I have owned three cars in my life: a 1996 Toyota Corolla, a 2006 Honda Accord, and a 2018 Honda CRV. I hate the process of buying a car. And I also know that a car is a depreciable asset, which loses the greatest proportion of its value early in its useful life. Consequently, when I purchase a car, it is my intention to drive it for the long-term.
In 2018, I had decided that it was time to replace my 2006 Honda Accord. The Accord had been good to me. However, I now had two children and all of the stuff that comes with children, and had decided that I needed a little bit more space.
As I had had good experiences with both Toyota and Honda vehicles, I had narrowed down my search to the Toyota RAV4 and the Honda CRV. As I value his opinion, and appreciate his vast car-buying experience, I asked my dad to come car shopping with me. We started at the local Toyota dealership. However, the RAV4 was due for a major redesign in 2019, so I was hesitant to purchase the 2018 model. So, our visit to the dealership was mostly a mission of ruling the vehicle out of consideration.
The salesman that we dealt with was personable. He provided information about the vehicle and answered our questions. My only issue with him was that he seemed uncertain about the nature of our relationship. At one point my dad had walked away from us and was looking at vehicles in the showroom. I was speaking to the salesman, and he inquired if my… huge pause for me to insert dad/husband/something else… had any more questions. I understand that he likely sees all sorts of customers, in all sorts of relationships, and didn’t want to presume anything about us. However, when I imagine myself landing a silver fox, he’s more George Clooney-esque than Grandpa T!
Having gathered all of the information that we were seeking at Toyota, we moved on to the neighbouring Honda dealership. The vibe at Honda was totally different. We were the only customers in the showroom, and walked over to the CRV on display. It is at this point that I would have expected a salesperson to greet us, and to offer their assistance. In fact, in commissioned sales, the salespeople take turns serving the new customers who enter the business. So we were someone’s “up,” yet that salesperson made no effort to greet us or serve us.
I walked over to the counter and found a group of salespeople gathered together, chatting. I inquired if someone could please help me, as I was interested in test driving a CRV. I had already done my research, and had no questions – I just needed a set of keys. This request mobilized a salesman into action, but I was already annoyed and did not feel valued as a customer. Things went downhill from there.
The salesman pulled a CRV around, and we went outside to look at it. I think that he had finally figured out that he had interested buyers here, and switched into full selling mode. He regaled us with the details of the driver’s seat with 12-way power adjustment, including 4-way power lumbar support. And then hopped into the car so that he could continue selling during the test drive. Which also annoyed me. I prefer to test drive a vehicle without the salesperson present. His presence provided no assistance or benefit to me; however, it removed the opportunity for me to speak freely with my dad about my impressions of the vehicle.
We completed the test drive, and concluded with a demonstration of the multi-angle rearview camera. The salesman asked what I thought of the vehicle. I told him that I liked it, and that I was interested in purchasing it. However, I was not interested in entering into a prolonged negotiation and asked him to start with the best price he was able to offer on the vehicle. A friend of mine had recently purchased a Honda Odyssey from a different dealership. She is member of Doctor’s Manitoba, and there is a negotiated agreement between Doctor’s Manitoba and Honda that allows their members to purchase new vehicles at 3% over cost. I believe that her husband was able to arrange the vehicle purchase via email/fax. There was no need to attend the dealership to enter into a prolonged negation process with a salesperson. Clearly recognizing that a doctor’s time is valuable. I was interested in the same type of fast-tracked negotiation. Because the salesman certainly knew what his bottom-line price is, and I also knew what was the approximate discount that I could expect to receive off of MSRP (based on my research). So, let’s not waste everyone’s time going through a “negotiation” that is going to lead us to these pre-determined outcomes. I should also note that during the COVID-19 pandemic, many dealerships were offering the cost + 3% pricing to front-line workers. So, this is not something exclusive to members of Doctor’s Manitoba. The salesman went back into the dealership (in my mind, presumably to determine what was the best price he was able to offer on the vehicle), and gave me and my dad a few minutes to chat before joining him inside.
We sat down at the desk at his cubicle. The salesman sitting behind the desk, with the computer, and my dad and I sitting in the guest chairs. This automatically puts him in a position of power, both due to the seating arrangement, and also due to the information asymmetry. He possessed the super secret price of the vehicle, and we were at his mercy, waiting for him to reveal it. It was clear from the beginning of our conversation that my message of a desired expedited negotiation process had not been received.
He began his sales pitch by asking about how I planned to finance the vehicle purchase. I asked what was the price of the car. He would not say. He pulled up a retail worksheet screen on his computer and wanted to discuss payment terms. And had I considered leasing? I was not interested in this discussion, as these are separate issues, unrelated to the negotiated purchase price of the vehicle. So I told him to set it up as a cash purchase. I wasn’t planning to pay cash; I just wanted to know the price.
This still did not get me the information I was looking for – the price of the vehicle. I had done extensive research online, and had gone through the “Build Your Honda” car configurator. I knew what was the MSRP, as per the Honda Canada website. On the retail worksheet for a cash purchase provided by the salesman, the MSRP was $3,027 higher than the MSRP on the Honda Canada website. The worksheet indicated a “discount” of $1,117, leaving the noted selling price still $1,910 higher than the published MSRP. So much for asking the salesman to give me the best price he was able to offer on the vehicle.
