Negotiation for a New Car

How do you feel about negotiating prices? I know there must be some people who enjoy haggling, but I am among the many who find it stressful. This applies to all sorts of situations, from buying a cheap bracelet in an Istanbul bazaar to buying an apartment to certain business deals. Now I have discovered that I hate it even when I am not directly involved!

Let me explain. A friend, who I will call Consuelo, is buying a car and I have inadvertently turned into her coach. When she started telling me about her last car purchase, which was her first, we both had to laugh about all the things she'd obviously done wrong. And this was over 10 years ago, when the online resources we have now weren't as extensive. She did research car models via Consumer Reports, and went shopping at a time when dealers would be trying to clear the previous year's models off the lot, but then when she was first offered a price and it seemed kind of low enough, she didn't even try to negotiate further, and then she got bamboozled into paying for some additional options and an extended warranty she didn't need.

I have never bought a car myself-- and as a New York City resident, I probably never will-- but of course I got interested in the topic and offered to use my online Consumer Reports access to help her figure things out better this time around. She already had a specific car in mind so I pulled the pricing info that helps you calculate a reasonable target price to bargain towards. It's not just the dealer invoice price-- you have to factor in incentives and dealer holdbacks to calculate how low the dealer can really go and still make a profit of 1-5%. It's great to have this information, but then you can't help worrying that paying anything over that amount means you are being ripped off.

I gave Consuelo all the numbers and talked through all the sorts of approaches that are recommended when dealing with car sales people. Basically, you want to do all your research in advance, know what you want and what you can be flexible about, and have a target price in mind for the car you want. You should make this clear up front and try to set up a bidding war between multiple dealers who have your desired car on the lot and want to unload it. You want to do as much negotiating as possible over the phone, not in the showroom. You have to go to the showroom to test drive the car, but you should make clear that you are still at the stage of testing different models and aren't there to buy right away. Sounds pretty straightforward, right? Well, it's a lot easier in theory than it is in reality!

I went with Consuelo to a dealership to test drive the car she wanted. We walked in without an appointment and were helped by a nice female salesperson who I'll call Debbie. Debbie sat us down while she made a copy of Consuelo's license and got the car ready. (Meanwhile, who knows what else was going on while we waited those few minutes. They might have pulled a credit report on Consuelo, though they aren't supposed to do that.) Then we went out for a drive. Debbie pointed out some nice things about the car but without any sort of hard sell. Somehow we ended up talking about how female car sales people are becoming more common, and how some female customers prefer to deal with women and some men refuse to. She told us she'd only been selling cars for a few months. When we got back to the showroom, Debbie sat us down and showed us a brochure about the latest model of the car, asked what color Consuelo wanted, etc. She wasn't pushy or high pressure, but she gently drew Consuelo into revealing more about her preferences than she should have. Consuelo said she wanted the previous year's model, in a certain configuration, and Debbie started looking in the inventory system for it. She didn't have the exact one in stock but said she could order it easily, with only a $500 deposit. Consuelo was sitting there biting her lip as if she might just do it, and was only reluctant because she hadn't seen the color she liked best in person. I was the one who had to interject that she could just look around a bit more to see if she could see the car elsewhere, and take Debbie's business card and come back later. In my head I was saying "Snap out of it, Consuelo! You're supposed to be playing hardball here!"

Afterwards, we discussed how things had gone. Consuelo liked Debbie and because the dealership was convenient, she wanted to buy the car there.  No discussion of price had occurred. I felt like she'd gotten off on the wrong foot-- she'd let Debbie establish a feeling of trust, and she was allowing herself to be influenced by factors less important than getting a good price, although I could understand that there might be enough value to those other factors that she'd compromise on price a little for them. So the next step was searching other nearby dealers' websites to see if we could look at the right car in person, and start getting some price quotes. I already figured that if Debbie had to order the car from another dealer, the price would probably include two dealers' profit instead of just one, and that a dealer with the car in stock would be much more incentivized to make a good deal. Consuelo emailed Debbie and asked what her price for the car would be-- pretty much just like that: "Hi Debbie, what would your price be for the car we discussed?" To me, this was her next mistake-- she should have put it all in context, saying that based on her research, she was looking for a price of $X, and if Debbie could give her a good price, she was ready to buy. But having left it open-ended, of course Debbie came back to her offering a price of only a few hundred dollars under the MSRP. Consuelo forwarded the email to me and said, "This seems high."

I decided to help her a bit more proactively, thinking it might also be a good idea if some searching was done under my name rather than hers. I found the car at another dealer not far away and submitted a request for a quote, and also sent Consuelo a link to yet another dealer who had the car so she could request a quote herself. The dealer she contacted gave her a very good price, only a little bit more than the target price from Consumer Reports, and specified that it included the destination charge, which was around $800. I told Consuelo to verify that they would not be tacking on a bunch of other fees CR warns you about, and meanwhile, she went back to Debbie with the lower quote, adn asked if her price had included the destination charge.  Debbie replied that it had-- though I am sure if Consuelo had accepted that price without questioning fees, she would have been told that the destination charge was additional. Debbie did not offer to match the other price, but instead said something cryptic about how she understood that price was important. We weren't sure if she was just saying she couldn't negotiate further or what-- I suspected that she sensed Consuelo wanted to buy the car from her and was not going to give an inch unless she had to. This time, I had to say it out loud: "Consuelo, Debbie is very nice, but she is playing you like a violin. Don't take it personally-- it's her job."

