If your credit score has gone up or down 20 - 30 points lately, it might have nothing to do with your recent borrowing habits. FICO (formerly Fair Isaac Corporation) has radically changed its methodology to the new "FICO '08." As a result, the three-digit FICO scores you get through credit reporting bureaus Experian, Equifax and TransUnion may have changed dramatically in recent months.
FICO's rationale and how it applies to specific types of borrowers is detailed in our new article. FICO says that half of the U.S. population will see their score fall under the new system, while the other half's score will stay the same or go up. That's going to affect thousands, possibly hundreds of thousands, of the nation's car loans.
If you want to get your next General Motors vehicle on eBay, better act fast. The company is ending its eBay experiment this week, apparently because the initiative failed to generate sales. According to an Edmunds.com analysis, one significant problem was that GM's "Buy It Now" prices were too high -- 2% above our True Market Value, to be precise.
Edmunds AutoObserver has all the details on GM's eBay adventure.
In an attempt to ignite sales and instill confidence in the post-bankruptcy automaker, GM will begin a 60-day no-questions-asked money-back guarantee offer for all its new 2009 and 2010 vehicles. GM will begin the new program Monday, September 14 and extend it through November 30.
Offering new cars with a no-questions-asked money-back guarantee has not been attempted in the U.S. auto market before, GM said. Guarantees from Oldsmobile and Saturn offered return policies which were not as comprehensive. A similar program offered in the U.K. by GM's Vauxhall resulted in a 2-3% return. GM expects a comparable rate of return here in the U.S.
Should you buy your next car online? And by "online," what do we really mean? Can you really click a button and have a car show up in your driveway?
GM has launched a month-long experiment to sell cars through eBayMotors in California. Some early figures are in. And the results are, well, intriguing...
Boy, have you come to the right place to learn about negotiating for cars. Negotiating with auto dealers -- or even with private parties -- can be one of the most intimidating parts of the car-buying experience. Most of us would rather skip the fireworks and just get a great deal.
That angst is what launched the Saturn brand, with its fixed-price policy, and led to the "no haggle pricing" campaigns you sometimes see. But truly, you don't have to have years of negotiating experience to get a spectacular deal. In fact, you may not need to negotiate at all.
With the suddenly shutdown of the popular Cash for Clunkers program only four days away, we pulled together 7 tips to help last minute shoppers get a good deal on a new, more fuel efficient vehicle.
The surprise announcement from the Department of Transportation Thursday afternoon means that shoppers will have to act fast to take advantage of the $3,500 or $4,500 incentive program. All applications for Cash for Clunkers deals will have to be filed by 8 p.m. Monday, Eastern Daylight Time, Aug. 24.
Here then is our list of 7 essential shopping tips.
A Los Angeles area woman traded in a clunker and bought a new car. A few days later the dealership called her and said she needed to come back in because there had been a problem with the paperwork. When she arrived they blocked her new car in with other cars. In the finance office they informed her that they hadn't done the paperwork correctly. They then increased the cost of the new car by $2,500. She signed the new contract and left the dealership.
I checked with two friends who are in the car business to get their take on this situation. Here's what they had to say.
An agreement has been reached in the Senate to move forward with another $2 billion in funding for the Cash for Clunkers auto incentive program. A vote is being called for today after Republicans have said they will drop their opposition to the program.
Despite a week of frantic activity, which saw dealerships packed with car shoppers for the first time in a year, critics have emerged saying the bill should be changed or killed. Though many detractors are quite vocal, there has been enough enthusiasm to add funds to the initial $1 billion allotted to clunkers. Despite initial concerns, there is still money remaining from the first installment so there has been no break in granting the $3,500 or $4,500 to car shoppers.
For all the latest details, including an analysis of the success of the program so far, please see our Auto Observer article.
After a weekend in which a White House spokesman told the American public "go buy a car," many shoppers might be left wondering if they still have a green light under the cash for clunkers program.
Friday was a roller coaster day for dealers with the White House guaranteeing deals through the weekend and the House of Representatives approving an additional $2 billion to subsidize the trade-in of old cars for more fuel efficient vehicles.
Cash for Clunkers was supposed to be a "win-win" situation for dealers and for car buyers. But it looks like some dealers have decided they will be the only ones winning.
Dealers were supposed to apply a $4,500 or $3,500 trade-in credit to the lowest negotiated price of a new car. But now that the program has rolled out we are getting reports that some dealers believe they are entitled to raise prices to adjust for this new government incentive.
Regardless of these problems, Cash for Clunkers is definitely moving metal. In the first days of the program over 4,000 clunkers have been traded in on new cars. There's still lots of money left though -- the Cars.gov site reports that over $875 million is remaining.
Still, reports of dealer high jinks are troubling. Here are a few things we've heard from the car lot.
With car shoppers expected to flock to dealership lots to claim the government's "Cash for Clunkers" credit, BMW has created an incentive of its own -- a $4,500 "Eco Credit" for its two new diesels, the 2009 335d and the X5 xDrive 35d.
BMW's Eco Credit is in addition to the "Cash for Clunkers" credit so a car shopper could be looking at the 335d would get a price reduction of $9,000. (Since the X5 has a base MSRP of over $45,000, it doesn't qualify for the Cash for Clunkers credit.)
Additionally, the 335d qualifies for a $900 alternative fuels tax credit and the X5 XDrive35d qualifies for a $1,800 credit. Finally, the sales tax on both cars is also tax deductible.
With Cash for Clunkers rolling out today, many manufacturers are viewing this as a chance to boost lagging sales. Some carmakers, such as BMW, are doubling the government's credit.
Combine a $4,500 Cash For Clunkers (C4C) rebate with the applicable federal hybrid tax credit ($1,700) and you can get yourself behind the wheel of a 2010 Fusion Hybrid for only $21,795.
So you've got a clunker that qualifies for the $4,500 rebate, and now you're wracking your brain for options for a replacement car. We're thinking along the same lines even though we aren't likely to cash in -- at Edmunds, we go fantasy car shopping all the time. So we put together a short list of vehicles, their combined fuel efficiency ratings, and figured out what the net cost would be after the government's C.A.R.S. (aka Cash For Clunkers) incentive.
We're not saying these are the only choices out there. We're not saying these are the greatest cars ever built. We're just saying these are 10 great cars you should take a look at if turning in a clunker. And we tried to put together a variety of makes and body types to jog your thinking. For a complete list of eligible trades and replacements, see our Cash For Clunkers page.
Keep in mind that final details of the program are not expected until July 24, and that all the vehicles listed here are the base model with an automatic transmission. We also assumed for the purposes of this exercise that these replacements would get the maximum credit amount of $4,500. Take a look after the jump.
As it emerged from bankruptcy GM announced it is considering selling new cars on eBay.
Car dealers have always had a love hate relationship with the internet. Mostly hate.
In 2000 when the internet was first sending ripples of terror through the car business, dealers fought to beat back the transparency that the internet brings to the buying process. A few years later, at a NADA conference, dealers talked smack, bragging how they had repelled the attack and how "all roads still lead to the dealership."
But now a humbled GM, reemerging from a speedy bankruptcy last week, announced it's working on a deal with eBay Motors to sell its new cars on the internet. The cars would still be delivered by local dealers.
Is this a path to profitability for General Motors? Or just lipservice to a generation of young buyers who currently get their books, music and movies with just a coupla clicks.
The Hyundai Elantra is a good replacement vehicle for someone turning in a clunker.
Hyundai is rolling out a new program that allows car buyers to use the "Cash for Clunkers" program before the bill even goes into effect.
The Korean manufacturer has tried to separate itself from the competition by offering creative incentives for car buyers such as the "buyback program" for people afraid of losing their jobs and defaulting on their car payments.
A Hyundai spokesman said that buyers can now bring in a clunker (any car getting less than 18 mpg combined EPA mileage and newer than 1984) and take advantage of the $4,500 or $3,500 government incentive. The bill goes into effect July 24 at which time it was assumed that the trade-in process would begin.
It appears that Hyundai is putting itself at risk of having the government decide that some of the clunkers taken on trade do not qualify for the program even though they have already given the credit to a new car buyer.
