I rarely buy cars, but I’m going to tell you the story of how I purchased two cars last February on the very same day.
I’d been driving a 1994 Mitsubishi Galant GS, which was still running well on the original engine and tranny. I’d bought the sucker new, paying $1,000 below dealer’s invoice, so I thought I’d gotten my money’s worth. When the radiator started to leak at 211K miles, I decided to cut my losses and replace the car.
My wife was driving a 1992 Toyota Corolla with 130K miles on it. I hated that car. It was utterly reliable, but I had to grit my teeth trying to accelerate whenever I got onto a freeway onramp. When my Galant got into trouble, I decided to replace the Corolla as well, justifying the purchase for safety reasons.
We decided on a pair of Hondas — a Civic and an Accord V-6 — figuring we wanted one “nice” car and one “economy” in the family. I already knew that Honda didn’t have rebates going, so I didn’t factor that into my expectations. Following the Fighting Chance method, I did the following:
- Looked up each dealership and determined who the fleet or sales manager was. I didn’t want the Internet guy; I knew that in a lot of cases, the Internet guy at a dealership was only somebody who was authorized to offer a specific discount, but not close a deal below the standard discount.
- Composed letters to each dealership in the area (33 of them) and listed the cars I wanted, the colors I wanted, the accessories I wanted, and the MSRP and Dealer Invoice prices for the vehicles and accessories. If Honda had been issuing rebates, I would have listed these on the letter too.
- A week before the end of the month, I faxed the letters out. I didn’t e-mail them because some sales managers are old-school and don’t read their e-mail. I was careful to call each dealership beforehand to make sure that the fax went directly to the sales or fleet manager. No sales flunkies for me.
- Within two days, I had responses from about half of them. I called the one with the highest prices and thanked him, telling him that I was going with Dealer X, who offered the lowest price. Sometimes he offered to beat the price; sometimes he didn’t. If I got a lower price, I thanked him and told him that I still had to call the other dealerships. Then I used the new lower price from the last guy to go through my spiel again. By the time I was done, I had firm bids for the Civic EX at dealer’s invoice price ($1,638 below MSRP) and the Accord V-6 EX at $810 below dealer’s invoice price ($3,533 below MSRP).
I went to the dealership to test drive the cars (to make sure there were no squeaks or rattles, and that everything worked, and that it was fully equipped as negotiated) and bought both cars. Paid cash for both of them.
Now this little story is akin to your post on April 29th about having dealers bid against each other. I’ll tell you why the Fighting Chance method works. Every manufacturer has sales targets for its models. If a dealer reaches his target for the month, he not only gets a rebate for that particular car, but for all of the cars of that model that he sold that month. The target can vary for each dealership, depending on size. And when you go shopping for a car, you have no idea if a dealer is below his target, over his target, or just close.
Let’s say that I’m a dealer, and I’ve got a hypothetical $500 rebate per car if I sell 200 Accords that month. A guy named J.D. comes in looking for a car at the end of the month. If I’m nowhere near my target, I’ll be motivated to sell him the car, but I can’t cut him a whole lot of slack on price because I won’t have that $500 rebate and I sure as hell won’t sell a car at a loss. So I might shave something off my profit, maybe a grand off MSRP, to make him happy and sell the car. Or I might be over my target. I can sell him the car and even more because I know I’m getting an extra $500 J.D. doesn’t know about. I can even split the rebate with him if he’s a tough customer and bring my price down to $1,250 below MSRP to temp him to buy the Accord. But supposed I’ve sold 198-199 Accords that month and I’m about to run out of time to sell Accords. What price would I be willing to sell the Accord to J.D. for if getting over the top will get me a total rebate of $100,000 ($500 x 200 cars)? Hell, I’d lower the price to below even my own invoice price if he puts me over the top because I’d not only get it back, but more!
That’s the way it works. You have no idea what a dealer’s target is and how close he is to it. So you blanket the area to weed out the guy who is desperate to sell and reach that target. The next month, it might be a different dealer. If a car is hot, like a hybrid, stores won’t deal, because they know that in 30 minutes, some other guy will come in and buy the car. But if it’s not something where demand exceeds supply, the buyer is in the driver’s seat. Because at the end of the month, you’re going to have an easier time finding a seller than the seller is going to have finding a buyer.
Again: I have no association with Fighting Chance. I receive no money from them, and had never heard of them before VinTek sent me his story. But I think that for $35 the service easily pays for itself.