What is in the guide?
- 1. Setting the Stage
- 2. Exploring and exploiting the anatomy of car buying
- 3. More than just exasperating: broken
- 4. The impact on you
- 5. Rethink how you shop
- 6. Consider this
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Setting the stage
A Broken System
Buying a car isn’t like making a regular purchase. It’s much more like buying a house: you’re committing to a huge expense, but also to a particular lifestyle, daily habits, maintenance and upkeep, licenses and fees, and much more. The difference between the right car and the wrong one is years of headaches and regret. That’s why most car buying guides miss the point. You need more than a few tips or a handy heuristic—you need to understand how car sales work.
And the most important fact is this one: auto sales is a broken system. Dealers have almost insurmountable advantages over you in terms of knowledge about how much cars are worth, what condition they’re really in, and what your other choices might be. They use that information to trick you into making the wrong choice, which is why almost 70% of customers experience buyer’s remorse.
We at Mats.org believe that these problems are built into the very foundations of auto sales. We’ve only found one solution: to build a fundamentally different kind of car buying service. One that focuses on providing expert guidance, reliable information and shifts the risk of car buying from the consumer to the supplier.
Our goal isn’t to offer flashy but misleading low prices. Instead, we give you the chance to get the right car—the car you really need—at a fair and honest price.
We’ll explain how we do that later on. For now, let’s take a look at why what we do is so important—and so unusual. We’ll start with the typical car-buying journey and some vulnerabilities that unscrupulous dealerships rely on to get you through the door.
We’ve only found one solution: to build a fundamentally different kind of car buying service. One that focuses on providing expert guidance, reliable information and shifts the risk of car buying from the consumer to the supplier.
Exploring and exploiting the anatomy of car buying
How dealers leverage common consumer behaviors
We all want the same thing: to buy a car with a price that matches its condition and features that match our driving needs and habits.
But in the world of car buying, price is a moving target and condition is hard to confirm until late in your search. Information is often incomplete, inaccurate, misrepresented, or just vague. That means a straight comparison of your options is usually impossible. Many car buyers, not realizing how little information they really have, believe this is exactly what they are doing.
Here’s the big-picture view you might not be familiar with: your buying experience has been deliberately hand-crafted by a broken industry. The confusion, lack of information, shady tactics, and surprise fees are all designed to work together. That’s why you’ll find yourself going through five messy and complicated stages of your shopping process.
According to Think with Google, there are 5 distinct moments that the majority of car buyers go through. The article we’ve linked to encourages dealers to form strategies around these moments to find new ways to leverage customer behavior to the advantage of the dealer. Dealers are savvy and they are acutely aware of these stages and use them—along with everything else—to get the upper hand in your transaction. Before we get into the heavy stuff lets take a cursory glance at these 5 moments to set the stage.
The 5 Common Auto Shopping Moments
Which car is best moments?
This is where most people start, trying to work out what car they want most or like best. Often, that means choosing a favorite make or popular model; some shoppers begin with a preference for style or appearance, while others are looking for practical. If you’re not careful, your list of preferred brands, makes, and models can easily lean too far in one direction or the other, leading you toward bad deals and causing you to miss opportunities.
At this stage, it’s important not to lose sight of the most fundamental question: whether the price matches the condition. As we say around here, what matters isn’t how many miles the car has on it now, but how many it has left. Figuring that out is, and always will be, the most challenging part of buying a car. Unfortunately, most consumers don’t have the tools or experience to make the right call.
Is it right for me moments?
Everyone’s different. But most shoppers think the right car for them is the one they like best—that finding the right car is only about personal preference. That’s a mistake: personal preference should come into play only after you’ve figured out which fairly priced cars are actually available, which can be surprisingly tricky given the problems with online tools. (We’ll get into that in a minute.)
Again, it’s all about the price matching the condition…and then introducing your personal preferences. As you research your options by watching test-drive, walkthrough, and feature videos and reading about features and functionality, don’t let yourself think that your work is done the minute you find a vehicle that matches your personal preferences.
