The Art of the Deal
Buying a Car
If every time you set foot on a car lot you feel as if you've been somehow time-warped onto the set of "Let's Make A Deal," where everyone but you knows the rules of the game, you're not alone.
For 95 years auto retailers have preyed upon consumers like piranhas in a feeding frenzy. So, when it comes down to crunch time, how's a Fool to overcome this historical precedent? The most effective way to stay away from the frenzied piranha is to stay out of the water, which is to say, the best way to negotiate a new vehicle deal is to stay out of the dealerships.
Staying away keeps you in control of the negotiation process and gives you your most effective tool in new car negotiations -- the Foolish same-apple principle. You're going to pit the piranhas against each other!
If you're here after reading the Gardner Brothers' book, You Have More Than You Think, then you probably already know that you are going to accomplish this task by using your fax machine. If you don't have one, consider borrowing a friend's, or improvise by using e-mail or regular old snail mail.
Next you need the fax numbers of all the dealers within 100 miles of you that sell your #1 vehicle choice. If you recall back in Step 6 we used the Internet to determine which dealerships to call about a test drive, so now run the same search in the Yahoo! dealer locator (or a similar Internet service) and you'll have such a list in a few seconds. Go ahead and print a copy of your dealer list if you haven't already.
If a fax number isn't listed, call the dealership and ask for the fleet manager's name, and the fax number. The person who answers may say "We don't have a Fleet Manager." Your response is a polite, "Oh, do you have a specific person that handles house sales?" If they continue to claim ignorance, then just ask them for the sales manager's name and fax number.
We should note that the dealership at which you test drove the vehicle in Step 7 must be handled in a special way. Since you've used that dealership's inventory and time, if you now send a bid request as a Fleet or House Sale, you'd be unfair to the salesperson who demonstrated the vehicle. If the dealership impressed you as an upstanding establishment, then by all means give them a chance to bid on your business: just take a few extra minutes composing a unique cover letter, and fax it directly to the salesperson who helped you. Should you consider this bid more than others? Not unless it is darn close to the low bid. You should pay a couple of hundred extra only if the place exudes top-flight customer service.
Okay, back to the rest of the dealer pack. Next you need to create a detailed listing of your vehicle on a single sheet of paper. You've already worked up a detailed list of base vehicle and options since Step 5 and Step 6.
So now create your Generic Fax Coversheet, on which you will introduce yourself and lay out your buying strategy to the various dealerships.
You might have noticed that we put "Dear ________," at the top of our cover sheet. Why not just make it truly generic and put "Dear Sirs?" Well, we've found that the more personal you make these inquiries, the more effective they will be. If you have the fleet manager's or the sales manager's name up top, they figure you're not "spamming" the entire marketplace, and when they see your detailed vehicle listing on the second page, they know you're a serious buyer. Nothing excites a sales manager as much as a serious buyer, so stay personal when possible.
A couple of other items for the fax cover sheet. Let them know you're a serious buyer by saying "I'm looking to buy a new car this week." Also, since it's to your advantage to put a time limit on the bidding process (this helps prevent your inquiry from going to the bottom of the pile) you might add something like "Over the next three days, I'll be taking bids." Make it a reasonable amount of time; if you say "I'll give you three hours to respond" then you're asking to have zero responses. Notice also the word "bid" -- this lets the dealer know you're shopping your dream vehicle around town. Again, let the piranhas fight amongst themselves; there is nothing wrong with dangling a juicy leg of beef in the water!
More than likely the fax bids will start rolling in after 24 hours or so. Some of these bids will not be bids at all; instead, they will be a nice little form letter inviting you to "Come on down" to the best dealership on the planet where they will be happy to beat any bid you have. Ignore these. They either don't have the vehicle you're looking for, or they figure they can switch you, or perform some other dealer prestidigitation on your wallet. Put these bids in your "No Way" folder, the perfect place to save them until you need some starter fuel for your fireplace.
As the real bids with real numbers start to come in, look each one over closely. Sometimes a dealer will leave off a thing or two from your model listing. Obviously, when they forget to include a retractable sunroof, and a trunk-mounted 10-CD changer, the price of the vehicle is going to be a few dollars lower. Any bid that deviates from the model listing you provided should have your red circles around the problem areas and inserted into the "Possibly Redo" folder.
The bids that are exactly as you requested should be placed in your "Top Priority" folder. After the bidding period is over (don't accept any late bids) start with your Top Priority Folder and line up all the bids by price, arranged from lowest (on top) to highest (on bottom). You may be amazed at the variations in these prices, particularly given the fact that they are all for the same Granny Smith apple! Now pull out your Foolish Value Price Worksheet, so that you can see how the bids look beside your pricing research.
If one bid is significantly lower than all the others, and we mean significantly (15 percent) and it is within a few percentage points (2% to 3%) of your calculated FVP, then, Fool, drop everything, your ship has come in! Get on the phone and call the nice people over at Car Sales by Tina, and tell them you're happy to accept the bid that they recently faxed to you. Be prepared to talk delivery and other paperwork, but when you finally get off the horn it'll be time to pat yourself on the back for a job well done. If you have a significant other, now's the time to demand that special something -- a back rub, a belly dance, coupons redeemable for golf dates or kitchen cleanups, an all-expense paid trip to Aruba -- you've just saved a pile of loot!
More often than not, you'll find yourself with a host of bids that are below MSRP but still some distance from your FVP. If this is the case, then prepare for phase two of the Foolish Fax-a-thon. But first take a peek at your "Possibly Redo" folder. Perhaps by adding and subtracting the various extras or missed items you find a bid that is near the line drawn by your FVP. Compose a second fax to this dealership asking them why they added or left off a particular option. Allow them an opportunity to requote the vehicle, making sure they comply with the model listing. Give them a shorter time period to re-bid, say 24 hours; in the meantime create your 100- to 200-mile dealership listing.
For this second listing of dealers, use the same cover letter, only add in big letters, LOWEST BID $__,_____ from the first set of dealerships, CAN YOU BEAT THIS? Be truthful here, put down the best price you've received, or use the low bid that had something missing, but add in the invoice price of the missing option(s). You're hoping one of the farther out dealers has a vehicle that matches yours which has been on the lot for some time. They might discount the vehicle several hundred dollars below the "Low Bid" in order to move it off their lot. Getting $500 off your lowest bid is certainly worth the extra 100-mile drive.
Eventually you have to stop the fax-a-thon and decide what you're going to do. If you're not comfortable with the bids you received with respect to your FVP then step back and reconsider -- perhaps you've miss-timed the market, or you've miscalculated. Whatever the reason, it is best to re-evaluate your financial and "needs" issues before accepting any bids. On the other hand, if you have bids that you're comfortable with, when viewed against the FVP, then it is time to take the best two bids and begin negotiating.
To do this, lay the best two bids out in front of you, call the second highest bid and talk to the person that sent you the fax. Make a FIRM offer to buy the car at a price, say $250 below the lowest bid. If they accept, then request that they immediately fax such a bid to you and arrange for a paperwork session and a delivery time. If instead they counter with a slightly higher price, say thank you and immediately hang up. At this point you're next move is to call the best bid dealer and congratulate them on winning your business.
Your job, Fool, is now nearly complete. We'll be working on the odds and ends and all the other tidbits to finalizing the deal in Step 13. Until then, be Foolish, and don't drive under the influence!