Car Buying Experience

July 4, 2016 / truecar, roadster, drivemotors, edmunds, kbb, mazda, mazda3, car, negotiation

I recently bought a 2016 4-door Mazda 3 i Sport with Automatic transmission and the Preferred Equipment Package (MSRP $20,730.00). This is the second time I bought a car and I viewed it as another learning experience.

The table below shows the various prices I got from different sources. They’re wildly different from what I actually paid in the end. When buying a car you need to do your research otherwise you might end up paying thousands more for the same car.

Source Price Before Tax & Fees
What I Actually Paid to Dealership D $16,878.00
Roadster.com $18,564.00
DriveMotors.com $17,846.70
TrueCar Average Price $18,225.00
TrueCar Exceptional Price $17,384.00
Edmunds Price Promise $18,545.00
Kelly Blue Book Fair Market Range $17,976.00
Dealership A $17,978.00
Dealership B $17,095.00
Dealership C $19,930.00 <- Ridiculous!
Dealership D Face-to-Face Negotiation $18,600.00

While I’m happy to have bought my car at a great price, the whole car buying experience is another reminder of the ugliness of the car industry. The pricing is opaque, the sales people readily lie to your face, and you have to be on guard for the variety of manipulations they might pull on you.

I distilled the lessons from this buying experience into its own section. Rest of the piece goes into detail about each and every step of the process.


Table of Contents


Lessons Summary


Car Buying Services

There are car buying services that allow you to buy a car without stepping foot in a dealership. Unfortunately if you use one of these services you will pay more than what you can easily get by yourself. Guaranteed.

Roadster.com

At first glance Roadster.com seems like the future. On their main page you’ll see slogans like “Skip the Dealership” and “Always a Great Deal”. I inquired about the Roadster Concierge service just to see if I really can “skip the dealership”.

One thing I found out about Roadster Concierge is that their sales people really want to get you locked in and committed fast. One of their first emails to me is one that says:

Our fee to use our Service is $295, $100 is due now in order for us to proceed. This is 100% refundable in the event you do not end up buying from us.

They want money immediately before I even know whether they’re worth it. Yes, they say it’s refundable, but that’s a hassle and putting money down could be a psychological trick to get you mentally committed. Before I proceed I wanted to know that they are even worthwhile, so I asked:

For me to proceed, please let me know if you guys are confident about beating $17,078.00 + TT&L when paying cash. That’s the best quote I have gotten myself already."

Their sales person hilariously questions whether I can pay their $100 fee and makes a bunch of typos in the process.

Thanks for your email. If you cannot make the Roadster $100 payment to start, could you please end me over the offer you do have and we can let you know weather we an help you or not?

I re-iterated the $17,078.00 figure I already mentioned. After that the sales person thanked me and said that the price quoted on Roadster.com website is around the price they can get the car for. In this case, it’s $18,564.00 as shown in the image below.

roadster concierge pricing

In conclusion, for about $1,981.00 more than what I actually paid, Roadster can buy the car for me. However, at that price you might as well just walk into a dealership and they’ll happily sell it to you with no haggling!

DriveMotors.com

Another similar service that I found was Drive Motors. When I was actually shopping for my car, the price quoted by Drive Motors was over $18,000 and quite similar to Roadster.com. But looking at their price now, it seems to have been updated:

drivemotors pricing

$17,846.70 is not too bad. It’s still about $1,000 more than I paid, but the price is getting more reasonable compared to what I remembered. At $17,846.70, I can see that being alright for some people to pay and save time.

For me personally, after checking out these services I still don’t see why I would ever use them. Not only I can’t see the exact car I buy, it’s so easy to get better prices myself.


Researching Price

When researching car prices, it seems that the best way is to do it via dealership websites and negotiate through email or phone. All other information sources can serve as the upper bound of what you should pay. I compare a bunch of them in this section.

Sales Tax and DMV Registration Fee

A quick note about figuring out the out-the-door price. In California, the DMV website allows you to get a sense of how much taxes and fees you should pay on top of the price you negotiate with the dealership. Use this to make sure you don’t get random charges added on.

TrueCar

TrueCar shows you what other people paid for their car, and they also link you up with their partner dealerships. When signing up, remember to use a junk email address and fake information to avoid spam. You don’t actually want to pay the prices shown on TrueCar nor do you want to pay the prices their partners give you.

