The Car-Buying Game Has Changed

January 13, 2016
Jeff Brown, MD

If you haven't bought a car in a while, you may need to brush up on your buying skills before you head out.

Everyone likes a new car: that wonderful smell, those intriguing new gadgets, the flashy bling. But no one likes the purchasing process. It is complicated, adversarial, and seriously expensive ($30,000 average in 2014). And every time I venture into those fetid, attraction-repulsion waters, I write a column because the economic soil is always shifting beneath our feet.

Keep in mind that the consumer usually buys a new car after up to 10 years. Cars have gotten quite reliable, they’ve also gotten to be expensive and we’ve been through a recent recession, so we keep them. But salespeople do this every day, they go to seminars on getting you to buy and they know they have the upper hand to the often unprepared and overwhelmed customer.

The biggest change in the car buying process in recent years is the advent of the Internet. For a while, the savvy buyer’s ability to gain product and pricing information on the net put the car salesmen back on their heels. But they quickly adjusted and balance has been restored to the universe, well, theirs anyway.

At first, we learned that MSRP (manufacturers suggested retail price, posted on the car window as required by law) is not the number to work off of for your best purchase deal, the invoice price is. That is what the dealer putatively pays the manufacturer for the car. So the smart buyer will simultaneously put out bids to local dealers to find which one will ask the least for a specific model vis a vis the invoice price. Often, the best way to do this is through an online buying service, which may charge a small fee. Let the dealers bid against each other anonymously and know that they are doing so. That is the consumer’s best strategy.

Dealers will try to steer you to a model sitting on their lot, whether or not that is what you want, because it is cheaper and easier for them. But if they do not have just what you want, and if you insist on a computer search of the region’s stock, you will still get your price related to the specific car’s invoice, regardless of the options added, if you got the promise of a price related to invoice. No “bait and switch” for you.

Occasionally a dealer will make an offer at or below the invoice cost. How can he make any money at that? There is a thing called a “hold back” where the manufacturer will refund to the dealer some measure of the purchase price once the car is sold. Some dealers deny their company does this, but under various names they all do it.

The latest wrinkle is that after going on Edmunds.com or Kelley Blue Book to learn the price of the car you are interested in, you can go to Truecar.com to see what your desired car has actually sold for in your area. Keep in mind that this number is an average, not the best price that you can get. In fact, Truecar has become so commonly used that in some areas it is the de facto MSRP.

Two last things: First, if you go online you can find a plethora of advice about dealer tricks to avoid, such as focusing on your monthly payment or eavesdropping “while I check with the sales manager.” Lastly, remember that your most powerful tool, beside careful preparation, is your ability to smile, say “No,” and walk out the door. Funny, how you will sometimes be called back to close the deal at your price.

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