The High Cost Of No-Haggle Used Car Pricing

What You May Not Know


Car dealer with calculator
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We had a perplexed radio show caller who found the perfect car at one of the used-car-only dealerships, but he knew it was overpriced and the dealer would not move on the price.

I cant help but chuckle to myself when someone tells me he or she bought a vehicle from a place that doesnt negotiate prices and had a wonderful experience. My first thought is always: Of course! You can have a wonderful experience at any car lot in America if you pay what the dealer is asking for any given car. The contentious nature of car buying started 100 years ago when some salesperson discounted a car for the first time.

Of course, we all want to have a great car buying experience, and of course, we all want the best possible price. The question of the day is, can you get both?

What To Know About No-Haggle Pricing Dealerships

As I say on the air all the time, places that market themselves as no haggle-no hassle dealerships are often priced higher than traditional dealerships that negotiate. As a consumer, you have to decide if easy and pleasant is worth more to you than saving money. CarMax, for instance, has built a brand around easy purchases and no negotiations, and they have been successful. Remember that all its inventory has to be purchased and to keep as many cars in inventory as it does, they have to pay top dollar, then in turn charge top dollar.

Carvana And Its Vending Machines

Ive had a lot of questions recently about a place called Carvana. Besides being a no hassle-no haggle place, their niche is they build high-rise buildings that are supposed to be car vending machines, right down to a person putting a large coin into the machine, which sets in motion elevators to bring your car down from the tower and on to a launch pad. Probably a cool experience and there is little doubt it would make for a memorable delivery, but what is that worth to you as a car buyer?

First quarter 2019 financial results for Carvana were dismal. It doubled its sales from first quarter 2018, but the losses skyrocketed to 82.6 million dollars. In other words, the more cars they sell the more money they lose. Not a winning long-term strategy to me, but I digress.

As someone who owned dealerships for many years, I cant help but wonder what it must cost to build one of these high-rise mechanical structures they call vending machines. Make no mistake, the cost of a dealership structure affects the price of every vehicle it sells. Carvanas CEO has been quoted as saying due to their cost structure, he believes he can save consumers $1500 to $2000 per used vehicle sold. I thought it might be a fun exercise to check that for accuracy.

I went to the Carvana website to pick a vehicle, and found a 2018 Ford F-150 SuperCrew XLT that caught my eye. It was extremely clean, there were plenty of pictures, and the miles were low at 8,700. The no hassle, non-negotiable price was $49,400. It was the 3.5-liter Ecoboost and it was 4-wheel drive. The original window sticker was there and when new, this truck had an MSRP of $53,650 (it is stock #2000305487). Bear in mind, this is a truck that could have been bought brand new at $45,000 tops but good negotiators could have bought the truck new for $43,000 and some change.

Then I moved to AutoTrader.com to search for comparable 2018 model vehicles with similar mileage, also 4-door, 4-wheel drive XLT packages for sale at traditional new car dealerships.

I found a factory certified one at a CarProUSA dealer with 23,000 miles for $36,000. That was the posted price online, I feel confident there was room in the price even though it came with all the benefits of being factory certified.

I decided to check Carvana on an SUV also. At random, I picked a 2016 Nissan Rogue S with 44,000 miles with a price tag of $17,700. A CarProUSA dealer in Central Texas had a 2018 model, also with 44,000 miles for $16,988. That saves you $700 on a two-year newer vehicle comparably equipped. Once again, there may have been room in that price.

Since the Rogue S is a popular SUV, I checked CarMax, too. It had a 2016 with 39,000 miles equipped the same for $17,988 and that is a non-negotiable price.

To be fair, Carvana appears to deliver on its promise of a pleasant car buying experience, the online ratings are very good. The question you must ask yourself is this: is getting your car out of a vending machine and doing no negotiating worth over $13,000 as in the case of the F-150 above?

Ill let you decide that.