Can I afford it moments?
There are two key things to know here. First, the list price is never the real price. Second, work out your price range in advance, and stick to it. It will depend on your income and how much you can earn by trading in your current vehicle.
Those two reasons explain why the affordability question is mostly irrelevant at this stage when you’re making a competitive analysis of your options. If the car isn’t in your price range, it doesn’t belong on the list, and you won’t know the car’s actual, accurate price until later in the shopping process. (In addition to which, you’ll need an accurate estimate of the car’s real value to know if the price matches the condition. More on that later.)
Where should I buy moments?
This is far more important than most customers realize. Dealerships vary not just in the obvious ways—location, the size of their stock, appearance—but also, and much more importantly, in how seriously they take the quality of their products.
You’ll want to look for a dealership with a few key features. They should:
- Provide a sales professional with wide background knowledge about the wholesale car-buying process and about makes and models of cars.
- Stand behind their products with warranties (7-30 days) backed by the dealership (not just paid extended ones).
- Reject the worst cars outright when buying wholesale.
- Conduct inspections and recondition their cars up to high standards of safety.
- Be willing (and have the skill and patience) to help you find a car outside their own stock.
These criteria are what create the environment that allows a dealer to focus on providing expert guidance, reliable information and shifts the risk of car buying from the consumer to the supplier.
Am I getting a deal moments?
By and large, it’s impossible to pay under-market prices for a car of above-market quality. What look like incredible deals online are invariably misrepresentations: either the car’s condition is not as good as posted, the car doesn’t exist, the marketing or labeling are wrong, hidden fees which add thousands of dollars to the supposed list price, or something else is amiss. That’s a big part of what this article is about: always shop by condition, never by price.
The point is this: the auto sales industry provides tools and content designed to make you feel comfortable and informed as you move through each of these stages. The tools may have initially been built to help you make clear, informed decisions. Unfortunately, they are easily exploited by dealerships to persuade you to make decisions quickly and on the basis of incomplete, inaccurate, or misleading information.
If you want to find a fair deal, you’ll need to re-think car buying completely. That’s what we’re here to help you do, and to start, we’re going to explain why it can be so darn hard to buy a car, and how many dealerships use their information advantage to mislead customers.
More than just exasperating: broken
By the end of the purchase many buyers are exhausted, but there is more at risk than just being weary.
The House Edge
In the gambling industry, casinos have what’s called “the house edge,” an advantage that’s partly mathematical, partly about information, and partly about environment and pure human error. Car dealerships have almost the same advantage, and you need to understand how it works if you want to overcome it and buy a car at a fair price.
In casinos, the edge is easy to understand. The games don’t pay out fairly. In roulette, for example, the game is random but the player always has a slightly higher chance of losing than they do of winning. Average the results out over enough players, and the house is always making more money than the guests. Now add in the casino’s expert knowledge of the odds of every game, the very deliberate absence of clocks and windows, the bright colors and loud noises, the free-flowing drinks, and the friendly, solicitous staff, and you have an environment where the guests have a hard time tracking the odds…which makes the mathematical house edge all the more potent. That’s how casinos become so profitable.
With dealerships, the situation is surprisingly similar. Where guests to a casino don’t know the true odds of the games, customers at the dealership don’t know the true value of the cars. They don’t know the real condition of its parts, how well it’s been maintained, whether the price has been changed, whether the car was reconditioned, and whether a similar car is available for cheaper somewhere else. The situation is called “information asymmetry”: the salesperson has more information than you do, which gives them an advantage in the negotiation.
They maintain that advantage carefully, using listings and conversation tactics that deliberately create confusion about the cars’ prices and conditions. They won’t answer questions directly, won’t volunteer information, might change listed prices frequently, offer different prices in-person than online or on the phone, claim that two cars are similar when one has been reconditioned and the other hasn’t, and so on. Their overall goal is to make sure that you’re forced to choose a car based on instinct or intuition—and, ultimately, that you’ll give up trying to find the right car and settle for what they offer you.
