Successfully Negotiating with Internet SalespeopleMost car dealers use the Web now to advertise their vehicles and negotiate prices - can a buyer use it to his/her advantage? Personal experiences with some conclusions and advice.
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The Bottom Line Write a specific and serious request for a dealer's quote, and you are likely to get good consideration, good price and save time on haggling.
It seems that only a few years ago, when you wanted to buy a new car, you had to come to a dealership in person and negotiate, negotiate, negotiate - sometimes, not always, ending up with frustrated, or paying too much. Well, the Information Superhighway ((TM) Al Gore) has changed all this, did it? Read on for the answer.
While some no-haggle, national, Web-based car-buying services have come (and some gone), I will not discuss them for two reasons: (a) I never used them, and (b) the majority of people still buy cars from bricks-and-mortar dealers, local or not.
To be competitive, most larger new car dealers now have an "Internet department", "Internet salesperson" or several of them, and a mechanism on their site to communicate with the dealer, submit and request prices etc. Many dealers are affiliated with sites such as cars.com or edmunds.com, which make it easy to request several dealer quotes in a given geographic area.
I don't believe there is huge difference in whether you use a dealer-specific quote request form, or one from Edmunds or cars.com. The important thing is what to include in your message to get a reasonable response, and how to negotiate from there. To determine this, let's look at how this side of a dealership may work.
The way I understand it - and I don't work at or operate a dealership, but have been hanging around with salespeople both online and in the real world (yes, really) - is that, contrary to what you may expert or hear, an Internet salesperson is still being paid on a comission basis. True, he or she (below, referred to in the masculine gender for brevity) may have a base salary, but he is still interested in you, the customer, paying the highest price. But: because, hopefully, he spends much less time on each transaction than his traditional brethern, and, consequently, "moves" more cars, he is more willing to let the car go cheaper. This general picture is not always true, but it is usually the explanation why you may get a lower price from an Internet guy.
But there is a downside to this equation. Because an Internet salesman needs to move a lot of cars, he needs to get even more Internet (email) solicitations for transactions: requests for quotes, "bids", etc. I have no idea what the ratio of solications to successful sales is on average, but my unscientific guess is that it is between 10 and a 100. That is, out of 10 to 100 emails the Internet person gets, he sells one car. So, he needs to optimize his behaviour in answering first or at all the ones that are the most serious and are the most likely to end up in a sale. With everybody and their pet having Internet access these days, how does the salesperson know this particular request for a high-end, in-demand car did not come from a bored 12-year old?
(What I am basing this on? When I was shopping for a bread-and-butter import family sedan, I sent a request for quote, using the Edmunds tool, to all 5 Honda dealerships in our metro area. Two did not respond at all. I am not upset, my request must not have appeared serious and specific enough for them to follow up on).
So, when you ask a Internet salesperson for a quote, you need to be serious and specific. Serious? The simplest way to do that is to include your real-world contact information (cell or work phone) and mention that you are giving it as a sign of good faith, but ask not to use for the quote because you want a written (or, rather, electronic) quote. Needless to say, you should include your name. Another thing to include in your RFQ (Request For Quote) is what your buying timeframe is. If you plan to buy within 2 - or 6 - weeks, mention it. If not, should you be wasting your own and salesperson's time at all?
Many people have the misconception that paying with cash will get them a lower price, whether dealing with an Internet salesperson or not. This is often not the case, since with the dealership handling your financing, they get a small or not-so-small kickback from the lender. Getting financed at the dealer is not automatically bad for the customer, since dealerships (similar to mortgage brokers) shop for rates and terms widely and have the advantage of bulk buying. By all means, check with your bank or Credit Union what their best rates are - essentially, have them pre-approve you as you would for a house purchase. Once you do that, you can in good faith mention in your RFQ that you are open to dealer financing if they can match or beat your bank/CU terms. If you do insist on paying with cash, in some case you can get a better price by financing and paying off the loan completely before the first payment is due. But check that the loan program does not have any prepayment penalties (most don't these days).
Describe the trade-in in your RFQ if you have one. The trade-in complicates the transaction. It introduces a mechanism for the dealer to look for your soft spots: whether you want to pay a rock-bottom price for a new car and get less for your trade-in, or the other way around. My recommendation is to sell the car privately if you feel comfortable doing it, especially if the difference between trade-in and private-party values is large. While books such as NADA, Edmunds and KBB are useful for gauging what your car may bring when sold, these guides will not write checks to you, dealers or private buyers will. A useful step may be requesting a trade-in quote from a site such CarMax. While this quote can be on the low side, it should be realistic.
Be specific on what model, trim level and possibly colour you are interested in. A sample may look as follows, A 2004 Canyonero XSS, 4WD, tow package, flexible on colour but prefer white, with blue as second choice.
