Auto retailers race for customers

Marketplace Staff Jan 22, 2010

Auto retailers race for customers

Marketplace Staff Jan 22, 2010


Tess Vigeland: Ever since Cash for Clunkers ended back in August, car dealers have been hoping that maybe the cars themselves might be cool enough to bring you back to the lot. But no fuzzy dice. The government reported this week that auto sales dipped by almost a percent in December. And that’s despite all kinds of rebates and incentives designed to get you in the door.

We wondered just how good those deals are, so we headed out to a Toyota dealership in Santa Monica to get some answers from our good friend Phil Reed, the consumer advice editor at Edmunds. I asked him what incentives you’re most likely to find right now.

Phil Reed: What most people will see is the customer cash rebates. Sometimes, they advertise up to $4,000 off on a vehicle. In actuality, in some cases, the low-interest and no-interest financing actually works out better for people.

Vigeland: And is that still out there?

Reed: Oh yes. Very often, they’ll be asked to make a choice between customer cash back and low-interest financing. And the answer usually lies in calculating the interest rate over a long period of time. Other incentives people don’t hear about or think about very much is lease specials. Leasing has been rebounding slightly.

Vigeland: Why is that?

Reed: Well, they want to keep the cars moving and it’s a painless way to get in and out of cars. In the long run, it may cost you more, but in the short run, it’s very easy. Little money down and low monthly payments. So sometimes, people look at leasing and they say, “Why wouldn’t I do that?” And the reason is because you can get turned into being a serial leaser.

Vigeland: Yeah.

Reed: You always have a payment. Then the final type of incentive that people don’t know about is what’s called “dealer cash.”

Vigeland: Really? I feel like I’ve heard that term in advertising though?

Reed: Do you have cash?

Vigeland: Have I not? Yeah, “dealer cash back.”

Reed: They call it all kinds of things, you know, “hidden money,” “funny money,” that kind of thing. But it’s substantial, easily $2,000 on a lot of vehicles. The dealer would present you with, you know, “I’m going to take a loss on this vehicle. We can go a thousand under invoice, if you buy today.” Well, in actuality, if there’s $2,000 dealer cash, he’s still making $1,000 profit on that transaction.

Vigeland: So that’s something you have to know about and specifically ask for?

Reed: Yes. Well, the starting point is knowing about it and then you can ignore all of the sort of whining that the dealer does about “Oh, I’m taking a huge loss on this.” You can say, “I actually did a little research. There’s $2,000 dealer cash and I would like you to share it with me. I’m looking for the dealer that would share it at the highest ratio.”

Vigeland: When do you get into the whole incentive business during the negotiation? I mean, you’ve decided on your car and you say, “OK, what’s the incentive?” And then you go deal or do you get the deal and then say, “Oh well, the incentive is on top of that?”

Reed: How you apply the incentive is really important and a lot of people don’t do it correctly. Basically, you have to negotiate your best deal and then apply the incentive. So, entering the negotiations, you would negotiate your best deal and continue saying, “And that would be minus the $1,000 cash back, correct?”

Vigeland: Ah. Well, this year it certainly seems like the hybrid and all-electric vehicle is what everybody is talking about. And I think you have one for us to take a test drive in?

Reed: Yeah, I have the Ford Fusion Hybrid, which was just this week named “Car of the Year.”

Vigeland: All right, well let’s check out this car.

Reed: Let’s go for a ride.

Door slams

Reed: All right, start it up then. It’s started now.


Reed: It’s all-electric now.

Vigeland: There’s no noise.

Reed: Well, the beauty of it is, we’re just waiting for the signal to change and we’re not running the engine. It has a number of technological features, which have been in high-end luxury cars and now they’ve been presented in a much more affordable way.

Vigeland: So what’s an example of that here?

Reed: Well, blind spot detection…

Vigeland: Wait, what’s blind spot detection?

Reed: Blind spot detection…

Vigeland: I don’t have that on my car.

Reed: I wish I had it on mine. It’s perfect for Los Angeles and very crowded urban areas. What it does is essentially shoots a radar beam into your blind spot. And if there’s a vehicle there, it will put a warning light on the side mirror. And then we have cross traffic assist. When you’re between two huge SUVs in a parking lot, and you can’t see what’s coming down the row, it will let you know and give you a warning signal here, saying there’s a car coming from the left or car coming from the right.

Vigeland: I wonder if folks are going out to look at new cars, are these features something that they should expect? Or are you still, in some cases, having to pay extra for them?

Reed: In some cases, they bundle them and present them at a discount. Other cases, they will break them out separately and you pay for them. You have to do a lot of research, so you have to really sit down, look through it carefully and make sure you’re getting what you want.

Vigeland: Well, I suppose we should head back to the dealership, because I’m guessing if talking on the cell phone is bad for you when you’re driving, doing an interview is probably even worse.

Reed: That’s right.

Vigeland: Well, that was a great drive. Thank you very much.

Reed: Oh it was fun.

Vigeland: What do you think are some last minute thoughts to consider before walking through the doors of a dealership? I know your big thing is you’ve gotta go in with a lot of knowledge, right?

Reed: Yeah, well, one of the things that I tell people is that if you have the numbers and if you’re well informed, you don’t have to worry as much about negotiating. And if it’s fact-based negotiations, it depersonalizes things and removes the king of personal “well, I won’t pay that, you’re crazy” kind of style of negotiations. Instead, you can say things like, “Well you know, I’m pretty well acquainted with the marke, and you’re at least $1,000 over some of the other people who are selling this vehicle.” And while it may make them seem sort of annoyed with you, you’re actually creating quite a bit of respect, ’cause they’ll walk away from you and go back into the back room and say, “Those people were tough.”

Vigeland: All right. Phil, thanks so much.

Reed: Thank you.

Vigeland: That was Phil Reed from

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