How to Avoid

Getting Screwed When Buying a New Car

[New Research by Harvard University]

by Cheryl Levy

I’m sure you know the proverb “knowledge is power.” To put it another way, the more knowledge you have, the more powerful you are. And when buying a new car, the right knowledge could make a huge difference to the price you pay.

A new study by Harvard University reveals that a little bit of knowledge could translate into significant cost savings. Although the study analyzed prices people pay for automobile repairs, the recommendations translate to buying a new car.

If you’re like me, you hate the process of buying a new car. It’s painful for a variety of reasons — uncertainty, stress, and time, to name just a few. What’s worse is the conclusion of tons of car-buying research: It’s more painful for women (than men) — especially to their pocketbook.

The most compelling evidence revealed women were quoted a higher price than men when they stated that they were uninformed about repair prices.

Females were quoted prices about $20 higher than males

Repair shops quoted higher prices to people who overestimated the market price of the repair.

A similar study in 2013 by economists Meghan R. Busse, Ayelet Israeli, and Florian Zettelmeyerin highlights the same results. The most reasonable explanation, as Nanette Fondas explained, was that repair shops believe women are less informed about prices than men.

Shops believe, rightly or wrongly, that women know less about cars and car repairs. In the absence of information to the contrary, they will be offered a higher quote.

How You Can Avoid Being Exploited When Buying A New Car

A point often overlooked when buying a new car is that women buy just over half of all cars sold in the United States and take part in 85 percent of all family car-buying decisions, according to Scotty Reiss founder of She Buys Cars, an online community of women and their automobiles.

Even so, women continue to receive higher price quotes than men for the same car, a Yale study has repeatedly found.

That said, here are some ideas women and, really, anyone should remember in order to get a great deal when buying a car.

Do Price Research

Do price research before you ever talk with the dealer – and know the price you want to pay.

Informed Shoppers Save More

Not surprisingly, the study Repairing the Damage: The Effect of Price Knowledge and Gender on Auto-Repair Price Quotes found that informed shoppers received the lowest price quotes. On the negative side, misinformed shoppers received the highest quotes.

Ayelet Israeli, one the of the study’s authors, said,

We show that the price a consumer expects to pay can alter the negotiation of consumers with individual firms directly by changing the price offers made by sellers.

The University of California at Berkeley and the University of British Columbia analyzed more than 10.5 million new-car transactions across Canada and the United States. They discovered the difference in price paid by consumers varied considerably. In some cases, price differed by as much as much as $3,000! They also found that older consumers tend to pay more than younger consumers, but that older women in particular pay more.

The average transaction price, vehicle cost, and dealer margin also vary substantially by age and gender.

Robert J. Stonebraker, professor Department of Accounting, Finance, and Economics at Winthrop University, explains car dealers practice ‘haggle-every-time discrimination.’  What this means is dealers try to guess the maximum price each customer is willing to pay and charge accordingly. He goes on to say,

They ask strategic questions about occupation, address, family, and what other dealerships shoppers have visited. All are designed to help predict what a consumer might be willing to pay.

Dealers know that women typically enter the showroom with less information and are less likely to bargain.  What’s more, females may be unaware that bargaining is even possible. A survey by the Consumer Federation of America discovered that many women believed that vehicle sticker prices were non-negotiable.

TIp

Go to Carjojo and find the car you want from 3 competing dealers.  Going into a dealer with competing offers will result in savings.

Once you’ve done your research, built up your confidence, and learned how to negotiate a car price, off you go to the dealer. But STOP! Before you do that, continue reading.  Research shows you’ll get a better price staying home.

Skip Negotiating and Save

Get the Insider Price on the car of your dreams

Negotiate in Pajamas

When buying a new car, negotiate over email or on the phone – from the comfort of your own home.

Nice Girls Don't Haggle. Right?

Ask the dealer to email you the price.  Occasionally, this number will be less than what you started out willing to pay. Having this price quote first can immediately save you money.

What’s more, women tend to be less hostile face-to-face due to perceived social norms and expectations. We are expected to be ‘nice.’ The assertiveness required to negotiate gets socialized out of many us — ‘Nice girls don’t haggle; they comply.’ Generally speaking, women tend to value relationships and, to that end, we try to be agreeable.  The perception is we are nurturing and less assertive.

And if we are not, well, one study found that males in particular were less likely to want to work with women who tried to negotiate.

So, I like to think that negotiating online is something equal to an act of feminism.

Virtual communications allows women to focus on the task of the negotiation rather than the relationship.

On the positive side, another studyGender Differences in Virtual Negotiation: Theory and Research, found that women were more hostile in non-face-to-face communications.

Furthermore, women who use ‘virtual’ negotiation, including email or phone, are more likely to ignore status cues. As a result, there’s less pressure to focus on relationships and more freedom to be assertive.

Additionally, according to the findings in the noted study, virtual communications allow women to focus on the task of the negotiation, rather than the relationship.

TIp

Back your price up with indicators that you know the market: “I’ve scanned prices in a 100 mile radius” or “It appears you have 50 of these vehicles in stock but sell only 5 per month.

Counter Their Offer

Ask for a price improvement — if you don’t ask, you won’t get it!

Keep Calm and just Say No

Referring again to the Repairing the Damage study, the researchers tested the repair shop’s willingness to lower the price after they had already provided a quote.  After receiving a quote, some customers asked for a price concession to match a price published by AutoMD.com.  Most of the time the shops were not willing to provide a price concession but, on the positive side, women were 10% more likely to receive a concession than men.

Tip

Make sure your offer is a great price, but not unrealistically low (the Carjojo Best Price is designed to be just this).  If you ask for an unreasonably low price, the dealer may not continue the discussion at all.  This is your “price signaling.”

In the end, a little bit of knowledge when buying a new car goes a long way. Using these tips, I’m confident you’ll be enjoying your next new car very shortly at a price that’ll make you proud!

Skip Negotiating and Save

Get the Insider Price on the car of your dreams

Over to You

I would love to hear from you. Do you have a story about your experience negotiating with a dealer? Have any negotiation tips you would like to share? Let us know in the comments below.