Purchasing a Car? Using a Buying Service Could Save Big Bucks
THE difference between buying a car on your own and buying one through the Consumers Car Club, says company president Michael London, is like grocery shopping before dinner without a list or shopping after dinner with one. The amount of time and money you can save is substantial.
The nationwide automobile buying and information service based in San Francisco claims to have found a way to streamline the process of buying a car. Since its launch almost three years ago, it has helped people buy $100 million worth of cars.
The club gets more than 4,000 telephone calls a month, says Mr. London, who expects the number to reach 10,000 by year's end.
Here's how it works: United States customers call the club's toll-free number and tell a representative what make, model, color, and options they want. The club's buyers - former dealership managers and owners segmented geographically - get price quotes from local dealerships and pass them on to the customer. Once he or she decides on a car, the club calls the dealer, who prepares the paperwork. The customer only has to go to the dealer to pick up the car and sign the forms.
Fees are based on where a customer buys a car. In California, the fee is $59; it is $139 in the rest of the US, but Florida's fee will soon be reduced to $59 due to heavy sales volume in that state, London says. The club can also factory order any domestic automobile, costing the customer about $100 to $200 more than the dealer's price, London says.
Last year, 4.5 percent of consumers who bought cars used car-buying services, according to J.D. Power and Associates, an automobile market-research company in Agoura Hills, Calif.
''Car-buying services have proliferated, particularly during the recession, when dealers were very anxious to sell cars in any manner they could,'' says Ted Orme, spokesman for the National Automobile Dealers Association in McLean, Va. But the trend has flattened somewhat as sales go back up, he says.
Also, dealers' profit margins have plummeted in the past decade. On average, dealers realize about 6.7 percent or $1,200 with the average car, Mr. Orme adds.
People generally use car-buying services for two reasons, Orme says: to get a better deal and to avoid having to negotiate.
Doris Ehlers, an account director for J.D. Power, says people believe they can save about $1,800 when using car-buying services - more than they could if they negotiate their own deals.
But London claims using his club saves a customer, on average, about $2,300 because the company buys in volume. The most saved was $14,500 on a Mercedes Benz, he says.
''If you're looking by yourself to buy a BMW convertible, you're walking in [to a dealership] as one sale,'' London contends. ''When we call up, we represent an entire flow of sales.''
Many people also don't like to negotiate, London adds. A 1991 Harvard Law Review study found women and minorities pay prices that give a dealer up to 242 percent more profit than the dealer would get on sales to white males. Because a club buyer negotiates, the dealer doesn't know who the customer is.
London admits the club has more difficulty serving customers in rural areas because dealers in small markets are less likely to discount cars, and customers are more loyal to local dealerships.
Other types of car-buying services exist. An autobroker, for one, acts as middleman between dealer and consumer. A broker's fee is based on a percentage of the car price.
Dealers, Orme says, do not oppose car-buying services. Consumers, he warns, should just make sure they deal with reliable people.
''Part of the problem with buying services is that you've got a tremendous range of outfits in the business,'' Orme contends. He is ''a little dubious'' of claims, often made by brokers, that they can save a customer a lot of money. These claims, he says, are probably based on higher-priced models.