Tuesday, November 13, 2007

My friends know cool stuff: Jon Lange

Jon Lange is another friend of mine from the University of Arizona. He was a stellar accounting student and is supremely organized. Seriously I wish I had his organization skills. I wanted to get his opinion on how to buy a car because I was very impressed with the discount he got. On a very desirable Toyota Camry as well. I think most people think they get a good deal when they buy a car, but that usually just means the salesman did his job. But I know for sure that Jon got way better than a typical price. And if you knew him you would know it's not surprising. If you have a company and want a great purchaser, he would be your guy.

How to Buy a New Car

I just bought my first new car; so RJ thought it would be a good idea to share my experience with anyone who is interested. I originally thought I was going to buy a used 2006/2007 Honda Accord, but after I found out the 2008 was set to be a new body style, I wasn’t too happy about that. So my first piece of advice is, which is a popular opinion: never buy a car that has a new body style just a year or two ahead of it – you will take a big hit on the resale value!

Below is how I went through the whole process of researching, shopping and eventually purchasing a new car. I have talked to a few smart “car” people about the price I paid for my car and from what I gather, I did a good job – so here’s how: (please note that I am not saying this THE ONLY WAY to get a good price on a new car, just that this worked for me so I assume it could work for you ☺.)

The Research Process

• Start the research process by going to the car makers’ websites (i.e.: Toyota.com), checking local newspapers weekly, & lastly, I highly recommend going to www.carsdirect.com. These resources will give you a great idea of options, features, specs, pricing (MSRP & Invoice) incentives, current specials, etc.

• Once you have researched what kind of model and features you want & get a basic idea of pricing, start calling all the local dealers in town.

• You will very quickly find out that these car dealers REALLY do not want to give out price quotes over the phone. They want you to come in and get in front of them – after all – sales is 10 times easier in person than on the phone! Another reason for this is they know if you get a quote over the phone for a specific car, you will just take that quote, call the next dealer and shop the daylights out of all the dealers, creating a bidding war.
• Tell them this when they ask you to come in, “Well, I work about 70/80 hours a week, so I just don’t have time to stop by in person, but let me assure you, I know what I am looking for and I am ready to buy as soon as I find the right car.”
• In realty, I recommend starting this process about 2 months before you want to buy – you will want to start building a relationship with the dealers if you want the best price.
• Continue to talk with them whenever they call you and just put up with their BS sales crap.
• At first, I couldn’t take dealing with their calls, but I quickly learned that if you entertain their stupid 3 / 4 minute calls, and be polite, they will grow very fond of you. Think about it…how many sales people call rude individuals every day, and they get so pissed off when a customer is rude to them – it really makes a difference when people are nice to them!
• Always take notes on what they are telling you regarding price, incentives, specials, etc. so that if they are lying, you can reference that conversation.


Visiting the Dealer

• ALWAYS ALWAYS go to the dealers at the end of the month. If you can go on the VERY LAST DAY of the month that is THE BEST…they always want to hit their month-end numbers!
• Late summer & very early fall are always the best months to buy a car because dealers need to clear the lot for the next year’s models. July 31, August 31, or even December 31 are probably the 3 best days to purchase a vehicle. (December 31 because of the year-end.)
• Bring a notepad with you to take notes on pricing
• Make sure to have an appointment or let your salesman know when you’re coming in:
• You absolutely want to work with the person you have been speaking with on the phone (as you should have solid rapport with them already and they will want to work with you – they have time invested in you so they WILL try get you the best deal.)
• NOTE: you are selling yourself to them just as much as they are selling to you. You want the salesman to think of you as a friend, a buddy, and in general a nice person – if they think of you this way, they will fight for you to get you the best price possible. If you are a jerk, believe it or not, it will affect their desire to sell you a car!