Of course, many customers will catch some of those tactics. But almost no one catches them all, and—from the dealership’s perspective—customers are replaceable. If a tactic doesn’t work on one person, it might work on the next one. All they have to do is maximize confusion, give themselves the largest possible information advantage they can, and over time they’ll make their sales.
There are a few especially important pieces to the house edge—major tactics that you can plan for and overcome. Let’s take a look.
The first hurdle facing car buyers is the difficulty of finding solid information. Let’s start with a simple example: history reports. These are easy to get from Carfax or Autocheck; even the worst dealers routinely make them available. To most consumers, a clean Carfax report looks like a certification that the car is in good condition. That’s a reasonable, rational assumption that dealerships desperately want you to make.
It’s also not true. History reports will tell you if a car was in a disclosed wreck or has a salvage title; they tell you nothing about the condition of the motor or transmission, the quality of the interior, or the durability of the exterior. In other words, they can sometimes inform you about one or two relatively rare types of vehicle damage, but provide no actual information about the condition of the car.
The dealer, on the other hand, has access to a complete and accurate genuine condition report, which they use when buying cars at auction. That report gives each car a rating (out of five stars), and lists both cosmetic and mechanical issues in detail. It’s incredibly valuable and exactly what you need to find the right car, and they will never let you see it.
Now let’s look at online search tools like cars.com or cargurus.com. The big problem here is that dealers can, and do, play games with their listing, introducing tiny inaccuracies or selectively leaving out key pieces of information. They design their listings to send their cars to the top of the search results and get those appealing-but-meaningless badges: “Good Deal,” “Great Deal,” and so on. All they have to do is set an unrealistically low list price, which they can easily compensate for later in the purchasing process by either fast talk or tacking on unexpected charges and inflated fees; it is, essentially, a trick that makes a bad car look like the perfect option.
Then there are the price guides: Kelley Blue Book, NADA (the National Automobile Dealers Association), and Edmunds. These can be accurate for the few makes and models that are most popular, but for many, many other cars they simply cannot be counted on to provide solid, accurate information. And just as bad, they’re hard to use. Go check your car’s value right now—you’ll soon find a screen that asks for a blanket assessment of your car’s condition. Is your car “fair”? “Good”? Which components matter most? Do cosmetic problems factor in?
There are a range of similar problems. Now remember that the dealer is using the same tool to design their online listing and negotiating strategy, and that they—unlike you—know the car’s true condition.
Ultimately, there’s exactly one way for the average consumer to get an accurate assessment of a car’s value: spend hours pumping the dealership for information, then take it to a mechanic you personally trust for a thorough checkup. Do that for every car you’re looking at and, after weeks of hard work and significant expense…the prices or availability will have changed and you’ll need to start over.
It’s no exaggeration to say that, if you’re restricted to standard tools built for consumers, it just isn’t possible to fairly assess the value of most cars.
We think there are better options, which we’ll get to in a later section.
First, we need to talk a little bit about deceptive dealership pricing tactics. There are four big ones to know about, all of which serve the same basic purpose: to make it hard for consumers to get accurate, reliable information about sale and trade-in prices. Dealers will usually refuse to give you a price over the phone; if they do, it’ll change by the time you get in. Online, things are worse.
That brings us to the first big tactic: the bait and switch. Dealers know that buyers will look online for cars with list prices below the value given by price guides. They can exploit that fact by listing cars online at extremely low prices they have no intention of honoring and then, when the customer comes in to see it, saying, “oh, darn, that car just sold. We have this very similar car, though, which only costs a little more…”
The second key tactic dealers will use are undisclosed fees. The fees aren’t actually hidden, they just aren’t shared with customers until the very end of the buying process, when the customer has made up their mind and thinks they’re almost done. Out of nowhere—from their perspective—the price will shoot up by anywhere from $500 to $3,000, inflated by a number of dealer-specific fees that are often more or less arbitrary.