For my car, TrueCar says that the local average price paid is $18,225.00. If you hover over the different bars on the graph, TrueCar also shows you how many people paid for each of the price ranges. Apparently 10 people paid between $17,008.00 and $17,152.00.

truecar pricing

TrueCar shows you what an “Exceptional Price” would be. In this case, it’s anything below $17,400.00. That’s actually what I was ok with paying, so it seems TrueCar is good for researching that information. But just ignore their average price. You shouldn’t be paying at or above that price.

Edmunds True Market Value

I didn’t get anything useful from Edmunds Price Promise. Prices I received from dealerships this way are all way too high. Two prices I received from dealerships nearby are $18,729.00 or $18,545.00.

The thing is, I’m sure all dealerships are perfectly fine giving you a “No Haggle” price if you’re already overpaying by $1,800.00. What’s there to haggle if you volunteer to pay more?

Kelly Blue Book Fair Market Range

Kelly Blue Book’s Fair Market Range is without any incentives applied. The price range for my car configuration is between $18,976.00 to $19,757.00. With the Mazda Customer Cash incentive, that means the Fair Market Range is $17,976.00 to $18,757.00.

kbb pricing

Again, we’ll be ignoring the top end of the spectrum because nobody should be paying thousands more for the same exact car. I live in the Bay Area with high cost of living and I already paid less, so really there’s no reason anyone should be paying the amounts in the higher end. Look for the range for your area and use the lower number as the upper bound in your consideration.

The $17,976.00 figure roughly matches the current price from Drive Motors. It’s still $1,000.00 more than what I actually paid, so you know there’s room to go lower.

e-Price & Phone

As long as you only look at TrueCar’s Exceptional Price, it seems TrueCar price matches reality somewhat. I found that another way to really know how low dealerships are willing to sell the car is to request price online or request price over the phone and then negotiate it down over email.

I created fake personas and emails, then I just went through all dealership websites in my area as well as in another state and requested pricing. From there, I was able to work at lowering the price by getting dealerships to compete. Having multiple personas helped because I can start different negotiations without giving up my negotiation edge. All I’m looking for is to get a sense of how much I should pay before I even step foot in a dealership. This also gives you a sense of which dealership to give business to depending on how they treat you through email.

When you negotiate over email and get dealerships to compete, they will want to see that you really do have competing offers.

What I do is, I request price online or over the phone, then I email the sales person with a competing offer to try to get them to match or beat the price.

Hi [Sales Person],

See below. Dealership X’s pricing is actually super easy to calculate. They don’t have any hidden deduction from loyalty or military discount. And I called them again to double check. They make it very clear upfront and you can just deduct whatever rebate is applicable.

Your price ($18,490.00) apparently includes rebate already. Whereas I’m looking at $17,278.00 if I finance with this other dealership. Can you match this for the Meteor Gray? or the Silver I was initially asking about.

or for the White, $17,478.00 if I finance through you, or $17,978.00 if I get my own financing and pay cash?

They sometimes might want to get you to come in for a good price.

My manager is going to ask me that if he beats this price when can you come down… Can you come down today if we do beat this price?

By doing the above back & forth, I’ve now gotten a concrete confirmation that a dealership will definitely sell the car to me below $17,978.00. You can then use the fact a dealership is willing to give you a good price if you come in today, and negotiate with another dealership. This is how I finally bought my car. I called the dealership I visited previously, let them know another dealership wants me to come in today, and said that if we could work something out then they could have a sale today.

You do this email negotiation with a bunch of dealerships and you’ll get a very good idea for the range. I got the lower bound through the exchange with another dealership shown below:

Hi [Sales Person],

I plan on getting my own financing and paying cash. I don’t qualify for loyalty nor military discount.

I already have a quote from another dealership for $17,278.00 + TT&L = out-the-door $19,136.00. Same car except in Jet Black, which I don’t really like. I prefer red, gray or silver.

The other dealer told me to add $500 to their price ($16,778.00) for not getting financing through them.

Is that the same for you? So my price is $17,095 + TT&L with you?

He replied:

yes you’re right, the price will be $17,095 Through me here at Dealership Y!

So now I know the price I should pay is between $17,095.00 and $17,978.00. At these prices the dealerships still make an unknown amount of profit of course. Different dealerships do have different pricing possibly based on their selling performance for the month and manufacturer bonuses.

