SOUTHERN CALIFORNIA GETS NEW SERVICE THAT MAKES CAR DEALERS BID
FOR CUSTOMERS' BUSINESS
Nonprofit Consumer Group Gets Consumers Competitive Prices
LOS ANGELES, Jan. 28 /PRNewswire/ -- Marilyn Silva of Pleasanton, Calif., paid $11,949 for her new Nissan pickup truck. The list price for that vehicle was $14,645. The factory invoice cost was $13,146. Silva's price was $1,197 less than the factory invoice cost.
Paul Spiegel of Silver Spring, Md., paid $14,007 for his new Ford Taurus 4-door sedan GL -- $450 less than the factory invoice cost.
How did they do it? They took advantage of a new service, called "CarBargains," which is now expanding to serve Southern California.
The service is offered by Consumers' CHECKBOOK, a non-profit organization that for the past 15 years has published magazines with ratings of auto repair shops, hospitals, plumbers, banks, and various other types of service firms in the San Francisco and Washington areas.
The CarBargains service makes automobile dealers "bid" for the consumer's business. It not only produces a good price, it also spares the customer the hassles, high-pressure sales tactics, and negotiations often associated with a car purchase. "This is the only way to buy a car," said Silva. "I know I got a great price, and just the feeling that you don't have to haggle was wonderful." Spiegel lauded the service as "the most civilized process for purchasing a car that I have yet experienced."
Here's how the service will work for Southern California customers:
1. The customer tells the CarBargains service the make, model, and style of car he or she wishes to buy (Ford Taurus four-door sedan GL, for example).
2. Within two weeks, CarBargains gets at least five local dealers to bid against one another to sell that make, model, and style. Each dealer commits to a dollar amount above (or below) "factory invoice cost" for which it will sell the type of car the customer wants.
3. CarBargains sends the customer:
-- A factory invoice cost printout, which shows, for the specific type of car, how much all dealers pay for the base car and for each available option.
-- Dealer quote sheets, which show at how much above (or below) factory invoice cost each dealer has agreed to sell -- and which identify the dealer sales managers responsible for honoring those commitments.
4. The customer visits one or more dealerships and:
-- Looks at the cars on the lot;
-- Selects the specific car he or she wants;
-- Uses the factory invoice cost printout to add up the factory invoice cost for the base car plus all the options on the car selected;
-- Sees the sales manager listed on the dealer quote sheet and purchases the car at the factory invoice cost plus (or minus) the amount above (or below) invoice cost that the dealer has agreed to sell for.
If a car with the options a customer wants is not available on a dealer's lot, the customer can have the dealer order the car from the factory or from another dealer at the agreed markup (or markdown) figure.
5. The customer is encouraged to contact CarBargains with any questions and is asked to send CarBargains a photocopy of the final sales contract to help CarBargains monitor the system.
CarBargains also provides other information to assure that the customer gets a good deal on other items that may come up related to the car purchase, including:
-- Suggestions on how to find low-cost sources of financing;
-- A valuation of the customer's used car (trade-in);
-- Advice on whether to get an extended service contract; and
-- Suggestions on how to get a low-cost extended service contract (taking advantage of the possibility of buying the car at one dealer and the service contract at another dealer).
The CarBargains service was launched in March of this year as a service to Consumers' CHECKBOOK magazine subscribers in the San Francisco and Washington areas and later expanded to the general public in those areas. All bids, including those from San Francisco area dealers, are secured by CarBargains staff based in Washington. So far, roughly 1,000 consumers have been served.
Although a number of consumers around the country, including some in Southern California, have used the service as a result of referrals from satisfied San Francisco and Washington customers, the service is just now beginning actively to seek Southern California customers. The price for the service is $96.
CarBargains reports enthusiastic response from the customers so far served:
"I just wanted to drop you a note to thank you for your assistance. Your knowledge of marketing and the factory to dealer rebate obviously saved us at least $1,400."
-- Steve Pollak, Potomac, Md.
"I would like to thank you for this service. It took all the pain out of the purchase of a car and resulted in my paying several hundred dollars less than I had quoted to me from an independent car broker."
-- Mary Firenze, Fremont, Calif.
"I asked for the convenience of a local dealer, since I am a widow and location and service were important factors. The CarBargain service was of great help and gave me the information and confidence to buy a car without the usual hassles."
-- Marie Anderson, Bethesda, Md.
"In a word, 'terrific.' The CarBargains concept has extreme value and for the amount of time and effort saved, the cost is minuscule."
