Sunday, August 8, 2010

The New Horse

Car salesmen really fascinate me.

One of the most useful things I learned in my social psychology class in college was the techniques that car salesmen use to convince you to buy a car...  And not just buy a car, but the car they want you to buy.  And not just the car they want you to buy, but for the price they want to sell it.  Well, not really the price they want to sell it, but more than you want to pay for it anyway.

Just off the top of my head, here are a few of the methods they tend to use:

1.  Cognitive Dissonance.  That's not the name of the technique, but the psychological phenomenon that results from conflicting feelings in your head.  The salesmen will do everything they can to make you imagine yourself in the car and talk about it being YOUR car.  That way, any feelings of hesitation you have about buying the car will cause a feeling of discomfort and anxiety because it conflicts with the image of it being "your" car.  They also try to get you to make little commitments here and there ("buy-in") that you would feel uncomfortable about reneging on. 
    For example, as soon as you arrive at the dealership, the salesman will say things like, "Let's take a look at YOUR car."  He's helping you to form that mental image that this is already YOUR car.  Then when the price is higher than you wanted or it isn't exactly the model or the color you wanted, then you'll be willing to give a little in order to avoid those feelings of discomfort.
    For another example, they will try to get you to shake hands or initial or sign something just as a "good faith" measure that you are there to "seriously" discuss purchasing YOUR car from them. 

2.  Low-Balling.  They lure you in or get you to agree to a price.  Then they go to work on the paperwork and come back and apologize.  They forgot that this car has option X or they were looking at the wrong price list or whatever other reason they can think of that will raise the cost of the car $500.
    This goes hand-in-hand with cognitive dissonance.  While he was off "checking" on the price, you were left by yourself to imagine how nice it will be driving on YOUR next family vacation to Lake Winnipesaukee in YOUR new car.  So when he tells you it's going to cost a little more than you initially agreed upon, you are willing to pay the extra rather than disrupt those mental images of your family bliss on the road to the Lake.

3. Anchor-and-Adjust.  This add-on package NORMALLY costs $2,000, but we have a sale today and it will ONLY cost you $1,500.  They anchored $2,000 in your mind as the "value" of the product, and you think you're getting a great deal at $1,500, or 25% off.  In reality, it probably only cost them $500, so they're still making $1,000 profit on it.
     Actually, the sticker price on the car itself is a perfect example of anchoring.  Nobody pays the sticker price on a car.  Even so, that sticker price anchors in your mind a reference point of the "value" of the car from which you will try to negotiate down in price.  

4.  Bait-and-Switch.  You don't want / need THAT one.  The salesmen aren't interested in selling you the car that you want... unless they happen to have it on their lot.  They want to sell you the car they already have on their lot. 
    For example, many years ago we were shopping for a car and I told the salesman that I wanted the factory-installed tow-package, not the after-market add-on.
    Aside:  The factory-installed tow-package had an increased cooling capacity in the engine and could tow a larger capacity than the after-market add on that did nothing to the cooling capacity of the engine.
    They didn't happen to have any with the factory-installed tow-package, so first the salesman and then the manager proceeded to question me about, "why do you want the factory-installed tow package?  Why do you want to wait all that time for a special order to come in?  We can have you out of here TODAY with that beautiful car sitting right here on our lot!"
    They'll make similar attempts to convince you that you really didn't want THAT color because it'll be too hot in the summer or it'll be noticeable when it gets the slightest bit dirty.  You REALLY want to get THIS color... and they just happen to have one in THAT color in stock.

5.  Upselling.   This is your typical extended service warranty or special paint or fabric treatment to extend the life of your car or make it more resistant to wear and tear.  This one frequently goes hand-in-hand with the anchor-and-adjust.  For example, they try selling you the extended warranty for $2,000.  When you say no, they say, "well, I'm not supposed to do this, but just for you, I can get it for you for $1,500."  They've established in your head that the value of the extended warranty is $2,000, and it's an ambiguous thing that you can't really put a definite price on, because it's all dependent on the probability of your car breaking and needing repairs. 

    Aside:  DON'T BUY EXTENDED WARRANTIES.  Go to Consumer Reports and search for "extended warranties" and you will find many articles on why extended warranties are a waste of money.

In our most recent car-buying adventure, we experienced each one of the techniques above.  We also went to three different dealerships before we made the purchase.

The last time we shopped for a car for my wife, we were torn between the Honda Pilot and the Acura MDX.  Back then, the price wasn't that different and the MDX had seat memory.  When the two drivers in your family have a height difference like my wife and I do, seat-memory is a very nice feature to have.

This time around, things have changed.  Now there's a pretty substantial price difference between the Pilot and the MDX, and the new Pilots have all the features we wanted like the seat-memory. 

This was our first time using the USAA Car Buying Service, and overall I am very pleased with the service.  However, be advised - USAA's assurance of a haggle-free buying experience is only true if you aren't trading in another car.  If you have a trade-in, be ready to haggle. 

Dealership #1:  Leesburg Honda.  Overall, these guys are pretty good.  Both the salesman and the manager I spoke with were very nice and very straight-shooters.  No high-pressure sales tactics. The only problem is the Leesburg Honda is a pretty small dealership and they don't have a lot of inventory, so they can't work as close to invoice prices as bigger dealerships can.  Their price was $1,200 over invoice, but they offered us a realistic trade-in value on the MDX.  They didn't have the model we wanted, and we weren't going to pay extra for the model we didn't want, so we kept searching.

Dealership #2:  Rosenthal Honda in Fairfax.  STAY AWAY from this place unless you are a psychology student doing research on high-pressure sales techniques.  You will experience every manner and method of high-pressure sales and manipulations at this dealership.  Although the USAA guaranteed price here was only $300 over invoice, they low-balled us on the trade-in value of our MDX by $2,000.  I told them that was a non-starter.  Both the salesman and the manager gave me a very well-rehearsed speech about how Kelley Blue Book values aren't accurate.  They also told me that I couldn't have both the USAA guaranteed price AND the 2.9% promotional financing Honda was advertising - I would have to choose one or the other.  We actually had a better deal at Leesburg Honda paying $1,200 over invoice and getting the KBB value for our trade-in, but the Leesburg Honda didn't have the model we wanted in stock.
Aside on CarMax:  The manager at Rosental Honda recommended we take our MDX to CarMax to see how much they would pay us for it and then come back to buy the Pilot.  We actually did take the MDX to CarMax and they offered us just what the Kelley Blue Book website said the MDX was worth.  Thumbs-up for CarMax.

Dealership #3:  Pohanka Honda in Fredericksburg.  When we walked into this dealership, I was feeling very skeptic that we would leave with a car that day.  I figured they would also low-ball us on the trade-in value of the MDX, and if they did, we could take it down the street to CarMax, sell it there, and come back for the Pilot.
    I was actually VERY PLEASED with Pohanka Honda.  They are honest, no-nonsense, no-high-pressure-sales-tactics professionals.  Their USAA guaranteed price was excellent, and they straight-up offered us the Kelley Blue Book value for the MDX.  Plus, they had the model we wanted in stock.  To top it all off, they also gave us the Honda promotional 2.9% financing that Rosenthal said we couldn't have if we did the USAA price.  Two big thumbs-up for Pohanka Honda!

LW behind the wheel of her new horse

1 comment:

Sagey said...

Just a side note, we bought the MDX at the Chantilly Pohanka Acura dealer and also had a pleasant experience there. Something about Pohanka... Two Thumbs Up!