Third, dealers hide financing, deposit, or purchase requirements in the fine print of an ad, luring customers in with the list price and then gouging them for thousands of dollars with requirements that they overlooked. Many dealers significantly increase their total revenue this way. Examples of fine-print changes include:
- The price includes a $4k trade credit;
- The customer must use dealer financing, with worse interest rates than those offered by independent loan providers;
- The deal is only available with a down payment of a certain size;
- The deal is only available if the customer also buys an expensive service contract, warranty, or gap insurance policy from the same dealership;
- The deal is only available to veterans.
Finally, dealers will often deliberately undervalue trade-ins. Once the customer’s expectations are set, they can then offer what sounds like a generous discount on the list price of the new car, but is, in fact, just a tiny bit closer to a fair deal. The net result is that the customer pays a little too much for their new car, doesn’t get nearly enough in trade-in for the old car, and the dealer walks away with extra cash and a cheap addition to their stock of used vehicles.
As you can tell, the common theme of these tactics is luring customers into the dealership with misleading offers, and then using bargaining, social pressure, and half-truths to persuade them to spend more money than they were planning to. The tactics only work so well because of how hard it is for consumers to get accurate information, and because of how hard that makes it to compare competing offers.
That brings us to the final major piece of the “house edge.”
Making Accurate Comparisons
Car shopping is mostly about comparisons: making a list of options that meet your basic parameters, and then weighing the smaller pros and cons of each choice. One might have fewer miles, another a higher trim level, and a third might be accident-free or have a more pleasant interior. And if that were all there were too it, shopping would be a simple matter of personal preference.
Unfortunately, that sort of apples-to-apples comparison is almost impossible to make. The customer typically will only know the make, model, trim, mileage, accident history, and list price of a given car, and will have to use those factors to assemble their list of candidates. You might, for instance, find five seemingly identical 2016 Toyota Siennas at five different dealerships, and congratulate yourself on being able to make your choice based on price when you visit the dealerships.
But as we’ve discussed, you simply don’t know what kind of shape each car is in or how much it will actually cost you. Specifically, you don’t have access to accurate information about interior condition or mechanical condition. You might find out—only after making your purchase—that the Sienna you chose needs to have half a dozen repairs made shortly after purchase.
The list of factors you don’t think about is too long to fit into this article. Here are just a very few quick examples:
- Was the car driven in a wet or dry climate?
- Did the previous owner provide the required maintenance?
- Did the previous owner fail to report a fender bender, ride their brakes, or get some touch-up paintwork done?
- Did the previous owner smoke in it?
- How are the tires?
When these variables differ over the cars you are comparing, they can add up to thousands of dollars of difference in value. Most consumers believe when the year and age are the same the price is the deciding factor. This is simply not the case.
At the same time, you also won’t have transparent access to information about fees, trade-in value, or how the dealers might have manipulated the price of each option, meaning the choice that looked cheapest at first might turn out to cost you an extra $3,000 by the time you’ve paid it off.
There are a thousand small problems like this. In aggregate, they mean one thing: you can’t accurately compare the condition or the price of any two cars you find. Ultimately, the only way to make accurate comparisons is to take each candidate to an independent mechanic for assessment, but most shoppers don’t have the time, energy, or resources to do so.
Let’s recap. When you start looking for your ideal car, you’re diving into a system that’s rigged against you. You have no choice but to buy from dealers who are doing their best to sell you lower-value cars at higher prices. They rely on information asymmetry: they have real condition reports; you don’t. They know how the car has been maintained and handled; you don’t. They know whether the list price is accurate; you don’t. They know whether they’re offering you a genuinely fair trade-in value; you don’t. They know the fees, conditions, and requirements of the deal; you won’t discover them until you’re three hours into the negotiation. They are happy to waste your time, distract you, confuse you, and obfuscate you; you have limited time and money.
Taken all together, those factors give the dealers an edge, an advantage that it’s extremely difficult for the average customer to overcome. Online tools can be exploited, price guides are tools for dealer manipulation, and the information you need can only be gotten with an expensive and time-consuming outside review.