Most auto manufacturers have car locator tools on their websites. With those, you can enter information such as I listed above and find out that no dealers within 500 miles have the car you want - this is the time to rethink your request, choose a different model or color etc.
Once you get the quotes back, you may decide whether to negotiate further or not. I found Edmunds TMV's (True Market Values) usually reasonable; if you can get below them, great. It does not always make sense to buy from the lowest bidder; if you plan to bring you car for service to a dealership across the street that is charging slightly more, you may want to pay a little extra for the privilege of faster appointments and additional perks.
The beauty of negotiating via the Internet is not just because it may save you money. I imagine a determined "grinder" can travel from dealership to dealership and get the really lowest all-Jupiter-moons aligned price. The obvious advantage of Internet negotiation is saving time - and getting a feel about a dealership's helpfulness and attitude (extrapolated from those of the Internet salesperson you work with).
Finally, there is the sticky issue of a test drive. The method I outlined above works well if you have decided what you would be buying. Riding and driving in your friends' new cars (if they let you!) works great for this. What if you are still vaccilating between an Expedition and a Mini and need a few test drives?
Some people I know would come to the closest or most convenient dealership for test drives, and then, once they are decided on a car, would start the Internet negotiation from scratch. Unless you were tossed the keys and told to have a good time, this is hardly considerate to the non-Internet salesperson who helps you - and then does not have a chance of a sale. A more considerate approach is to rephrase your RFQ to include a request for a test drive - an Internet salesperson will usually find somebody to accommodate you, or do it himself. Once you choose exactly what you are buying, you may want to give the dealership that you test drove at a little break, and, in general, consider yet another factor - how prompt and helpful dealerships were with the arrangements.
I'd like to conclude with summarizing my personal experience negotiating a car deal over the Internet - this was a 2003 Accord. Of the three responses I got (out of 5 Twin Cities Honda dealerships), the first invited me to come over and get the best deal. The second response asked for my own bid, which I promptly offered at invoice + destination. They countered with a price $XYZ (approximately invoice + 600), but explained they were doing me a huge favour, just for the sake of future business, and that they would waive the car preparation fee of about $120 if I bought today. The last dealership that responded quoted invoice + $500, and quickly agreed to my counteroffer of invoice + $200. So, in my case the choice which dealer to buy from was obvious; I am sure it can get more interesting in an area with more dealers and a higher response rate. The in-person experience at that dealership was also top-notch, highly professional, no games, as well as the subsequent service there.
[Originally pubished as an Epinions essay.]
It seems that only a few years ago, when you wanted to buy a new car, you had to come to a dealership in person and negotiate, negotiate, negotiate - sometimes, not always, ending up with frustrated, or paying too much. Well, the Information Superhighway ((TM) Al Gore) has changed all this, did it? Read on for the answer.
While some no-haggle, national, Web-based car-buying services have come (and some gone), I will not discuss them for two reasons: (a) I never used them, and (b) the majority of people still buy cars from bricks-and-mortar dealers, local or not.
To be competitive, most larger new car dealers now have an "Internet department", "Internet salesperson" or several of them, and a mechanism on their site to communicate with the dealer, submit and request prices etc. Many dealers are affiliated with sites such as cars.com or edmunds.com, which make it easy to request several dealer quotes in a given geographic area.
I don't believe there is huge difference in whether you use a dealer-specific quote request form, or one from Edmunds or cars.com. The important thing is what to include in your message to get a reasonable response, and how to negotiate from there. To determine this, let's look at how this side of a dealership may work.
The way I understand it - and I don't work at or operate a dealership, but have been hanging around with salespeople both online and in the real world (yes, really) - is that, contrary to what you may expert or hear, an Internet salesperson is still being paid on a comission basis. True, he or she (below, referred to in the masculine gender for brevity) may have a base salary, but he is still interested in you, the customer, paying the highest price. But: because, hopefully, he spends much less time on each transaction than his traditional brethern, and, consequently, "moves" more cars, he is more willing to let the car go cheaper. This general picture is not always true, but it is usually the explanation why you may get a lower price from an Internet guy.
But there is a downside to this equation. Because an Internet salesman needs to move a lot of cars, he needs to get even more Internet (email) solicitations for transactions: requests for quotes, "bids", etc. I have no idea what the ratio of solications to successful sales is on average, but my unscientific guess is that it is between 10 and a 100. That is, out of 10 to 100 emails the Internet person gets, he sells one car. So, he needs to optimize his behaviour in answering first or at all the ones that are the most serious and are the most likely to end up in a sale. With everybody and their pet having Internet access these days, how does the salesperson know this particular request for a high-end, in-demand car did not come from a bored 12-year old?