With a few key strokes, a car salesman can turn the cash for clunkers into gold -- for them.
Now that the Cash for Clunkers bill (aka CARS) has been signed, and will go into effect July 23, it's time to think about how to actually apply the cash credit.
Some readers have suggested that dealers will perform their usual sleight of hand with the government credit of $3,500 or $4,500.
What could go wrong? A lot. Let's take a closer look.
With the CARS (aka Cash for Clunkers) program expected to go into effect July 23, Edmunds.com has released a handy list of vehicles that are eligible as trade-ins. You can review this list to see if that old car in your driveway qualifies as a trade-in vehicle (clunker), and note that the list shows in what category the trade-in belongs.
We've also got a complete list of new cars that meet the Clunkers mpg requirements, these are the vehicles which you can apply your clunkers trade-in amount towards. Again, the category is called out so you can see how best to maximize the program.
Edmunds.com is working to make the Cash for Clunkers bill as understandable -- and more importantly useable -- as possible. For more information, and to see a table that describes the fuel economy requirements see our Cash for Clunkers page. Check back often for updates and additional resources.
I can't tell you how many times I've heard people say that. But if you change your oil this frequently, and you do it at a dealership, you are probably hemorrhaging money. That's because every time you enter the service department, you have a big bull's eye on your back. You are about to become a victim of the dreaded "upsell."
My 2000 Mitsubishi Galant has a trade-in value of $2,437 but it isn't technically a "Clunker."
Many folk have been asking about Cash for Clunkers, how it will apply to their specific situation and details of how the program will work. I have a clunker. It's a 2000 Mitsubishi Galant. I'd love to turn it in for a $4,500 voucher but I can't. The mileage is too high -- 21 mpg combined. Not only that, but I'm not looking to get into a car payment right now.
But based on the email we're getting about this bill that was passed last Thursday, a lot of you are sharpening your pencils and staying up late at night looking for loopholes in this government program.
"Hey, what if I trade in TWO clunkers? Can I get $9,000?" Or, "Can I tow in a rusting piece of junk and get my voucher?" And even, "Can I put an ad in the paper, find someone with a clunker, trade it in and buy a car for me? Then I'll give the guy $500."
Calm down everyone. You're making this WAY too complicated. Here's how to think this through.
Avoid the long wait to pick up your new car at the dealership -- ask to have it delivered.
One of the great secrets of car buying is that most dealerships are willing to "deliver" the new car you want to buy. It's best to push for the delivery just before you agree to the deal. Say something like, "Well, I think the price is reasonable but I can't get down there to pick it up until the weekend. Could you deliver it to my office over the lunch hour?"
In some cases the answer might be, "Yes, but it will cost you." But the vast majority of the times, they will jump at the chance to ink a new deal and say yes. Basically, they send the car, along with a salesman or porter, to your home or office with all the documents. A "chase car" follows to take the salesman back to the dealership. They are in and out in 15 minutes.
There are many advantages to having your car delivered, not the least of which is your time and aggravation. But the biggest advantage isn't immediately obvious. Here's what it is.
Invoice price (a.ka. "dealer cost") is the amount the dealer pays to the manufacturer for a car from the factory. This, of course, is less than the MSRP -- the sticker price. But the invoice price is almost always higher than the amount the dealer actually ends up paying to the manufacturer, because the manufacturer offers extra discounts to the dealer. The two most common discounts are "dealer holdback" and "dealer cash," and there are often others based on sales volume.
A few things to remember about invoice price. It doesn't include tax, title, license or registration fees, nor does it include any manufacturer-to-consumer rebates. Sometimes the amount quoted as the invoice price includes the destination charge and sometimes it doesn't, so look closely. (On Edmunds.com, we always make that clear.)
[Note: Because of regional pricing differences, the invoice price you see on Edmunds may occasionally vary a bit from your local dealer's invoice. Why? Regional pricing differences. For example, in the South and Southeast, large independent distributors control the pricing of Toyota vehicles, and they may set prices at different levels than those established by Toyota for the rest of the country. Same with Subaru in the Northeast.]
All this makes determining the dealer's actual net cost difficult even for seasoned automotive insiders. That's why we developed the True Market Value pricing system, which accounts for the effect of all of the manufacturer's extra charges as well as the dealer's hidden subsidies.
So, can you buy a vehicle for less than its invoice price?
General Motors followed Chrysler into Chapter 11 bankruptcy protection this morning in an effort to restructure and reinvent itself as a profitable company.
Since there is a lot of noise coming from the media and Washington, it creates the feeling that the product itself -- the car you are driving or are thinking of buying -- has somehow changed. It hasn't. Many GM cars are dependable, practical, even exciting vehicles that will provide years of service.
So we come back to the two most persistent questions: Should I consider buying a GM now that the shadow of bankruptcy has fallen on this company? Has anything changed for me, the GM owner?
Chrysler announced yesterday that half of the inventory it's trying to liquidate from closing dealerships (over 44,000 mostly 2008 models) has already been sold.
You've heard there are great deals at Chrysler and GM dealerships that are closing due to recent or impending bankruptcies. Still, did you know that you shouldn't pay asking price for a car, no matter how low that is? So how do you find your best deal?
Negotiate.
Are the rules different now that Chrysler has until June 9 to sell its inventory? The answer is yes. Here's what we suggest.
You will be hearing a lot of rumors this week that General Motors is expected to declare bankruptcy soon even though the exact timing of it is still a matter of speculation. GM's bankruptcy has become increasingly likely as poor sales continue and debts mount. Declaring Chapter 11 will allow GM to keep most of its dealerships open (some closings have been announced that will take place in a year) and allow sales on remaining inventories.
Over the weekend, President Barack Obama commented that GM and Chrysler, which is already in bankruptcy, will have to emerge as "leaner, meaner" companies from their restructuring. If they do, he added, a substantial market will await them.
When bankruptcy arrives for GM it is expected to be one of the most complex legal restructurings of our time. Because of the vast reach of GM, and its multinational status, the situation is expected to require the work of legions of attorneys.
As bankruptcy looms, the deal making continues on GM car lots with high incentives and deep discounts. Meanwhile, consumers who own GM vehicles, who are worried about what this will mean for them, can read "What if My Carmaker, Dealer or Warranty Company Goes Under?"
Whenever we discuss whether there's a "best" time to buy a car, a lively debate ensues. End of the month, in the rain, end of the year -- there are lots of possibilities for saving money. Taking a lesson from Wall Street, though, we tend to believe that trying to "time the market" is fraught with peril. But one thing is generally true, and that's that holidays bring out special incentives on new vehicles.
It's not enough, though, to just run into the car dealership and get a new car to try to take advantage of, say, $500 cash back being offered for Memorial Day weekend. Why? Because that time pressure (buy it before the incentive disappears) can cause you to grab a "deal" that isn't really the best one for you.
You need a real plan to save real money. Our article, Your Three-Day Shopping Plan for Holiday Weekends, covers all the bases. The most important step, of course, is figuring out how much car you can really afford, made easy with our new Affordability Calculator. The hardest part? Sticking to that budget! Seriously, though, if you follow the plan, you'll be sure to finish the holiday weekend with confidence that you've got the best possible deal on your new wheels. I did this during Memorial Weekend last year, and walked away with a great deal on a Nissan Altima Hybrid with all the trimmings. I never had to wonder if I could have done better, and that's a great feeling to have on such a major purchase.
With Chrysler's recent announcement that it will close nearly a quarter of its dealerships, consumers might be wondering how this will affect their purchasing decisions if a Chrysler, Dodge or Jeep product is on their short list. As the saying goes, I've got good news and bad news (and some sad news). Which do you want first? I'll give it all to you after the jump.
Oren Weintraub, president of Authority Car Buying, enjoyings the negotiating that is essential to his job.
All day every day, Oren Weintraub works car deals. And he loves his job. That's because he's saving money for his clients.
Now here's the surprise: there isn't a lot of yelling and screaming. Weintraub makes people feel good about giving him what's best for his clients.
Weintraub was reluctant to allow me into the inner sanctum of Authority Auto, in Sherman Oaks, Calif. because he was worried I would give away all his negotiating secrets. After seeing him work, I'd have to say he's in no danger. He can give all the advice in the world, but he still a master at the moment to moment improvising his job requires.