Meanwhile, the other dealership replied that there were no additional fees. It was all sounding good, so Consuelo made an appointment to go in and see the car without asking if any further price reduction was available. The earliest she could get to that dealer was a few days later, and by that time, it turned out the exact car she wanted had been sold and they didn't have another one like it. So much for leverage (especially since Consuelo forgot to ask if that dealer would honor the same price when they offered to order her the same car from somewhere else). Another dealer had a price a little closer to Debbie's, but we were starting to worry that since there had been some big sales over Memorial Day, fewer and fewer examples of the model Consuelo wanted were showing up in the inventory at local dealers. I figured Debbie would be well aware of this, so Consuelo had less and less negotiating power.
Finally, after a couple of phone calls with someone at another dealership who sounded like the stereotypical sleazy car salesman, Consuelo just decided she was sick of the whole thing, and by that point, I really was too! I'd been thinking so much about all these negotiating strategies and trying to help Consuelo get the best possible price, but that seemed to be less and less possible, and the idea that her desired car model would sell out in the meantime was adding a lot of pressure. By this point, we knew she wasn't going to be all that close to the target price CR had fixated us on, so we felt like we were somehow failing at the whole thing and getting screwed. I was trying to be a good adviser and coach, but ended up taking it so personally that I got really anxious on Consuelo's behalf and was having nightmares about car negotiations! Ultimately, Consuelo told me she was just going to write back to Debbie and say she wanted a price $1,000 lower than Debbie's original offer and could she do it or not. I told her to ask for $1,500 lower and that Debbie would then come back to her with the $1,000 lower price-- which was exactly what happened, so Consuelo thanked me for reminding her not to negotiate against herself. The price did end up being a few hundred dollars below invoice, so it wasn't a terrible deal-- it was an average deal, an acceptable deal-- but it was disappointing not to get the very good deal I thought she should aim for. To put this all in perspective, the price range we're talking about between best feasible price and MSRP was about $32,000-$36,000, and Consuelo's paying $34,000-- but even when you're buying a $34,000 car, it's painful to think someone might be cheating you out of $1,000!

Of course agreeing on a price isn't really the end of a car purchase negotiation-- it's just a step along the way. But this post is getting long, so I'll write a sequel soon covering the rest of the process, including negotiating a trade-in allowance and financing. Consuelo hasn't actually gotten the car just yet, so there's plenty that can still go wrong!! And I'm learning a lot from her experiences along the way.

I'd love to learn more from all of you too-- have you bought many cars in your life? what price range? How did you negotiate? Did you find helpful information online? How good a deal did you get?

When The Going Gets Tough...

... Bankers Wait in Line at Hermès Sample Sales

Wall Street may have turned into one big fire sale, but that is apparently not enough to dampen the perennial feverish enthusiasm for a sample sale, even one where bargains are defined as a $900 pair of boots or a $280 leather-bound hunting horn the size of a comb.

It’s not that the women in line were unaware of the scent of financial disaster hovering in the air. To the contrary, more than one was waiting there to get away from it.

“I just needed a break,” said a banker who waited, on crutches no less, for well over an hour on Tuesday. “You know it’s not going to be a good year for anyone. But some things are recession-proof, and this sale is one of them. Even if I don’t find anything, I still spend a thousand. It’s like Costco.”

That shopper would not give her name or say where she worked, since she probably should have been at the office, under the circumstances. “Let’s just say my bank’s still around,” she demurred. “That narrows it down to about four.”

Nice to know that panic isn't running too rampant! Then there's this attitude:

“Even if the economy’s down, a sale is all the more reason to buy something nice,” said a young woman in a dark, sharply tailored suit. Like the banker ahead of her, she declined to give her name, on the grounds that she was supposed to be at the office — in her case, helping to prepare Securities and Exchange Commission filings to comply with new hedge-fund regulations.

She folded her Wall Street Journal under one arm. “Buy something nice, it makes you look good. If you look good, you feel good. If you pay full price and things are unstable at your job, it takes away the enjoyment.”

There is always that other option. “Not to buy?” she asked. She shook her head. “That wouldn’t work.” No one seemed to be considering the possibility that a few months from now she might not have a job to dress up for. Then again, there’s no more pressing time to buy a high-prestige morale boost than when you might be dressing for job interviews.

Perhaps it's this kind of attitude amongst the nation's bankers that got us into this mess in the first place. But that doesn't mean we can't also glean some investment tips from this article:

“I used to buy Sirius stock to keep myself from buying more Hermès scarves,” said Jan Goode, who was wearing a coral one and carrying a tote she had had made to showcase another one. Ms. Goode, who is in her 50s, considers herself a serious collector of Hermès scarves, stopping just short of considering herself someone with a serious problem.