Talking Pricing at the Dealer

• After taking the test drive, be prepared to talk pricing. Even if you are not ready to buy today, act like you are!!! This is the only way to get EXACT price quotes.
• Have other solid quotes with you from other dealers - you can make them up if you want, but keep them reasonable – the point is to let them know you have done your homework and you will not be taken for a ride.
• This is a great line, and worked with everyone I told it to: “Well, here’s the price XYZ Dealer gave me, it’s a great price, but I really did not like their sales reps there…they were rude and aggressive and I don’t want to deal with that. If you can beat this price, I will give you the business. I have enjoyed my experience here, so I would prefer to deal with you.” (This line accomplishes many things at once, and it is a nice compliment to them ☺.)
• VERY IMPORTANT: Keep in mind the sales rep you are dealing with is probably the 3rd person in command – so he/she is not making the pricing decision. He/she takes your request to the manager and they say yes/no, or the manager will take it to his/her boss, the director, who says yes or no.
• Be firm and no matter what they give you in the first bit of discussion, know they CAN AND WILL DO much better than that – I promise!
• Here’s how you know you have done a good job when talking price:
• If the Sales Rep gets so frustrated (NOT mad, but frustrated – there is a very big difference!) with you that they get the Manager – you have done a good job.
• If the Manager gets so frustrated with you (again NOT mad) that they have to get the Director to try and close you – you have done a GREAT job and I would bet that you are getting the lowest price they can offer.
• IT IS VERY IMPORTANT TO KNOW THAT YOU WANT TO FRUSTRATE THEM, IN A TEASING MANNER, THOUGH. Build rapport, keep it fun and light - just very politely let them know that you are an informed, knowledgeable, yet willing and ready buyer.
• For Trade-ins:
• If you have another vehicle, which almost everyone does, when you are shopping for your new one, keep this in mind when considering a trade-in vs. selling on the open market: the amount of trade-in value for your car is deducted from the gross price of the car, which results in about 8.1% additional tax savings!
• Example:
New car purchase price: $30,000
Your car trade-in value: $10,000
Net purchase price: $20,000
Tax Rate: 8.1%
Total price w/ tax: $21,620
Real Value of trade-in: $10,810


• So, the actual value of your trade-in is $10,810, not $10,000. Do not forget to factor in the cost of getting your car detailed, fixed-up, marketing & advertising dollars, taking phone calls, making appointments to show the car, and the list goes on if you try to sell it on the open market.
• Another pro-trade-in comment: the dealerships will only do a quick 5-minute inspection of the vehicle.
• Generally the inspector guy will check the A/C, pop the hood, verify mileage, check the tire-wear, look very quickly at dings/dents, and then they are about done. If you have leaks, squeaky brakes, bad hoses, belts, battery, or anything else that can’t be seen by just a quick glance, you will get away with it at the dealer! I highly recommend trading in your car, if you can get within about $1500 or less of what you would get on the open market.


Buying the Car:

• Once you get down to the exact price, here are the last few things I would recommend:
• Make sure you are getting a quote that is ONLY the price + tax, title & license
• If they try to charge you for crap such as a destination fee (about $660), a paint protection package, an Arizona desert package, blah blah blah, tell them “absolutely not” – only the huge suckers get charged that stuff
• You can listen to the extended warranty pitch, and all the other additional things available to “help the new car owner”, but my recommendation is to NOT PURCHASE any of that extra junk right then.
• You can always go back and buy it after you have sufficient time to thoroughly read it.

Well, that’s about all I got for now. I personally had a great time going through this process – and it was REALLY rewarding getting such a good price on a car I wanted. If you are wondering, in total between research, dealership visits and phone calls, I probably spent about 40/50 hours buying a new car – but it yielded about $2,000 in additional savings of about $2,000 over the average car buyer purchasing the exact same vehicle that I did. So, strictly mathematically speaking, I earned about $40/$50 per hour by doing my homework. Some may say that’s a great value for your time, some would think that’s a waste, but if you enjoy the process and like feeling like you got a deal, which I absolutely love, then do your homework! Best of luck, email me at jon.lange@gmail.com if you have any questions.

2 Comments:

Blogger Jeff said...

Jon,

Great advice, and very well organized :). I especially like the part about tax savings on a trade-in.

One suggestion. I think the savings/hour of work figure is too low. It should instead divide savings by the number of extra hours you had to spend to get the savings, not the total number of hours you spent shopping. You would have spent some amount of time shopping even if you had used a low-energy approach, so those hours shouldn't be factored into your per-hour savings measure.

8:24 AM  
Anonymous Jon Lange said...

Good point, Jeff. Totally agree.

9:31 AM  

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