Lazy Man and Money

TrueCar Reviewed: We Bought a New Car

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I may have teased it a few times in the last couple of weeks, but we bought a new car. The Jeep with 125,000 has had enough problems that we no longer feel we can depend on it. I might feel differently if it was just me, but with one young child, and another on the way, we have to a premium on reliability. I saw this day coming and back in August picked the best luxury SUV for us. That luxury SUV was an Acura MDX. Why a luxury SUV for this frugal guy? Well, it would be the wife’s car and she’s earned a luxury car for the first time in her life. I also subscribe to the Clark Howard school of personal finance… you can have the frugal car and let the wife have luxury one.

As far as luxury SUVs (with 3 rows) go, the MDX is one of more reasonably priced ones in the low $40Ks. The category has a lot more than 70K SUVs in it than I thought. After having driven the Acura MDX for a couple of weeks now, I have to say that it is an extremely awesome car. That’s subjective and certainly related to my previous experience. If you drive complete junk, any new car will seem incredible, right?

We were under a time-crunch to buy the new car, we need two cars to function. The planning we did back in August really paid off as we didn’t need to test drive multiple cars. We coud just jump right into the negotiations.

I’ve been reading a lot about the TrueCar buying service and decided to give a try. It works a little like LendingTree if you are familiar with them. You put out a request for a car, mark off some dealers in your area and they come back with quotes. TrueCar’s website gives you a great idea of what price to expect before you even place the request. In my experience it is very favorable price in comparison to just going to dealer and negotiating yourself.

Here’s how it went down for me. The base Acura MDX with all-wheel drive (must have for New England snow) has a MSRP of $45,185. TrueCar’s website estimated that they could save me $1,926 of that and for an Estimated Dealer Price of $43,259. When I went to a dealership in August, they said they had no flexibility on that MSRP because it is a newly designed model and in great demand. It could have been typical dealer BS, but that’s what they told us.

My feeling is that it couldn’t hurt to get the TrueCar quotes and… worst case scenario use them as leverage in negotiations with non-TrueCar dealerships. A dealership can’t stick to its guns on a MSRP of $45,185 when I’ve got quotes around $43,259, right?

There were three TrueCar dealerships in my “area”… Boston, Connecticut, and New Hampshire. As you can tell they have a fairly wide area. The first quote came in at $43,544 and the second quote came in at $43,038. That $43,038 was pretty exciting to us. I like the idea of getting $2000 off of MSRP without having to actually negotiate for it. A day later the last quote came in… $41,998! I should mention that all quotes were our preferred color, they didn’t bait and switch us with that.

Obviously, we went with the dealer that offered us the $41,998 price, which is lower than the factory invoice price $42,211 according to TrueCar. (Though Edmunds says that the factory invoice is $41,911.) It seems like a great deal by any measure.

The dealer did add a $399 destination charge, but I think they all would have done that? I don’t know. In any case, it was still a very fair price considering the amount of work I put in to negotiate it… zero.

TrueCar itself has a few whitelabel sites. For example, Consumer Reports has a car buying service and while it looks like they built it themselves, it really is just TrueCar behind the scenes. My favorite bank, USAA, also has a car buying service that uses TrueCar as the back-end. USAA was offering a 0.64% discount on their already great financing for using the TrueCar service. The end result is that we got a 60-month loan at a 1.35% interest rate. That’s not too shabby, right? Imagine what it could have been if I paid MSRP and used the dealer financing… yikes!

As we were completing the paperwork on the deal, I asked the salesman what he thinks of the TrueCar service from a dealership perspective. He said (paraphrased), “Quite honestly, it’s not that good of a deal for us. The prices are very low and we have to pay TrueCar for each car we sell. I don’t know how long we’ll continue to be a part of it.” I suspect that the draw is to bring in customers like our family, who went in and bought a car very quickly. We normally wouldn’t have driven to that dealership, so that’s increased volume. However, I can see how they’d lose money from the locals who would use the dealership anyway, but get the TrueCar quotes to save themselves a grand or two.

I’m not going to feel sorry for the dealer. In the end, it’s their choice and they can quote whatever prices they want. Instead, I’m just going to enjoy the good price and hope that TrueCar is around in 12 years when we’ll probably be looking for a new car again.

Do you have any experience using the TrueCar buying service? Let me know in the comments.

Frugalism vs. Capitalism III

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Rich Slick over at Get Rich Slick has a rebuttal to my post yesterday. To continue the debate, here’s a rebuttal to his rebuttal…
1) By “that dollar will be taxed”, I mean that a dollar saved is dollar in your net worth. A dollar earned could be only 72 cents in your net worth. Trust me, I want to pay a ton of taxes. I’d like to pay 1M or more in taxes a year.

2) Yes there are risks to everything, but saving a dollar is not a risk. So the capitalist takes a risk, while the frugalist typically doesn’t. Yes, risk is a fact of life, but there are degrees of risk.

3) It’s the “without too much concern for the price or cost of an item” that leads to over-extending oneself. Yes, it’s not a guarantee, but it’s a risk of not concerning oneself with the costs of things. The frugalist doesn’t run this risk.

4) The “wasteful nature” that I was talking about was related to buying new cars with the idea of helping the economy. Meanwhile perfectly good cars go into landfills.

5) Yes we agree that a car isn’t an investment. I realize the phrase “depreciating investment” is an oxymoron, but it’s common vernacular to say, “I invested in new shoes today.” If this missed you then… (sigh and shrugs shoulders). Would you have preferred, “A frugualist doesn’t waste money on new cars and uses it to make more money?”

6) Do you want to teach me? Ben Franklin said a penny saved is a penny earned. Perhaps this could be a post in and of itself. I would really like to understand the math behind it.

7) For each Bill Gates how many people have filed for bankruptcy? Millions and millions? What if you just took $100 and played roulette hoping for black (or red) to come up 15 times in a row. I’m guessing you’d throw away a lot of $100 chips, but if you get it right you’ll have over $3M. Or you could just invest your life savings in some penny stocks. Do it wisely and you’ll join those names Rich Slick mentioned.

In the end, Rich Slick makes the perfect argument I was intending to make from the outset. Warren Buffet and Sam Walton were frugalists AND capitalists. Of course they didn’t make their billions by being frugal, but they are examples of how it is possible to be both.
Did I make a lot of assumptions about capitalists? Indeed. Did Rich Slick make a lot of assumptions about frugalists? Indeed.