Sitting with him Weintraub for a morning, and hearing him work deals, was eye opening. But it also confirmed some basic principles I've always thought about negotiating. Here's a few things I learned.
There's as much advice about when to buy a car from a dealer as there are days in a year. Some say that Mondays are good because business is slower on Monday than on the weekend. Others advise to go when it's raining or snowing, because who wants to look at a car and get wet? Still others say that the end of the month is the best time, because the dealership needs to make its quota and will be more willing to cut a deal. And finally, others advise not to buy a car until the end of the model year, or in slow months like August or December when people are busy thinking about going back to school or shopping for Christmas gifts.
While there is some truth to all these theories, our advice is that you should not buy a car until you're ready. By then you have saved enough for a good down payment, researched the lowest interest rate, and you know all the current incentives and rebates. And by the way, you'll never get a good deal when a new hot model has just been introduced. Those vehicles are in demand and go for over sticker price. Let the excitement die down if you want to get a discount.
Despite lackluster car sales, incentives and rebates on new cars have remained relatively stable over the past few months. The exception to this would be Honda and Acura, which offered more incentives six months ago than they do today. But there are still some amazing deals out there.
Here are a few noteworthy deals for this month that our data team has compiled:
The economic downturn is even affecting current year model vehicles. The 2010 Hyundai Genesis Coupe and the Mazda 3 have recently added special low and no-interest financing and lease offers. This month the 2010 Kia Soul has also added special financing offers.It is also unusual to see incentives on this year's models so soon after their release.
Saab has the most discounts for this month, and has increased its incentives from February 2009.
2009 Saab Models:
9-7X went from $1,000 customer cash to $3,000 dealer cash
9-5 went from $1,500 customer cash to $5,000 dealer cash
9-3 kept the same $1,500 customer cash but added $1,000 in bonus cash
2008 Saab models:
9-7X went from $8,500 to $10,000 customer cash
9-5 went from $4,500 plus $1,000 bonus cash to $8,500 customer cash
9-3 went from $4,000 plus $1,000 bonus cash to $6,500-8,500 customer cash (depending on the model)
(A customer "in the box" at a dealership negotiates with a salesman. Photo by Andrew Reed.)
This week we stumbled across the account of a car shopper who made every mistake in the book. Unfortunately, he ran straight into two dealerships which were trying to make up for a bad economy by running the old shell game on any unsuspecting customer who ventured onto their car lot.
While the shopper was thinking he was boosting the economy by purchasing an American car, the dealer thought it was payday. Uninformed consumer + hungry car dealer = disaster.
This story illustrates how there is blame on both sides. And it also shows that the car buying system (at least the traditional feet-on-the-ground method) is an outdated business model.
(Sales Manager John Davis, Glenn E. Thomas Dodge in Signal Hill, CA, with our new Challenger.)
Car buyers are told that they can get screaming deals these days. But when I went shopping for our long-term 2009 Dodge Challenger R/T I found that when car salesmen have a hot product they still try to hold the line on price. You can't blame them since if they're giving away most other cars they have to make their money somewhere.
We decided to get our Challenger with the six-speed manual transmission and the 27J Package which includes the smaller wheels. And don't forget about the the 5.7-Liter V8 Hemi. We also wanted it in either black or white, not some crazy retro color like orange. By selecting these colors and specific features we substantially reduced the pool of vehicles we could buy from.
To search for the Challenger, we used our Edmunds.com New Vehicle Inventory tool. After locating a prospective vehicle, we then went go to the Dodge website to view the window sticker to verify exactly what equipment was on it.
We then had to consider at what price we could purchase this Dodge. It appeared that the Challenger could be purchased under Chrysler's Employee's Pricing Plus plan which brought the price down to below invoice.
At this point I made a classic car buying mistake.
Everyone knows that the sale of new cars is way down. But what's happening in the collector car market?
That was the subject of a discussion hosted by Meguiar's car care products Wednesday featuring a host of speakers who have their finger on the pulse of the market.
Barry Meguiar, president and CEO of Meguiar Inc. said, "We need some good news these days and the good news is that attendance is up (at car shows). We can grow in bad times." He added that while the sponsorship money has dwindled, the attendance has not.
This growing audience is largely unrecognized by the mainstream and exists, "under the radar," according to Meguiar. Some five years ago the collector car market was estimated to be as large as 3 million people. Other estimates have said that 11 percent of all drivers feel passionately about their cars.
Each Wednesday in the Idle Chat Lounge (read: a musty sectional in Karl Brauer's garage), Brent Romans and Bryn MacKinnon, two editors at Edmunds.com, pontificate on a topic that's kinda about cars.
Today's Idle Chat Topic: What is the deal with those stickers and fake emblems dealers slap on the cars they sell?
Ms. MacKinnon: Here in Southern California (home of our editorial offices), dealers mostly stick to (easily removable and totally unnecessary) license plate frames and fake license plates for advertising that you just bought your new ride at Honest Tony's Autoporium-o-rama. But there are plenty of out-of-state cars cruising our mean streets so that I am quite familiar with this (IMO) strange and annoying practice of dealer branding, whether it's a blocky sticker crudely stuck on the rear decklid (see above) or an almost believable metal trim piece spelling out the dealer's name and placed next to the car's factory badging. Sure, dealers should be allowed to advertise to the public. But the nerve of using adhesive on my precious new set of wheels to do so! Shocking.
Mr. Romans: Yep, they're tacky. But what can we really expect out of the country that invented Las Vegas, truck antlers and the 1974 Ford Mustang II? Really, we only have ourselves to blame. It seems plenty of people don't mind (or are otherwise oblivious to) rolling in decade-old cars with original dealer stickers and plate frames still attached. Even here, though, I would argue that it's not all that bad, as the alternative is even worse. When these people remove their car's dealer kitsch, they replace it with items like "I'd Rather Be Crocheting" license plate frames and "My Chihuahua Is Smarter Than Your Honor Student" bumper stickers. I think we're facing an unsolvable problem, here, Bryn. (Although, I must say, our long-term BMW X5 test car would look pretty snazzy with a set of truck antlers.)
Want to get rid of an unwanted or unsightly dealer sticker or emblem on your own car? Just remember that the longer it sits, the harder it'll be to remove. We've also heard of shoppers refusing to take delivery of a car with a dealer sticker on it, so keep that in your back pocket when you buy your next car, if you're not into being a rolling billboard.
We've been saying for a long time but it's a great time to buy a car. Apparently people are listening. And they're using our advice to press for smokin' hot deals.
Last week I had to sell our long-term Scion xB and nobody even wanted to come look at it before making an offer. Everyone wanted to negotiate over the phone.
I put it on Craigslist and Autotrader.com for $29,000 voting for quick sale. Before doing that I had taken it to Carmax for a quote. They offered $26,000.
Last night, during dinner, my phone rang and when I picked it up it was a woman interested in buying our Mercedes. She didn't make any preliminary comments or ask if I was flexible on the price or even try to make small talk. Here's what she said:
At a time when automakers are desperate for every sale, a remarkable number of shoppers are drifting out of the new car market and purchasing a used car instead. In fact, Edmunds.com has determined that approximately 511,000 used cars sold in the past three months would have been new car sales in a more normal economy.
But how do you determine a fair price -- whether you're buying or selling a used car? The market is so volatile that you can't rely on anything from a book, because it would be instantly out of date.
Edmunds created True Market Value pricing for this very purpose. (For a cool tutorial on TMV, please click here.) Here's how you research a used vehicle's TMV price:
1. click the Used Cars tab from anywhere on the site
3. Select the make, year, model and style of the vehicle you would like to appraise
4. Choose whether you are planning to buy or sell the vehicle
5. Indicate the vehicle's color, mileage, options and condition
6. Finally, click "Get Pricing Report" to generate a customized TMV price for the vehicle. This report will provide you with the vehicle's trade-in, private party and dealer retail TMV prices.
TMV pricing is the most accurate reflection of actual transaction prices in your area. For more information, see How We Calculate Used TMV Prices.
