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This is practically verbatim copied from "The Millionaire Next Door". Additionally it really has nothing to do with Game Theory, just common sense negotiating.

This is practically verbatim copied from "The Millionaire Next Door". Additionally it really has nothing to do with Game Theory, just common sense negotiating. And you can improve on their play by A LOT. What power does the salesman have? None. He has cars, he wants to sell them. You have the money. You have the power. He postures that he has the power but really, you can walk out at any time. There are other dealers, there are other kinds of cars, there are other sales guys at that dealer, and you can come back another day. Used cars maybe you don't see great deals all that much but on a new car, there will always be another car. As a buyer, I want the seller to know two things to make a deal. 1) I'm serious about buying, and have the money/financing to buy TODAY. I can make a deal if he makes a deal. I don't HAVE to buy today, but I CAN. That makes a big difference. No one wants to quote a price that they can never match again, often times there are specific reasons why they can get a price at that moment but can't in general. 2) I'm not interested in the fine particulars. I want the best price. I will look at his lot and his competitors lot, and buy the car that is closest to what I want FOR THE BEST PRICE. Often they have inventory they are desperate to get rid of and will do it with 0 margin or at a loss just to get rid of the car. An example, my last car was supposed to be $328 a month, but I paid $208 because I got the car in a dark gunmetal gray instead of the black I wanted, even though all the other features were the same no one wanted that color. I eventually grew to like it. I bounced between 3 dealers and they knew I had the cash, they knew I had the credit, and they knew I was flexible. Their initial offer was $250, I squeezed them down from there. If I had just faxed them like this article says I would have gotten nothing because it says I want black, and they didn't have the car in black. If you say you want the car in any color they aren't going to give you a good price because you sound flimsy. Also as a note, never show one dealer another dealers quote. Tell him the number but NEVER show him the quote. You can cause serious problems for the original dealer and lose your deal. Often times you get these deals with things like the dealer getting a manufacturer rebate that you don't really qualify for but they can fudge some how. You play nice with the dealer, they will play nice for you.

sammyo 17y ago
It certainly is a game. It's an attempt to construct a game of 20 participants bidding on a scarce resource (you, the buyer) with specific rules. And would likely work, unless say, a few buddies happened to chat over beers and the subject of 'that crazy guy on the phone' comes up. The element of scarce information will then break some of the 'rules', negating much if any of hoped for strategy. I like your approach much better, going in with maximum knowledge is key. The one I've read about and wish I had the nerve is to get a few thousand in hundreds and right off spread it out on the table in front of the salesman, say this can but yours today, just hit my price.
- timwiseman 17y ago
  And would likely work, unless say, a few buddies happened to chat over beers and the subject of 'that crazy guy on the phone' comes up. The element of scarce information will then break some of the 'rules', negating much if any of hoped for strategy. How so? If they can collude on price then they can change the outcome of course, but for that its not enough for to all know what you are doing (you have after all told them all everything from the beginning, except what offers the others are making...) In order to collude, they have to know what you are doing, all agree on the same price, and they have to have all players in that market involved. It could certainly done, but has little to do with knowledge and more about the ability for them to come to an agreement amoungst themselves and then stick to it.
deleted 17y ago
[deleted]
mrkurt 17y ago
It's interesting that you mentioned your prices in monthly payments, rather than the pre-financed total. What precisely were you negotiating? This article has a fascinating discussion of the "4 square sheet" that dealers use to fudge negotiations. Two of the squares are price and financing (included in your monthly amount), and the others are trade in and warranty. People generally get a better deal if they're negotiating solely on price: http://www.edmunds.com/advice/buying/articles/42962/article.html http://www.edmunds.com/advice/buying/articles/42962/article....
- dolinsky 17y ago
  Thank you for that link. One of the most informative reads of my life, and timely too. My lease runs out in a few months, and now I feel sorry for any dealership that I walk into.
- krschultz 17y ago
  I was negotiating the total price of the car. I guess the missing bit of information is the term (both prices were the same) and the amount down (both were $0). That wouldn't always be the case if the dealer is trying to pull a fast one on you by giving you a lower monthly payment but a higher total payment. I made sure to match apples to apples. I assume most people reading this website would realize the possible bait and switch. On the 4 variables. I can see their point but I never get into that stuff. My experience has been that you can usually sell the car yourself for more than trade in value, and these days with craigslist and ebay its not very difficult. I've sold 2 cars this year and you know bad the economy is. I also don't really finance. I guess I will have to in the future but so far I've been able to buy all my cars cash. I buy most coming off a lease 2-3 years old. And I definitely never buy an extended warranty or dealer warranty. The dealer I bought that car from is gone now and its only 4 years later, the manufacturer's standard warranty is all that matters.
  - mrkurt 17y ago
    Extended warranties are fantastic if you get them from the manufacturer. I would recommend looking into those if you're ever shopping for a used car that's at or near the end of standard warranty. Extended warranties that aren't backed by the manufacture aren't worth the money. The dealership going out of business isn't really relevant, though, as those warranties are "owned" and serviced by a third party warranty company.

