Author’s note: Over the years, I’ve talked to hundreds of consumers who were unable to find the vehicle they wanted at dealerships and asked about the pluses and minuses of a factory order. This is a long distillation of what I’ve learned from them and what I’m telling others today.
So you’re new-car shopping, but you can’t find a vehicle close enough to your specs? That’s when it’s time to consider placing a factory order.
First, understand that there are macro factors that limit everyone’s configuration choices
Automakers publish pricing data showing all the trim levels, equipment packages and accessories available for a given model. That may imply to you that you can get the car with all the features you want and none you don’t want, but for most new vehicles that’s not true. (I’ve been told that BMW is the only brand that will build a car to your exact specs.)
- Car companies typically build vehicles in only a limited number of configurations. If you and your 500 best friends wanted the same vehicle, with each equipped slightly differently, they’d have to cut the assembly-line speed dramatically and raise the price commensurately. So they offer a finite number of trim level and equipment combinations. You almost always have to buy things you don’t want to get everything you want.
- In addition, automakers like to ship ‘em “fully loaded.” Few vehicles arrive with just the standard equipment. Almost all have one or more equipment packages.
- Complicating the picture further, dealers order the configurations that sell well in their markets. If you want a car that’s atypical of that norm, you’ll have trouble finding it because dealers don’t want to pay interest carrying charges on vehicles that sit there for several months. That could be a color issue (black cars don’t sell in sweltering climates, and nobody wants brown or green ones); a transmission issue (stick shifts account for only 5% to 6% of new-vehicle sales); a low-sales issue (many vehicles sell at only one or two per month per dealer, so they don’t stock 15); or a two-door issue (coupes are sales dogs that should come with a leash as standard equipment).
- One more caveat: Automakers will often ship certain configurations to some markets, but not to others. Example: A Seattle customer wanting a Camry found that no dealers in Washington, Oregon or Idaho could order it to his specs, but a Nevada dealer could.
Start by learning whether they’ll build the configuration you want
- Do this by using the “Build Your Vehicle” function that’s on every car brand’s website to determine how they’re equipping the model you want in your market. You’ll enter your zip code and pick your trim level, and you’ll see which packages and/or equipment choices you must make, whether you want to or not. Settle on a final configuration that’s as close as possible to your ideal specs without adding many costly unwanted items.
Then search inventories for vehicles that are close to your specs
- Check inventories on dealers’ websites. All auto brands’ sites have “dealer locators” where you can enter zip codes to get to car stores’ sites. Change the zip codes to search more dealers’ stock — even those as far from you as 50 or 100 miles, who might see you as “found business” that would never walk in their door and quote prices below those they’d offer their neighbors.
- Don’t assume that all the available cars are sitting on dealer’s lots. On average, over 35,000 consumers buy or lease a new vehicle every day. So tens of thousands are always in transit between the factories and their dealers. There are also “holding pens” with cars that haven’t been ordered yet by dealers — typically in the most popular colors and trim levels. (These are more likely to be assembled outside of North America. When I drive past the Ports of Long Beach and Los Angeles, which handle about 40% of the goods shipped to and from the U.S., I see acres full of cars from Japan and Korea.) So ask dealers to check vehicles in transit and/or other locations.
What should you do if you find just 2 or 3 “right” cars in a 50-mile radius?
• Use a truncated version of the competitive bidding process recommended at the end of this article: “Beat the Pricing From Online Car-Buying Sites.” Call only those 2 or 3 dealers on the next weekday morning and ask for the Internet Sales Manager or the Fleet Manager. Tell them you’re ready to buy a (fill in the blank) and have a marginal preference for a configuration that they and a few other dealers list in their inventory.
• Describe that car to confirm that they’ve got one. Say you’re plan is to get several dealers to compete for a factory order, but you’re starting by calling just those few dealers and asking for a car price and an itemized out-the-door price that knocks your socks off! If one of them does, you’ll buy the car now.