Here are a few bullet points for buying a used car:
In a show of the new consumer conservatism, more people are deciding to buy used vehicles rather than new. According to our experts here at Edmunds, in the last three months over a half-million consumers bought used vehicles while in a stronger economy they probably would've bought new.
We see two major factors contributing to this shift:
1) Consumers are more thrifty than any other time in recent memory. If they need to purchase a vehicle and can't (or don't want to) spring for a new one, a one- or two-year old, well-kept vehicle with low mileage is the way to go. That way, you still get a nice car that should last you and you don't take the huge depreciation hit that occurs when you buy new. Furthermore, often times you still have a fair amount of warranty coverage left.
2) Struggling car dealers are prioritizing selling their used cars, so salesmen are steering some new car intenders to the used car lot. The reason is that the profit margins tend to be much higher for used vehicles versus new, especially now.
This week we got an email from a car sales manager with a list of 25 things he wanted to tell car shoppers. Later in this blog, I'll post some of his items. But first I wanted to revisit an AutoObserver article with comments about car dealers from the head of Hyundai Motor America.
Seems acting Hyundai CEO John Krafcik believes that part of the reason cars aren't selling is because of the way they are sold. He even quoted a study saying people would prefer to visit the dentist rather than go to a car dealer. Do you agree? Dentist? Or car salesman?
The answer obviously lies in the kind of car salesman you're dealing with. And the dental procedure you're having perform (having your teeth cleaned isn't so bad).
So, to spark some discussion, here is a list from an "anonymous sales manager" who writes, among other things, "Sales people have families too and have the right to earn a living just like anyone else." (Hey, we never said they didn't!)
We edited his list down to the points we thought were particularly valid and added a few comments of our own in italics.
There are so many ways that a manufacturer can help a dealer to "move" a car that it's almost impossible to keep track of. But two of the main tools are Dealer Cash and Dealer Holdback.
Dealer Cash is money that the manufacturer offers to the dealer to help sweeten the deal for the consumer. The manufacturer might offer this money when the dealer first buys the car, or later, when the dealer sells the car or reaches certain sales targets. Dealer Cash is listed in our Incentives and Rebates, so you can see exactly what's being offered to the dealer. But here's the catch: Dealers aren't required to pass all that cash through to the customer. They may, or the customer may get some or none of it. It all depends on your negotiation.
Dealer Holdback is a percentage of either the MSRP or invoice price of a new vehicle (depending on the manufacturer) that is repaid to the dealer by the manufacturer. The holdback is designed to supplement the dealer's cash flow and indirectly reduce "variable sales expenses" (code words for sales commissions) by artificially elevating the dealership's paper cost. It is dealer holdback, among other factors, that allow dealers to sell a vehicle at invoice price -- or sometimes even below -- and still make some profit.
Our True Market Value vehicle figures incorporate Dealer Cash as one of several types of incentives that can affect the average transaction price for a car. So when you use TMV as your target, you can rest assured that Dealer Cash has been factored into that price.
Dealer Holdback is a "sacred cow" to dealers and something they generally won't budge on (and if you bring it up, you're likely to be met with some scowls), so it is not figured into TMV. Although there are strategies for when to ask for the holdback, we recommend only bringing it up if a dealer starts whining about "not making any money" on a vehicle. Even if they sell the car for invoice price, they will still make a few hundred dollars on the holdback.
There are plenty of fees associated with buying a new or used car -- enough to make you think you should have bought a less expensive vehicle. Which of these fees are mandatory and which can you haggle over? Let's break it down:
Vehicle Registration fee: This one's a no-brainer. Every vehicle must be registered by the state. It covers registration, license plate fees, and title assignment.
Sales Tax: Same as it ever was. At 8%, tax on a $20K car can cost $1,600!
Documentation fee: If the doc fee is regulated in your state, pay it. But in most states it's not, and the dealer could really overcharge you. Try to keep your doc fee at or below $100.
Dealer fee: Often labeled 'dealer prep' or 'shipping' or any of a number of made-up names, this is where you need to be careful.
Advertising fee: If it's listed in the car's invoice, pay it. If not, but the dealer tries to write it into your contract, fight it.
Taxes on Trade-Ins and Rebates: This is a complicated subject and, as usual, it depends on your state law. But a state-by-state breakdown of these taxes, along with more details on all the fees listed above, is in our article, What Fees Should You Pay? Here, as with the price you pay for the metal you'll be driving home, it really pays to do your homework before going to the dealer.
Imagine this -- you buy a nice used car from what you think is a credible dealer and after you start making payments get hit with an additional loan to pay off. Huh? Turns out this other loan is left over from when the previous owner traded the car into the dealership. How did this mess happen and why is the innocent new owner on the hook for it?
We've been hearing that dealers are trying all kinds of different sales tactics to stay afloat and that this has created wild price swings for car buyers. Earlier this week I told the story of a Denver-area man who drove 2,000 miles to a dealer in Wisconsin and saved $12,000 on a new hybrid SUV.
Now we have the data to back up this anecdotal evidence of price variations. According to the Edmunds.com data department, the difference in pricing on new cars varied by as much as 62 percent from July to December. But that's not all. For 2009 cars the prices varied as much as 34 percent in December and for 2008 models it was an amazing 119 percent.
That means that some buyers paid way too much while others got screamin' deals.
(With dealerships closing, this electronic billboard has slides not being used to advertise to freeway drivers in Southern California.)
I hope you'd never do this.
A dealer last week told me that consumers are smelling blood and demanding ridiculously low prices for the cars they want to buy.
"They come in and say, 'Look, I know you dealers are hurting,'" one internet salewoman told me. "So they expect you to take a $5,000 loser on this car." She looked at me, her expression seeming to say, "Can you believe it?" She continued, "I mean, that's not right. Product is still product and it has value, even in a bad economy."
I heard of a similar thing happening at Circuit City stores. When it was announced the chain was closing, consumers flocked to the bargains like vultures, rudely demanding that the salespeople give them even deeper discounts. I don't know about you, but that doesn't seem right to me.
Yes, car dealers are a favorite target for angry consumers. And, yes, there are deals to be had in this marketplace. But remember to get your deal the right way. Stick to the facts by consulting True Market Value (and while you're there, check out our new TMV tutorial). It's essential that you also review the incentives page which is updated frequently to reflect changes in the market. For an overview of recent incentives see this recent blog post. And finally, make sure you use our new "Search New Car Listings" feature which is on the home page just below the new car box.
It's a great feeling to get a good deal on a car. But I feel that it's also important to feel good about the way you do business. Let your research get you your best deal, not a predatory attitude.
Incentives on new vehicles -- even ones that used to command sticker price and above -- are getting to crazy levels. Why? Dealer lots are still full of new 2008 vehicles that aren't moving (not that the '09s are moving so well, either). In fact, on average, 39% of the cars in lots in December 2008 were that year's models, compared with only 19% for 2007.
The average "days to turn (DTT)" -- the number of days from when a dealer receives a car to when it drives off the lot -- is at a record 86 days for the industry overall. Here's the December DTT for the Big 6. (All names include their subsidiaries except for Ford's Mazda.)
Chrysler Group 124 GM 99 Ford 88 Nissan 83 Honda 59 Toyota 58
Of the above, GM, Nissan, Honda and Toyota are at all-time highs. Toyotas that used to be sold before they even came into the showroom are now sitting on the lot for two months!
What this means to consumers is deals galore. In an unusual reversal of the general rule, it may even be a better deal to get a new car (with incentives on it) than a late-model used car. But the deals aren't limited to '08s; there are some great deals on '09s as well.
Welcome to FAQ Fridays, a new weekly blog feature that answers some of the most frequently asked questions Edmunds readers send in.
First up: Folks want to know why the prices, specs or options on Edmunds might be different from what they see on other automotive sites. Good question! There are several reasons why this might happen, and we'll outline them here. Destination Charges and Other Fees: On our site, we always make it clear when destination charges or other fees are included in a vehicle's price, but to determine this elsewhere you may need to examine the pricing details or window sticker closely.