sammyo 17y ago

It certainly is a game. It's an attempt to construct a game of 20 participants bidding on a scarce resource (you, the buyer) with specific rules. And would likely work, unless say, a few buddies happened to chat over beers and the subject of 'that crazy guy on the phone' comes up. The element of scarce information will then break some of the 'rules', negating much if any of hoped for strategy. I like your approach much better, going in with maximum knowledge is key. The one I've read about and wish I had the nerve is to get a few thousand in hundreds and right off spread it out on the table in front of the salesman, say this can but yours today, just hit my price.

timwiseman 17y ago
And would likely work, unless say, a few buddies happened to chat over beers and the subject of 'that crazy guy on the phone' comes up. The element of scarce information will then break some of the 'rules', negating much if any of hoped for strategy. How so? If they can collude on price then they can change the outcome of course, but for that its not enough for to all know what you are doing (you have after all told them all everything from the beginning, except what offers the others are making...) In order to collude, they have to know what you are doing, all agree on the same price, and they have to have all players in that market involved. It could certainly done, but has little to do with knowledge and more about the ability for them to come to an agreement amoungst themselves and then stick to it.

deleted 17y ago

[deleted]

mrkurt 17y ago

It's interesting that you mentioned your prices in monthly payments, rather than the pre-financed total. What precisely were you negotiating? This article has a fascinating discussion of the "4 square sheet" that dealers use to fudge negotiations. Two of the squares are price and financing (included in your monthly amount), and the others are trade in and warranty. People generally get a better deal if they're negotiating solely on price: http://www.edmunds.com/advice/buying/articles/42962/article.html http://www.edmunds.com/advice/buying/articles/42962/article....

dolinsky 17y ago
Thank you for that link. One of the most informative reads of my life, and timely too. My lease runs out in a few months, and now I feel sorry for any dealership that I walk into.
krschultz 17y ago
I was negotiating the total price of the car. I guess the missing bit of information is the term (both prices were the same) and the amount down (both were $0). That wouldn't always be the case if the dealer is trying to pull a fast one on you by giving you a lower monthly payment but a higher total payment. I made sure to match apples to apples. I assume most people reading this website would realize the possible bait and switch. On the 4 variables. I can see their point but I never get into that stuff. My experience has been that you can usually sell the car yourself for more than trade in value, and these days with craigslist and ebay its not very difficult. I've sold 2 cars this year and you know bad the economy is. I also don't really finance. I guess I will have to in the future but so far I've been able to buy all my cars cash. I buy most coming off a lease 2-3 years old. And I definitely never buy an extended warranty or dealer warranty. The dealer I bought that car from is gone now and its only 4 years later, the manufacturer's standard warranty is all that matters.
- mrkurt 17y ago
  Extended warranties are fantastic if you get them from the manufacturer. I would recommend looking into those if you're ever shopping for a used car that's at or near the end of standard warranty. Extended warranties that aren't backed by the manufacture aren't worth the money. The dealership going out of business isn't really relevant, though, as those warranties are "owned" and serviced by a third party warranty company.