If your search comes up ‘snake eyes” and/or your socks are still on, you’re a factory-order candidate. However, here are two caveats:
1. You need a reliable car to drive until the new one arrives — typically six weeks to two or more months, depending on where the vehicle is assembled. If your current car has died, or your lease expires soon, you’ll need one that’s already built. If you’re leasing and your new vehicle will be the same brand, they will usually continue the lease month-to-month until the new one arrives.
2. You need the ability to postpone gratification. If you’re an “I want what I want when I want it” person, don’t consider a factory order.
Will dealers bid competitively for a factory order?
• Is water wet? They’re in business to sell consumers the cars they want, whether they’ve got ‘em or not. They’d prefer that you buy from their stock, but they realize that new vehicles come in so many configurations that no dealer’s inventory can please everyone. And factory orders have some dealer benefits:
1. They’re guaranteed sales that will help them reach some future month’s sales target.
2. They’ll never pay a nickel of interest to stock that car because you, your rich uncle or your lender will write them a check the day it arrives.
3. If it’s a totally redesigned vehicle in its introductory months, when supply trails demand and it’s selling at its full sticker price, they’d prefer taking a factory order that arrives after that initial sales excitement dissipates.
• You’ll use the process recommended at the end of “Beat the Pricing From Online Car-Buying Sites,” starting by telling them you’re seeking price proposals for a factory order. In most cases, you shouldn’t have to pay more than you’d pay for one on a dealer’s lot.
• Since they typically can’t count the sale until you take possession of the vehicle, there’s no advantage in waiting until month-end to solicit prices. That only delays the delivery.
A few more relevant points
• Dealers typically don’t get price protection on factory orders. The price may increase while you wait, but only by a modest amount — perhaps a couple of hundred dollars. Dealers’ price proposals will often be stated as “X dollars over or under whatever the invoice price is at the time of delivery.”
• The cash incentives and/or cut-rate financing offers will usually be those in effect when the vehicle arrives, not the ones in place when you place the order. But some car companies may give you the most favorable of the two offers.
• The dealership may ask for some “earnest money” as an expression of your good faith, assuring them that you will buy or lease the car when it arrives (and they won’t be stuck with interest carrying charges on a vehicle they didn’t want in their inventory). $1,000 is typical. Don’t write a check. Put it on a credit card, so if the deal falls through you can dispute the charge.
• There’s always a cut-off date for ordering a current year’s vehicle. That will differ from model to model, as the arrival dates for the each new model year’s cars are spread widely over the calendar year. I get new and updated pricing weekly. There are over 430 pricing files. I’m typing this on Sept. 19, 2015 and already have 242 files for 2016 models, 95 of which arrived by mid-June.
However you decide to proceed, keep these fundamental facts in mind
1. You are shopping for a commodity. The vehicle you want, configured as you want it, is the same car with the same price structure at every dealership selling that brand.
2. You’ll always get the best deal on any commodity by having several sellers compete on price. That’s the only negotiating leverage you have. There is zero leverage in walking into a car store and haggling. Only a solid gold-plated fool does that.
3. The dealer invoice price is an inflated imposter that has had nothing to do with any “true dealer cost” for well over a decade. Before the Internet arrived, there was a 15% to 20% gross profit built into the MSRP. Today the average is 6% to 8%, with many vehicles at just 3% to 4%. And that’s assuming you pay the full sticker price. (Who does that? Only the guy who thinks Taco Bell is a Mexican phone company.) But every car store has a 10% to 15% overhead expense, and they’ve got to make a profit on top of that to get a decent return on their multi-million dollar investment. Anyone who’s spent one day in Retailing 101 would look at those bogus invoice prices and fall over laughing.
4. So what’s it worth to have a “target” or “right” price in mind that’s based on either “what others have paid” or a phony assumption of “true dealer cost?” Zilch!
It’s lonely being the only one telling you the truth about the second most expensive purchase you make. I’m also the only new-car information source that takes no revenue that comes from car dealers or automakers — something Consumer Reports can’t claim.
I hope you’ll visit me when I have to join the witness protection program?