Two-thirds of buyers in the market for a new vehicle prefer paying a single, set price rather than facing the stress of negotiating, according to a recent study from Kelley Blue Book Marketing Research. At the same time, nearly 60% of buyers "strongly disagree" that paying the manufacturer's suggested retail price -- the sticker price -- is a fair deal.
Conclusion: Most people don't want to pay sticker, but they don't want to work at whittling it down, either.
Leave the haggling to the pros
Fortunately, there are services that take the onus of negotiating off your shoulders. For example, Kiplinger has teamed up with CarBargains, the buying service of the nonprofit Consumers' Checkbook organization, to make it easier for you to take advantage of the service.
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You specify the make, model and style of the car you want, and CarBargains solicits bids from at least five dealers in your area. You receive a copy of each bid and the name of a contact at the dealership. The service costs $190.
We recently asked CarBargains to shop for several 2007 models in Washington, D.C., Chicago and Los Angeles -- because competition and regional incentives can lead to big price differences from area to area. For the entry-luxury Lexus ES 350, the bids ranged from $30,625, or $500 more than invoice, to $32,875, or $2,750 more than invoice. Invoice price is basically what the dealer has to pay the manufacturer.
For the base RAV4 V6 model, bids varied from $200 less than invoice to $1,000 more than invoice.
The point is, the folks at CarBargains are professional hagglers who can use their contacts and their clout to clinch a great deal. If you're in the market for a lease, the $335 LeaseWise service works the same way. The price is higher because of the extra complexity of lease deals.
No hassle, no bargain
The free services we checked didn't do as well as CarBargains did in snagging a deal.
For example, using CarsDirect.com (available in 39 states) involved almost zero hassle. The buying service negotiates with dealers in advance, so it has a list of prices waiting for you. Choosing the car and options are straightforward, and the site also divulges all current rebates and incentives.
When you're done building your car, you see the final price. Then you get a call from a CarsDirect "vehicle specialist," who matches you with specific cars at specific dealers.
However, the CarsDirect price on the Lexus ES 350 was about $3,000 above invoice, or $2,500 more than the lowest bid CarBargains negotiated. On the RAV4 V6, the CarsDirect price was $1,000 more than invoice, or $1,200 more than the lowest bid from CarBargains.
All-in-one service
Even when someone else negotiates the price for you, you still have to go through the F&I process. Short for financing and insurance, it's a dealer's last-ditch chance to sell high-profit add-ons or supply you with a loan that also generates profits for the dealer.
Doing the F&I bit online is part of the pitch for a new service from Capital One Auto Finance. Called Drive One, the service enables you to purchase as well as finance a new or used car. (You're not obligated to finance through Capital One if you use the service.) It's currently available only in Atlanta, Los Angeles, Miami and Minneapolis but will be rolled out nationwide soon.
With Drive One, the vehicle price is guaranteed to be at or below Kelley Blue Book's New Car Blue Book Value -- the average transaction price for a new model, which also is listed in our December issue new-vehicle buyer's guide. (KBB's New Car Blue Book Value doesn't include cash rebates, which go directly from the maufacturer to the consumer.) You can try to negotiate even lower prices when you get to the dealer.
On the Lexus ES 350, the Kelley Blue Book transaction price is about $2,700 above invoice -- better than the CarsDirect price but not nearly as good as the price at CarBargains. On the RAV4, the Blue Book price is $1,500 above invoice -- higher than the CarsDirect price and certainly no match for CarBargains. (New-car buyers also get a $250 rebate from Capital One, and used car buyers get $400.)
Getting your financing at point of purchase is convenient, but it's a good idea to shop your bank or credit union as well, so you're sure you're getting the lowest rates. Check to see if subsidized rates are available from the carmaker's financing division, too.
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