After about 8 dealers and numerous salespeople, we finally got what we wanted - at the price we wanted.
It was a very rich learning experience in the field of used-car buying; and hopefully I will summarize a few key points next week.
Our final choice (war trophy) was a lease-returned 2005 Toyota Corolla CE with about 21K miles - still has a fraction of the original warranty on it. I won’t disclose the actual drive-out price, but people who read this blog are smart enough to fish that out from online sources.
In our little psychological battles with car salesmen, we defeated about 10 salespeople (and a few managers) before finally making a truce with a down-to-earth guy (in terms of the prices).
The summary of the proceedings (divided over two days) was as follows:
Day 1: Dealers were taking us for a ride - this was our learning phase.
Day 2: We set the pace of the negotiation and the price - here we were implementing what we learned on the previous day.
We could have reduced the price a little bit more, but we realized that at the price we agreed, all parties involved were looking comfortable. I guess that’s when you know that the deal is reasonable.
The deal wasn’t a *bargain* for us, but it was very *reasonable*.
I have so much to write on this subject; I am thinking of devoting a few days next week to discuss it.
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Congrats on your new Corolla!
Yes, I agree, it is a battle going to the dealer to buy a new car.
So far I have had to go three times to experience this. I feel I’m getting better at negotiating with dealers. First car in 98, wife’s car in 03, then my 2007 corolla.
That’s why I started a blog to help with tips on car buying. I got my 2007 Corolla LE for $750 under invoice. The price before tax was $15995 after the $750 cash rebate. This was for 2007 Corolla LE with auto transmission, BE side airbags, ABS, 6 CD, and alloy wheels.
For those interested in the nitty gritty, please visit my blog at http://buycorolla.blogspot.com
Great to hear that you got a new car! (pre-owned, but new to you none the less).
You mentioned that you settled on a deal with a down-to-earth guy, which I assume you mean someone who seems nice and makes you feel comfortable. If you think about it, you don’t really need a salesman like that. These plesant salespeople end up being the best ones since he/she can get natually get the most sales. What you really need with buying a car is someone who you can get the best deal out of.
I’m sorry to say but sales people are happy when you buy a car regardless of the price since most of the price difference will be earned by the car dealership and not the salesman.
As long as you give him business, a salesman will be happy. It doesn’t matter if he is able to make the company $5,000 on the car or $4,000 since that’s not really what he cares about.
Honestly, it gets down at the end to whether you are happy with your decision or not. If making the other side happier makes you fell more comfortable and ultimately happier yourself, then by all means don’t try to negoiate every cent. If money is very important to you, then you also know what to do, especially since you already seems to think you could’ve gotten a better deal.
MoneyNing: Here is my definition of down to earth salesman - the guy who quotes you closest to the True Market Value (TMV) of the car (I follow Edmunds.com for TMV). In fact, the one we spoke to had a shabby appearance, and spoke broken English at best - and he also made us walk in the sun for 30 minutes (so probably, he hardly made us feel nice and comfortable). But he was better than other salesmen - some who were convincing me to buy a 2000 Honda Civic with 73K for $11,000 + taxes!!
So, although all salespeople make you feel nice and comfortable - it doesn’t mean that they are “down-to-earth”.
Salesmen are happy if you pay more, because their commission depends on sale price (more specifically, profit) of the car [except at Carmax where there is a fixed commission for every sale - irrespective of the price of the car]. That being the case, with any salesman (except at Carmax), you could really hammer down the price of the car to an extent where the salesman will get about $50 as commission. I am not sure how happy the salesman will be about that - although he will always smile and pretend he is. I say he was happy because I am guessing he made *enough* from the deal - which probably means I paid more - but it’s alright because that was the price I was expecting.
MoneyNing - thats not usually true. Most car dealerships work on a tiered commission structure. There is a great article out there on Edmunds titled “Confessions of a Car Salesman” where one of their reporters went undercover to find out whats its like. Here is an excerpt:
“Commissions were based on the “payable gross” to the dealership and were applied in three tiers. If the payable gross was from $0 to $749, our commission was 20 percent of the profit, from $750 to $1249 the commission was 25 percent of the profit. Above $1250 the commission was 30 percent of the profit. In other words, the higher the profit for the dealership, the higher the commission I would earn. Obviously, this motivated salespeople to build profit into the deal so they could hit that magic mark and get into the 30 percent bracket.”
So I would think most sales people do care about how much money they are earning off the sale.
Yes I agree, I always get the invoice price from Edmunds.com. Then I email this to various dealers and ask for their best price.
Then I get various email responses. This time I got a quick response from Dublin Toyota. Their Internet sales manager Ken was very thorough and quick to reply to my many emails. I got a response from Walnut Creek Toyota and their numbers didn’t even add up. Guess which dealer I went with…
I don’t even think of stepping into the dealer’s door without a detailed quote. That’s crazy. Otherwise these sales people will let you sit sit and sit. They have all the time in the world. Instead get it all negotiated in email first.
I went in with a complete quote all done via email: including breakdown of price, rebates, estimated tax, all extra fees. Plus I also went prepared with a preapproval loan from a credit union.
And just to be sure, I asked explicitly if the car was in stock today (with exact addons) in the colors I wanted, to avoid them pulling a bait-and-switch.
So I was ready to do a quick sale, I told him I was ready to buy–and I did not want to waste my time nor his.
I worked for one summer after high school in the back office of a mid-sized local car dealership. Just to add to the info over how car salesmen are compensated, there are times when salesmen will be happy with even a low profit just to make another sale.
