One of the most frustrating aspects of buying a car from a dealer is the back and forth about the price. Some dealers have responded to this by offering upfront, “no haggle” prices. And while this seemingly streamlines the process and makes (some) buyers happy, in practice, it’s a little bit more complicated.
We all know the scene. A buyer walks into a dealer looking to buy a car, they find something they like, and then the conversation goes something like this:
Customer: “So what is your best price on this car?”
Salesperson: “How much are you looking to pay per month?”
Customer: “I just want your lowest sale price on the vehicle.”
Salesperson: “Well...I have to talk to my manager.”
[Customer waits for awhile.]
Salesperson returns: “My manager says I can get you $2,000 off the sticker price. That’s the best we can do, and this deal is only good today.”
Now, the customer has no idea if $2,000 off the sticker price on that particular car is a good deal or a crappy one because, in that moment, they don’t know what other stores would be willing to offer. It is completely possible, for example, that two grand off is the best that that dealership can do, even if another dealer across town can go lower.
Of course, the internet has changed a lot of this, whether it’s through email, phone calls, or websites like TrueCar, which customers use to compare quotes. But the process can still be frustrating, especially when dealers refuse to send quotes or send ones that aren’t remotely competitive. It still, in other words, takes time and diligence to shop for a car and be confident you’re getting the lowest price possible.
How have some dealers adapted? By offering so-called “no haggle” prices when you request a quote via the internet. On the surface, this should increase competition and transparency, but, in reality, a lot of stores approach it with a “take it or leave it” mentality.
To wit: I was recently shopping for a brand new Mazda CX-5 for a client in Idaho, but because there were only three Mazda dealers in the area and two of them had the same owners, the lack of competition meant that they didn’t have much incentive to be super generous on one of the hottest-selling crossovers.
The first dealer came back with an offer of $600 off the sticker price, while a competing store came in around $1,800 off the MSRP. When the first store followed up with me, and I informed them that their competitor offered a discount that was triple what their offer was, I got this response, “Well sir, we are a no-haggle dealer and that is our best price.” When I told them that there is no way that price could be acceptable given the other offer, they said: “Well, we sell quality cars, not cheap ones.”
That is when I said (very clearly and slowly) “It’s... the... same... car. A brand new CX-5 why would the quality be any different?” They reiterated that they their “no haggle” policy meant that that was the best they can do.
Which is exactly what I have found elsewhere: Mainly, that these “no haggle” prices on brand-new cars don’t solve the problem. More often than not, the customer is better off actually haggling with someone else.
The issue gets more interesting when it comes to used cars. About once a week, I get an email from a reader who says something along the lines of, “I’m trying to buy a used car from this dealer and they won’t negotiate because they say their pre-owned prices are ‘no haggle.’”
My response to them is usually, “Have you found a similar car with similar miles in your area for a lower price?” More often than not, the answer is no, which means that the dealer is probably not overcharging for the car, just that they did their homework and they already have it priced competitively.
That’s because used car prices are fundamentally different from those on new cars. With new cars, the product is the same across the board, meaning that most of the time you’re just trying to find the dealer willing to sell it to you at the lowest cost. Used cars are a different animal, and there are a lot more factors to consider. When finding the best price on a used car it is more about finding the best value in your particular market, rather than how much you can get off the asking price.
Here’s another example. Recently, I was shopping for a used BMW 3 series Sportwagen, and I narrowed the leads down to two cars. The first one was a non-Certified Pre-Owned 2015 with 28k miles that had an original sticker price of about $48,000, and a current asking price of $28,700. The second one was a Certified Pre-Owned BMW 2015 with 27k miles that had an original sticker price of $56,000 and a current asking price of $29,500. The BMW dealer that was offering the CPO wagon said their advertised price was “no haggle” at $29,500, while the Subaru dealer that had the other wagon was flexible on price and was willing to come down an additional $700.
Despite the fact that the first car now had a sale price $1500 cheaper than the wagon being sold by the BMW dealer, the CPO car had the factory-backed extended warranty, which adds value, in addition to thousands of dollars of additional equipment. In this case, the more expensive “no haggle” car was the better deal.
Another layer of complication: it’s often the case that used car domain retailers like CarMax and other similar outfits who have become synonymous with the “no haggle” approach don’t often have the best prices. That is because CarMax leans on their marketing and dealership style to sell cars, while other stores selling used inventory are pricing their cars in competition with similar vehicles on the market.
The “no haggle” concept is a good one in theory, but depending on the type of car you are trying to buy the approach can cause some confusion for your average buyer. In short: When buying a new car, “no haggle” dealers can often be beaten by someone else, but the dealers that price pre-owned inventory with a “no haggle” prices have usually done their homework.
All of which is not to say that you shouldn’t ask for additional discounts, but, in both cases, the only way to be sure if that “no haggle” price is a good one is to shop around and compare.
This story was originally published on October 5, 2017.