“Now my Hermès holdings are much more valuable than my Sirius stock,” she said. “Sirius is at 90 cents a share. I should have been buying scarves all along.”

...When the prices of vintage Hermès scarves go down on eBay — then we’ll really know we’re in trouble.

And lest you think there is no sense of financial discipline and moderation driving these shoppers, check this out:

“I’ll only buy if it’s something I really need,” resolved the woman from Long Island, as if she might enter the sale to find, alongside $2,000 jackets, $300 change purses and $200 toddler robes, essentials like light bulbs, toilet paper or toothpaste.

I don't know whether to laugh or cry.

Something's Missing at Continental... And It's Not Just My PIN

So, ever since I moved, I have been gradually getting my address info changed with all the various places I deal with: DMV, online shopping, my gym, credit cards, dentist, etc. Today, I thought I was actually finally going to be finished, by doing a few last frequent flyer programs. American, done. Delta, done. United, done. All that was left was Continental. But when I tried to log in, my user name and password weren't being recognized. So I tried to recover my PIN info with my primary personal email and my current work email, but both came back saying they had no record of any associated account. So that means I must have registered with a previous work email. So let's hope when they mail me my PIN, it gets forwarded to my new address, or I'm stuck!
Meanwhile, as I poked around Continental's FAQs, one of the questions that caught my eye was about bereavement fares. I once had to help a friend try to get home when her father was dying-- she really couldn't afford the very long, very expensive trip, so I used some of my frequent flyer miles to buy one leg of her journey, and the travel agent we spoke to managed to get her a "compassion" fare on the rest-- it wasn't a big discount but it helped a little. Money is the last thing you want to be worrying about at a time like that. You just do what you have to do.
But here's what Continental offers as a discount if you're traveling "in the event of a death or serious illness (requiring hospitalization or hospice care) of an immediate family member."

Fare Range	Discount
Up to $499.99 One Way	5%
Up to $999.99 Round Trip	5%
$500.00 One Way and above	10%
$1,000.00 Round Trip and above	10%

And here are the relationships that are eligible:

Immediate Family

The deceased or hospitalized family member must be one of the following:

* adopted ward
* aunt
* brother
* brother-in-law
* daughter
* daughter-in-law
* father
* father-in-law
* foster brother
* foster daughter
* foster father
* foster mother
* foster sister
* foster son
* granddaughter
* grandfather
* grandmother
* grandson
* half-brother
* half-sister
* husband
* legal guardian
* mother
* mother-in-law
* nephew
* niece
* sister
* sister-in-law
* son
* son-in-law
* step-brother
* step-daughter
* step-father
* step-mother
* step-sister
* step-son
* uncle
* wife

Notice anything missing there? How about "Registered Domestic Partner or Equivalent?"
Are you just S.O.L. if you happen not to be married to your significant other who might be dying? I thought for the most part the travel industry was pretty progressive on these issues and tended to be early adopters when it came to offering equivalent benefits to unmarried couples, such as not having to pay extra for a 2nd driver on a rental car, etc. It doesn't cost them much money, it's good PR and it's just the right thing to do.
I think this is an important issue-- a while back, I linked to a related post written by TiredButHappy as a guest post at Queercents. Whether you're gay or straight, there are a lot of financial issues to be dealt with when a couple can't, or chooses not to get married. And let's face it, a 10% discount from Continental is probably the least important of those issues: don't forget it's still possible that you might take that full-price flight and then be told the hospital won't allow non-relatives at your partner's bedside.

Rule #12: Coupons

• Pay attention to coupons

This would seem to be a personal finance no-brainer, right? You look out for coupons, buy things for a little less, what's not to love? For grocery and pharmacy items that are repeat-purchase staples, I definitely try to use coupons. Sometimes it's a little annoying if the coupon requires you buy a lot of something, but I know I'll use these basic things, so I will stock up a little to get the discount if I have to-- it makes perfect sense. But there is another part to this rule:

• Ignore coupons

Aside from the aforementioned items, I don't go looking for coupons, and I often don't use the ones I come across. Too often, seeing a coupon makes you think you should buy something that you probably didn't need. It makes you go to that store or website, and once you're there, you end up spending money. Sometimes coupons are only good on a large size of something, at McDonald's, for instance, where you end up paying what you would have paid for the smaller size you should have gotten in the first place. Sometimes the coupons aren't valid on certain merchandise, so you end up picking up all kinds of stuff at Macy's only to discover that since it was already on sale the coupon won't give you any additional discount but you buy the stuff anyway.
I pretty much try to ignore these kinds of coupons and discount deals. When I need to buy something major, I'll look around to see if I can get a deal anywhere. If I can't, I'll buy the thing anyway. If I end up buying fewer unnecessary things overall, I think that makes up for possibly paying a few dollars more for the ones I do buy.

Some more thoughts on coupons in this post and its comments.