Your car is likely to be one of your largest investments, which is why it's often best to use a car-buying service in order to become a more informed buyer and to make the normally painful experience of buying a new vehicle more automated, efficient, and low-pressure.
Instead of spending eight hours or more wrangling with seasoned car sales experts and coming away wishing you were smarter, tougher, or savvier, you can eliminate most of the discomfort and wasted time and feel like you got a great deal. The old paradigm is being replaced by new technology and services that help you level the playing field. And there are signs on the horizon that acquiring a new car or truck will soon become as simple and straightforward as buying a computer, or maybe even a smartphone.
Let's go over the different options available so you can decide which car-buying service is the best for you.
In the last few years, car information services like Edmunds.com, Cars.com, and others have begun to offer vehicle shoppers a semi-disinterested source of relatively objective information. You can now go online, research many different vehicles, and identify exactly the options and colors you want. Once you've "built" a car you like, you can see an approximate MSRP or even an "actual cost" with which to begin your negotiations with traditional dealerships.
But there's a problem: To get the good information, you must offer up your contact details, which these websites promptly sell to local dealers and insurance companies. "It's simply a form of lead generation," says Damien Bullard, president of leading automotive consulting firm IDDS.
It's understandable why these would unleash an avalanche of unlikely offers and unkeepable promises. They're hungry for new customers. But if you object, you can always use the opt out mechanism which legally must be included.
However, without these online services, you're an easy target for sophisticated salespeople who have far more information at their fingertips than you do. With them, you're armed with a suite of data that gives you a realistic starting point for your negotiations, as well as a better understanding of the vehicle market you're entering.
A more advanced breed of websites, like Kelley Blue Book and TrueCar (NASDAQ:TRUE), do even more.
After you're done with research and reviews, building a car, and obtaining a "market value," Truecar.com allows you to print a document that you can take to up to four specific dealerships that have promised to honor your TrueCar price.
That's a great feeling, until the sales expert explains that the one and only car available at your promised price has unfortunately been sold. He or she will then helpfully steer you to another car that's almost the same. But guess what? It's slightly more expensive. Unless you're careful, you're right back in the traditional, heavy-handed sales process.
Without a second-level service, you're subject to all the tactics and subterfuge of savvy salespeople, who can play you like a trout on a hook. With it, you have a valuable tool to help you to play one dealer against another, along with documented evidence that you're among the more eager buyers, whom dealers are likely to tempt with a somewhat better deal.
Another helpful resource is the "negotiating service." Available through AAA, Costco, Sam's Club, Wal-Mart, and a variety of local "brokers," a negotiating service has a knowledgeable automotive insider pre-negotiate lower prices for you with a variety of dealers. By working through these services, you can get the vehicle you want for a lower price much more quickly and easily than you could on your own.
However, hard bargainers will discover that these pre-negotiated prices are not much better than the normal prices available to the general public. Tough-minded customers can usually get the dealer to agree to packages even more attractive than the bargaining service's best offers. And these pre-negotiated prices do not include any of the fees you must pay the negotiating service itself.
Without this kind of service, you're negotiating alone against sophisticated and experienced salespeople who encounter prospects like you all the time and routinely get them to sign. With this service, you have an industry expert in your corner who can guide you past the early rounds of the negotiation process and thereby shorten the time it takes for you to make your best deal.
As the market continues to evolve, even more powerful car-buying services are beginning to emerge. One of the most exciting examples is actually a manufacturer: Tesla Motors (NASDAQ:TSLA). Not only are its vehicles among the "best ever tested" by Consumer Reports and other trusted reviewers, but the sales funnel is so consumer-friendly it's illegal in many places.
Basically, you take a 30-minute test-drive in a Tesla, get out, and walk away. There's never any pressure to buy. As one salesman told me: "It's my job only to plant the seed." If the seed takes root and you decide you want a Tesla, there's a website you can access from home or from any Tesla showroom that allows you to pick your car, add the options you want, and see the final price to lease or buy it.
Tesla does not haggle, and it adds no hidden extras. Take the car at the listed price, or don't. Your choice.
Buyers willing to wait months for their cars keep Tesla's sales staff so swamped with orders that they have no incentive to hornswoggle or even pressure you to sign on the dotted line.
Dealers are frightened by Tesla's laid-back sales method because it threatens to choke off the cash cow on which they've been feasting since the early 1930s, when car manufacturers began to grant one person the exclusive right to sell their cars in geographic areas as large as a whole state. Today's legacy dealerships now pay millions of dollars in sales taxes to local and state governments. This gives them enough political power to try locking out Tesla and anyone else who threatens to circumvent their fat share of the lucrative new-car industry.
Without participating in this business model, you're fighting solo (or nearly solo) against a phalanx of highly experienced deal-making opponents. If you work within it, most of the time-honored selling procedures get thrown out the window, and your car-buying experience is far more similar to most other purchases you make.
A brand-new paradigm
While dealers are successfully banning Tesla from Texas, Arizona, Virginia, New Jersey, and Maryland, there's another vehicle acquisition paradigm on the horizon that may help consumers eliminate the age-old high-pressure experience of buying a new vehicle while keeping today's revenue-engorged dealers fully in the loop.
It's a start-up in the Los Angeles area called DealerPinch.com.
Like most of the other websites in these categories, DealerPinch allows you to read reviews, build a car and check its MSRP, research options, and obtain a "market price." But then it goes one important step further: It allows you to submit a bid, online, for lease or purchase of that car. You can specify what colors you'll accept, how much cash you wish to put down, and how large a monthly payment you'll agree to. If you prefer to lease, you can also specify the annual mileage allowed and the duration of the contract.
DealerPinch then checks your credit (as a "soft pull" that won't affect your credit score) and -- if you're a bona fide buyer -- submits your offer to four of the top dealerships in your chosen area. If your bid is accepted by any of the dealers, then you'll get your car on your specified terms. If your offer is too extreme, then dealers can simply decline to respond, or they can make a counter-offer.
To accept or counter your offer, however, the dealer must have your car in inventory and must specify the VIN number. This keeps you safe from the "bait and switch." Another safeguard is that DealerPinch keeps you anonymous, so dealers (and insurance companies) are unable to bother you with unwanted sales pitches or promises. If you and a dealer come to terms, you have 48 hours to schedule an appointment, pay, and pick up your car.
DealerPinch charges you $99 for facilitating your purchase. If, for whatever reason, you don't get a car through DealerPinch, you owe them nothing.
As DealerPinch expands its service area and its capabilities, the company is contemplating enhanced "concierge" features, such as making sure the car and the paperwork are ready at the dealership before you ever arrive.
Of course, you can still buy your car the old-fashioned way. But with all these car-buying tools available, why would you bother?
Robert Moskowitz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Costco Wholesale and Tesla Motors. The Motley Fool recommends TrueCar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.