Auto buying services are flourishing because buying a car is something that the average person dreads more than a root canal or a colonoscopy! You may be familiar with AutoTrader.com, AutoByTel.com, Cars.com, Costco, Sam’s Warehouse, and TrueCar.com. There are thousands of local, private brokers who will buy a car for you for a fee. There are also a lot of other organizations that provide auto buying services for their members. AAA, American Express, Consumer Reports, PenFed, Nationwide, GEICO, USAA are just a few.
The first thing to remember is that all auto buying services are in the business to make a profit. They are all “middle men” that you and/or the dealers pay fees to. Paying a fee raises the cost of the car to the dealer. That means that if you are a shrewd negotiator who really does their homework you should be able to buy a car for as low a price as any auto buying service and save the cost of the fee.
Realistically, very few people are that good at negotiating. Remember that car salesmen and managers are professional negotiators. This brings to mind the old joke…”When you sit down at a poker game and look all around the table but don’t see a sucker. You’re the sucker!” Besides lacking professional negotiation skills, few people have the “thick skin” to be able to deal with the game-playing and insulting shenanigans of car salesmen and their managers. In addition to the “pain” of buying a car is the inordinate amount of time it can take.
I consider local, individual brokers as being the least efficient and trustworthy of all auto buying services. Most auto brokers are ex car salesmen. They charge you a fee and they often charge the dealer a fee too. A private broker’s fee is usually much higher than a national auto buying services. At my dealership I’ve paid brokers several thousand dollars to his customer and had to charge a lot more for the car than if the customer had come to me directly. The broker probably charged the customer a fee too. There are a few brokers who are trustworthy and won’t gouge their customers, but they are few and far between.
As far as all of the national buying services, it’s still “buyer beware”. My two favorites are TrueCar.com and Costco, but even with these two you should never let your guard down. The Costco program is administered by a separate company from Costco that is licensed by Costco to use their name. TrueCar is owned by a group of private investors and is new on the scene but are growing very rapidly. I’m signed up with TrueCar and Costco and I’m also a member of the TrueCar national dealer council. I do business with Cars.com, AutoTrader, and Autobytel.
The auto buying services advise you or the dealer of the price you should pay for the car. But, you have to remember that they don’t come into the dealership with you when you actually purchase the car. Even though I don’t recommend local car brokers, this is one advantage they have over national auto buying services. A broker will go into the dealership with you to assist you in the buying process or actually to the buying himself. If he is honest and his loyalty is to you, not the dealer, he can protect you from being tricked into paying more than you were told the price was.
This is the biggest problem with national auto buying services. Every service will, or should, give you the name of the salesman in the dealership that administers their program. They usually have more than one person, and you should be sure that you deal only with their designated representative. All too often, members of auto buying services and companies just walk into the dealership and say “I’m a Costco member and I want to buy a car at the special Costco price.” The person you are talking to is likely a commissioned sales person and he’s also likely to say, “Sure, I’ll be happy to sell you a car at the Costco price.” Of course, what happens is he sells you the car at the highest price he can because he’s paid 25% of the total profit he makes on that car. Never deal with anyone else at a car dealership except the designated member of that car buying service.
You should also know the auto-service quoted out-the-door price of the car you’re buying before signing the papers or taking delivery. One of the reasons I like TrueCar.com is that they give you that price before you ever go into the dealership. Costco does not give you the price but they require the car dealer to give you an official Costco price sheet for the specific car you’re buying. Unfortunately this doesn’t always happen. I recently mystery shopped a Costco dealer and they did not show my mystery shopper the Costco price sheet, but they said it was.
My definition of an “out-the-door price” is one that excludes only government taxes and fees. All too often, the car dealers add their own fees which they variously refer to as doc fees, dealer fee, prep fee, administrative fee, dealer handling fee, electronic filing fee, etc. One of my gripes with TrueCar.com is that they give you a “TrueCar Price” but below that in the fine print they say “Dealer’s Name charges a $XXXX.00 Documentary Fee.” Be sure that you read your auto buying services quoted price very carefully including the fine print.
Another common trick by dealers is to add “dealer installed accessories” to the price quoted by the auto buying service. My advice is to never buy a dealer installed accessory, only factory installed. There are always exceptions to this but be very careful when making one. Dealer accessories are typically low cost items, virtually worthless with hugely inflated prices. Examples are nitrogen in tires, paint sealant, fabric coat, pin stripes, VIN’s etched in glass, and roadside assistance.
If you cannot get the dealer to agree to the price that was given you by the auto-buying service, leave the dealership, call your auto buying service, and report that dealer. Usually there are other dealers in your area who are also affiliated with the same buying service and they may recommend one of them. The auto buying service is paid by the dealer and that can be a problem. They have to keep the dealers happy so that they can make money. They like to keep the car buyers happy so that they will come back and tell their friends. The wise auto-buying service will realize that the best long term strategy is to put the car buyer over the dealer. The auto buying service’s first loyalty should be to the car buyer, not the dealer. This means that services should police their dealers and cull out those dealers who try to take advantage of car buyers by raising the agreed upon prices.