Normally, the only thing visitors to this site will see is my fiction, fragments or whole chapters of my novels Affirmative Action and Rogue Elephants, or my short story When Devil’s Advocacy Fails… Bad Things Happen. On rare occasions I’ve written a non–fiction piece that has some tie-in, albeit in some cases only remotely with the fiction prose. This post is one of those non-fiction pieces:
How to buy a new car using a reverse auction process
and the tie-in is that it was so successful I’m trying to figure out how to fictionalize it into one of my novels. But while I’m intuiting that I thought I’d post it for others to use as they see fit. I’m sure many of my readers have conducted reverse auctions so feel free to comment.
New cars are commodities and reverse auctions are made for buying commodities. What makes a new car a commodity is that every dealer that sells the make and model of your choice has exactly the same car. That means the price the dealer is willing to sell the car for is the most important buying issue. After you own the car you can take it anywhere you choose for service.
Flash update: September 1, 2016, US auto sales fall 4 percent in August
What is a reverse auction? It’s just a fancy term for many sellers chasing a single buyer. When you bid on a commodity, in other words, when you state what you are willing to pay, that is an auction and you are setting a floor under the transaction price. But when you refuse to reveal what you are willing to pay and instead ask multiple sellers what they are willing to sell the commodity for, you are conducting a reverse auction. The sellers are competing for your business and depending upon the current state of the market for the commodity you are attempting to buy, you’re likely to get the best price, a price you would never get using any other method. It’s also very easy to execute without ever visiting the seller. Here’s what I just did to buy a new Honda.
I live on a remote ranch thirty miles from the nearest city of any size (25,000 permanent residents, another 15,000 seasonal college students) and that city does not have a Honda dealer. So, I selected eight within 150 miles. I knew exactly the model I wanted to buy so I was able to conduct the reverse auction from my desk by email and telephone. And to sweeten the already sweet deal I negotiated, the winning dealer delivered the car to me so that I did not have to make a 300-mile round trip. You can too. Here’s how.
First, determine exactly what you want to buy. I can’t tell you how to do that but if you visit dealerships to inspect and test drive the product, do not buy no matter what deal you are offered. You can almost certainly do better by executing a reverse auction.
Next, determine how you intend to pay for the car. If you intend to finance, get pre-qualified first from a lender, not a car dealer. Once you have a firm offer to finance the purchase you can better compare what financing the dealer might be offering but never, never, never discuss financing with a car dealer before you have his best offer to sell the car.
Next, locate a selection of dealers from whom you are willing to buy. This is the second new car I purchased with a reverse auction so I chose to get bids from eight. The first time I purchased a new car with a reverse auction was in 2010 and I obtained bids from 22 dealers, which was overkill and too unwieldy. Research the dealers within the range you are willing to travel who sell the car you want to buy and select 6-10. Hint: try Google maps and search on car dealers in your area.
Next, if you can, get the email address of the Internet Sales Manager at each dealership. I say if you can because most dealerships with an online presence do not disclose email addresses but instead, provide a contact form for customers to use to request price information, what most call an ePrice. You might be able to get that address by calling the dealership and asking for it but don’t be surprised if they insist you use the online contact form. Using the contact form will probably not get you the best price in the first set of bids you receive but this isn’t a one-round process so if you are patient and persistent, sooner or later you will smoke out better bids from each dealer even those that insist you use those forms. And do provide contact information when you fill out the form. How else are they going to contact you and leaving out your telephone number or email address will only convince them that you are a looky-loo.
Whether they call you on the phone or email you and press you to buy today, right now, this minute, and can you come into the dealership today, your answer is to politely say you are waiting until you receive all of the bids you requested.
I used the contact forms at seven of the eight on my list and to each, even to the one dealer for whom I had the email address of a real person, the approach was the same. I entered all my contact information and then in the comment box I included the following text, which I pasted from my word processing software:
We intend to buy in August a new (year, make and model go here) for cash. Prefer (preferred color(s) go here) but color not critical. Am querying all dealers within 150 miles of (your zip goes here). Will buy from dealer with lowest price (reverse auction). Please, no extended warranties, scotch guarding, undercoating or any other dealer add-on. Please respond with best complete itemized out-the-door price below MSRP.
Then I sat back and waited for the responses.
Now you should be aware that timing has a lot to do with getting the best price on a new car. Every dealer has month and quarter targets he must meet in order to maintain the pricing relationship he has with the manufacturer. If he misses those targets the prices he pays for inventory next month or next quarter are very likely to be higher than those in his current inventory. So month-end, quarter-end and year-end auctions will always get you better prices than those conducted earlier in any given period. I chose the Monday of the last full week in August to begin my reverse auction. Be aware that sales people often take days off during the week so be prepared for some delay after the first set of bids are in hand for the second round.
Speaking of the price the dealer pays for inventory, forget about the notion of discovering the invoice price of the car you wish to buy and negotiating up from that price. That’s exactly what they want you to do. Any invoice price published on the web is a scam orchestrated by the car manufacturers to convince you that you can out-negotiate a car dealer. Forget it. They are the pros and unless you buy and sell cars every day as a business, you are an amateur, a sheep waiting to be fleeced. You can’t out-negotiate them unless you use a reverse auction. Any published invoice price on the net is bogus and car buying sites that will connect you with a dealer willing to sell you a car at $129 or $200 or whatever over invoice are getting a kick-back from the dealer if you buy based on that referral. The referrer makes money and the dealer makes money even if he sells you the car at the so-called invoice price, because you are so smart and such a great negotiator, so anything over the invoice price is gravy. No merchant in his right mind is going to disclose the price he pays for inventory. If you think otherwise, well, disregard my advice and experience and do your own thing, and best of luck.
After the first round of bids are in – and now you will have email addresses of real persons – send a polite email to all listing the highest and lowest bids without disclosing the names of any of the bidders, ask them if they are willing to submit another bid and sit back and wait for the second round. You can, of course, do more than two rounds but very likely two is all you will need and if you try a third and subsequent rounds, you’ll only piss them off. Be polite and after you receive each bid, thank the person and say you will get back to him when all bids have been received. And don’t be afraid to reveal in general what you are doing. I used the term reverse auction and I disclosed right up front that I was soliciting bids from multiple dealers. If any refuse to participate, chose another from your list of dealers within your area. Now relax and be patient. You might even let a day or two go by before picking the deal you want to accept. Try to have a backup in case the first dealer backs out for any reason. Most offers won’t be bait and switch but some might say the deal they offered was only good for 24 hours and now the deal is… obviously higher than that first quote. The only real power you have is your willingness to walk away from the deal and remember; the closer to the end of the period the more likely you are to receive super-low pricing. Remember too, your goal is to get the best price available at this time and in this place. What someone else might achieve in some other market is not relevant to you. I bought a new Honda at 7% below MSRP and I don’t believe I could have done better using any other method. Good luck and feel free to comment, either with your own experience using reverse auction or to critique my technique.
Flash update: September 1, 2016, US auto sales fall 4 percent in August
Read this article if you are in the market for a new vehicle, especially a new car. This may be the best opportunity in years to buy a new Honda Accord or Civic or a new Acura (or, your favorite marque). Sales of SUV’s are up but sales of cars are down – way down. Do your research and then buy a new car at the end of September 2016 using a reverse auction. September is a good buying opportunity, because it is a quarter-ending month, but so will be the three remaining months of 2016. End-of-year should be a killer buying opportunity. Go get ’em.