Monday, May 10, 2010

Bought New Lexus at $527 Below Invoice

Yipee! We got a 2010 Lexus ES350. It's a replacement for my 1998 Acura.

I've been driving my Acura 2.3CL for 144k miles now. The Acura only broke down once at about the 110k mile mark (overheated due to bad thermostat). Our other car was bought in 2007 used and now has 90k miles on it. We're almost to the point where its impractical to take our high mileage cars on cross country road trips. We have been waiting since 2008 to buy and decided to buy now and take advantage of my ability to buy in Washington State tax free. Basically, military personnel residing in Washington State can buy a car tax free if they are within 3 months of transfer out of state and are not a Washington resident. Well, it certainly is nice to avoid paying their 9.6% sales tax.

So, how did I get this deal? Well, first off, I didn't bring my spouse (smart & dumb move). Before dropping her off at the airport, I asked her what she would like. She knows that I was primarily looking at cars at the $25k price point as a replacement for my car (Toyota, Honda, Subaru, Ford). However, she said "I would like a BMW, Mercedes or Lexus." I said, how about Infiniti or Acura. She said no. She said she wanted a sedan, but would also be willing to take a Lexus RX SUV. I asked her what color. She said Silver, any color interior. As an alternate she would take a white car with tan interior. In prior conversations we also agreed on paying up to $35k for a new car.

I promptly went to my favorite dealer (Acura). Test drove a used 2006 Acura RL. It had 59k miles and wasn't certified pre-owned (CPO). Nice car for about $24k, but I would want CPO. I told the dealer that i'm all over the map on what I wanted and that I needed my wife with me before making the purchase.

I then test drove the Mercedes C300 Sport 4Matic. The Mercedes was nice and sporty. Much better than the one I test drove around 2002. The 2010 Mercedes C-Class is also an IIHS top safety pick. I told the sales rep that I needed my wife with me before making the final decision and left.

I then went to BMW. Their cars were all a bit more expensive and not as safe as Acura, Lexus or Mercedes (crash test wise). Heck, half of the BMWs I looked at didn't even report their crash test ratings on their window stickers like others. I left and went to Lexus.

Upon arrival, I spoke with the dealer about the Lexus RX and RX hybrid. They didn't have any entry level RX or RX hybrids. Then we discussed the ES series. They had some nearly entry level models. I asked for one in Silver and they had me test drive one with an MSRP of $38,220. I liked the test drive but said I wanted to wait until my wife returned from travel and had the option of being involved. However, I did double speak and say that I would be willing to talk numbers.

I sat down with the sales rep and he asked for some credit information. I said that I didn't want to do a credit pull and that if that was necessary I would wait until my wife was back in town.

The sales manager walked over and made conversation. He offered me the car at one price. I was silent for about 10 seconds (thinking). Before speaking, he shaved off $500. I was momentarily quiet and insisted that I wanted my wife present. At the very end he asked at what price he could get a sale. I asked to use the Internet and pulled up I forgot to plug in the dealer installed LoJack, but plugged in all other options. Truecar then provided the dealer "true cost," invoice and what would be a "great price" based on historical sales (without LoJack). I said if you can met this Truecar "best price" i'll buy. He came back and offered me my price plus $100. He then stated off the cuff how much I would expect to spend in fees. He advertised $140 in additional dealer fees (he was off by $48). When added altogether, the price was at about $35,300. I stated that at the start of the day I was really only in the mindset of spending up to $30k (Acuras on my mind). He gave me a moment and I walked out to the car. I thought, if I could get the car for $34k then it would be worth buying now. I walked back in and said I would be willing to buy for $34k.

The sales manager offered with another Lexus that was identical but without LoJack. This car's MSRP was $37,435. He offered it to me for $33,885 plus what ended up as $188 in sales fees. I asked to test drive the different car. The counter offered car actually had cleaner paint and fewer miles (5 total miles). I test drove and then went to the back room with the Ninja Super Sales Lady. She tried to sell me everything under the sun in dealer mark up items (warranty, paint protective film, leather treatment, light treatments, glass treatments, LoJack, etc.). I didn't buy any. In the end I paid:

$33,885 (agreed price)
+ $29 title, license fees.
+ $9 lien fee
+ $150 document prep fee

Total: $34,073 financed at 1.9% for 60 months... Before leaving I also got a full tank (~$36 value).

