By Kathy Bryson
Sooner or later, everyone has to buy a car, but oddly enough, no one looks forward to the process. Once an American teenager’s dream, buying a new car has become a nightmare of negotiation and financing. It’s not uncommon for potential car buyers to spend hours in front of a sales person, being bombarded with numbers, and then walk away feeling as if they’ve been ripped off. As student Chris Demmons exclaimed, “Car dealers are evil!”
If you’re looking for an alternative, TrueCar.com promises “Upfront pricing info. Guaranteed savings. No negotiation.” Easy enough to use, it gives you an estimate and sends your email to local dealers. Two dealerships in Clearwater and one in St. Petersburg emailed back immediately with quotes on a Kia Soul ranging from $16,601 to $17, 651.
The St. Petersburg dealership had the most professional auto-responders with an email greeting from the manager, the sales person, and information on four cars. Only one of those listed was automatic transmission. This dealership ignored the TrueCar pricing altogether, subtracting rebates from the MSRP of $18,132 before adding tax and dealer fees. During the 2nd round of negotiation, the dealership offered either the rebate or the financing listed on the Kia website. Total final cost was $22,000 or 25% over advertised price.
The Clearwater dealership, or lowest price, started calculations on the TrueCar quote of $17, 404, adding on tax and dealer fees and subtracting rebates. Salesperson Tom Hessler explained that the actual markup on cars is only 2 to 9%. “We don’t advertise our second best price. If it’s on the internet, it’s our best price.” Total final cost was $21,000 or 20% over advertised.
Financing is the one area where the customer might be able to lower costs. Financing offered at either dealership for good credit was 4%. Banks and credit unions are currently offering 2 to 3%. Getting a loan in advance is the only way most buyers can put down half a year’s salary in cash. Getting approved in advance also saves your credit score from being dinged by repeated requests for credit. Shopping for a cheaper model is also not an option. Like most cars, the Soul comes fully loaded with options. You get and pay for power windows, satellite radio, and Bluetooth whether you want it or not.
With these costs, it’s not surprising that millennials, or the current crop of 78 million young adults, are not big car buyers. The assumption is that their internet habits will change the buying process, but TrueCar isn’t that much of a change. It might give a starting number, but you’ll still need to put in hours of research into cars and loans before investing an average of 3 hours into each dealer visit to uncover the true cost of your new vehicle. Enjoy!
Originally published on Feb 23, 2015.