Taken all together, how bad is the problem?
Most Car Buyers Regret Their Purchases
From the perspective of car dealerships, the system is working beautifully. According to the National Independent Automobile Dealers’ Association, both real and anticipated car sales have been steadily increasing for the last decade. Dealership size, number of employees, online sales, in-person sales…they’re all going up. Business is good for the auto industry.
But the situation isn’t quite so positive from the consumers’ perspective. The house edge, and the information asymmetry that creates it, have a real negative effect on car buyers’ experience. For one thing, the effort dealerships put in to confuse, mislead, deceive, and entrap buyers stretches out the process and can make it difficult to complete. According to a 2016 survey from AutoTrader.com, barely half of the shoppers buying used cars were “satisfied” with the length of the purchasing process; fully a third were unhappy with the way they were treated by the financing department.
And that isn’t even the main problem. The real negative consequence of the way the system operates is that most car buyers regret their purchase in general. Specifically, AutoTrader.com reports that 69% of consumers experience buyer’s remorse after purchasing a vehicle, leaving fewer than a third who are happy with the car they end up with. Among those who are disappointed, the most common reason was that the cars had unexpected mechanical issues—the result of inaccurate information about car condition.
The next most common reason was the feeling that they had paid too much, as a result of misleading pricing, dealership tactics, and hidden fees. Many shoppers specifically ended up feeling that they had gotten a bad deal or that they’d been talked into an impulse purchase they didn’t really want. According to an AutoTrader representative,
On big shopping days like Black Friday, consumers can get caught up in the excitement of a good deal, sometimes at the expense of their needs, wants and budget. In addition to hunting for a good value, consumers should search for a car that suits their lifestyle 365 days of the year.
In other words, if you head into your car-buying experience planning to rely on easy-to-manipulate online tools, start with your preferred make and model, and trust what every dealership is willing to tell you about the condition of each vehicle, you’re extremely likely to end up among the unhappy majority of shoppers.
The chance that you’ll pay a fair price and not be surprised by mechanical issues later on is just vanishingly small.
You need a different way to approach car buying. One that lets you overcome the house edge, upset the advantage dealerships have, and identify a car that will genuinely meet your needs for a fair, up-front price.
The simple truth is that most consumers won’t be able to reliably find the right car for them. The house edge is too significant, and the information they need is too hidden, too time-consuming, or too expensive to obtain.
That means you need outside help—you need someone with both the resources and expertise to get you the information you need to compare your options.
Too many people rely on the help of friends, family members, or acquaintances. There’s nothing wrong with getting advice, of course, but ultimately those people’s judgment is at best only marginally better than your own. Rely on your network to help you decide on things like size and shape, or to make a list of must-have features. Resist the temptation to rely on it for making the actual choice.
Instead, when it’s time to find the car that meets the needs you’ve outlined, look for an expert.
Specifically, the person you’re looking for will be an expert in both cars and wholesale car buying—they’ll know by heart everything that you’re just learning, and will be able to offer significant new insights into the likely condition and value of the cars you’re considering. They can also help you work out what your options are for meeting your usage goals within a set budget.
Why You Need an Expert
Think of it this way. Normally, when you have a major decision to make or a complicated problem to solve, you look up someone with a career’s worth of experience to help you out. When your breaker box keeps blowing, you call an electrician. If your health isn’t good, you see a doctor. If you need to buy a home, you find a realtor: someone with the expertise to weed out scams, avoid shady sellers, guide you to the best neighborhoods, and identify hidden gems.
Buying a car is no different. The question, then, is where to find someone who’s both knowledgeable and reliable. The answer, unfortunately, is that it’s incredibly difficult to do.
What you’re looking for is a dealership where the core sales strategy is to find, buy, and sell high-quality vehicles, rather than one where the core strategy is to rely on the house edge to make sales even if customers leave unhappy.
That rules out almost every dealership in the country. There are some exceptions, though, and you can try to find one by looking for these characteristics.
