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#1: 08-11-2010, 10:32 PM
Deal/Negotiation experience shared
 
 ARBIADYA
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Hello Guys,
Hope this post helps new buyers looking for a 2011 Subaru models. I'm sharing my experience about the whole process and also hoping that this could help guide some of you out there. It would be good to get feedback or comments regarding the deal as well.

Disclaimer: I am not advocating the use of these methods in any way. This is merely my experience and facts found from extensive study on the internet.

I purchased a brand new 2011 Subaru Legacy 2.5i Premium CVT w/All Weather Package + Auto Dim Mirror w/Compass + All weather mats. The MSRP for this is 23,475$. After contacting exactly 15 dealers in the state and negotiating with half of them, I ended up paying 21,000$ as the Selling Price of the vehicle. The invoice for this configuration is 22,100$ (22,096$ to be precise). So that’s a selling price of 1000$ below invoice - and at a time when no customer cash back or rebates are going on for the Legacy model. I was also successful in getting the advertised 2.9% APR rate for this. The Out of the door price (TTL + State Tax) came just a little over 23,000$. [Note that this deal was not on a 2010 model, which by the way was also advertised with a Selling price of 22,500$ (with dealer discount on the MSRP) ].

So here is what I did -
After finalizing which car and model I needed, I made a list of all dealers available in my state. Even if that meant including dealers which were 180 miles away. This could be easily done from the Subaru website. Even before I called a dealer, I made sure I had all the pricing information regarding the model I was looking for. For this I got the data from Edmunds.com, NADA.com and Cars.com. I also visited some individual dealer websites from Colorado, Utah, CA, Seattle, MA , NJ and PA. Some dealers were also offering dealer discounts on the 2011 models in these states and where I live. So this basically gave me a complete picture of what discounts and prices this model was being offered at across different regions.

I also collected information (if available online) on what people paid earlier for a similar model in the country. So, based on this, I had a ballpark number ready with me. Many people got deals around the invoice – but hey, that could get better! Isn’t it worth a shot to negotiate further? One could easily know what dealers are willing to sell for, after starting the negotiations anyway.

Moving on … with this information I started calling dealers nearest to my town and started getting quotes from them first, and then gradually moving to all the 15 dealers in my list. A couple of dealers quoted around 22,000$ (about a 100$ below invoice and after “Dealership advertised Discount”). Some dealers ended around 22,400$ and were not willing to budge further down. So these were off my list immediately. A couple of dealers did not even show interest or return my calls, and this was even before beginning the negotiations. So these were off my list as well. Finally it boiled down to 6 dealers out of the 15 (all of whom were more than 150 miles away from my town).

In the meantime, I kept on educating myself on how dealerships work with the manufacturers. One very crucial piece of Information that came up from my study was regarding Dealer Holdback (which many customers are unaware of). This is also how the dealers add to their profits. I won’t get into the details of this (you could Google it and get more information). But for Subaru, the Dealer Holdback percentage is 3% off the total MSRP and not the Invoice. So, deducting this profit margin from the Invoice of 22,100$ comes to 21,395$ (22,100$ minus 0.03% of 23,475$ MSRP). So, this is the true figure around which one would have to negotiate to get a “real” deal. Many people would argue that dealers are entitled to their profit. I agree ! But then, I also feel that if the dealer is willing to cut some of his hidden profit out, what’s wrong ? No one is compelling them to sell the car, isn’t it? It’s after all the dealer’s call on what he can afford and what he can’t. So let that be just the case! At the end of the day, a customer also has the right to see how much he can save. But a note of caution: Do not mention about the Holdback with the dealer. Since this is something that’s never advertised and the dealers might get ticked off with the mention of this (it’s sort of a secret with many).

Moving along … In my research, I also realized that the best time to negotiate would be towards the end of the month when the dealers are crunching their numbers to reach their target sales. This is precisely what I did. I started calling the 6 dealers just 2 days before the end of the month, letting them know that I was ready to make a “deal” over the phone itself – at the very instant if they arrive at a price I was willing to pay (How one talks matters ! The play with words is very important here. The dealer should feel that if he gives you the right price at the very moment, the deal is going to happen).

Now, digressing a bit here – Another thing I realized in my research was there are cash back allowances, bonuses etc. that the factory provides the dealers if they are successful towards achieving their sales target. This is something that’s never advertised and adds to the hidden dealer profit. Don’t confuse - this is not a part of the cash incentive or holdbacks that the factory provides the dealers. Subaru doesn’t have a factory to dealer incentive going on right now. This bonus amount can be an additional 300-500$ per car, for the entire sales target batch the dealer achieves. So say, a dealer has a target of selling 100 cars in a month. If he is successful in selling even the exact 100 cars a month, he would get an additional 300-500$ per car for each of the 100 cars he sells. Do the math and you can see that this comes to 30,000-50,000$ in bonus the dealer receives. However, even if the dealer sells 99 cars, he does not get the bonus. Since he falls short of achieving the sales target - even if it’s by just 1 car. So, if you negotiate towards the end of the month, you could essentially be helping the dealer get his bonus amount!!! So, which dealer would not want to make that crucial sale, even if it calls for a miniscule loss on a couple of cars? Compared to the gains seen here, who would not mind taking this small loss?

So, taking into consideration all this – I started negotiating with the dealers on the sale price of 20,800$. This was well below the invoice minus dealer holdback amount (which even I realized might not be achievable. But you never know!) . A couple of dealers even made me feel as though I was crazy. But that’s fine – as I said earlier, no one was compelling them to sell. If they were fine, I was fine – and if not, move on.

So, I finally got 3 dealers to get down to between 21,400$ - 21,600$. I told each one of them, that I would get back to them with my final number. Now, all this was just a day before the end of the month.

Last day of the month – I did not call the dealers myself till noon that day. I wanted to see if there was any dealer really eager on making a deal for this price or even below. So, out of the 3 dealers, I got call back from 2 dealers. I never told any dealer the fact that I was also in talks with other dealers side by side. I made it look as though, they were the only dealer I was really interested in and ready to make a deal with. So , towards the end of the last day of the month – I tell both the dealers that I was ready to arrive a number in between (making them feel as though even I was willing to give up on part of my price). I quote both the dealers the figure of 21,000$ just 15 minutes before the showroom closes.

But at this point, I tell them that if they agree on the price, then deal was done ! and that I was willing to pick up the car and sign the papers asap. Out of the 2 dealers, one agreed to sell it at that price, but nothing below that. And as they say, rest is history. The dealer did mention that he did not see many people do so much of homework before dealing.

Also, a couple of dealers did ask me as to “how did I come with a crazy figure of 20,800$?”. But never disclose your sources of how you do the price calculations. I just replied to the dealers “through the internet”. This answer seems to silence most dealers, since they know what you are talking about and that you really are in the process of doing your homework.
Also, don't let the dealer feel as though you are in a hurry to make a deal.

I hope this experience proves valuable to others as well. Feel free to comment and also share your thoughts on this deal.

Last edited by ARBIADYA; 08-11-2010 at 11:01 PM..
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