By Ali Koomen, who spent over a dozen years in the car business
While haggling over the price of merchandise makes most Americans uncomfortable, in many mid-eastern and Asian countries it is considered a normal part of doing business. In fact, in some markets it is almost an insult to the shopkeeper if one does not engage in some good-natured bickering before mutually reaching a price.
It is not in our culture to haggle over prices. Sure, we may ask for a ‘freebie’, like no delivery fee when we buy a washer-dryer combo, but it’s almost an embarrassment to haggle a price —except when it comes to buying an automobile. Could you imagine going into a nice furniture store, pointing out a thousand dollar sofa and then telling the owner: “I looked it up online and I know you paid $600 for it, so I am prepared to give you $650 because fifty bucks is more than enough profit.” It would certainly take chutzpah to do that, but conversations similar to this take place every day at car dealerships across the country.
If back and forth haggling is unsettling to you, a no-haggle dealership may be the best place to buy a car. The sticker posted on the vehicle is generally a fair price somewhere below the MSRP (Manufacturer’s Suggested Retail Price.) No haggling, no bickering, the price is what it is. The no-haggle price allows the consumer to get a fair deal and it allows the dealership to make a profit. The dealership still sets the prices, so the discount given will vary from car to car, just as it would on a regular lot. It’s easier than the standard way of purchasing a car, but in many cases a better deal could be made at a regular lot. However, dealing with a regular dealership involves a lot of time-consuming back and forth haggling. In today’s world, many do not have the luxury of the time needed to negotiate a traditional deal, while others are adverse to the pressures of such a purchase. For those people, the no-haggle lot presents a simple way to buy a car.
Saturn, a division of GM, is well-known for having no-haggle lots. It’s easy for Saturn dealerships to do so, as GM restricts the number of Saturn dealers in any given area. However, many other brand dealerships have turned to the no-haggle policy. An example is Autonation which is the largest car retailer in the U.S. with over 200 dealership locations, sells new and used cars at fixed, no-haggle prices. Carmax is another large automotive retailer that offers up-front pricing on used cars; Carmax has close to 100 used car superstores throughout the U.S.
Keep in mind that no car dealership sells any vehicle without making some sort of profit, and the no-haggle places are certainly no exception. While the price of the vehicle is a given—after all, it’s posted right there on the windshield—the dealership has all sorts of other ways to make money off any deal. One common trick is to undervalue the trade-in or to charge a higher interest rate than merited. Dealers also make a lot of money by selling unnecessary insurance policies and extended warranties and/or aftermarket equipment and add-ons.
The best way to come out ahead at a no-haggle lot (or any dealership, for that matter) is to sell the trade outright, obtain financing ahead of time from your own lender and by saying no to all pressures to buy additional policies and equipment. That’s how the dealerships juggle numbers, and without that, it’s quite easy to see if you’re getting a good deal.