Buying a New Car in 2013: What’s the Best Strategy?

Game Theory, Fax Blast, and other Car Buying Strategies Dissected

2013 Chevrolet VoltThe Internet is a game changer for car buyers.  Consumers now have the power to research cars online and getting prices from multiple dealerships.  But there are many dissenting opinions on how to properly use the Internet to get the best deal on a car.  Let’s dissect the most popular car buying techniques and see what works and what doesn’t.

Old School Negotiating (What your father taught you)

You probably heard the following advice when you bought your first new car.  Negotiate UP from Invoice or Negotiate DOWN from MSRP.  The old advice was to throw out a low ball number and hope a dealer takes your offer seriously and wiggles on price.  You could either pick a number based on a % above the dealer’s cost (invoice) or something lower than the sticker price (MSRP).  Unfortunately, both of these strategies will cost you money.  If you mention any price to a dealer, they’ll never go below that number.   If you're shopping for a TV online, would decide on an amount and not buy a TV that showed up in a price comparison below your target price?  Of course not, that would be crazy.  Setting a price floor for yourself can be a costly negotiating mistake.

Strength: At least you know better than to pay full sticker price.

Flaws:  Very outdated.  You work with only one salesman and don’t see the benefits of price competition.

Fax blast

The fax blast (or fax attack) is a strategy recommended by and the Motley Fool.  Both have a similar approach.  They suggest you flip through the yellow pages and find a large number of local car dealers.  You then send each a fax a request for a car price quote.  When you get responses back, send out another round of faxes and ask the dealers to beat your best price.

The theory behind this is sound, but the implementation is flawed.  First off, no one faxes anymore.  You’re much more likely to get a response to an email.  Secondly, it’s easier to manage a process like this with a temporary email account that you use strictly for contacts with car dealers.  You’ll have an online history of all your contacts and a record of any offers.

Also, Motley Fool suggests you try to find the Fleet Manager before sending a fax.  That may have been important before Internet Salesman came along, but is no longer necessary.

Strength: Competitive bidding is the best way to get the lowest car price.

Flaws:  Who owns a fax anymore? Or more importantly, who wants to use a fax?

Game Theory

Game theory is similar to the fax blast method, but instead of faxing, in the video below Bruce Bueno recommends calling car dealers to get prices.

Great idea, but the implementation is even worse than the fax blast.  Calling car dealers is problematic for several reasons.

It’s much better to get written communications so you have a record of offers.  It’s very difficult to take notes on the phone about specific models and inventory while trying to negotiate.  Also, phone calls leave the door wide open for salesmen to do what they do best, influence you.  The main goal of most salesman is to get you to show up on the lot so they can close a deal.  They'll say just about anything to get you off the phone and meet in person.

Strength: Again, competitive bidding is the best way to get the lowest car price.

Flaws:  Playing phone tag with dealers is time consuming and it's difficult to track responses.  Phone negotiations leaves you susceptible to manipulation by salesman.

Email Negotiating

This is a similar strategy as the fax blast and game theory, but instead of using a fax or a phone, all of your negotiations are done over email.  You start out by getting car price quotes on the Internet.  When car salesmen respond, you send out a round or two of emails asking each dealer to beat your best price.

You can use pre-written email templates to say exactly the right things to salesmen to get the best responses.  It's easier than a fax and you can track all of your responses in a folder or an Excel worksheet.

Strength: Competitive bidding is the best way to get the lowest car price.  It's much easier to manage than fax or phone.  Also, you can keep a record of your communications and offers.

Flaws: If you’re not an organized person, this might not be for you….but the next option can help with that.

CarWoo Automatic Negotiating

CarWoo is a service where you can get price quotes from several dealers anonymously.  You can view all of the latest car prices in one place, the CarWoo website.  Car dealers are able to see the prices of their competition, so they can make multiple offers and drive the price down.  It’s sort of like a reverse auction, but there’s no set time period and you don’t have to buy if you don’t find a deal you like.

Strength: Competitive bidding is the best way to get the lowest car price AND CarWoo manages much of the process for you.  Also, you can remain anonymous throughout the process until you find a deal you like.

Flaws: CarWoo has a rapidly growing network of dealers, but you may not be able to reach every local dealer in your area. Also, as I mention here, using their “Send Counter Offer” feature is a mistake; instead let dealers lower their own prices and don’t set a price floor for yourself (see my note on “Old School Negotiating” above).

Car Buying Services

You pay a fee to a broker who negotiates a deal on your behalf, usually between $300-600.

Strength: It’s simple and you’ll get a decent deal with minimal hassle.

Flaws: You always have to pay the commission on top of the car price.

Hybrid approach (CarWoo plus email)

My preferred strategy is to take a hybrid approach.  Use an Internet price service to get dealer quotes and negotiate via email, but also use CarWoo.  Sometimes the same dealers respond to both (but they don't know it because CarWoo keeps you anonymous).   You may find the same dealership offers different prices!  Also, never use the phone to talk to dealers until you have a deal and are ready to setup an appointment to pick-up.

Want to buy a car near (or below) dealer cost?

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