-- Christopher Kelly, Hyannisport, Mass.
Robert M. Krughoff, president of the Consumers' CHECKBOOK organization, explained the idea behind the CarBargains service: "For many years we have given consumers information on how to save money and avoid headaches on all kinds of purchases, from a new roof to a health club membership. But we hadn't found a good way to help consumers with one of their largest -- and in many cases most unpleasant -- expenditures, the purchase of a new car. CarBargains is a simple, effective solution.
"We don't guarantee a particular markup or markdown. Sometimes prices will be far below factory invoice -- if a car is selling slowly and there are big factory-to-dealer cash incentives. Other times the price will be substantially above invoice -- if the car is in very short supply.
"We just guarantee that the consumer will get a competitive price where a good selection of dealers has fought hard for the business knowing that they are in a tough, fair process and that only a good bid will win."
The CarBargains staff suggested steps that can be followed by consumers who don't wish to use the CarBargains service:
-- Find out the factory invoice cost of the car you want to buy -- the base cost and the cost for options you might consider. There are various sources for this information available in bookstores or through the mail.
-- Call various dealers and invite them to quote a markup or markdown they will accept relative to the factory invoice cost for any car you can find on the dealer's lot of the make, model, and style you want. Talk with the sales manager at each dealer. Explain to each that you are getting bids from at least four other dealers and that each dealer will have just one chance to bid. Be sure to get a clear understanding of whether the dealer is including the destination charge and dealer advertising association fee in the invoice cost.
-- Find out whether there are any required add-ons -- like preparation fees or such dealer-installed options as rust proofing and paint sealant, which are usually over-priced.
-- Keep trade-in, financing, extended service contract, and other related items out of the new car sales price comparison. Separately find out the best deal you can get on each of these items by shopping other vendors before discussing them with the dealer where you will buy your car. After you've settled on a price for the new car, use the other vendors' prices on the financing, trade-in, and other related items to negotiate with your dealer, or simply do business with the other vendors on these related items.
"Although a well-prepared, forceful consumer can often get a good deal without the help of CarBargains," Krughoff said, "the CarBargains service saves any consumer a lot of time and can be expected to get a much better price than most consumers would get on their own. CarBargains has several advantages:
-- "Dealers know we're for real. They know we'll actually get at least five quotes. In addition, they know that a consumer who has paid for the CarBargains service is almost certain to buy from one of the quoting dealers, so refusing to quote means losing any chance at the customer.
-- "Dealers know we'll get good bids from other dealers. We remind dealers of any ongoing factory-to-dealer incentive programs, manufacturer holdbacks, and other factors that give the dealer room to cut its price. Also, dealers know that we know the market. They know that if we don't get good prices locally, we can get prices from out-of-area dealers who will deliver locally.
-- "Dealers know there's a real prospect of a sale. While some customers might shop around for months with no real commitment to purchase, a customer who has paid the fee for our CarBargains service is obviously serious. So dealers know it's worth bidding carefully.
-- "Since the CarBargains staff knows the business, we can be sure all costs -- advertising association fees, dealer-installed options, processing fees, etc. -- are explicit in the bid, not added on later.
-- "Since we are continually getting bids, we know which dealers tend to give low quotes.
-- "We also know which personnel within each dealership have the authority to commit the dealership to low quotes and will handle the final sale most smoothly.
-- "We are a witness to each dealer's quotes, and the dealers know we will follow up. In contrast, if a customer gets quotes by phone, the dealer may believe it can back out without serious consequences."
Krughoff distinguished the CarBargains service from other services that promise to help consumers purchase cars.
"Many services sell factory invoice cost printouts that are supposed to help you negotiate for a car," he said. "But because of 'holdbacks,' factory-to-dealer incentives, and other allowances, these printouts don't tell you what the cost to the dealer really is. More important, even with one of these printouts, you are on your own to figure out what is a reasonable markup and to get a dealer to agree to that markup.
"There are also services that promise to find you a good deal from one of a list of precommitted dealers. Some of these services get commissions or other financial benefits from their selected dealers. Even if such financial arrangements don't exist, there's a good chance that the dealers affiliated with these services won't be those with the best prices for the car you want. Non-affiliated dealers may be getting larger cash incentive payments from the manufacturer, may have excess stock of the kind of car you want, or may simply be willing to accept a lower profit. In contrast to these other services, the CarBargains service, since it has no ties with any dealer, is designed to find dealers that have the best prices at the moment."