Vehicle Styles: Most vehicles are available in many different styles, and sometimes this leads to confusion when making comparisons. Styles listed on our site include the vehicle's trim, number of doors, body type, drive type, engine and transmission. For example, here's a style currently available for the 2009 Honda Pilot: EX-L 4dr SUV AWD (3.5L 6cyl 5A).
Sometimes a style contains a Special Identifier (SI) when a manufacturer wants to specify a unique feature. For example, rear entertainment is the SI on the following style of the 2009 Honda Pilot: EX-L 4dr SUV w/Rear Entertainment AWD (3.5L 6cyl 5A).
For many, buying a car is as much an emotional as it is a practical decision. Sometimes we just can't believe the things that push the right buttons for folks when they're looking for wheels -- certain colors, the gold emblem package. Knowing what you like is all well and good, but when it comes to considering a used car, things such as condition, mileage and a solid maintenance history take priority.
So in the interest of helping you keep a clear head and making sure you do everything possible to ensure the used cars you're considering are worth taking a look at, we've created this handy worksheet for you. Use it when you're calling or e-mailing prospects. It's a pre-emptive strike designed to minimize the chances of you wasting time going to see a car, only to discover, for example, that it doesn't have the features you want or is going to need some big repairs. It's also a good idea to bring it along when you examine the car in person; as any lingering questions can be answered at that time.
Last summer, gas prices shot to record levels at a rapid rate. Buyer's panicked and snapped up every fuel efficient vehicle they could find. Fuel sipping hybrids were more in demand than front row seats to the Presidential Inaugural. Consumers were happily paying thousands of dollars over MSRP for any hybrid car or small hybrid CUV. Fast forward to the here and now. Gas prices have dropped by more than half, people are buying trucks again and the once high-flying hybrid sales have crashed. Not only can you deal on them, but now you can get a deal.
Dealing with an automaker's finance arm shouldn't be a harrowing experience, but it sometimes is. Recently, J.D. Power came out with their 2008 Consumer Financing Satisfaction Survey, which measures customer satisfaction with new vehicle finance services according to four criteria: application approval process; customer contact; payment/billing process; and provider offering.
The rankings are divided into categories: Luxury loan, luxury lease, non-luxury loan, and non-luxury lease. BMW took both luxury categories, while Hyundai took the non-luxury loan and Ford the non-luxury lease. Interestingly, Honda ranked third (which is still quite good) in three of the four categories.
I noticed that Toyota and Nissan, which I personally found to be a pain to deal with on my own vehicles, were nowhere to be found. Just goes to show you; 27,964 surveyed consumers can't be wrong.
So for now, forget about the dealership experience. What's your experience been with the finance companies? Good, bad or otherwise?
The recent credit crunch and associated downturn in the economy has contributed to the bottom falling out of the lease business. While many leasing companies like GMAC and Chrysler Financial have completely stopped leasing, others have severely cut back on their subsidized lease rates. This has resulted in a bit of sticker shock for lease customers who are approaching the end of their current lease.
Leasing has traditionally comprised about 20% of new car purchases. Most of these lease customers tend to come out of one lease and go right into another one (myself included). This has resulted in a large number of people who, expecting to lease another vehicle, are seeing payments 20-40% higher than what they were paying for their previous lease. Unable, or unwilling, to pay such a premium, many lease customers are thinking of buying their currently leased vehicle. But is this a good idea? How do you decide?
"I make most of my money off my friends. They aren't looking for you to screw them so you can really sock it to them." The salesman bragged that one of his most profitable sales was to his sister, who bought a fully loaded model at top dollar.
I bring this up not just to warn car shoppers, but because I thought the wry observation by the reviewer was hilarious. In a Wall Street Journal review, the critic says, "Screwing your sister, even figuratively, then boasting about it indicates a certain detachment from mainstream values, but moral obtuseness was virtually guaranteed by the structure of the business."
Rather than comment on the nature of car salesmen, I want to present a story from the trenches we received recently:
It probably won't surprise you to hear that car sales are still way down as of November. Our sister blog, Auto Observer has the whole story.
But that means you can probably get a really great deal on a new car right now, particularly on 2008 model. And to help you make the most of this opportunity, check out our Car Buying Tips for a Slow Economy article.
Faced with sales that are 45 percent lower than last year, GM has gone back to what's worked for them in the past -- the Red Tag Sale.
Several summers ago the Red Tag event turned sales red hot. Now, prices are being slashed to invoice and below on most models.
Included are all 2008 and 2009 Buick, Cadillac, Chevrolet, Hummer, Pontiac-GMC, Saab and Saturn passenger cars and light duty truck models. The only cars not being Red Tagged are the Cadillac CTS-V and the Corvette ZR1.
How good a deal can you get? We are changing our TMV pricing to reflect current GM deals. But as a rule of thumb, the Red Tag sale appears to be invoice minus the holdback (about 2 percent) minus $150.
If you want to see if waiting will give you an even better deal, take a look at our new feature TMV Predictive Pricing.
We''ve been hearing a lot about the frozen tundra of credit availability and how folks under 700 FICO need not apply. Well, Phil and I did a little research and got the low down on what's really happening to consumers in search of new wheels.
Why Are Car Buyers Staying Away from the Dealership?
Can I Get a Car Loan?
How Have Credit Requirements Changed?
Is It a Good Time To Buy a Car?
Car-Buying Tips in Troubled Times
Because automakers are hurting so badly, it might be one of the best times ever to buy car -- just be sure to check our Rebates and Incentives information to make sure you get every manufacturer and dealer incentive coming to you. Yes, it's true: Both auto financing and leasing standards are tougher, but nowhere near impossible to overcome. If your credit's not great, you'll have to pony up more cash up front to make it happen. But the people who are shut out of vehicle financing are likely to be those who truly should be -- because they're bad risks. Call it a market correction.
But what about you personally? Have you found it tougher to buy a car, or do you know people who have? Are you polishing up your credit score? Are you shopping the used car market instead? Or have you taken advantage of the chaos to score a great deal? Let us know!
Dealerships all over the country are getting hit particularly hard by our country's current economic woes. Many consumers are deciding to hold back on buying that new car until they feel more financially secure (or are being forced to do so because of credit issues). In September, new car sales across the industry were down about 23% from what they were in August. It's predicted that many, many dealerships will be forced to close their doors permanently by the end of the year. What does all this have to do with oil changes and tire rotations, you ask? Read on.
(The newly redesigned 2009 Volkswagen Jetta TDI. Photo by Andrew Reed)
My father called me recently and said he had found a 2009 Volkswagen Jetta TDI (diesel) he wanted to buy from a local dealership in Denver, Colorado. I told him to ask the dealer for a breakdown of all the fees and call me back. Here's what he came back with:
It's funny because, when he read me off the "market adjustment" fee, he added, "Whatever that is."
My father is a smart guy but he didn't know what the "market adjustment" charge really is. It is essentially a dealer markup for an in-demand car. I told him if he wanted to wait six months it might cool off and he could buy it at sticker. Or I could shop for it around Los Angeles. He asked me to shop for the car.
I hired Authority Car Buying Specialists (www.authoritycbs.com) and they located the car in Los Angeles for $500 below sticker. Yesterday the car was delivered to my house.
So, my dad saved $7,298 (the dealer markup and $500 discount off sticker) not to mention the fact that California's doc fee is only $55 (a $345 savings). And who knows what those "other fees" were for that justified $496.
If you're shopping for an in demand car, and you find that there is a hefty markup at local dealers, try another city or another region of the country. Often, you can save enough to pay for the shipping cost -- and then some.
A Florida dealer decided to stop tacking on a $495 "doc fee" (document fee) and, although it reduced his profit on each car, he sold twice as many vehicles.
Earl Stewart, of West Palm Beach, Florida, decided the doc fee was a dealer's "dirty little secret" and he didn't want to be associated with it. The decision raised his son's opinion of the business so much he joined him on the staff at Earl Stewart Toyota in North Palm Beach. But now other dealers in the area are hacked off about Stewart's position. They feel they need the extra profit even if it is a "gotcha" for the customer when they discover the charge as they sign the contract.
Read more about the controversy on Stewart's blog. You can find out what fees you'll be facing before you sign by checking out our 50-state chart called "What Fees Should You Pay?"