Most typical car dealerships (not Saturn, CarMax, etc.) have a sales board in the back office, and it shows how many sales each salesman has for the month. It is updated by the manager. It shows their # of cars sold, total profit $, total sales $, etc. In a dealership that sells both new and used cars, these will be broken down into used and new figures. Salesmen compete on all of these metrics and an overall basis. There are bonuses at the end of the month for top salesmen in each category. (There is also a similar board for finance guys.)
Also, there are monthly bonus tiers regardless of how you place within the competition. E.g. if you sell 20 cars in a month, or 5 used cars if you’re a new car salesman, or 5 new cars if you’re a used car salesman, or your total profit is over $X, etc. then you will be paid extra for that month. The bonus might be an extra cut of your sales or a set dollar amount like $1500. It all depends on the dealership and the management.
Anyway, all of this is to say that sometimes salesmen will have motives besides the pure profit. Yes, what was said above about commission structure is totally true (but again will vary by dealership). It is well known advice to go car shopping at the end of the month, because that is when salesmen are facing the cutoff for “making their numbers.” Top salesmen will be fiercely competing for any customer that they can snag (although there is usually a gentleman’s agreement to rotate walk-up customers). A quick and easy sale at a marginally profitable price won’t be turned away by such salesmen in those situations.
Of course, the sales manager has to sign off on any deal that comes in, but they have numbers to meet too, and if you will commit to buying then they will often go along.
Why not disclose the actual drive out price?
Golbguru,
As you know from Martial Arts, the key to victory is practice and knowing your competition. For fun, I test drive cars every two to three years to practice and size up my competition. (Yes, I have an otherwise boring life
By the time I’m ready to buy, I “in shape” for the game.
Even so, I am sure that the dealer makes a good profit from me. Otherwise, they wouldn’t sell me the car.
The other interesting point I’ve noticed is that my dealer’s shop prices for maintenance and repairs is at or lower that “discount” shops. I think dealer’s realize that competitive shop prices will develop loyal customers. It’s worked on me.
Gaming the credit system: “It is well known advice to go car shopping at the end of the month, because that is when salesmen are facing the cutoff for “making their numbers.— - I was aware of that. But end of the month was just too far away for us
Lazy: I will have a separate post on the price wars and some related issues - so that information will be released at that time.
Super Saver: You are right with “Even so, I am sure that the dealer makes a good profit from me.” - I am sure the dealer made a nice profit in my deal too - considering that it was a leased vehicle. The lease itself must have earned them more than half the MSRP and then I paid a fair *market price* on top of that.
I work in a technical sales environment so I’m well aware of commission structures etc. I don’t think I can work as a sales for consumer products but that’s another story.
Obviously, the higher the resulting price, the more commissions the sales person will get so I totally agree with this. What I was trying to explain is the psychology of the sales guys since getting a sale is better than not getting a sale and that’s where our advantage as a consumer lies. I can’t say how EXACTLY the car industry works since I don’t work in it, but I’m sure selling a car will be beneficial for a sales person (commission, quantity sold total, bonuses etc) regardless of the car being sold at a loss or a profit. So although he/she benefits more with a higher profit margin by getting more commissions, there will still be room to negoiate as we can always find a sales person that is desperate enough to have the tendency to give it away. There could be a million reasons for this. Maybe it’s because he needs to feed the kids, getting pressured from his management since he hasn’t sold any cars, or just him trying to keep his job.
We must realize that even though most of us always talk about the consumer being emotional etc and would benefit from doing their research and calculations beforehand, it happens with the salesperson too but only in reverse. It’s an easier calculation for the salesperson since they are always doing similar deals and there’s always management who will make sure the sales team is doing what the company wants.
Lately at work, we are always talking about positioning. The top salespeople are always the best positioners and the most confident in pricing and negoiations. They never sound desperate and just talk to you as if there is no other alternative but for you to work with him. Their customers often are the ones that end up with the worst deals but end up being the happiest
I feel like when buying a car, you just need to talk to many salespeople and find the one that is the most desperate (or desperate enough) to get the best deal.
In the end, it gets down to whether you feel happy about the purchase or not. Even if the sales guy earns $50 for selling a car, that’s $50 that wasn’t in his pocket before the sale so he/she will be happy. If we really want the sales people to be happy, all we need to do is not be a troublemaker (in his view) like always wanting more, having problems everyday etc since he will think we are annoying and will probably call us names behind our backs.
I also believe the car dealerships must have quantity bonuses for people who is able to sell the most cars so anything sold helps. The company might not always be happy since the $1000 or whatever the profit was might not cover the expense of carrying the car, but in true honestly, the sales guy never cares about that.
Golbguru, you have done great since you got the car already. What you need to do is go enjoy your new ride and stop thinking about and/or talking about it
We should all discuss and research before big purchases, and once the decision is made, we should focus on the future and how to make the best of it (financially, emotionally etc etc).
I love your blog and I’m sure your decision of getting the Toyota Corolla was great so keep up the good work!
Hi, I just recently discovered your blog. I’m in a similar situation where I need a costly repair on an older (but otherwise very good) car. I’ve decided to make the repair for now but I’ll probably will be shopping for a new-to-me car in a couple of years. I’m very interested to hear about your experience so that I can hopefully learn from it. The thought of haggling over a car price is pretty terrifying for me and as a woman I know that I’m thought of as an easy mark. So I hope that you let us know of all the gritty details!
Why didn’t you buy from a private seller and cut out the middleman? Because you were in a hurry?
Salesmen and women become emotionally invested in a sale, just like the consumer. Each person that comes to the lot gets the salesperson one step closer to paying the bills or earning a big bonus. I’m sure most sales people would rather make a sale than make a killing.
You can also check out http://www.evenlevel.com to get an idea on how much dealers are paying for cars, or to buy a car for yourself. Prices are low because the cars are straight from dealer auctions, plus, a standard fee is applied to each car, so there is no haggling.
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