Now armed with a good idea of the price range, if I can get a dealership to sell the car to me below $17,400.00, then they have my business. Buying a car isn’t just about lowest price. As noted in the Test Drive section, some dealerships are pretty terrible and I wouldn’t buy from them even if the price is marginally cheaper.

Some dealerships will choose to not engage with you at all. For example, I had a dealership quote me $19,930.00.

On M22823, $19,930 plus taxes and fees. What do you think? :-)

What do I think? Putting a smiley at the end of an email doesn’t lessen the blow of how much he’s trying to scam me. I told him that price is insane, and after some back & forth he doesn’t want a sale.

I am inclined to make a competitive offer. However, I am mindful that dealerships out of the area offer cut-throat pricing that we can only beat by moving away from the Peninsula. What should I do now? We want you to become part of the Dealership W family. :-)

The dealership I finally bought my car from is about 15 minutes away from the one above. It’s their loss. I was ready to buy for a reasonable price, but $3,052.00 more than what I actually paid is not fair nor reasonable. Also, because of the way this person treated me over email, I’m unlikely to buy from them in the future.


Test Drive

Whenever you interact with a sales person, just assume that everything they say is a lie. Every time you’re with them face-to-face they’re waging an emotional warfare against you even if you don’t realize it. Their goal is to get you excited so that they can get you to buy the car and at a higher price. This is why you should test drive on a separate trip than when you’re ready to buy the car. You protect yourself from the emotional manipulation and avoid making impulse mistakes.

There is a wealth of information online about the different ways a sales person might manipulate you. I remember reading something on Edmunds when I bought my first car, and I also found this thread on Reddit that was helpful. During my own test drive, I remember the sales person asking “So can you see yourself driving this car?” and talking up about how nice a drive it is. Their goal is to get you dreaming about after you’ve bought your car and how nice that would be.

If during the test drive you get bad vibes from the sales person, then just leave. When I went to Fremont Mazda to test drive the car, the sales person actually chipped some paint off when he was filling up the tank. He was annoyed that my wife wants to drive on a wider road, and he dismissed the fact that the passenger airbag light was on and told us to drive on. All very bad signs.

Interestingly Fremont Mazda has 4.5-star rating. Yelp has become a very unreliable source of information. The ratings are either fake or written by people who really don’t know much. Remember that the sales person is very good at manipulating you emotionally, so he/she can make you pay more while making you feel great about it! If everyone starts putting down how much they actually paid in the reviews, then it might become more useful. Otherwise, I have no way of knowing whether someone overpaid and felt great, or they actually got a great deal.


Negotiation

Unlike the first time I bought a car, this time I was very confident regarding the price I should be paying. So as a learning exercise, I thought that I should go negotiate in-person with a sales person for my own edification.

In hindsight that was a bad decision in terms of the outcome, but I welcomed the learning experience and wouldn’t mind doing it again. The more practical thing to do is to avoid negotiating with a sales person face-to-face. Unless you are an expert negotiator, you probably should avoid doing that too.

When you are already at the dealership, the sales person doesn’t need to work hard to entice you to come in. Even if you are an informed shopper, the sales person might not be willing to give you a good price. I could not get the sales person to come down on price lower than $18,600.00 even though I knew that’s not a good price. I ended up still buying at the same dealership, but from a different sales person and agreed on the pricing over the phone before I went in again.

Maybe the reason is because my wife and I look young, or maybe we just look like targets with whom they can be firm on pricing and come out on top. Whatever the case is, my negotiation-fu needs some leveling up. If I’m looking for maximum efficiency rather than learning, then I’d negotiate over email or phone and only go in when there is an agreed upon price.

Also remember that when you’re negotiating, the sales person will make a bunch more lies. Things like how they need to feed their kids or stay in business. Something similar actually came up in my own negotiation. The fact that the same dealership sold the same exact car (same VIN) to me for $1,722.00 cheaper is proof that all of those lies about feeding kids are negotiation tactics. There’s a good YouTube video that talks more about this and other tips. A good way to think about it when the sales person brings out the “feed my kids” card, is to think to yourself that you need to save that $1,700.00 to feed your own kids!


Other Random Notes

More lessons:

For Used Cars: