From time to time, someone comes up with a new car-buying strategy and broadcasts the good news to legions of weary shoppers. One of the latest advisers is Bruce Bueno de Mesquita, a professor of politics at New York University and a senior fellow at the Hoover Institution. Bueno de Mesquita specializes in international conflict, foreign policy formation and nation building, and approaches car buying from his expertise in game theory.
Game theory, Bueno de Mesquita writes, "is a fancy label for a simple idea. People compete, and they always do what they think is in their own best interest." He advises that a shopper call competing dealerships, tell each dealer that she will be purchasing a car at 5 p.m. that day and demand the dealer's best price. He recommends that the buyer then show up at the dealership that has the lowest price, carrying a check for the exact amount, and then drive away in the new car.
Bueno de Mesquita also is a consultant to the CIA and has been noted for his predictions on when Iran would develop a nuclear bomb. And while his advice on car shopping isn't as dramatic as weighing the possibility of world war, it does describe a winner-loser car-buying process.
While there are several potential problems with this method, the biggest one is that it takes a blatantly antagonistic approach to the dealership's salespeople, presuming they are guilty of their own kind of gamesmanship without giving them a chance to be cooperative in the sales process. For example, if the salesman initially refuses to give a price over the phone, Bueno de Mesquita tells shoppers to say, "If you don't quote a price to me, I understand that you're telling me you know you don't have the best price."
While many Edmunds articles, including "Confessions of a Car Salesman," describe various car sales tactics and ways to avoid falling prey to them, the fact is that there are honest, hard-working car salespeople working in dealerships all over the country. Part of the car-shopping process is finding the right salespeople and work with them, not against them.
This is true in many areas of sales, but somehow, car salespeople are so universally despised that shoppers believe that mistreating them is justified. Consumers love to swap stories about how to get the best of car salesmen and share "gotcha" strategies to strip the dealer of every penny of profit. A few such tactics are hiding the fact that there's a trade-in until the last moment, or pretending to be buying when in fact they are planning on leasing.
Despite the chest pounding on Internet forums, most people don't have the stomach for these confrontational approaches. Does a nonconfrontational path to a new car exist? Yes. In describing such a strategy, we can address some problems in Bueno de Mesquita's approach.
In the game-theory approach, where shoppers call a dealership and demand the best price on a car, they will be routed to a salesperson. In many cases, the salesperson will be unable to comply — even if he wants to — because all cars are optioned differently (with the exception of Honda and Acura). And because of that variation, they have different prices. So the shopper first needs to settle on a specific car before the price discussion can be meaningful.
Also, many salespeople do not have the authority to quote a price and will have to go to the sales manager to request the best deal they can offer. So for this advice to have any chance of success, callers should put this "best-price-now" question directly to the sales manager.
If you're tempted to try Bueno de Mesquita's approach, we'd like to suggest an alternative opening move: Check the online new car inventory to find a car with the exact options you want. Then call the Internet manager at that dealership and ask for a price. Internet managers are different from their counterparts on the sales floor because they are expressly assigned to deal with consumers who are shopping remotely. It's their job to quote prices over the Internet or on the phone. The job of the on-the-floor salesperson, on the other hand, is to get customers to physically visit the showroom, where he can negotiate with them in person.
Some vehicles you find in our online new car inventory will be marked as having an Edmunds Price Promise special offer. This means that the car is eligible for an instant competitive price quote, which you'll see when you click on the "View Price Now" button. That price will be honored when you buy the car. Edmunds Price Promise eliminates the hassle and confrontation of negotiating.
Deadlines and Demands
Rather than giving the Internet manager the 5 p.m. drop-dead purchase deadline, tell him or her you are ready to buy and you're shopping around for the best price. This puts the Internet manager on notice that you are contacting other dealers for their prices. But you hardly need to even say that since Internet managers already assume shoppers are Web savvy and have checked the market. In fact, Internet managers anonymously check competing dealerships' prices so they can undercut them.
To prove the difference between the conventional sales approaches and those taken by the Internet car sales department, I walked onto a Toyota car lot and requested a price. It took 45 minutes of aggravation and game-playing to get even a vague price. But the next day, in a five-minute phone call, the Internet manager at the same dealership cheerfully gave me a price quote for the exact same car. It was $1,000 below the vague showroom quote.
Comparing Apples to Apples
When you're calling around for the best price, it is often hard to make accurate comparisons between cars since, as noted above, they are optioned differently. But an accurate method, which would help Bueno de Mesquita's approach, is to ask for a price quote in relationship to the invoice price. In other words, if a salesperson says the car is $23,457, you can ask, "How much over invoice is that?" The answer might be that it's $500 over invoice. Using the "amount over" invoice, you can then assume that, even when the options change, the price will be about the same in relationship to the invoice price of the vehicle.
This is a handy way to simplify pricing and make accurate comparisons. If you were to call another dealership, you could then say, "I've shopped around and found this car for $500 over invoice. What are you charging?" This is a nonconfrontational way to say, "Can you beat the competition's price?"
Even better, tell the salespeople that you have shopped around and gotten prices but don't specify what those prices are. Ask them to name a figure first — it could be even lower than what it would be if they merely beat the competition by a few hundred dollars.
Bueno de Mesquita's recommendation to bring a cashier's check for the exact amount is good advice because it forces the dealer to reveal any additional fees up front. It also means that it will be harder for the finance and insurance manager to sell you extra products or services, since the check is already made out. Arriving with a cashier's check is clearly a preemptive strike against some kind of dealership switcheroo.
Of course, the check-in-hand gambit won't work if you have to finance the car. In that case, you can lock in the total by asking for a dealer's "worksheet," which is a written summary of all fees.
In many cases, the lowest rate for financing a car might be through the dealer, which has access to low- or no-interest financing from the captive finance companies that operate as lenders. A smart play is to arrange independent financing to serve as your bargaining chip, and then ask the dealer to beat the rate.
Putting It All Together
To accomplish all the benefits that Bueno de Mesquita describes in his video, but to remove all of its confrontation, follow the steps below. They're also described in more detail on the Edmunds.com Guide for First-Time New Car Buyers.
- Choose your car. Research what vehicles are in your budget and meet your needs.
- Get pricing information. Look up the Edmunds.com True Market Value (TMV®) price and use this as a guide as you shop for the best price.
- Finance your car. Get pre-approved financing from a credit union or bank before you go to the dealership. If the dealer can beat that rate, so much the better for you.
- Find your car. Use online inventory to find the exact car you want. Also look for Edmunds Price Promise offers, which are guaranteed, up-front prices on specific cars.
- Test-drive the car. Arrange a test-drive through the Internet manager — but then leave the dealership. This is not the step at which to buy.
- Get dealer price quotes. E-mail the Internet department for a quote or call the Internet manager for the dealership's best price.
- Trade-in or sell your old car. Check the TMV trade-in price for your used car. Or consider selling it yourself to get more money.
- Negotiate the deal. You can push for an even better price by asking one dealership to beat the lowest price of a competitor. But keep in mind that you might be negotiating in a narrow range of only $200 or so. Instead, choose the dealership that has provided the best customer service.
- Close the deal. Before you sign the paperwork, make sure you know all related fees. Know your out-the-door price.
A Stress-Free Process
Once shoppers find the Internet path and know how to circumvent the few possible bumps that arise, they have a truly easy way to buy a car. Rather than turning car buying into a zero-sum game, wouldn't you rather walk the nonconfrontational path to a lower price and a faster, stress-free shopping experience?
To find a dealership that knows how to treat shoppers right, please visit Edmunds.com's Dealer Ratings and Reviews.