George B
Had a similar experience at Texas Direct Auto Sales, now ZOOM. With TDAS yes the prices were higher, but you could negotiate. Now with Zoom, the price is the price unless you are a first responder or military and than it is only $250.00.
I am sure that TDAS prices were above even after negotiating drive out cost. Thanks for all you do.
Amy P.
Thanks for the info George, that is very helpful.

Jerry Reynolds
.
I share your view of "no-haggle" dealers, but I am confused about your comparison to your CarPro dealers. When comparing a CarPro quote with a fixed price you say, and there might be more room in that. Are you saying the CarPro quote is not the best price available and should be negotiated further?
The Car P.
No, I was saying the ONLINE price at one of my dealers could have room in it, not the price you get when you go through my website to speak to my .

Jerry Reynolds
.
Personally, I avoid any dealership that post no haggle pricing. Along with watching out for other gimmicks car dealers put out there to sell cars. Like True Value stickers. :-( Always shop around and compare prices to get the best price for the car you need/want. Then show up at the dealer and haggle for a better price! lol
Amy P.
This is the essence of my Radio Show: best price up front, no games or gimmicks.

Jerry Reynolds
Sonny
But Carvana doesn't charge the thousand in finance and delivery fees that get tacked on to the dealership prices. We looked at the Mazda CX-5 at a dealer. Price starts at 21k , by the time you're out the door with all of the dealer fees you are up to 25k out the door. Which seems ridiculous.
Amy P.
Sonny comparing a NEW Mazda 5 to something used at Carvana is not a good comparison at all. Not to mention, dealers don't charge for transportation. The dealer fees go to the State and Carvana has to charge the exact same fees by the way.

Jerry Reynolds
John V.
About 6 months ago I was looking to buy a fairly new smal car and went to Carmax. They had a 2017 Hyundai Electra Limited with all bells and whistles for $18995. I then went to Car Gurus and found the same car and lower miles (10000) at a Houston Dealership (Sterling MacCall) for $18500, and much cleaner and certified! I bought it right on the spot. Very happy with it, by the way.
John
I agree with Sonny. We were just looking at used cars for my daughter and the dealer had an internet 'final price' posted on a 2017 Hyundai Elantra. Great! We went and test drove the vehicle and really liked it. "Let's do the deal" I said. Going in to sit down with the finance guy at the Hyundai dealership I was expecting the price to be what's posted as 'final' on their website taxes and title. 'Whoa there' I was told....there was a $297 'Dealer prep fee' and then another $300 anti-theft fee to be added. I was told the anti-theft fee was to put the VIN on 7 different places of the vehicle. So the 'final price' was NOT the final price. Those fees are non-negotiable and on every car on their lot. We were lucky enough to find a car at a Toyota dealer that had just come in and wasn't even up for sale yet so they didn't have time to add their 'anti-theft' fee, we only had to pay for dealer prep.

I get that the dealer has to service and inspect the vehicle and get it ready for sale, but then that is what is ALREADY taken care of at Carmax dealer and others. There are no surprises. That's what's the most frustrating dealing with car dealers is the slight of hand that they try to pull. I was told the internet site discloses that the 'final price' excludes additional fees (way at the bottom of the site in tiny print). Very deceiving.

I think that's the draw of the non-negotiating places. There are no surprises....the price is what the price is. It may not be the best deal but with the Internet you can quickly check like Jerry mentioned. You just have to know that you 'may be able to lower' the price at the dealer.....maybe not. The stress of not having to deal with that and your time is worth something. Imagine if you went to a grocery store to buy a pound of hamburger that they advertised for 3.99 a pound and then at the checkout they said there was an additional 50 cents a pound 'refrigeration fee', a 75 cent a pound 'preparation fee' and a $1 a pound packaging fee. That 'sale' price really isn't that good of a deal then is it?
The Car P.
Good work John, it's smart to shop and not just accept the price from the no-haggle places.

Jerry Reynolds
The Car P.
John, I assume you didn't go through my website to use my process. I don't know over a single one of my dealers that does the add-ons you describe.

Even with the $597 phony add-ons, I'd be willing to bet money was saved at a dealership versus CarMax.

Jerry Reynolds
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