownership, sometimes called “true cost to own,” is a five-year tally of the major expenses of owning a car, like depreciation, financing costs, insurance premiums, maintenance and repair costs, taxes and fees, and fuel expenses.)

Next, go to the showroom. No, we’re not kidding. You should test drive all vehicles that you’re interested in. Another reason for going to the showroom floor is that you’ll be able to ask to any questions you have. You might even get an idea of the price the dealership would ask if you went the traditional haggling route.

Line up your financing before you start shopping. Trying to get financing through the dealer may not be the lowest cost option. If you arrange your financing in advance, you'll very possibly get a better deal. (Hint: try a credit union.)

Now, prioritize your choice of vehicles. Identify the dealers nearby that sell your top choice. Send them an e-mail describing in detail what you want. American manufacturers offer a large variety of options, so your description could get lengthy. Still, it’s better to be specific because you’ll be more likely to get what you want. Foreign manufacturers are more likely to offer a choice of styles with largely fixed options packages—although this is less flexible, it makes shopping by e-mail easier.

The dealers that have your preferred car in stock will get back to you quickly. You may be pleasantly surprised by the prices they quote. If you see a deal you want, call and let them know you’re coming.

Last September, we tried this. Not every dealer had our top choice in stock. The first dealer to respond offered a price that was 8% lower than the best price advertised in the local newspaper. The second dealer offered a price 10% lower than the best newspaper price. The second dealer made a sale about three hours later. When you consider that the average price of a new car is somewhere around $28,000, discounts like these can fund half your annual contribution to an IRA. (For more information about IRAs, read the discussion of retirement accounts in Uncle Leo's Den.)

Of course, the price advantage you might get would depend on supply and demand. If you want the hottest car in the market, the Internet department won’t be selling it. But if you want something that's in lower demand, perhaps at the end of the model year when the dealer hopes to clear out old inventory, you might pocket a fair amount of dinero. Can you haggle with the Internet department? It’s a free country and you can try. But if they’ve offered you a very good deal to begin with, they may not be able to do much more (or anything). Even so, you could still have a very good deal.

Not everything is improved when you buy through the Internet department. If you have a vehicle to trade in, you’ll end up dealing with the same old bluster, bluffing and snake oil nonsense that you wanted to avoid. But if you get a good price on the new car, this is more tolerable. Another annoyance is that if a dealer doesn’t have the make and model you want, they’ll probably try to interest you in something else they have in stock. But it’s up to you whether you follow up. Since you’re probably e-mailing from the comfort of your home, you’re only under the pressure you place on yourself. A third annoyance is that if you send an e-mail to a dealership, they’ll put you in their customer address book and e-mail you for months about every car you didn’t want to buy. Just remember that you control the delete button.

It’s harder to use the e-mail technique to buy a used car. One used car won’t be strictly comparable to another used car, and each needs to be individually researched and checked out. But if you’re in the market for a new car, think about buying through the Internet department.

Crime News: A caper with toilet paper.

For more shopping ideas, visit the blog carnival of shopping:

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