Factoring free gas, my adjusted price was $34,037. reports this car at a Truecost of $33,897 and a dealer invoice of $34,600.

My final adjusted price was $140 over "truecost" and $563 below invoice.

Can you get the same price? I hope so, but you should understand that I also had a slight advantage.

(1.) The dealer threw in an unadvertised $1000 in Toyota Loyalty credit.
(2.) The dealer threw in an unadvertised $750 military appreciation credit.
(3.) The dealer reduced his price several times due to my excuse of needing the wife there.

So, what did the wife think? Well, she wasn't completely satisfied. She is a bit concerned about now having two Silver Lexus ES cars (2010 and 2004 ES). Ha, Ha, Ha.

In the end, we got what I thought was a good price. Even though I got my wife what she asked for, she still has a little leverage on me whenever we decide to replace our 2004 Lexus 50-60k miles from now. She states "If I was there, we would have never got a Silver Lexus... We now have two Silver Lexus ES cars!!!" Even though she asked for a Silver BMW, Lexus or Mercedes this morning, i'm going to keep my mouth shut and simply say yes dear and no dear. Also the house will be nearly spotless when she returns from travel.

While the dealer made $140 over "truecost," he/she is still getting paid the factory military and loyalty concessions. That said, the only car that I'm seeing now going below "truecost" are left over 2010 Hyundai Sonatas.

Anybody else had luck getting a car under "truecost?"


Jake said...

Thats awesome! thats definitely good thats you were an informed consumer and you got the best deal!

Parag said...

This shows that by putting efforts you will definitely achieve desired results. You did the same and hear you are with your best deal. Also what it does is even if you need to spend more than you budget, it still satisfies you.
Personal finance

Robert Platt Bell said...

Nice blog. But if you really want to retire early with $125K in passive income, it ain't gonna happen if you keep buying brand-new luxury cars.

The road to middle-class poverty is paved with car payments.

A far better deal would be to buy the same model as a Toyota, about 1-2 years old, from the original owner, who has all service records.

A used Toyota Avalon with 20K on the clock would cost half as much as the Lexus, last about as long, and still be under warranty.

Half as much. That is a huge savings for basically the same car.

Once out of warranty, find a good independent mechanic for repairs. Car dealers are far too expensive for consumer-paid-for repairs.

Sorry, but buying a new car from a dealer is never a "good deal". That Lexus is worth 10-20% less than you paid for it, the day you drove it off the lot. The depreciation is huge.

The good news is, you flogged the Acura for 12 years, which was a smart move. The Lexus should last that long as well.

But think long and hard about why you bought a Lexus instead of a Toyota - was it to impress people you don't even know?

I am closer to retirement than you are and yea, I had, until last week, four (4) BMWs in my fleet, three of them convertibles. They were fun cars, but in retrospect, I wish I had that money in my 401(k) instead.

I did, however, buy them from a friend, secondhand, when they were only a few years old. She lost nearly 50% in depreciation on them in four years (ouch!). I didn't do as badly as she did, at least.

But from here on it, no more "status" cars for me, I think.

Good luck with retirement! Keep your eyes on the prize.

finnews said...

I didnt get it under invoice - but got a low interest rate loan when I had cash. I invested cash and my effective rate for the car went down significantly.

Robert Platt Bell said...

Sorry, but you still got duped. The "low interest rate" loans are a gag, as they are offered only without the rebates and other price reductions.

So yes, you save $1000 in interest payments. But you paid $1000 too much for the car.

If you want to become really wealthy, you have to stop thinking about wealth in terms of what is parked in your driveway.

That's trailer-park thinking, and a sure way to middle-class poverty.

Want to get rich? Stay away from car dealers, period.