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Strategies for Smart Car BuyersSM
How to Use TMV
By Philip Reed, Senior Consumer Advice Editor
Email
My brother called me last weekend to ask for my advice buying a new car. We both
got onto the Edmunds.com Web site and began exploring cars — he was in Massachusetts
and I was in California, but we were looking at the same screens.
My brother is a frugal New Englander (actually, he's so tight that he squeaks),
so I knew that a mixture of reliability and price would dictate his buying decision.
Each car we looked at provoked the same question: "What's this baby gonna cost
me?"
If he had asked me that question two years ago, I would have said, "Well, the
sticker price is such-and-such, and the invoice price is so-and-so, which means
that if you haggle for two hours, threaten to walk out, and put on an Oscar-winning
performance you can probably get it for thus-and-so."
But that was then — this is now. So I said, "Just check the TMV®
price."
"TM — what?" came his response.
It brought me back to earth. Here at Edmunds.com, we're pretty excited about TMV
or True Market Value pricing. But there are still people who don't know what it
is. Or, more importantly, how to use it.
I told him that TMV is the average price at which a car is sold in a consumer's
specific region.
"So you mean I can probably get it for this price?" he asked, quoting TMV for
a certain car.
"Basically. Yes."
"How do I do that?"
Bingo, I thought. Here's a great idea for a column. Here at Edmunds, we
spend a lot of time saying how great TMV is, but we sometimes forget to explain
how to use it.
I know that when I buy cars for Edmunds, I use TMV as an indicator of how desirable
a car is and what the supply and demand situation is. If a popular car is in short
supply (the BMW Z4 M Coupe, for example) the price shoots up to, and above, sticker
price. If a car is readily available (the Honda Accord, for example), you will
pay closer to invoice.
The beauty of TMV is that you can see, ahead of time, what you'll pay.
OK, so far, so good. But the fact remains that if you walk onto a car lot, the
salesperson will try to sell you the car — almost any car — at sticker.
How do you get the salesperson to go for TMV?
I put that question to some of our experts here at Edmunds and got some informative
and colorful answers.
An executive at Edmunds.com, with many years experience in the dealership environment,
said that the most powerful thing about TMV is that you know, ahead of time, where
the negotiation will end. That is the essence of TMV. Being able to get that figure
ahead of time is like "getting around third base."
He added that, in the past, "a consumer had to jump from dealer to dealer, playing
each against the other to eventually get a feel for where the transaction point
was. TMV is that point. The rest of the negotiation (getting from third to home)
is really up to the consumer and how comfortable they feel moving the deal to
close."
He said there are two approaches for using TMV. Which you use will depend on your
personality:
- If you don't mind confrontation and you are willing to spend three to four
hours negotiating, then "don't disclose the TMV price. Instead, just hammer
away (negotiating) in a traditional form to get as good a deal as possible...of
course, empowered by the TMV, knowing that it is the exit point for price."
- However, if you just want to get a fair deal and cut negotiations to an
absolute minimum, then "disclose TMV up front and hold firm. Say, 'I'll just
go to XYZ dealer if you won't deal with me.'"
The executive added, "The key is that a consumer who is armed with TMV is empowered
on an equal footing with the dealer. It's kind of like going to war knowing where
your enemy's positions and ambush sites are, how much ammo they have and the extent
of their supply lines."
Our new car pricing manager chimed in with this observation: "TMV does not necessarily
reflect the best deal you can possibly get. It reflects the average of the transactions
within one region. Variable factors, such as the inventory levels of a specific
dealer, or how eager the dealer is to sell, may also affect the purchase price.
I would suggest always offering less than the TMV to begin with, hoping to close
the deal at or under TMV."
A manager in our data department said he frequently uses TMV to buy cars for himself
and to help friends buy cars. Recently, he helped a friend buy a Jeep Grand Cherokee
Limited. He had this observation: "I kept advising my buddy on each deal he presented
to me that if he paid right around TMV plus tax and license, he was getting a
good deal, but any deal he showed me that was for sticker or even remotely close,
we both kicked to the curb. Conclusion: If the car is hard to find, pay TMV for
sure; if the car is not rare, try to pay below TMV with TMV being the max."
The readers of Edmunds.com have often written to us about the successes
they've had using TMV. One reader described negotiations this way: "I had my briefcase
with all my Edmunds.com material and when the sales guy inquired what was the
most important consideration in my buying a car I replied 'price.' I gave them
a price range between $16,000 and $18,000. He said that he could not accommodate
me, so I said, 'Fine, thanks for your time. Goodbye.' The sales manager then handed
me his business card and on the back of it wrote down a price of $16,888."
Another reader relates: "As a woman, I've particularly hated to car shop, I've
often felt intimidated and at a disadvantage. Not this time! I went in with my
data and TMV sheets in hand. The first time the salesman said MSRP, I pulled out
my sheets and showed him the three columns, informed him about TMV and said 'This
is the range we'll be negotiating in.' He checked invoice against my worksheet,
every number from Edmunds.com was exactly right. From that point on, he talked
in terms of invoice price, however, I bought my car for less than invoice because
he needed to make quota and was willing to sacrifice some profit for volume."
Finally, there is this story from a young Edmunds.com reader. He said he studied
the advice material and felt motivated to get his Toyota for TMV. "I told my dad,
and he said that it was unlikely that would happen. My dad said $15,000 would
be a good price since MSRP was $15,561."
After negotiations stalled at one dealership, he called another. We told them,
"We know the Edmunds price, and know what we can get the car for.' We offered
$14,000, but the dealer rejected this price and came back with the TMV offer from
your Web site for $14,312. You saved me $700 at least! $700 is little for most
people, but right now it is like a million bucks."
So, from these first-hand stories, you can see that the TMV price is accurate
information. How you use that information is up to you. The two main avenues you
can take are as follows:
- Offer the TMV price to a dealer, knowing it is a price they are likely
to accept.
- Make an opening offer that is below TMV, but in the ballpark. Negotiate
up to TMV.
Finally, I'd like to stress several things that might seem pretty obvious. First
of all, make sure you include all the options of the car you are looking at by
using Edmunds.com's New Car Calculator (or the Used Car Calculator for used cars).
This will total all the options and automatically include the destination fee.
Then print out this form and take it with you.
Should you wave the TMV form in the salesperson's face? As our experts said, that
all depends you and your personal style.
For this, and other buying and leasing strategies, pick up a copy of STRATEGIES FOR SMART CAR BUYERS, by the editors at Edmunds.com.
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