“You probably have a spreadsheet!”
“No One Talks about buying Cars in Percentages”
In Dec 2008, I anticipated buying a new Toyota Avalon in about a year and got a brochure.
In Dec 2009, I started researching prices. I also test drove a Toyota Venza but didn’t like it because it drove rough compared to the Avalon. Avalon MSRP was about $28,000 for the XL (base) trim. Invoice price was about $25,100 for a 2009 and $25,300 for a 2010. My “mindset” was to buy a new Avalon for about $25,500.
Between Dec 5 and Dec 12, I visited Molle Toyota and Olathe Toyota. At Molle, with my talk about numbers, details and research, at some point the salesman said, “You probably have a spreadsheet!” I then smiled, pulled out my spreadsheet, waived it in the air and exclaimed, “You mean like this!”
While talking with Chris at Molle, he said they are #1 in sales in the region. I said, “yes, there are 6 dealers in the area. Yes, I know that from my research. I’m getting quotes from all the dealers. Got a quote on an XL that they can get within 200 miles of here.” He said, “So now you can use it to get a lower quote from another dealer.” I said, “Absolutely not! That does not give every dealer a fair chance. Each dealer has one chance to quote and the lowest one I will come back to and buy. Jay Wolfe Honda tried not giving a quote with me and I wouldn’t deal with them.” Chris said, “Ok just a moment. Well, that got another $1,000 taken off the price. “ It has side molding and floor mats, MSRP 29,089. Invoice 26,237. Quote about $26,500 plus $90 doc. 91.4% of list. Olathe Toyota quoted me a price of 92.1% of list.
At this point, it was apparent that the new Avalon market was not a buyer’s market and I probably couldn’t get down to $25,500, or about 87.5% of list. I started looking at used Avalons. Maybe I could get a used Avalon with low miles for a few thousand less than new. My “mindset” for used cars is to buy from a new car dealer for a private party price.
I found a used Silver 2008 Avalon XL at SM Hyundai with 10,620 mi. For sale since 10/22/09 and priced at $21,900. My research showed: Orig MSRP 27,100, Orig invoice 24,200, Trade in 17 – 18, Priv Party 19.4-19.9, Retail 21.5 – 22.1.
I also found a Sand 2009 demo Avalon XL at Adams Toyota with 6,300 mi and priced at $29,989. My research showed: MSRP $34,444, Invoice $30,510, trade in 23k-27k, 3rd Party 26-30. Suggested max $26.6, my start $25k.
I now had two dealers to compete against each other for my business. I didn’t really want the demo because it had more features than I wanted but I had this leverage now to get the price lower on the 2008.
On Dec 12th, I looked at the 2008 Avalon at SM Hyundai. Tom King met me in front. Price $21,900 (kbb 22,085). Tom printed kbb page. Told Tom and Michael that I was looking at new Avalons for $26k. Michael said that $4,000 was about right for one year of depreciation. I didn’t drive it. I just said that it’s another option to consider.
On Dec 19th, Tom called. They’ve lowered the price on the Avalon to $20,831, $1,000 lower. I went to test drive and give an offer. Tom printed a carfax report. Test drove. Identified some things. The steering wheel control for the fan does not work. Other things that need to be investigated; the maintenance done on 11/18 for what (SMHyun), why main due light on, why low tire pressure? Gave me form for quote. Had $745 dealer prep fee on form. I told Tom I was trying not to fall out of my chair. I’ve never seen such a fee. He said I can mark it off and put whatever total price on the form that I want. I offered $18,000. They came back with $20,831 plus $349. I said thanks and left.
On Dec 22nd, Tom called. Lowered the price $1,000 again this time to $19,987. With the fee it’s $20,336. I called him back Wed, 12/23, his day off. He said I can call Michael directly and deal with him. I called Michael Wed morning and told him I would come by after work. I told him I needed to know what maintenance was done 11/18 and why maintenance light was on.
On Dec 23rd, I went to Hyundai. Met with Michael at about 5:15. He gave me the keys and asked me to drive the car. As I got in the car, I told him that I’m also looking at a demo with 6,000 miles. Michael asked me how the car was. I said it was the same as before. Regarding the maintenance, he said that on 11/18, there was no maintenance done and that was just a check-in and general inspection. He said the maintenance light was probably on just because of being due for routine oil change, etc. He also said the dealer owner was in the office now and normally he isn’t in this office. He has the final say on used car sales.
Michael was ready to talk. He said he didn’t need to use paperwork. I asked him how business was today. He said they sold 3 today. I said that sounds pretty good. He said that doesn’t mean we don’t want to sell more cars. We talked a bit about preparation fees and documentation fees. The preparation fees ($749) on new vehicles are because margins on new vehicles are so low now. He also said that the $349 documentation fee is required on every vehicle because it would be discriminatory to exclude it on some. I said we just have to subtract that from any sale price that we agree to. He agreed with me on that (“exactly”). I said, “you know by now I don’t pay much attention to retail prices when I look at vehicles. I start at trade in value and move up from there. I offered 18,000 originally and you came down 1,000. I’m willing to come up 1,000 to 19,000. However, I’m planning to look at the demo on Sat. I’m willing to pay 19,500 now and forgo looking at the demo if you sell it to me at that price.” He asked, “What are you going to offer for the demo?” I said, “it really doesn’t matter the dollar amount that I’m going to offer, because each car that I make an offer on is different depending on the particular car. For this one, I was going to offer about 70% of original list.” He wrinkled his forehead and incredulously asked, “What do you do?” I said, “I’m a CPA. Why do you ask?” He jumped up, rolled his eyes and said, “My gosh, because no one talks about buying cars in percentages. I’ll talk to the owner about this and see if we can do it.”
Michael came back and had two questions for me. First, are you paying cash and do you have a trade? I said I’m paying cash and I don’t have a trade. I said paying cash is something I may not have to do for the demo because they are offering 0% financing on 2010 Avalons. Since this is a demo, it qualifies for new car incentives. He said they wouldn’t sell for as low if financed at 0% because they wouldn’t be getting their warehouse allowance (finance rebate?) money back. They have to make their money somewhere. He said they’ll agree to 19,500. He said, “Sometimes I do deals like this so I can get funds to buy another car. I also wanted to reward Tom for calling you back. It was after 6:20 and I asked if we can do this later, like Sat the 26th. He said customers usually want to get their car right away. I said, for me, the price is the main thing, once I get that then the delivery is secondary. He said Sat is fine.
Bad weather and scheduling conflicts delayed pick up until Dec 28th. We talked to the finance guy (Pope), a required step. Asked him what the price was and what he thought of the price. Pope said it was within $50 of what they would get at the auction. I don’t know if it was true, but it made me feel good. $19,500 was only 72% of original list for a 1 year old car with only 10.6k miles and was at the low end for the private party price.
This also maintained my history of buying all cars (new and used) for less than $20,000 each.
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