Being fresh out of college and still on my used car from high school, it was time to get a new vehicle. I bought my 1993 Toyota Camry at the age of 16 for $2900. Other than transmission replacement 2 years ago its been a great car. It was falling apart and was just a few ticks away from 225,000 miles on the odometer. I am a bit of a car enthusiast but Weakonomics kept me in line while researching cars. I decided on the 2008 Honda Accord EX because of its standard features, reliability, and its compromise between ride and handling.
The sticker price on this vehicle was $24,495 (including destination). That was out of my target price range. I then considered the 2007 or earlier Accord, but the standard features I wanted were absent. If I wanted to save some money on this car, I was going to have to haggle. Here’s what I did:
I went to Honda’s website and obtained a list of 8 local Honda dealers. By local I mean anything within a 90 minute drive. I then created a generic email and sent it to all the dealers. This email was sent to the internet sales departments and it told them I knew what I wanted. I identified the make, model, trim, and color of the car I wanted. Research is my hobby and saving money is my passion so I knew exactly what I needed to say. Dealers save money using Internet sales, they get kickbacks for volume selling (from the manufacturer), and I played the fact that 2008 was going to be a slow year for everyone to my advantage. Everyone came back with their best quotes, ranging from above sticker price to well below.
I narrowed the dealers down to the top 3 and played them against each other (never telling them what dealers I was working with). Of 8 dealers, there are always a few looking to move cars and I decided on one for the price of $21,343.69. A savings of $3,151.31 or 13%.
If you want to try this, you won’t hurt anything and please tell us all how it goes. Make sure you ask the dealers for the “out the door” or OTD price. This includes dealer fees, taxes, and title etc… Your taxes and fees will be different depending on dealership and state. My OTD price was $22,500. Special thanks goes to the Edmunds forums for their input on the prices I should expect to pay.
Financing:
I have been expecting to replace my car for a few years so I had saved up $11,000 for a down payment. I financed the other half of the car through the dealer and Chase Auto Finance. While rates are always important it was less so for me because I am making accelerated payments to pay off the loan faster. I went with a 3 year loan but expect to have it paid off by January 2009.
Related posts:
- The Weakonomist Pays Off His Car
- Auto Industry Smack Down Part II
- The Weakonomist Buys an iPhone
- The Weakonomist Buys a Computer
- The Weakonomist Buys an Engagement Ring
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4 Responses
greg
10|Apr|2008 1MSRP/sticker is not the number to negotiate from nor the number to use to determine whether you got a good deal. the starting point should be invoice and a good deal is a below invoice cost.
your approach is right, just the basis number you’re starting with is wrong. i bought my truck for $600 below invoice (plus the $2500 rebate). i don’t even remember what the MSRP was, but it doesn’t matter, that’s just a made up number anyway. but i followed a very similar approach to yours, with phone/emails to the internet sales departments, plus a little back and forth with the two dealers who were most aggressive. i bought the last few days of the month and committed by buying before the last day of the month.
the weakonomist
10|Apr|2008 2First of all, glad you made your purchase by negotiation.
I see your argument and there is validity to that. Perhaps another metric would be the edmunds TMV (true market value) as it represents the average price people are paying for the vehicle.
I never mentioned MSRP in my negotiations, but it does serve as a common number people are familiar with. I didn’t base my savings over TMV, because then I would have had to explain what TMV was.
For the record, TMV on my vehicle is $23,000. Savings of $1,500 on a car on the market for only 3 months. Not bad by those metrics either.
Either way you base the savings, don’t ever settle for sticker price.
Phoenix
12|Apr|2008 3Hello Weakonomist. I am a regular reader of MyMoneyBlog and found your post on car buying throught a series of blog links emanating from that blog. We (my wife & i) are now in the process of purchasing a Toyota Sienna or Honda Odyssey minivan within the next two months and so this blog is very timely for us. Your strategy was a great one, thanks for sharing. Would you be willing to forward me your initial “generic” email you sent to the dealers?
the weakonomist
12|Apr|2008 4Phoenix, contact me privately and I’ll be happy to share with you what I have learned. My email is philip@weakonomics.com
Maybe we can create a generic email to get you started that is catered to your needs.
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