Even in this crazy economic climate, most people can get still auto financing. Preparation and knowing what to expect at the dealership can make the difference between getting a car loan (yes, a good one) and not getting one at all. Below are the most common auto financing pitfalls that consumers experience:
#1: Not knowing their credit rating when they apply for an auto loan.
#2: Overspending once they get to the dealership.
#3: Not knowing the current interest rates being offered in the marketplace
#4: Not having approved financing in hand before entering a dealership
#5: Assuming a zero-percent loan will save more money than a cash-back rebate
#6: Falling victim to the F&I officer, who may try to confuse you by "intertwining" different elements of your deal. ("We'll give you an extra-low price on the vehicle, but this interest rate is the best we can do.")
#7: Not reviewing the contract for "extras" that have been thrown in before signing.
#8: Succumbing to pressure and exhaustion by signing the contract, despite confusion, second thoughts, or misgivings.
Most people forget that the price of the car is important, but the financing deal is often moreso. Paying a slightly higher interest rate or extending your payments for a few more months adds up to hundreds, sometimes thousands of dollars more. If you take time to do a little homework, you'll leave the dealership confident that even in these strange economic times, you got a good deal.
Why are they so mad? Because I told the truth. And my boss, understanding the way of the world, knew that anger often accompanies revelations of this kind.
It's hard to imagine any good news about credit right now. According to Bloomberg.com, Senate Banking Committee Chairman Christopher Dodd said, ``I was told today you have to have a FICO score of 720 to qualify for a car loan. The effects of this could be huge.''
Huge, indeed. Before you can buy or lease a car, a dealer checks your credit, and if you don't pass the smell test, the rate s/he offers you will be higher... or you might not qualify at all.
We've got lots of information on the importance of your credit score and tips for subprime borrowers. (Is 710 the "new" subprime?) But the bottom line is, not only do you need to know your score, you need to know what's keeping it from being the best it can be. For example, when I refinanced my mortgage, I discoverd that my score was getting dinged for an outstanding payment owed to a book club from five years ago... and I knew nothing about it.
So where's the silver lining? TransUnion, one of the big three credit reporting agencies, got caught giving away too much information about its customers to insurance and credit marketers (read: unsoliticed phone calls and junk mail). As a result of a successful class-action lawsuit, TransUnion now has to provide free, 24-hour credit monitoring to pretty much the entire country. The benefit of this is that you'll be able to see your TransUnion score, what's affecting it, and receive 24-hour credit monitoring (which will help protect you from identity theft, a service not to be underestimated). Whether you get six or nine months free depends on whether you opt to take a little cash that might come your way with the settlement. Personally, I would forego the cash, because it's likely to be pennies or a couple dollars at most. (Analysis on the settlement can be found here.)
The settlement is old news, but now you can register for benefits at a special site set up for the purpose. It's super easy and we strongly recommend you tell all your friends about it. (To make this work, you will need to have an email address.) This service is far beyond the once-yearly credit report that these companies are normally obligated to provide.
There's something convincing about hard copies. When something is printed out, it lends substantially more validity to a subject than just the spoken word. Nowhere is this more true than when you're in the heat of battle. That is, when you're at the dealership negotiating the price for your new set of wheels.
The other night a warning light came on in one of our long-term cars. It was late on a Friday night, I was out of town, and I wasn't sure where to turn. Being an Internet junkie, I immediately went online to search for the nearest dealership, and in no time was able to set up an appointment online for the next morning. Sure, I could have just called them the next day, but there was something comforting about being able to secure a spot right then and there.
But before I made my appointment, I had entered my personal information on the dealership site and inadvertently clicked on "get a quote" instead of the "find appointment" button. When I realized what I'd done, I was petrified. "Oh no," I thought, "here it comes. I'm going to be harassed."
Times are tough for the auto industry. Sales are down and the costs of raw materials are rising rapidly. The result is that the red ink has gone from a steady flow to a deluge for many suppliers, manufacturers and dealers. Over the last several years, costs and expenses have been reduced to the point where there is virtually nothing left to save. Yet the red ink still flows. The once less-than-tasteful option of raising prices is looking to be the only possible way to turn things around. This will eventually result in higher prices for the consumer.
As if I haven't had enough problems with my newly-leased 2008 Nissan Altima Hybrid. First the battery died as I tried to leave the car dealer's lot. Then, it died again two days later, requiring that it be towed and the battery replaced.
Now, the headliner -- the cloth that covers the roof interior -- is falling down. I've only had this vehicle one month. What happened to "vehicle quality"? Tomorrow I go to a nearby dealer to get it fixed... the whole headliner might need replacement. I just love hanging around dealership service departments; don't you?
But wait, there's more. The dealer's finance department messed up a date on the original contract, so the leasing company (Nissan Motor Acceptance Corporation) thinks I took possession of the car two weeks before I actually did. Calling the dealership finance manager (twice or three times) to straighten things out (which NMAC told me to do) has been fruitless.
True, the headliner (the cloth that covers inside of the car's roof) is starting to fall away over the left rear seat. I have to give my local Nissan dealership two days notice before I can bring it in to fix it...
According to a report by GM, women buy 45% of all vehicles and 85% influence the vehicle purchasing decisions in relationships. So it should come as no surprise that when shopping for a new vehicle, especially one that will be used primarily as a weekend family vehicle, that my ultimate vehicle choice has to have a high WAF - Wife Approval/Acceptance Factor.
This does tend to create a bit of discourse, given that my wife tends to let her emotions sway her buying decisions, while I tend to be much more objective. As with many consumers, she is influenced by the marketing professionals...
Yesterday I continued my story on how I came to choose the 2008 Nissan Altima Hybrid as my new ride, and the deal I got on it. What I didn't have room for, though, was the details on how the car died as I tried to leave the lot.
Yes, after a few hours with the salesman and the finance woman -- during which time I had to do all the paperwork twice because someone screwed up the VIN -- I was finally ready to leave. But my new car was missing floor mats, the navigation manual, and a second key. What's up with that? Well, these things get poached when a car is sitting on the lot for a while... Would I come back at a later date to get those things? Well, what choice did I have at that point?
The car had been gassed and washed (at least on the outside; the inside was still really dusty, as I found later.) But when I pushed the START button to drive it off the lot, nothing happened.
Was my foot on the brake, as required? Yes it was. I tried repeatedly, but no dice. The salesman tried, but again, no dice. He looked concerned. He said, "I don't get it, it was working fine all day." I looked back at him and said, "You know, this isn't supposed to happen, right?"
Right. So they jumped the car, got it started, and the battery continued to charge itself as the car ran. The salesman and I drove around the dealership for a mile or so just to make sure it wouldn't die, then I dropped him off and went home.
All went well for two days. Then, on Wednesday evening, aftering return from an event for Planet Green, the Discovery's Channel's new eco-lifestyle channel (launching June 4), I parked in front of my house and turned the car off. Two minutes later, when I went to take the babysitter home, the car wouldn't start. Dead in the water. I got the babysitter home using the Highlander (which I hadn't yet returned to the Toyota dealership yet), and went to work to figure the damn thing out.
I went through the manual till after midnight, then gave it a rest. In the morning, I prayed for a miracle, but there was nothing. So Thursday, after I returned from work, the Nissan dealership had my new car towed -- towed! -- back to the dealership for repairs. And there it still sits now.
I started looking at regular five-seater vehicles. I spent Sunday testing a ton of cars at Galpin Motors, because 1) they responded to my Edmunds quote request, and 2) they have Volvo, Ford, Saturn, Mazda, and Honda -- as well as five other brands -- all under one roof. My salesman from the Internet department, James K., was a mensch, letting me test drive everything I had my eye on without any pressure. (And no, he didn't know I was from Edmunds until later in the process.) I tried out everything from the small Mazda 3 (because the editors always loved that car, and after driving it, I could see why) to the Mazda CX-7, to the Ford Escape Hybrid, to the Volvo S40. All cars I had liked for one reason or another. The smaller cars on that list I ruled out because the back seat wasn't comfortable for three people.
