It’s very rare that I find a product or service I feel strong enough to advise everyone to try. But, such is the case of FightingChance.com, a business owned and run by Mr. James Bragg who’s been doing it for 14 years. I just bought my brand new 2006 BMW 325i for $30 over invoice ($30,735). MSRP on the car is $33,420.
FightingChance.org is a fairly non-descript site but offers lots of content (hey, just like in value investments). For about $35, Mr. Bragg offers a package of information that includes invoice pricing, sales trends for the car and make you’re interested in, recent sales prices in various geographic areas, and a proven strategy for winnowing out the best price from dealers with very little hassle. I know similar methods have been discussed elsewhere, but Mr. Bragg includes important details not included in those that are key to making the process effective.
I don’t want to give away too much information, out of respect to Mr. Bragg and the work he’s put into his business. (And no, I receive no compensation for my endorsement or for advertising his service on this site.)
However, the basic strategy is the following: go to a local dealer only to learn about the car and test drive it. Once you’ve found the car you want, research and learn about its reliability, safety, options, etc. (Ironically, and again, just as in investing, most people put more thought into buying a TV than in dropping tens of thousands of dollars on a car or stock).
You then wait until the end of the month and send out enough faxes to dealers to make the situation competitive, and let the quotes roll in. Three critical points to this strategy are that you need to have a car that isn’t in ridiculously high demand or hard to get (such as the Mini, for which people are paying MSRP or above); you have to have enough dealers in your pool to make the bidding competitive; and perhaps most important, you never make an offer.
This last point is very different from the methodology advocated at other sites and by other experts. However, it makes plenty of sense. In negotiating to buy a car, you come in with very little information, though the Internet is making this somewhat more a level playing field with sites like Carsdirect. Still, car dealerships operate independently and information is ridiculously fragmented. Transactions and prices are not transparent: what one person got for his car depends on not only the type of car, options, time, and place where he bought it but also many other intangibles. But, once you have a competitive bid from one dealer for the car you’re interested in, you have hard evidence to present to another dealer.
And the reason you can get a competitive bid is that you never know what incentives or reasons which dealer may have for wanting to sell a car at slim margins or even below cost, especially at the end of the month. This is information you’d likely never be able to find out, and hence the reason faxing multiple dealers works well. Mr. Bragg mentioned that during GM’s employee pricing for everyone extravaganza last year, his customers were getting quotes from dealers at $2000 or more below employee pricing! Moreover, the process is conducted indirectly, and you meet in person with the dealer only to close the transaction by signing the papers and picking up the car.
Like everyone else, when it came time to buy a new car, I originally dreaded going through the process. It probably sounds canned, but FightingChance actually made the process enjoyable and a fun learning experience. I live in the Bay area, so getting enough BMW dealers wasn’t a problem. For those who live in smaller geographic areas, the setup might be a little tougher since you’d probably have to contact dealers in another state or at least some distance away, which might add to transaction costs.
I found 17 dealers within a 3-hour driving radius and waited ’til a few days before the end of the month. On that day, I faxed them a polite but no-nonsense letter stating the exact car I was looking for and listed both the invoice and MSRP prices for each option. I gave them all the ways I could think of to contact me and waited for responses.
Now, I have to preface this by saying I did this at the end of March 2006, which was probably one of, if not the most optimal time this year: it was not only the end of the month, but also the end of the quarter, and the last week of the month had no weekend when most interested buyers have time to browse showrooms. It was also at the beginning of the year (when sales are slower), and I was looking for a base-model car. All other things being equal, higher-priced cars (e.g. cars with more options) will sell at more over invoice than lower-priced cars.
In total, 11 dealers called back with quotes ranging from $100 over invoice to $1300 over invoice and most had cars matching exactly or very close to what I was looking for. Note the range in responses: each dealer had his own reason for wanting or needing to sell the car at a particular price. The next day, I called all the dealers back who’d contacted me letting them know the lowest quote I’d received and that I’d be taking that one. All but one of the dealers couldn’t match the lowest price I was given (actually, the price didn’t make sense to most of them). But, one dealer was willing to match the $100 over invoice, which actually made the total come to $30 over invoice since the particular car he had in stock had one extra option that we weren’t looking for. To top it off, he even threw in free floor mats and a full tank of gas. I called the dealer who had originally offered $100 over invoice, and he counteroffered with $200 below invoice if I was willing to make the longer drive to his dealership. Unfortunately, we couldn’t justify the price difference given the cost of travel. (Nevertheless, those in California who might be reading this and looking for a good deal on a BMW may want to contact this dealership anyway, and if so, feel free to contact me for more info.)
Long story short, the next day we went to purchase and pick up our new car. The whole transation went very smoothly. The dealer had the car ready and prepped, told us about some other options and services that we ought to consider (they were just doing their job), but with no pressure to buy. We were very satisfied with the whole transaction. It turns out this dealer is also known for giving good deals, so again, those who are in the Bay area can feel free to contact me for more details.
I did ask some of the dealers why they were willing to go so low, and their reasons varied: one had a car in stock for over 60 days and needed to increase his turnover; another was in a remote area and needed to get more business with aggressive pricing; a third had too much inventory. Keep in mind that dealers are generally measured by the number of cars they sell in a given period (not profit margin), turnover rates, and customer satisfaction index surveys. Incentives or bonuses from the manufacturer to the dealer are also usually tied to one or more these. You can make these work in your favor, especially when time is a factor, such as the end of month and quarter closes.
So, if you’re ever in the market for a new car, I recommend looking into FightingChance.com. Mr. Bragg sells not only the information package but essentially a consulting service. He’s willing to talk and advise each and every one of his “clients” whenever they have any questions or need help (though he gets very busy at times). He even offers advice on leasing and financing. Not bad for $35!