posted: Apr. 24, 2010 @ 11:00a
This topic comes up a lot, and there are different approaches to accomplish the same goal. I buy a lot of cars, and handle those transactions for my extended family and friends. In doing so, I consider the ROI of the time necessary to do this. So, throughout the years I have streamlined this process. Some deals I have even done without ever going to the dealership, and having the cars delivered straight to my house.
1) First and foremost is to do your research. You need to know exactly what you want, and what you're willing to spend. As you all know, the Internet is a very valuable tool. So use it to your advantage, go to Edmunds.com, enthusiast forums of the car(s) you like, and find out the dealers cost (don't forget hold back, this varies between mfg's), incentive's, etc. Many dealers will advertise silly deals when in fact these are mfg incentive's that you can see just by doing the research. Ie: trade in an older model car of the same mfg and get $2,000 for "loyalty".
2) Select the exact car, and model you want. Unlike some advice given elsewhere, PICK the color and features you want, exactly. Let's face it, if you're buying a new car.. you need to get what you want. Don't sacrifice unless it's for financial reasons and you do not want to spend the money on upgraded features.
3) If you must go to a dealership and test drive car(s), then do so quickly. First look up the dealership, find out who does Internet or fleet sales. If they don't have these department's and they're a small dealership, go straight to the owner, or the owner's son or family member who would then handle sales. Tell them you have no intention of wasting their time, but you are interested in a certain MODEL (don't get into details or attachments of a specific car on that lot) and say you'd like to drive that car (don't worry about every creature comfort, just the model car.. hopefully same engine you want, stick/auto, etc) and then ask for their business card and that you will contact them soon. Do NOT discuss competitive cars, features, financing, etc. If he insists on riding with you in the test drive, just change the subject and discuss personal interests of his. Ie: if you saw in his office that he has a bunch or horse pictures, then talk about horses. But after that's done. Thank him for his time, tell him you will be in contact and leave quickly.
4) Once you have selected the exact car details, decide on your financial situation. If you are paying cash, know your OUT THE DOOR limit price. If you are financing, then figure this out first. For example, many mfg's offer great financing incentive's such as 0% APR for 36-months (or even 60-months nowadays it seems is not all that unusual), but for those regular financing deals then secure your own financing from someone like capital one auto finance so you do your deal as a CASH deal (capital one gives you a blank check, with a preapproved credit limit). If you're financing through the dealership, know your FICO score and financial ability. You have to know you can afford this car before moving forward.
5) Now that you have done your homework, you need to compile the list of dealers! This can be quick, or it can be time consuming. The mfg of the car, the dealerships systems/websites, radius, etc will effect this. I never go less than 50 miles, but I have gone as far as 1,000 miles when including people in my list. When I purchased a Corvette I made it a point to include the largest dealership on this side of the country because I knew volume meant discount. They had more room to move on price than my local dealerships who barely ever moved Corvettes. At the end of the deal, the car was delivered to my front door in an enclosed trailer from nearly 1,000 miles away cheaper than any closer dealer could do it without shipping costs. When you're dealing with specialty or high-end vehicles the cost difference could very well be enough to justify the shipping, or your travel expenses in picking up the car. If a car costs $40K+, you want to take this into consideration. Then you have things like European delivery on European cars. You can go to Europe, flights on the mfg, a hotel room for a night, and a reduced cost on the car, drive your car around Europe for a while, get a tour of the facility in Germany, then they ship your car back home for less then the cost you could buy it new without that option.
6) Once you have compiled your list, you will probably have some time. Why? You want to wait until the last week of the month, or even the last week of the quarter if possible (no incentive's expiring, running out of last years models, etc). Now this is where you will get varied results. Some dealerships will NOT run on a month-to-month budget, or may not fun their fiscal calendar on a standard calendar months, but MOST DO. So, use this to your advantage! Business is business, and dealerships need CASH. They have multi-million dollar floor plans, payroll, utilities, and other business expenses and have to make payments to regardless of profit. This is specially helpful if you're dealing with your own cash, or a blank check financing, as the dealership gets that cash the same day you do the deal.
7) With your time, compile your Email list of recipients. You want a simple, straight forward Email that will be sent to potentially 30 or more dealerships. I don't go and just send out Emails to every dealership I come across. I will quickly search for the largest volume dealerships (and if there's a HUGE one states away, include them too) and try to target their Internet/fleet sales Email address's.
8) Write your Email. Keep it short and sweet. Be professional, but not too formal. You're not addessing a dealership or person by name, this is ONE Email that gets sent to everyone. Write that you know exactly what you want, and tell them exactly what you want, every feature, and color (use option codes, then they know you know what you're talking about and will assume you know their price on it as well) and that you want to close this deal by the end of the week (will get more into that later). Politely ask them to be sure the deal they offer is already accepted at the dealership, and that they don't have to go and get approval from the manager, owner, etc later. You want something that the salesman is ready to close on. Remember ROI, don't waste any more time. If your list is long, tell them they have ONE chance to earn your business and place the bid accordingly. If it's shorter, then tell them to offer the best price and ASK THEM FOR THEIR DIRECT PHONE NUMBER. Why? They know you're serious, and you will take this to the phones. But they have to earn your attention first with the starting price.
