Written by: Corey Janoff
This post was originally published on our previous blog website on September 12, 2017 and has since not been revised and/or updated.
After reading my original post back in March about deciding whether or not to buy or lease a car, some of you have asked me what I ended up doing. In this post I’ll review our car search experience and how we came to our decision.
The big debate we had was whether to purchase or lease a vehicle. We needed a bigger car to handle our expanding family. If we wanted to drive anywhere we wanted to stay for more than a few hours and bring our dog with, our little sedans weren’t very practical. The main factors driving our decision to buy or lease were: 1) how long we planned on keeping the car and 2) cost. Ultimately, we ended up purchasing a Toyota Highlander. Here’s why.
How Long We Plan to Keep the Car
We looked at several makes and models to see what we liked the best. This would be the car for my wife, so the decision was ultimately hers on what car to get. I was in charge of the purchase vs. lease decision. In comparing different SUV’s we concluded that if we went with a 5-seat vehicle, we would lease it. If we went with a larger car that had a third row of seats, we would probably purchase it.
The reason being, if we plan to have a second child, the five seater would quickly become too small. For now it would be perfect. All we need is a little more room in the back seat to get the car seat in and out and a little more trunk space for the extra gear we need to lug around. But it would likely only be practical for another couple of years.
With a larger car, the ability to fold up a third row would be helpful in seating everyone in the future and any luggage that can’t fit in the back could go in a Thule on the roof rack. The car would likely last us a decade or longer. If for some reason we are crazy enough to have a third child or get more dogs and need an even bigger car, I could drive the Highlander and get rid of my current car which is coming up on ten years old this winter (still runs great though and only has 90,000 miles!).
The wife liked the Toyota Highlander best of all the cars we checked out, so that’s what we went with. We ended up purchasing/financing using the above logic.
For those wondering, a minivan was out of the question. Convincing the Mrs. to drive a minivan would be as difficult as getting her to eat green eggs and ham. She be like:
I will not drive one to my house,
I will not drive one with a mouse,
I will not drive one here or there,
I will not drive one anywhere!
The Fun Part
Now for everyone’s favorite part – the car buying experience! Many people would rather walk barefoot across thumbtacks than buy a car again, so recap what we went through to get the car.
We are members of Costco and USAA and I was aware they both have car buying programs. For anyone familiar with TrueCar, it works in a similar fashion. You go onto Costco or USAA’s website, say you are looking for a car, enter the specifications of what you are looking for (year, make, model, color, etc.) and it puts you in touch with three dealers in your area that will offer you a “special member price.”
Most people hate the notorious car dealership negotiation tactics (although some have fun with it), so the ability to get a pre-negotiated price that is competitive without any of the hassle is extremely attractive. We are no different. I don’t want to spend all day at a dealership haggling, so if I can walk in and out with a car at a good price, sign me up.
We quickly learned that these special programs are mostly a way for the dealer to get a hold of you and proceed to engage in the traditional car buying process. I conducted a search on both USAA and Costco and made the mistake of giving out my phone number. Shortly after I hit submit, my phone was blowing up with calls from dealerships. I also received dozens of emails over the ensuing days from the dealerships.
The “special pricing” varied from place to place. The Costco and USAA guarantee is that the price will be below MSRP. I don’t think anybody in the history of ever has ever paid more than MSRP for a car. With the internet, it is pretty easy to see how much the average person pays below MSRP for a particular type of vehicle. On average, it seems like 5-10% below MSRP is typical, but if a company or dealer is really trying to get rid of a car, you could pay even less.
Once you complete your search through those programs, you receive a certificate via email that says your guaranteed price is at least X amount below MSRP. One of the dealers was about $800 below MSRP (not impressive). Another email said “contact the dealer to uncover your special pricing.” For the most part, I was very underwhelmed.
I contacted all three dealerships that I was put in touch with to see what the special deal was that USAA or Costco was able to negotiate for me.
The first dealership we met with has a unique “one person, one price” strategy. You work with one salesperson through the whole process and their pricing is transparent. They list the price of the car on the car window and there is no negotiating. The Highlanders we were looking at were all about $2,000 below MSRP at this dealership. I asked what the Costco or USAA pricing is and the salesperson informed me that there is only one price and no special pricing available. Well what the heck is the point of going through that membership program if you don’t save anything? On to dealer number two.
The second dealership was your classic car dealership. We found a car we liked, we sat down with the salesperson to negotiate price. He had a certain limit he could go to before having to go check with his manager. So we would wait while he checked with his manager and then would come back with a counter offer. We would haggle some more, he would go talk to the manager, they would counter. Rinse and repeat. My wife was getting anxiety and wanted to walk away. Simultaneously we enjoyed leveraging her anxiety to see how low we could get them to go. We kept saying we were going to leave and sleep on it. Eventually the manager came over to us to see if he could close the deal. We had a verbal agreement on a price about $4,000 below MSRP with the condition that they throw in a cargo cover and bumper protector (about $200 worth of accessories). My wife still wanted to think about it, so we walked. They didn’t chase after us.