Krughoff cited an example of the difference between one of these buying services and the CarBargains service. "Recently the Auto Buying Program sponsored by the Price Club membership warehouse stores was steering Toyota Camry customers in the San Francisco area to a local dealer that had committed to prices $399 above invoice for Price Club members. At the same time, the CarBargains service was getting bids for customers at $600 below invoice. That's a difference of $999. Through competitive bidding, the CarBargains service was getting dealers to give customers the benefit of factory- to-dealer incentive payments; the Price Club service was not demanding this concession from the single Price Club-affiliated Toyota dealer in the San Francisco area."
A third type of service is that offered by auto brokers, who promise to go through a dealer to secure a car for the customer at a good price. "The problem with auto brokers," Krughoff asserted, "is that you have no way of knowing whether the broker is really getting you a good deal. The broker may always deal with a particular dealer, may allow that dealer a big profit margin, and may add an additional markup that the broker pockets.
In contrast, the CarBargains service has no relationships with dealers, guarantees to get at least five dealers to bid competitively, will include in the bidding any dealer the customer requests, and gives the customer copies of all the bids. Everything is in the open."
"CarBargains is the only service I'm aware of," Krughoff said, "that has no ties to specific dealers and gives each customer a choice of multiple bids secured under current market conditions from various dealers for that customer's particular make, model, and style of car."
For more information on the CarBargains service, consumers can call 800-475-7283.
EXAMPLES OF COMPETITIVE BID PRICES THROUGH CARBARGAINS
(Car-buying assistance service of Consumers' Checkbook, a non- profit consumer organization)
Model: '92 Ford Taurus GL 4-dr sedan, automatic, with preferred equipment package. List price: $17,793. Factory invoice price $15,598. Dealer low bid: $15,398. Price after factory rebate: $14,898.
Model: '92 Chevy Caprice 4-dr sedan with preferred equipment group. List price: $19,171. Factory invoice price: $16,880. Dealer low bid: $16,530. Price after factory rebate: $15,530.
Model: '92 Honda Accord LX 4-dr sedan, automatic. List price: $16,865. Factory invoice price: $14,363. Dealer low bid: $14,563. Price after factory rebate: $14,563.
Model: '92 Toyota Camry LE 4-dr sedan, automatic, 4 cylinders, anti-lock brakes. List price: $18,538. Factory invoice price: $16,192. Dealer low bid: $16,392. Price after factory rebate: $16,392.
Model: '92 Geo Prism 4-dr sedan, automatic. List price: $11,870. Factory invoice price: $11,028. Dealer low bid: $10,428. Price after factory rebate: $8,928.
Model: '92 Jeep Cherokee 4-dr, Laredo, 4WD. List price: $21,999. Factory invoice price: $20,112. Dealer low bid: $19,112. Price after factory rebate: $17,612.
Model: '91 Acura Legend 2-dr Coupe L, automatic with leather seats. List price: $33,525. Factory invoice price: $27,749. Dealer low bid: $25,749. Price after factory rebate: $25,749.
Model: '92 Toyota Corolla DLX 4-dr sedan, automatic with air and value package. List price: $12,537. Factory invoice price: $11,052. Dealer low bid: $10,652. Price after factory rebate: $10,652.
Model: '92 Nissan Maxima GXE 4-dr, automatic with luxury package. List price: $22,220. Factory invoice price: $19,260. Dealer low bid: $18,760. Price after factory rebate: $18,760.
Model: '92 Plymouth Voyager SE 3-dr, quick order package. List price: $17,149. Factory invoice price: $15,841. Dealer low bid: $15,631. Price after factory rebate: $14,631.
Prices include destination charge and dealer advertising association fee. Bid prices obtained from dealers in Washington and San Francisco areas. Prices vary depending on dealer incentives and allowances, regional rebates, and demand for particular models.
Source: Consumers' Checkbook/CarBargains
/EDITOR'S NOTE: Robert Krughoff, president of Consumers' CHECKBOOK, will be in Southern California Jan. 30-31. If you would like to schedule him for an interview to discuss car buying strategies and the CarBargains program, contact Brooke Bessert, 800-475-7283./
/CONTACT: Brooke Bessert, Robert Krughoff or John McManus of CHECKBOOK, 800-475-7283/ CO: CHECKBOOK ST: California IN: AUT SU:
DC -- DC038 -- 4482 01/28/92 18:20 EST