So why not get the Mazda CX-7? I love the way Mazdas drive (the "zoom-zoom" ads are actually true). But SUVs are generally more expensive than sedans of the same size and get poorer fuel economy. In California, gas prices are already well over $4 / gallon. And prices are only going to go up. While it's true that hybrids don't yet make financial sense for most people (because the price premium for the hybrid usually outweighs the money saved on gas), that changes as gas prices rise. And besides, I'm even "greener" now than I used to be, and my husband and I really like the idea of less pollution / great fuel economy.
I started thinking: "family" sedan (for the rear seat) + great gas mileage + driving dynamics + style. Right there, that limited my list. I probably should have tested the Honda Accord -- but I was in overwhelm mode, and the Internet manager at the dealership needed his salesman back.
A few weeks ago, I asked for feedback on my next new car. Well, so much has changed since then, and I finally (finally!) made a decision over the Memorial Day Weekend: A 2008 Nissan Altima Hybrid.
Gas prices may be sky high, but apparently most Americans (at least those in Buttler, MO) would prefer a free gun over gas. Max Motors is currently offering anyone who purchases a vehicle the choice of either $250 in gas or a gift certificate, worth the same amount, good at the local gun store. Their offer has garnered international attention and has no doubt been good for business. Most curious, however, are reports that about 80% of people have chosen the handgun over the gas...
Ward's Dealer Business, an industry publiciation, recently published a good article on women-owned dealerships. Here's an excerpt:
"Women bring a different approach and style to something that has been a man's world," [Deborah Dorman, president of ENYCAR, Inc., the Eastern New York Coalition of Automotive Retailers] says. "And what they bring helps the industry to prosper because of some of the old traditional methods and styles commonly used in auto retailing today are not effective for today's workforce."
Few women dealers woke up one morning and decided to buy a dealership. Most women dealers became dealers because their fathers were dealers before them or their husbands were...
Just as you are getting ready to sign on the dotted line, agreeing to purchase that vehicle for the price that is indicated, you will most likely be thinking, "could I have done better?" Thanks to decades of "wheeling and dealing" and playing "fast and furious" with the numbers, car dealers have garnered a reputation of being less than forthcoming when it comes to their "best price." While things are certainly changing, with information from Edmunds and the near ubiquity of the internet, old habits die hard, for both dealers and consumer alike. As a result, there is a bit of a disconnect between how much money consumers think dealers are making, verses how profitable a dealership really is, especially in this depressed economy.
According to the National Automobile Dealer Association (NADA), average dealership pretax profit for 2007 was 1.5% of sales, while over 20% of dealers lost money. Dealerships selling domestic branded vehicles generally did worse than those selling imported branded ones...
Time to take your car in for service? Before you call to make an appointment, check out this super useful tool we have on Edmunds.com. I was recently reminded of its existence in the Tips & Advice section after one of our editors posted about taking our long-term Hyundai Veracruz in for service this week. I wish I had known of its existence before I took my car to the dealer the last time (which was before I worked here)...
Isuzu sold nearly 104,000 light vehicles in 1999. Last year they sold just over 7,000. Isuzu's sales have been in steady decline for nearly a decade, mostly because of a lack of new and updated products. This neglect can be traced back to financial difficulties that parent company Isuzu Motors in Japan suffered when it tried to expand too quickly in Asian markets, and its desire to pour the limited resources it had into its more profitable commercial truck business...</DI
Even if you're not working on Wall Street or an employee of one of the four airlines that failed in 2008, chances are you're feeling the pain of the slow economy. Gas prices up, unemployment up, spending money down. Sounds like a lousy time to buy some wheels...
Industry sales took a nose dive in the month of March, with sales down 12% from the previous year. There is no question that this downturn can be linked to the faltering economy, headlined by the national housing crisis and rising energy costs, People have become more cautious with their money, especially since many families have less of it to spend.
As energy prices continue to rise, it should be no surprise that most automakers saw sales of their SUV's and trucks fall while sales of more fuel efficient small and medium sized vehicles were up. Buyers are beginning to respond to record high gas prices by purchasing more higher mileage vehicles like the Honda Fit and four-cylinder versions of mid-sized sedans like the Sautrn Aura...
It seems that quite a few Honda and Acura dealers have been making some extra money by selling Honda/Acura warranties over the internet. Consumers love the idea of this since the sale of extended warranties tend to be a large profit center for a dealer, with markups as much as 100%. Plus, consumers often feel pressured to buy these warranties on the spot, without waiting to do research. So this gives the consumer a chance to save some money buy purchasing a discounted warranty and the selling dealer makes some easy money...
When I purchased my first new car, I spent eight hours in the dealership. It took that long to do the test drive, negotiate the price, do the paperwork and wait for the car to be prepared for delivery. Dealerships know that the longer they can keep you in their store, the better chance they have of 1) closing the deal and 2) getting you to pay more than you had intended to. This is why it is no accident that every move your salesperson makes usually has to be run by their sales manager...
We try to cover topics that we think you might find beneficial. However, there may be questions you have that we have not yet answered. So, post questions you would like to have answers to, and we will try to address them in future entries.
I often get asked if the dealer holdback should be taken into consideration when it comes to the selling price of a vehicle. Before I present my opinion on this, let me give everyone a quick tutorial on what the dealer holdback is.
The holdback is an amount of money that the manufacturer holds in reserve, paid to the dealer after the vehicle is sold. These funds are designed to cover some of the cost the dealer incures...
I received a question from a mother concerning the $4000 deposit her son put down on a car. He ended up not buying the car and the dealership has not returned his deposit yet. She wanted to know if the dealer can refuse to refund his deposit. In nearly every state, any deposit you leave on a vehicle is fully refundable, unless otherwise stated on the deposit receipt...
The other day I received a question from someone asking whether or not a dealer can deny the top tier interest rate, even though the customer claimed to have excellent credit. The customer might not have been denied the top tier interest, but may have actually been a victim of interest rate markups. Unfortunately, this is a practice that can happen, and not just to those with perfect credit. In fact, it often happens more often with people with less than perfect credit...</DI
Tuesday I told you about my best car buying experience. Let me now present you with the story of my worst car buying experience.
Back in 1994, a friend of mine was looking for a new Honda Civic. She asked if I would be willing to go down to the dealership and help her with the negotiations and I agreed to do so...
Even before I started working for Edmunds, I had been someone who other people came to for car buying advice and assistance. Family, friends, friends of friends (you get the idea), would all come to me for my input and I was always happy to help. Over the last 20 years or so, I have been involved in scores of car buying experiences. One deal, however, stands out above all others when it comes to a positive experience, and it happened to be one of the cars that I purchased for myself...</DI
Nowadays when you hear the word "subprime," you think of the housing market. But subprime simply means that your credit isn't ideal, and it affects every loan you want to take out, including car loans.
What to do? You can get a car loan with bad credit; you just have to try a little harder...
Question: Would a 2007 auto,which has never been sold, be considered a new car or a used car with low mileage? Hasn't it lost retail value after sitting on the lot for a year?
Answer: A vehicle is considered legally new if it has never been titled. However, from a practical standpoint, a leftover 2007 model that has been used as a demo vehicle probably has some pretty hard miles on them, even if they are not a lot of them. In addition to losing value due to mileage and wear on components such as brakes and tires, a 2007 model year vehicle is already a model year old, and value would certainly be deducted for that factor too...
2008 Hyundai Azera... practically identical to the 2007, but you can get great deals on all remaining 2007 makes and models.
A little while ago, my brother ran over a stop sign. He made the mistake of trying to go back and forth to loosen it from the undercarriage of his old Buick...
The best part of the Lexus booth was their spa loft. Sure, I loved the look of the LF-A Roadster concept
, the one with a V10 engine capable of 500 plus horsepower and a top speed of over 200 mph. All very nice.
But, after checking out their vehicles and hybrid technology, I couldn’t stop myself from floating up a cascade of white steps to an aromatherapy infused loft based in soothing music and scents of aromatherapy...
You've probably seen Edmunds' CarSpace -- where consumers can discuss any automotive-related topic from shopping for cars to the specifics of makes and models. Now, the people in charge of CarSpace (the Community team) has just launched a new service to answer all your questions. Appropriately called Edmunds' Answers, it's a social question and answer system where any member can ask an automotive question. Members of the community, including Edmunds employees, can answer these questions...
