Can car-buying services work for you?
If you hate the idea of negotiating with a dealer to buy a new car, a car-buying service may be a good, money-saving alternative for you.
In fact, many organizations, such as AAA, warehouse clubs and credit unions, offer car-buying services to their members free of charge, says John Nielsen, director of auto repair and buying services for the AAA national office in Heathrow, Fla.
Nielsen says buyers who use these car-buying services can save thousands of dollars off their purchases. “I know somebody who bought a car from our program and saved $2,600,” he says.
Though shoppers have the potential to save a good deal of money, not all car-buying services are alike, says consumer auto expert Lauren Fix, author of “Lauren Fix’s Guide to Loving Your Car.” She says consumers need to know what the car-buying service stands to gain from these deals and if their goals are the same as yours.
Here are five points to consider about car-buying services to determine if they can work for you.
Companies offer negotiation, convenience
These companies usually hire auto-savvy professionals to find a vehicle on the consumer’s behalf. The professionals usually have a large network of dealers, so they can help locate a car with the options the customer wants, Fix says.
“These services are for shoppers who are tight on time and aren’t able to locate and negotiate for a car,” Fix says.
At Meriwest Credit Union in San Jose, Calif., members can take advantage of the Personal Auto Shopping Service, or PASS, car-buying service, and they barely interact with anyone from a dealership, says William Fultz, Meriwest’s PASS manager. “The auto is usually delivered right to the buyer’s home,” he says.
Free services are usually for members only
Generally, companies offering car-buying services have some type of existing association with the shoppers, Fultz says. At Meriwest, the PASS program isn’t offered to the general public. If there is no banking relationship with the customer, he or she can’t use it, he says.
At AAA, different regions operate different programs, but most offer prenegotiated pricing for their members only, Nielsen says.
Buyers should still do their homework
Consumers who use these car-buying services may enjoy the convenience, but they should still do basic research on the type of cars they want to buy. Otherwise, they won’t know whether the car-buying service is offering a good deal.
If you’re on the hunt for a new auto, Fix suggests browsing auto research websites, such as Edmunds.com or Kelley Blue Book, to learn the average sales price for your desired car in your geographic area.
Another benefit to doing your homework upfront is that buyers also should have a good idea of what they want before they contact the service company, Nielsen says. “It’s difficult to help you if you’re looking at minivans, sports cars and convertibles all at the same time,” he says.
Nielsen suggests narrowing down your search to your top two or three choices, including make, model, color and options, before contacting a car-buying service. “Think about what it is that you truly want to buy and how much you want to spend,” he says.
When a company has that information, it can work much more efficiently at finding the car you want at a competitive price.
Understand how car-buying services get paid
If the service is being offered at no charge, make sure you understand how the company is compensated. Generally, the dealer pays the car-buying service a commission or incentive for bringing in the customer. “The broker is usually paid by the dealer, and it’s a free service to the buyer,” Fix says.
There’s nothing necessarily wrong with this arrangement. Car-buying services often are able to negotiate lower prices with the dealer because of the sales volume the dealership achieves as a result, and they can pass along the savings to the consumer.
But buyers should be aware the company could be steering them to certain dealers with whom they have a business relationship, she says. “You have to ask yourself if you really are getting the best price,” Fix says.
Fultz says referral fees may not be the only benefit these companies receive. Credit unions often offer car-buying services because they strengthen the customer’s relationship with the financial institution. “It keeps our loans in-house on a much higher basis,” he says. “It benefits us, the membership and the dealers.”
Know the return policy
Consumers should know in advance what will happen if they’re not satisfied with the vehicle, Fix says.
Many services try hard to minimize the risk for consumers, says Fultz. “If the member rejects a car or there’s an issue, we’d either take care of it to their satisfaction, or they’ll just not complete the transaction,” he says.
Consumers should make sure they understand the customer satisfaction policy before they take possession of the car or truck, Fix says.