Are New Cars Ever Really on Sale?
January 14, 2009 by Mr. ToughMoneyLove
Filed under Spending
In the past few months the car companies have been burning a lot of cash and media time advertising their “Toyotathons”, “Red Tag Events”, ”Employee Pricing Plus “, and “Loyalty Incentives”, trying desperately to inspire bargain hunters to buy a new car. Sometimes these car commercials interrupt a stimulating TV interview of some Deputy Assistant Undersecretary of Bailout Funding (former job title: printing press operator). When the car commercials do get my attention, I watch and listen intently to see or hear exactly what vehicle is on sale and what the precise terms of the sale are. You may wonder why I would do that, given that I don’t buy new cars. The reason is that I am still waiting for an automobile manufacturer to come right out and explicitly say that a certain car is “on sale.” I hear about “sales events” and “special pricing” but never “sales.” Why is that?
The Federal Trade Commission (FTC) regulates deceptive consumer advertising. Some years ago the FTC decided it needed to crack down on retailers that advertised products as being “on sale” when, in fact, the prices being offered during the “sale” were no better than at most other times when there was no “sale.” Car manufacturers and dealers were notorious for this. Sears was also a culprit, as the saying was that if you bought anything at Sears that was not on sale, you paid too much.
The FTC actually publishes guides against deceptive pricing. Retailers of all kinds have concluded from these guides that to stay out of trouble, they needed to drop the phrase ”on sale” from their advertising vocabulary, unless the prices offered during the alleged sale were truly lower than the regular selling price.
New cars are rarely sold at a pre-determined price. Negotiation is expected. Thus, the price that someone negotiates in July could very easily be better than prices negotiated during a January “Red Tag Event.” That being the case, the auto company can’t take the legal risk of calling the “event” a “sale.”
So next time you are tempted by TV images of excited shoppers in a new car showroom, start by asking the sales person if the actually selling prices being offered (net of incentives and rebates) during this “Toyotathon” or “event” are better than at any other time of the year. In fact, ask for a low price guarantee like you might get from a big box retailer. I’m betting that instead of answering your question, the sales person will ask you the three most notorious questions in new car selling: (1) What monthly payment can you afford? (2) What color are you looking for? and (3) What will it take to put you in a new car today? Your answer to question (3) might be: “How about really putting this car on sale.”
Listen to a new car commercial next time one comes on. I’m curious if you think my observations are accurate.
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I highly recommend Remar Sutton’s book Don’t Get Taken Every Time for anyone looking to buy a car — new or used, dealer or private party sale. He goes into the breakdown of dealer “sales events” like these, along with basics on how to choose a used car, how to understand loan financing and leases, how to negotiate on price, how to maximize trade-in value, and so on. It’s an excellent book.
If you actually need a car, this isn’t a bad time to buy from a new car dealer — they’re hurting. Bad. Just make sure your answer to question three is “Sell the car to me for my price.” And don’t budge. (I got my car for invoice minus a grand in manufacturer’s rebates. If I’d known how easily they’d give me that price, I would have started lower! And no, they didn’t get me on the financing — I financed through my credit union.)
The downside to the poor market for new cars is that the used car market in my area is seriously out of whack, which is the only reason I was willing to go new. 2006 Toyotas with 30K miles for only a grand or two less than the new models? Not so much.