(What I am basing this on? When I was shopping for a bread-and-butter import family sedan, I sent a request for quote, using the Edmunds tool, to all 5 Honda dealerships in our metro area. Two did not respond at all. I am not upset, my request must not have appeared serious and specific enough for them to follow up on).
So, when you ask a Internet salesperson for a quote, you need to be serious and specific. Serious? The simplest way to do that is to include your real-world contact information (cell or work phone) and mention that you are giving it as a sign of good faith, but ask not to use for the quote because you want a written (or, rather, electronic) quote. Needless to say, you should include your name. Another thing to include in your RFQ (Request For Quote) is what your buying timeframe is. If you plan to buy within 2 - or 6 - weeks, mention it. If not, should you be wasting your own and salesperson's time at all?
Many people have the misconception that paying with cash will get them a lower price, whether dealing with an Internet salesperson or not. This is often not the case, since with the dealership handling your financing, they get a small or not-so-small kickback from the lender. Getting financed at the dealer is not automatically bad for the customer, since dealerships (similar to mortgage brokers) shop for rates and terms widely and have the advantage of bulk buying. By all means, check with your bank or Credit Union what their best rates are - essentially, have them pre-approve you as you would for a house purchase. Once you do that, you can in good faith mention in your RFQ that you are open to dealer financing if they can match or beat your bank/CU terms. If you do insist on paying with cash, in some case you can get a better price by financing and paying off the loan completely before the first payment is due. But check that the loan program does not have any prepayment penalties (most don't these days).
Describe the trade-in in your RFQ if you have one. The trade-in complicates the transaction. It introduces a mechanism for the dealer to look for your soft spots: whether you want to pay a rock-bottom price for a new car and get less for your trade-in, or the other way around. My recommendation is to sell the car privately if you feel comfortable doing it, especially if the difference between trade-in and private-party values is large. While books such as NADA, Edmunds and KBB are useful for gauging what your car may bring when sold, these guides will not write checks to you, dealers or private buyers will. A useful step may be requesting a trade-in quote from a site such CarMax. While this quote can be on the low side, it should be realistic.
Be specific on what model, trim level and possibly colour you are interested in. A sample may look as follows, A 2004 Canyonero XSS, 4WD, tow package, flexible on colour but prefer white, with blue as second choice.
Most auto manufacturers have car locator tools on their websites. With those, you can enter information such as I listed above and find out that no dealers within 500 miles have the car you want - this is the time to rethink your request, choose a different model or color etc.
Once you get the quotes back, you may decide whether to negotiate further or not. I found Edmunds TMV's (True Market Values) usually reasonable; if you can get below them, great. It does not always make sense to buy from the lowest bidder; if you plan to bring you car for service to a dealership across the street that is charging slightly more, you may want to pay a little extra for the privilege of faster appointments and additional perks.
The beauty of negotiating via the Internet is not just because it may save you money. I imagine a determined "grinder" can travel from dealership to dealership and get the really lowest all-Jupiter-moons aligned price. The obvious advantage of Internet negotiation is saving time - and getting a feel about a dealership's helpfulness and attitude (extrapolated from those of the Internet salesperson you work with).
Finally, there is the sticky issue of a test drive. The method I outlined above works well if you have decided what you would be buying. Riding and driving in your friends' new cars (if they let you!) works great for this. What if you are still vaccilating between an Expedition and a Mini and need a few test drives?
Some people I know would come to the closest or most convenient dealership for test drives, and then, once they are decided on a car, would start the Internet negotiation from scratch. Unless you were tossed the keys and told to have a good time, this is hardly considerate to the non-Internet salesperson who helps you - and then does not have a chance of a sale. A more considerate approach is to rephrase your RFQ to include a request for a test drive - an Internet salesperson will usually find somebody to accommodate you, or do it himself. Once you choose exactly what you are buying, you may want to give the dealership that you test drove at a little break, and, in general, consider yet another factor - how prompt and helpful dealerships were with the arrangements.
I'd like to conclude with summarizing my personal experience negotiating a car deal over the Internet - this was a 2003 Accord. Of the three responses I got (out of 5 Twin Cities Honda dealerships), the first invited me to come over and get the best deal. The second response asked for my own bid, which I promptly offered at invoice + destination. They countered with a price $XYZ (approximately invoice + 600), but explained they were doing me a huge favour, just for the sake of future business, and that they would waive the car preparation fee of about $120 if I bought today. The last dealership that responded quoted invoice + $500, and quickly agreed to my counteroffer of invoice + $200. So, in my case the choice which dealer to buy from was obvious; I am sure it can get more interesting in an area with more dealers and a higher response rate. The in-person experience at that dealership was also top-notch, highly professional, no games, as well as the subsequent service there.
[Originally pubished as an Epinions essay.]
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