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Buying Tips
Part Two: Internet vs. Traditional Car Buying
Shopping for Price
By Philip Reed, Senior Consumer Advice Editor
Email
There are two ways to buy a car from a new car dealership: through the Internet
department or by walking onto the car lot. Like in a TV game show, choosing the
wrong door can cost you dearly — in time, money and aggravation.
As we discussed in Part One, Internet (and fleet) salespeople make their money
by selling a high volume of cars. Salespeople who are "working the floor" (the
showroom floor) rely on commissions to earn a living. Therefore, they try to maximize
profit on fewer deals. This means the car lot salesperson will usually attempt
to squeeze out a larger amount of profit from a car buyer than the Internet salesperson.
A veteran fleet saleswoman told us she would never walk onto a car lot if she
wanted to buy a car because "those guys will always start at sticker." On the
other hand, the Internet salesperson will hit you with a tempting price that may
leave little room — or reason — to negotiate. (In several cases, we've
found the opening quote from the Internet department to be close to — and
just a little under — the Edmunds.com True Market Value® price.)
We decided to test this Internet saleswoman's opinion by sending one of our editors
to three dealerships, having him act as a normal buyer and getting vehicle prices
from the salespeople working the lots. Afterwards our editor would telephone the
Internet sales managers of those dealerships and ask for prices on the same cars
that we shopped earlier.
We knew we would have difficulty even getting a car lot salesperson to quote us
a price — any price. Usually they won't talk about the cost of the car until
the buyer is deeply committed in the buying process. Their fear is that the buyer
will take a good quote from one dealership and challenge another dealership to
beat it.
In Defense of the Salesperson
It's true there is more to buying a car than getting the lowest price. A good
car salesperson can demonstrate the car's features and options. However, this
information is readily available on Web sites such as Edmunds.com
as is expert automotive advice and opinions.
We apologize in advance to the three salesmen we met during this story for taking
their time without intending to buy. Furthermore, we don't encourage shoppers
to test drive a car with a salesman and then buy that car through that dealership's
Internet department. Internet salespeople are happy to show and demonstrate cars
on their own.
Rules of the Game
We selected three popular vehicles to shop for: a 2003 Toyota Camry LE, a 2003
Volkswagen Passat GLS and a 2002 Ford Explorer XLT 2WD. We posed as "today buyers"
who were cross-shopping different brands. We assured the salespeople we were not
going to "shop their prices" at another dealership of the same make. We just wanted
a price — a real price — so we could make an informed comparison between
cars. All our shopping was done in the Los Angeles area. The Toyota and Volkswagen
dealerships were medium-size; the Ford dealership was a high-volume lot.
Scenario #1: 2003 Toyota Camry LE
Salesman Steve got us quickly settled on a car matching our request. He gave us
a full "walk around" demonstrating all the Camry's features. But when we said
price would be a deciding factor, he tried to redirect our interests toward another
Camry, one he called a "new car" with "only 26,000 miles on it." We declined this
generous offer.
Following a test drive, we asked for the price of the car and requested a written
price quote from the manager. We were escorted into a sales office where Steve
wrote down our name, phone number and address on a "four-square" worksheet (used
by salespeople to negotiate the four elements of a typical car deal). We repeated
our request for a written price quote from the manager. Soon, Paul appeared, a
short, stocky man who smelled of cigarettes. Apparently, Paul was a "closer" or
assistant sales manager. After an opening sales pitch, extolling the virtues of
the Camry, he said, "What if we could discount it by $500?"
"Is that your best price?" we asked.
"Well, it depends. The price isn't set by us, it's what you're willing to pay."
Paul then began firing questions at us about a possible trade-in, a down payment
and monthly payments. He began crossing out numbers and writing in lower ones
while asking, "Where do you want to be?"
We stopped this activity by saying, "I'm really confused now. I liked it when
you said $500 off the sticker — I understood that. If that's your price,
that's your price." Our editor started to leave.
Paul said, "Let me talk to my manager."
While Paul was gone, Steve again tried to sell us the "new" car with "only 26,000
miles on it." We declined a second time. "Just thought I'd ask," he said, slouching
in his chair.
Paul returned with the four-square with writing on it that read, "$999 discount!
Great deal if you buy now!"
When we said it was time to test drive our other possibilities, Paul's pressure
to keep us there increased. We left anyway.
Time on Lot: 1 hour 10 minutes
Pressure level: Medium increasing to high
Camry Sticker Price: $20,809
Best Price Quoted: $500 discount off sticker or $20,309 (after we
threatened to leave, a discount of $999 was mentioned if we bought today)
Salesman's best line: "The only difference between low-balling and lying
is the way they're spelled."