The salesman was determined to return to his selling script, and once again brought up the idea of leasing. He prepared an additional 2 retail worksheets, one for a purchase financed over 5 years at 2.99% and the other for a 48 month lease at 2.49%. I had no interest in leasing a vehicle. I had never inquired about leasing. I had advised the salesman that I was interested in purchasing the CRV for cash. Yet, he was determined to explain to me the advantages of leasing: the lower monthly payment and the fact that I wasn’t “locked in” to the CRV, in the event my needs changed in the future.
In my opinion, leasing a vehicle is a very expensive way of acquiring a car. As mentioned at the start of this post, a car is a depreciable asset, which loses the greatest proportion of its value early in its useful life. By leasing the vehicle for 3-4 years, you are paying for the most expensive years of that car’s useful life. At the end of the lease, you have the option to purchase the car at a previously determined price. But what the car dealership would prefer, is that you return the car to the dealership at the end of the lease, and then enter into a new lease agreement for the brand new (or an upgraded!) model. This is a win-win situation for the dealership in two ways. First, once you are on the hamster wheel of perpetual leasing, the dealership has a new lease agreement to look forward to every 3-4 years. And second, the vehicle that you return after 3-4 years is a desirable used vehicle for the dealership to sell. The lease agreement has limits on the maximum number of kilometers that can be driven each year, has guarantees on the condition that the vehicle will be in when it is returned, and the vehicle also has 1-2 years left on the power train warranty at the end of the lease term. For someone in the market for a used car, lease returns are an excellent option!
I communicated, once again, that I had no interest in leasing. And asked, once again, what was the purchase price of the vehicle. The salesman responded that it was important that we go through these calculations, as even his best friend, who had gotten 100% in high school math, wasn’t able to understand them. That was the last straw for me. I am Dr. Wendy Schultz, CPA, CA. I don’t recall what my grade was in high school math. However, I have a PhD in Financial Accounting, and am a Chartered Professional Accountant. Don’t try to out math me!
So, I asked a follow up question: Was there a financial incentive to leasing, other than the lower monthly lease payment (which is only a function of the lease term covering only a portion of the vehicle’s useful life)? Specifically, was the net present value of the cash flows different between the lease vs. buy options that he had presented on the retail worksheets that I had been given? I got a deer in the headlights look in response. We were now off his selling script. Of course, he did not have an answer to my question. However, any Corporation Finance student with an HP-10B financial calculator could have done the math and answered the question. But the answer was not on his retail sales worksheet.
The salesman decided to engage his manager, in order to provide assistance. The manager’s office was located behind where we were sitting. It had a glass wall and a glass door. The salesman went into the office and spoke privately to the manager. He then returned and tried to provide some additional information about the leasing option. It was not, however, an answer to my question. The manager was observing our interaction, and could see that I wasn’t satisfied with the answer. So, he decided to elaborate on the information that he had provided to the salesman in his office. However, rather than coming out of his office to join our conversation, he remained seated behind his desk and shouted the information to us. I was completely taken aback by his rudeness. We continued our conversation with the salesman, and the sales manager shouted additional information a second time. At this point, I asked the salesman if he thought that it was appropriate that his manager was yelling at us from another room. He did not reply. My dad was horrified that I was commenting about the manager’s rudeness. But shouldn’t he have been horrified that someone was treating us that way? I don’t know if it was because I was female, or if the manager was just a rude man. However, at the time, I was the Faculty Advisor to the Asper Network of Empowered Women student group at the University of Manitoba, and am an empowered woman myself. I simply could not let this behaviour continue without expressing my concerns about it. The manager shouted from his office a third time. At this point, I asked the salesman to please tell his manager to stop yelling at us. He did not.
I had determined at this point that I would not be buying a vehicle that day. First of all, we had been at the dealership for close to two hours (including the test drive), and I still did not know what was the selling price of the vehicle! I told the salesman that I was out of time and had to leave. He had no idea that he had completely blown what should have been a sure-thing sale.
He walked us out of the dealership, and at that point noticed that I was driving a 2006 Honda Accord. He never asked in our conversation what I was currently driving, or if I had a vehicle to trade in. Had he asked these questions, it might have provided some insight into the type of car-buyer that I am. And perhaps he would have realized that I would not be getting on his leasing hamster wheel. But now he was interested in getting my trade appraised. I reiterated that I was out of time and would be leaving now. He told me that I could send him a picture of the VIN and some interior and exterior pictures of the car, and he would be able to provide me with an approximate trade-in value via email.
I had no interest in getting my 2006 Accord appraised for trade. If I was interested, I would have asked the salesman about it. I was not interested in discussing the trade-in value of my car, as, like how I planned to pay for the vehicle purchase, these are separate issues, unrelated to the negotiated purchase price of the new vehicle. The salesman likes to combine these three aspects together, as it is a way to obfuscate what is the true selling price of the new vehicle. Don’t fall for this trick!
I am a polite person, so I smiled and nodded, and thanked the salesman for the offer to appraise my car. And then I got into my car and drove away from the dealership as fast as I could, never to return. After my experience with the salesman and his manager, there was no way that I would purchase a vehicle from that dealership. Not then, not ever. Imagine rewarding that salesman with a commission for the sale, and the dealership with the profit on the transaction. Never!
I did, in fact, purchase my Honda CRV the following week, from a different dealership. Stay tuned for details on how I changed my strategy to get what I wanted (somewhat), and for some tips on how to negotiate on a new car purchase.
Life Lessons 