Characteristics of a Reliable Dealership
There are six features that reliable dealership behavior. Together, these define the minimum that you should expect from someone who’s genuinely trying to help you, rather than just trying to add to a sakes tally.
1. They stand behind their products
A good dealer will answer all of your questions about a vehicle. If they don’t know the answer, they’ll find out for you prior to moving forward with the sale. They’ll compare cars for you, volunteering important information about condition, comparative value, and other options. Just as importantly, they won’t rush you through the purchase process, because they aren’t trying to dupe you into buying a car you won’t be happy with. Most crucially of all, they’ll never sell cars “as-is”—they will always offer a free in-house warranty rather than leave you with all the risk related to the vehicles condition.
2. They have high purchase standards for their inventory
A good dealership will be extremely selective about the cars they buy wholesale. A common practice among less reliable dealers is to buy cheap cars in need of serious reconditioning, correct a few of the worst problems, and rely on the house edge to sell them to someone who doesn’t have enough information to realize how bad a deal they’re getting. Better dealerships avoid those cars entirely, and typically reject about 90% of the cars available at auction.
3. High standards of safety
Selective purchasing should be paired with high standards for the reconditioning process. After buying the cars that are in best condition, a good dealership will then invest the time and money to inspect and recondition them to a point where they are reliable, safe, and worth a fair price.
4. Price should match condition
You can tell whether a dealership has put in the work to recondition their cars because they’ll be eager to share information about the cars’ condition. They’ll disclose the relevant news—good and bad.
5. Expert knowledge of cars and car buying
The salesperson you’re talking to should be able to speak confidently and in detail about a wide range of car makes and models, drawing comparisons between them in terms of durability, suitability for different needs, lifespan, maintenance needs, features, trim levels, and cost. They should be an expert in giving you advice, not in sweet talking you into a sub-par deal. The experience of a salesperson with this skill includes significant personal experience and training in the wholesale buying process. Unfortunately, most dealerships do not provide this training rather invest in sales strategies that attempt to exploit customers.
6. Access to specialized tools
Finally, a reliable dealership will have resources at their disposal that the consumer doesn’t. They typically rely on advanced industry search tools to offer customers access to a wide range of vehicles beyond the ones in their own inventory, and then to provide insight the buyer wouldn’t be able to reach on their own about the value and suitability of each option.
We only know of one dealership that actually meets those basic requirements: ours. In fact, we do much more than just give honest answers and make sure that our customers get accurate information about price, condition, and other options. We strive to be the kind of expert guide and consultant that you have available in other fields. Our direct colleagues aren’t other dealerships so much as they are realtors, travel agents, and financial and retirement planners.
Our business model does not rely on the house edge. We don’t hide fees or claim that our prices are lower than they are. We set fair prices, and rather than trying to sell cars by talking customers into buying what we have on the lot, we sell cars by taking the customer’s needs seriously and using our expertise, advanced tools, insider knowledge, and database access to help them dig up options they wouldn’t be able to find on their own.
Car buying can be difficult, exhausting, and, as we’ve seen, ends in disappointment for the large majority of shoppers. Our message is simple: we’re here to help. We believe that providing a positive experience and a unique service are more than enough to keep our business running, and we’ve built a workforce capable of delivering both.
Our hope is that this article has been a useful introduction to the pitfalls and complexities of the car-buying process. Ideally, you’re now better-prepared for the next time you buy. Here are our recommended steps:
- Talk to friends and family about some must-have features. Think about seating and cargo space, speed and power, hauling and towing capabilities, comfort, safety features, and cosmetic features. Don’t worry too much about make and model—those are distractions at this stage.
- Get some recommendations from friends about dealers. See if the prices they offer online match what they offer in person, and work out whether they match the criteria outlined above.
- Once you have someone you trust, that’s when you should really start your search. They’ll provide a list of specific available cars and offer guidance on the real value of each option.
- From there, you’re free to trust your judgment.
The Mats.org team