Internet Experience: Five-minute phone call
Best Price Quoted: The Internet manager gave us a price on the same car
of $19,310. When we inquired about additional fees he said, "I can fax
you all the fees and your out-the-door cost if you like."
Savings: $999
Scenario #2: 2003 Volkswagen Passat GLS
We were inspecting the window sticker of a silver Passat GLS when a cheerful voice
greeted us. Our salesman would be "Stan," a white-haired man with dark glasses.
We immediately felt at ease with Stan. We said we would be buying very soon, perhaps
today, and wanted to test drive the Passat and get a price for it. "I can do that,"
he announced and went to fetch the keys.
"Is there anything you'd like to know about the car before we drive it?" Stan
asked. We asked a few questions and Stan volunteered a brief overview of the car's
features. On the test drive he controlled our route closely. At one point he urgently
warned us, "Car coming! Car coming!"
Back in the car lot, we sat in the car with the engine running. We said it was
time to talk price. Stan said he would give us a price when we were "ready to
do something." We said we were comparing the Passat to other cars that would likely
be less expensive. It would be helpful to have a number to work with. We volunteered
to meet with his manager to let him know we were serious. Stan finally said he
would "work from invoice" with us and give it to us for $600 over invoice, "or
whatever fleet is selling them for."
Stan made no attempt to force us into a sale on the spot and cheerfully bid us
farewell.
Time on Lot: 37 minutes
Pressure level: Low
Passat Sticker Price: $24,990
Best Price Quoted: $600 over invoice "or whatever fleet is selling them
for." If this had been honored the selling price would have been $23,833.
Salesman's best line: "The Passat comes with a full spare. We had to go
on a diet. Doctor's orders: no more doughnuts."
Internet Experience: A five-minute phone call
Best Price Quoted: The Internet manager gave us a price on the same car
of $23,533 or $300 over invoice on the same car.
Savings: $300
Scenario #3: 2002 Ford Explorer XLT
We weren't more than a dozen steps onto the Ford dealership when we were greeted
by Mike, a short, round, enthusiastic man with a foreign accent. He asked if we
had come from the service department. When we said we hadn't, he brightened visibly.
We told him we wanted to look at the Explorer XLT with few options. He took us
to a white one. The sticker had been shredded when the window was rolled down
and he apologized saying, "It's not very professional." We pieced it back together
and found it cost $30,060.
We said we were cross-shopping brands and wanted to know how much we would have
to pay for this Explorer. Mike said he could offer us a $2,500 cash back rebate.
We said that was nice, but wanted to know how much this would reduce the price.
He shook his head sadly, then said, "Do your shopping first, then come back. We
will beat any price out there." We said we needed a figure as a benchmark, to
know how aggressive this dealership would be. We even offered to come inside and
talk to the manager. Mike was still shaking his head sadly. "All I can tell you
at this time is, we'll take care of you."
We left the car lot.
Time on Lot: 15 minutes
Pressure level: Medium
Explorer XLT Sticker Price: $30,060
Price Quoted: None
Salesman's best line: "We need to sell these cars. They have no nutritional
value — we can't eat them."
Internet Experience: A three-minute phone call
Best Price Quoted: The Internet manager at this Ford dealership seemed
more like a car lot salesman. He was vague about the selling price of the car
and wanted us to come in and settle on a specific car first. We asked how close
he could get to invoice. He said, "Very close, probably $500 to $600, depending
on the model you choose."
Savings: Unknown
Internet vs. Traditional Car Shopping — Conclusions
We don't consider the numbers we got from the car lot salesmen to be very firm.
And more money could have been lost by making poor spur-of-the-moment decisions
on financing or additional products. If we had returned to buy one of the cars
at the quoted price, we probably would have had to start negotiations again. Still,
we got an idea of how pricing would be handled and a rough idea of what discounts
were available. On the other hand, the Internet prices were specific and realistic;
we felt confident we could close the deal at that price.
This exercise showed us just how hard it is to get a real price for a new car
from a traditional salesperson. The price is obviously in flux and will depend
greatly on how the customer presents him or herself and handles negotiations.
When dealing with a salesman on the car lot there is the reassurance of the human
contact, however. One can't help but like one salesman more than another and want
to buy from them. Furthermore, the product knowledge and their advice might, in
some cases, be valuable.
On the other hand, the Internet route is fast, easy and clearly saves money. It
also is good for people who don't have an appetite for negotiations. Furthermore,
the decision is apt to be more informed since the buyer can consider all the possibilities
in a relaxed atmosphere away from the well-documented enticement of new car smell.
Part One: Internet vs. Traditional
Car Buying
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