It never ceases to amaze me how many car ads there are this time of year. It feels as though 50 percent of all TV advertising is for cars. There are a lot of deals to be had now -- 0% financing, lease specials, etc...
While most of us will be ringing in the new year in just a few days, the new year starts a bit late for most car dealers, and buyers. Taking a look at the list of current incentives, we can see that nearly all of the December 2007 incentives expire on January 2, 2008. This means that buyers have some time this weekend to shop around and to negotiate their deal without feeling pressured to actually make a final decision before their new year celebration. Of course dealers will try to push that it is the "end of the year" and the deal may not be there after the new year, but we all know that is not the case...
Question: Is buying a 2007 vehicle a good idea, and what should I pay since the 2008's are already out?
While the idea of saving a bunch of money on a "leftover" model seems appealing at first glance, keep in mind that your new 2007 model will have already suffered an entire year's depreciation because of the fact that most all 2008 models are already out. If you plan to keep this vehicle less than six years, the money that you saved when you bought that 2007 model may be off-set by the lower residual value the vehicle will have down the road.
This is not to say that buying a previous model year vehicle is a bad idea, I am just suggesting that you take all the factors into consideration when making a major purchase, such as a vehicle. Buying a previous model year's vehicle can make sense, especially if the current model year vehicle has made changes you don't like or certain options or colors are no longer available.
As far as what you should pay, I wouldn't offer more than invoice minus any available customer or dealer incentives. Often times, there are thousands of dollars in dealer incentives on previous model year vehicles, so depending on the make and model, it can really be a major upfront savings...
Question: Can I pay for a new car with a Visa credit card? If not, do dealers require a certified or cashier's check?
Most dealers will take a credit card as partial payment of a vehicle, but generally they will not let you pay for the entire vehicle on a credit card. Since the credit card companies charge a 2-3% transaction fee on every purchase, it could cost the dealer hundreds of dollars in fees if they put the entire amount on a card. This is an amount that they would almost certainly want to pass onto you in one way or another...
For anyone intrigued by the fine points of negotiation, here's a few gems from the enemy camp.
In SalesTalka magazine aimed at car dealerships, an article tells salesmen and finance and insurance officers (F&I guys) how to read the body language of customers. The idea is that greater understanding will bring larger profit. The article is accompanied by this photograph of, presumably, a black belt negotiator...
The automotive business is one place where a woman's skill set (compassion, communication, creativity, organizational skills and multitasking) is appreciated. Got your interest? Read on...
Last year, a free event hosted by the Greater New York Automobile Dealers Association (GNYADA)
was dubbed "Chocolate, Cars and Careers" to entice more women to attend...
At the beginning of every month, all of the auto manufacturers report their prior month's sales figures. Whether these press releases announce higher or lower sales, the tone of the release is always impossibly optimistic; hey this is public relations we are talking about.
Acura gave us the following release:
Record sales of the MDX luxury SUV and continued strong demand for the RDX turbocharged crossover SUV lead Acura to August sales of 16,436 units, down 10.0 percent versus last August. Acura year-to-date sales reached 122,357 units...
Of course you know that there's more to test-driving a used car than listening to its radio while driving. Well, in case you didn't know that, you might want to check out our newest top 10 article, Top 10 Tips on How To Test-Drive Used Cars. A professional race driver offers his tips on how to figure out if a used car is a safe, reliable value by just showing you what to look out for and how to drive it.
Although we haven't formally announced it yet, Edmunds.com now gives the low-down on your local car dealers. It's called (appropriately) Dealer Ratings and Reviews. Just type in a make and your zip code, and voila, you can read dealership details, sales reviews, even services review!..
After more than six months of pondering their next car purchase, my parents finally settled on something a month ago -- only to have it disappear from the dealer's lot on delivery day. Spooky! The following is a harrowing story of a Honda-loving family, Edmunds' Dealer Pricing, a sales person on the disabled list, dumbfounded fill-in managers and one courageous CR-V's supposed journey from Phoenix to Washington State.
A California BMW dealer is now requiring customers to provide a thumb print in order to buy a vehicle. Treating your customers like a criminal doesn’t seem to be a very smart business move, but that doesn’t seem to matter to this dealership. Even more amazing is that most buyers apparently have not objected. I did say most, but not all. Read about the story of one buyer who was determined to not give up her rights or her fingerprints...</SP
Don't like negotiating eyeball to eyeball with a car salesman?Now you don't have to.
For some time now internet managers would respond to email offers and counter offers to buy their cars. But a new company has taken it one step further. A website called myliveoffer.com
connects you to a salesman and the process can be done live, without having to go to the dealership...
Saturn, long a brand favored by women because of it's no-haggle pricing and friendly dealership experience, is adding the cherry on top of it's consumer-friendly cake. With the new "Test Drive at Home" program, a Saturn dealer can now bring a new Saturn to your home or office so that you can test drive it from there. As a nice little bonus, the salesperson may even:
* Prepare specific routes to replicate your daily drive cycle
* Allow you to use the test drive to complete routine errands
* Pre-selecting music to match the your preferences
As part of the program, Saturn also offering a 24/7 chat feature with Saturn representatives on Saturn.com...
Forbes.com has an entertaining and enlightening article on the biggest lies car dealers tell. It starts off with a longish apology of sorts for the working stiffs who sell cars -- how a few bad apples can spoil an otherwise honorable business for everybody. After all, it says, they lie no more often than other people:
It may not be more dishonest, but it is more harmful, as a tube of toothpaste or a cup of coffee won't set you back too much, but a bad deal on a car can cost hundreds or thousands more than it should.
It also states that people actually like the bargaining process...
We always advise consumers who belong to a credit union to check out their union's rates on vehicle financing -- usually they're really good, better than most banks. But members of many credit unions in California, Oregon, and Washington now have another advantage: If they go through their credit union to buy a used car through AutoLand, they get a free "buy back" policy for five days or 500 miles. That means if a consumer is unhappy with the car, the dealer will buy it back anytime during that period. AutoLand, which services hundreds of credit unions, is also extending it's limited warranty on pre-owned cars to five months or 5,000...
Bad news for used car buyers: You have to be extra careful that the car you want to buy wasn't flood damaged in hurricane Katrina.
New study by Experian, which provides vehicle history data, found that thousands of cars have been retitled by unscrupulous dealers who bring the cars across state lines for "title washing." That means the cars title won't say "Salvage" or "Flooded" like flood-damaged cars should. About half the cars that are brought across state lines are given clean titles. Experian estimates about 7,000 cars are on the loose that could have real safety problems with their electrical systems, brakes, etc...
This week's Business Week
magazine has a great article, Death of the Car Salesman
, discussing how tough selling cars has become. Here's an excerpt describing the "old" days versus nowadays:
Excerpt: Since buyers didn't know what cars really cost, dealers could pad them with all kinds of options and keep thousands of dollars in markup. Unscrupulous salesmen did just about anything to close a deal. One trick was to say the dealer had misplaced the keys to the trade-in...
Here's the first "green" car dealership
-- the 53,000-square-foot two-story Pat Lobb Toyota
in McKinney, Texas. The dealership has a car wash and an irrigation system that uses recycled water and a heating system that runs in part on waste oil from oil changes. Bike racks and preferred parking for vanpools encourage car shoppers to "walk the walk."
It's not surprising that this is a Toyota dealership, given Toyota's leadership position in the hybrid market...
![usedcars[1].redtag.175.jpg](http://blogs.edmunds.com/strategies/2008/11/assets/images/usedcars1redtag175.jpg)
Most dealers will take a credit card as partial payment of a vehicle, but generally they will not let you pay for the entire vehicle on a credit card. Since the credit card companies charge a 2-3% transaction fee on every purchase, it could cost the dealer hundreds of dollars in fees if they put the entire amount on a card. This is an amount that they would almost certainly want to pass onto you in one way or another...
At the beginning of every month, all of the auto manufacturers report their prior month's sales figures. Whether these press releases announce higher or lower sales, the tone of the release is always impossibly optimistic; hey this is public relations we are talking about. 
