New Car Pricing Data From Offers On CarWoo

I recently purchased a three year old car, and when researching how car dealerships work, it seems like the pricing for used cars is substantially different than new cars, making used cars much harder to make sense of.

With new cars, you're dealing numbers that aren't impossible to come buy -- MSRP, dealer invoice, holdback, buyer incentives, and dealer incentives. With very few assumptions, it seems like you can figure out approximately how much money a dealer stands to make off your purchase (not including upsells or finance incentives) and you can figure out their bottom line, which improves your bargaining power.

With used cars, from what I've gathered, dealers are buying these things from off-lease auctions and then use some sort of networked system that changes used-car pricing in real-time. But the pricing is still all over the place from dealer to dealer and the amount of money paid by the dealer at auction is completely unknown.

When I negotiated my car, I did a simple search of the +/- 1 year, make and model in a 100 mile radius of real ASKING prices (not pricing guides like Edmunds or Blue Book, who, by the way, the dealer was VERY quick to start quoting because they're quoting prices in the dealer's favor). The spread was nearly $10,000 and even isolating mileage to a smaller range produced a spread of several thousand dollars.

I wanted to test out negotiating techniques when I actually went in to buy, so the first day, I negotiated through several rounds, finally landing on my bottom-line price and it was soundly rejected without the "sales manager" even bothering to meet me. During negotiations, I presented no data to back up my price, but was claiming to have done the research.

I went in the next day and I brought in actual print outs from other dealers, took a lower-end price, marked it up a bit, told them that it was a reasonable price and from my estimates they'd still be making reasonable money off of it. If that deal wasn't accepted, I had alternative dealers to work with and would also consider other brands (this tactic, I thought, was good because the brand wants to rope in younger buyers to try and turn them into lifelong customers). They accepted it without any substantial pushback and it was less than the price they had refused to accept the previous day.

It is important to remember that a middleman service operates either on a flat fee or a commission. This is money the dealer cannot use to negotiate down with you. I do not know CarWoo's sales structure, but TrueCar makes 300-400[1][2] per sale. So if this is data based on CarWoo deals it will not reflect the best deals, because the cars all had to include this price. Now, that said most people are not prepared or comfortable buying a car or negotiating. Given that you get some degree of anonymity and can haggle back and forth online is nice and you are paying for the convenience. Many people will likely save more money than if they tried to do it on their own.

This is an application of the wisdom of crowds to determine a market price. It is a good indication of what the market is willing to pay, but not the best deal you can get. Savings as a representation of MSRP are misleading; think about how many things you buy off the shelf and the price is usually much less than MSRP for any number of per-store pricing or sales, coupons, etc. Car buying is no different.

In the case of the model I am looking for, the CarWoo price is close to the two offers I got on CarWoo, but the offers I got directly or through my bank are much lower( Best Direct quote I received was through my Bank's no haggle direct car buying service, which is about 7% lower than the CarWoo average).

Mean averages on their own are not very helpful in evaluating offers, perhaps if we saw a distribution or standard deviation? Prices over time (later in the model year should higher prices be used in the average, are they still relevant or should they at least be weighted?) would also be good for the car buyer.

I also have a hard time believing CarWoo would publish this information if it were not in the best interest of their customers (the dealers, car buyers are the product). Therefore, I would be lead to believe that this data only serves to keep buyers from trying to negotiate lower rates based on the average. Then again, maybe a tech startup has not yet considered this and just thought it would be cool to share data and be transparent.

It's a cool service and it's probably a good fit for many people. You could also just create a new email address and use a google voice number for privacy reasons. At any rate, I would advise you to do your research and try every tactic and service you can to optimize your wallet spent and time spend.

[1] http://www.dealerelite.net/profiles/blogs/true-car-and-zag-c... [2] http://www.thetruthaboutcars.com/2011/12/truecar-versus-hond...

The data that would have been valuable in showing the value of carwoo is how its price compares to what non carwoo buyers who negotiate on their own pay, or even the no-haggle fleet pricing which is available via AAA, Costco and others.

eBay Motors: http://www.ebay.com/itm/Honda-Accord-EX-2008-honda-accord-ex...

Carwoo: http://carwoo.com/new-car-prices/T85363842-2014-mazda-mx-5-m...

[1]: http://pages.ebay.com/motors/buy/purchase-protection/index.h...

Looks like the "I prefer to be contacted through email" selection is broken...

Or

NYC area car dealers are extremely pushy and brazenly ignore said request...

;)

This caused an immediate disconnect when I looked up the price of the Ford Explorer. The discount percentage averages out to 10.4% but the Infiniti is instead shown on the front page at with a 7.1% discount.

Also, I would add a "by Discount %" sort to the table, since that is a sexy driving factor in how I process the page information.

Hope this helps!

That was it. No communication from CarWoo, no tips on how to get more offers. Just a scummy offer from yet another typical car sales guy.

Having now gone through the new car buying process, I can confidently say that it is "ripe for disruption" and somebody needs to level the playing field.