9) Back to timing, get ready to fire off that Email. You want to send this just a couple days before the end of the week, and end of the month. So for example, next Wednesday if you're dealing on a large Email list, or Friday for a LOCAL dealership list only, and you're available that day. Tell them your zip code, and you want the quote at the OUT THE DOOR PRICE for a CASH deal. If you're doing a blank check financing, then you just tell them later to add the cost of the lien to the title for the financing. Don't mention that from the beginning though there's no need. Salesmen get in a different mindset if you say financing but if you have the blank check in hand then it's a different type of deal because financing to them is NOT a sure thing, and if they're working the table to get you your deal that will hurt their chances. Also if you do it on the last day, TELL THEM YOU WANT TO CLOSE TODAY AND WILL GO TO THE DEALERSHIP ONCE AN AGREEMENT IS MADE. AND DON'T LIE. MAKE SURE YOU'RE AVAILABLE TO GO. This can be more effective than larger Email campaigns if you really hit an urgent dealership. I scored an awesome deal on a new Jeep liberty, well under dealer cost (not including incentives) this way as the dealer was literally days from going under and HAD to have cash to stay afloat. It didn't matter that they lost over $2,000 (after hold back) in the deal, it was another $19K they wouldn't have had in their bank account otherwise that day.
10) The day has come, it's now 8 AM. Send off those Emails.. be sure to BCC everyone so no one knows who it's going to. This is important it's done early. If you wish, leave your phone number in the Email but this is only recommended for those that can handle it. I've exhausted an entire day on the phone doing this before, but I am a business man myself and am very eloquent on the phone so I could keep the salesmen in check, and focused, but it was for a $60K+ vehicle and the savings to me was worth it as phone conversations WILL make the dealerships more comfortable. They like hearing your voice, knowing you're serious, knowing you're capable of buying immediately, and of course they like the opportunity to make some money too but if you're firm but polite, you'll be fine.
11) Give it time, don't make a fast commitment to anyone. Even if you see an offer come in an hour that's already below invoice.. if it's two days before the end of the week or month, give it the full day. If this is the last day deal, give it till about noon to open the door to take negotiations further. Because if you're going to deal that day, you need to give the dealership time to clean up the car, draw up the paperwork, for you to get there, etc.
12) Now is the time to negotiate further. Let's say you have three great deals all within a couple hundred dollars from close dealerships. Get on the phone with all of them, get them to compete for your business. First ask them if the car is there, or do they need to do a dealer trade. If it's there, then they are ready to move quick. If it's a dealer trade, they very well could be trading at one of your other best bidding dealerships, but in that case they have to lose a car of their own (and it's usually a better car) and drive to the other dealership and do that deal with them first. This will DOUBTFULLY result in a better deal for you, but if they are really the lowest bidder already.. then you may want to consider taking a hit on a feature or color as they will go lower for a car they have on their lot if they have a close match to what you want. Maybe $300-1000, sometimes even more if it's a specialty vehicle.
Remember, we're playing the odds that you'll find a dealership that NEEDS the cash, so a very small number of dealerships will fit into this category and that is your opportunity to score the best deal. This can also happen if you find a dealership that purchased some cars that they are having a very tough time selling locally because no one wanted them. For example, I bought a mercedes-benz 4matic a state away because they had a few in stock they could not sell. No one wanted 4matic's as they don't get enough snow but thought they would sell, they've been sitting on the lot for ~6 months so they just wanted to move them.
Be honest, polite, and professional, and have fun. Remember, even if the dealer is losing money it doesn't mean they don't need the deal or the salesman won't make a commission. To many dealers, sometimes any deal is better than none when they're in a bind. And don't forget the old rule, cash is king. If possible you're much better off bringing your own cash, or blank check financing to the table.
This is optional, but recommended. Because I give dealers a hard time, I bring two $50 gift cards (or a $100 mortons gift card! courtesy AMEX rewards points) when I close, and give it to who I deal with, or half to the manager/owner if I know they were highly involved in the deal and the one really making the concessions for me. There's no doubt they are working for you deal and making sacrifices so you should be thankful, polite, and precise with the information you give them. This is just a final thank you as I never want to burn a bridge with anyone I deal with, and otherwise they may have a bitter taste in their mouth of the deal.
*DISCLAIMER: This will not always achieve under cost results. On the highest demand, new model, and limited vehicles many dealers simply cannot bring in more cars as they have reached their allocation limits. If they're moving every car they come in with good profit, they will not sell it to you at a loss, no matter how quick and simple your deal is. They may knock a few hundred off but don't expect the world.*