Sometimes I can't save you thousands on a new car
(Not clickbait) It’s simple - when manufacturers slash their margins you’re already saving thousands, and it’s a walk-up start. Massive savings are already on the table.
Some people just aren’t happy with just saving thousands - they want to do it twice. On the one car. Here’s a perfect example of the kind of thing people complain about indignantly. I dealt with this particular complaint this morning.
See, right now it’s about two weeks before the end of the financial year, in this, the year of the global zombie apocalypse, 2020. And car sales are on the ropes, so carmakers are slashing prices like there’s no tomorrow - which has been the prevailing sentiment of 2020, now that I think about it.
EOFY discounting
Below left is Hyundai’s current EOFY offer on Tucson Active X 2.0 petrol 2WD auto. I’ve just answered quite an indignant e-mail from a punter whose nose was profoundly dislocated because I was unable to save her thousands off that $34,340 drive-away price. We were able to get her a further 500 smackers off - but I was left in no doubt how pathetic and feeble my price-saving efforts were in respect of that.
The reason is (above right) the standard, undiscounted, drive-away price: $38,870. The difference between this price and the discounted EOFY price is about $4500, broadly, or roughly 12 per cent off.
And unfortunately, there’s really no universe where you save thousands off a price that’s already been slashed by $4500. Not on a low-margin item like a car for mid-$30s. Maybe on Fantasy Island - but not here in the real world.
Economics for carmakers
Commercially, this is because all the input production costs for that car - the steel, the stamping, welding, component supply, assembly, shipping, amortising the R&D and compliance - those costs are still what they always were. Cars are a high capital cost, low margin product.
So, because car sales are so apocalyptic at the moment, globally, importers are slashing their margins and probably paying dealers a backhander to sell cars at prices like that. I mean, if you own a car factory, production has to equal sales, otherwise you go out the back door rapidly.
So when supply is high relative to demand, globally, such as right now, it’s better to sell a car at cost, or even at a slight loss, than it is to have them piling up on the docks, unsold, leaving a black hole in your bank balance. And bear in mind this is not an isolated example. All the top mainstream carmakers are enjoying - if that’s the right word - EOFY slash-fests at the moment.
It’s not Hyundai Tucson Active X - whatever - it’s all mainstream vehicles: Toyota, Volkswagen, Mazda … the complete boxed set. I just handled this one this morning, so I had the numbers and it’s kinda representative.
Take what’s on the table…
My point is: When it comes to deals of this nature, you’re already saving thousands. Ten to fifteen per cent off is right there in the sweet spot of you getting a cracking price. So, if you go into a deal like this with the intention of saving additional thousands, the cupboard’s bare.
We could go for the trifecta on this. You get those extra thousands off, and I’ll take you unicorn hunting afterwards, and then, later this evening let’s blow the pot of gold at the end of the rainbow at the local casino. That sounds like a plan.
Deals like this are a walk-up start. Like, here’s your massive saving - no need to negotiate. All the major mainstream carmakers are doing it.
…But don’t get ripped off in the process
Firstly - don’t obsess about the price. If you’re a totally hard bastard and you get another $500 off, then you have officially achieved ‘blood from stone’ negotiating status. Well done. #Respect. But make sure this does not come at a significant cost.
Which brings us to point number two. I’d obsess instead about not letting the dealer gut you at every other touch point on the new-car transactional highway. Dealers routinely leverage one really sharp aspect of the deal as a decoy to distract you from their other profiteering.
These EOFY deals are designed to get you in the door. Once you are in the door, on the showroom floor, you are standing on an X, and the dealer is a ruthless ambush predator. Car dealers are the saltwater crocodile of the commercial wilderness.
In every ambush, the worst place for you to be, as the prey, is on the predator’s X. It’s just like getting mugged - if you get off the X rapidly and change the mugger’s topography, force them to adapt, your chance of survival skyrockets. This is that, only metaphorically.
So you need to guard yourself against getting jammed on the trade-in or the finance, and things of that nature. ‘Here’s your massive new-car discount - now just sign here. I’ve already taken care of the trade-in and the finance.’ That blade is so sharp, you won’t even feel it pierce your skin.
The white-label insurance they sell for $1000 commission, which they’ll happily wrap up in the finance over five years to earn even more, together with all the other high-margin add-ons like useless extended warranties, tinting with one billion per cent mark-up, paint protection you don’t need and minor damage insurance you definitely don’t need.
These things really ramp up the profit. They can take a hit on the car all day long if they make it up in spades when you tick every other box.
CONCLUSION
Instead of squeezing blood out of the stone of already discounted pricing, try to make sure you don’t become a deleted scene from Kill Bill on all these other aspects of the deal which, to the dealer, remain absolutely fair game in this environment of extreme discounting.
I guess if I wanted to sound like a politician, I’d suggest that me insulating you from all that inherent underhandedness is part of saving you thousands on a new car. But, hey, knowledge is power and if you want to DIY it at a dealership, at least now you know where the danger zones really are at this time of year.
Toyota RAV4 is the best-selling medium SUV in Australia, offering good resale value and envious fuel economy. If you need an enormous boot and a simple, functional family vehicle, RAV4 is hard to beat.