After we got home, we discussed it and decided it was a good deal. I called the dealer back and said we would buy the car under the terms we discussed at the dealership. The salesperson put me on hold and got his manager. I was on hold for longer than I should have been and started to get a funny feeling. When the manager finally got on the phone he told me he could do the price but couldn’t throw in the accessories. An argument ensued.
“You told us you would honor the terms we discussed!” I exclaimed.
“I did not. I said if I can get the senior management to go with that offer, would you move forward with it?” he countered. “I can do the price, but I can’t do the accessories.”
Well, if you’re going to lose a sale over $200 in accessories that probably cost you half of what you try to sell them for, then that’s your problem. There are six Toyota dealerships within a 45 minute drive of my house, so it shouldn’t be hard to find someone willing to play ball. Onto dealership number three.
I was fed up at this point and told my wife I am not stepping foot in another dealership unless it is to pick up a car. The third dealership we contacted was the only one that actually gave me a decent price over email at $3,500 below MSRP. They didn’t have the exact color we wanted and they were also the farthest dealership of the three from where we live, so I didn’t follow up with them initially.
I called the person on the phone who had previously emailed me from this dealership and asked him if he could get us the color we wanted and to confirm the special USAA pricing in his email. He had to check to see if he could get the particular color, as they would have to trade with another dealership, but confirmed that the price in the email would be the price of the car.
“Are there any catches?” I asked. “You’re not going to pull a bait and switch on us when we show up at the dealership and say that price is no longer valid.”
“No, that’s the price of the car. The only other costs are the DMV fees.”
Huh. So the USAA car buying program actually works (one third of the time). “Alright then,” I replied. “Let’s do it!”
He got some of our information over the phone so he could prepare the paperwork for us and have it ready when we came in the next day to pick up the car.
When we got to the dealership, the car was there waiting. Everything looked good. It was actually the exact same car we were about to buy at dealership number two. They must have traded each other as that one had all the specs we wanted. The paperwork was ready and it took about 20 minutes to sign everything.
We ended up going through the USAA program over Costco, since it would save us a half of a percent on the interest rate of the loan. That would make our monthly payment about the exact same as our current car payments after we sold my wife’s old car and paid off our existing loan balances.
Finalizing Everything
After spending about an hour and a half going through a tutorial about the service, warranty, and car features, we sat down with the finance person to finalize the purchase. He tried to sell us hard on purchasing the extended warranty. Toyota offers a two-year warranty on the car. We could extend that to ten years for only $1,800. He was explaining to us about how expensive all the technology and features are and how costly it is if the computer breaks.
My philosophy on insurance is you should only purchase insurance for things that will ruin you financially. Car repairs rarely cost more than $1,000. Even if it was a $5,000 repair, it wouldn’t be ideal, but we could dip into our savings and not take a vacation for a year or so to cover the cost. Life wouldn’t be over. We politely declined the additional warranties and protection packages.
One More Thing…
Another lesson learned is do NOT transfer your license plates from your old car to your new one. We have these special edition license plates that my wife wanted to keep. The finance manager at Toyota told us he could have those plates transferred to the new car and when we sell the old car, the buyer would just have to go straight to the DMV to get new plates. Sounds easy, so we did it. Not so fast.
After we got home, we contacted the person who was going to buy the old car and explained how he would have to drive to the DMV to get new plates. We contacted the DMV to confirm the process and it turns out it’s not that easy.
For one, you aren’t allowed to drive a car without license plates. Until the new plates are on the old car, if anything happened to the old car, we would be liable, since it would still be registered to us and on our insurance. Also, in order to get new plates on an old car, it has to pass DEQ. So, someone has to take the car to the DMV and get a temporary trip permit, then go to DEQ, pass inspection, then go back to the DMV to change the registration and get temporary plates until the official plates can arrive. Keep in mind, this all has to be done between 9am and 4pm on weekdays. The person purchasing the car didn’t have the time to do all of this during those hours in the coming weeks, so we would be stuck with three cars in our driveway for a while. We thought we could do all this for him, but the DMV said you need the original driver’s license and registration – copies won’t suffice.
So, rather than trying to coordinate with the buyer, we decided to jump through all those hoops ourselves, get the new plates while the registration was still in our name and then sell the car. Fortunately, the DMV was able to give us new plates at the office, so it all went pretty quickly. But lesson learned. It’s much easier to just get new plates on the new car than to transfer plates from one car to another.
In Conclusion
It was a good experience. We learned a lot of lessons. Hopefully I don’t have to buy a new car for a while. I’m looking forward to when self-driving cars take over and don’t have to deal with a lot of this stuff ever again.
