A New Service Works Used-Car Angles To Save Consumers Money
Carsala Thrives on Your Dread of Negotiation
When Linda Wilson's car was hit by a dump truck, she had to buy a new set of wheels fast. She wasn't a big fan of the car-buying experience and knew she wasn't much of a negotiator. So Wilson turned to a used-car buying service called Carsala.com.
After she registered at the Carsala Web site, the company assigned Wilson a negotiator who helped her through the process. Jude Carter located a car, negotiated the deal and set an appointment for Wilson to take possession of a 2007 Honda Accord at a dealership in northern New Jersey, near her home. Ultimately, Carsala saved her time, money and hassle, Wilson says.
"We had so much fun doing this together," Wilson says of Carsala's Carter. "He spent hours and hours. It was money well spent."
Carsala is the latest entrant into the car-purchasing business, which exists largely because people loathe the game-playing and stress of buying from a dealership. In the past, only car brokers worked this territory, buying cars for clients and charging a fee to the dealership — something the buyers didn't always know about.
But with the arrival of the Internet, this market has expanded to include "car concierges" who charge a set fee to the buyer, promising it will be more than made up by the savings they get on the car. Carsala plays in a specific part of this landscape: It charges buyers to locate and negotiate for used cars from dealerships.
Carsala operates nationwide and caps its fee at $399. To start the process, a consumer provides a credit card and Carsala places a $100 hold on the account. It assigns one of its negotiators to consult with the customer about what used car to buy. (Used cars are Carsala's specialty, but the company will also help buy new cars upon request.) The negotiator locates a number of prospective vehicles, presents them for review and negotiates for the car the customer chooses. The customer then goes to the dealership with a preapproved deal, signs the contract and drives away. Carsala charges the customer 20 percent of the savings, based on the difference between the dealer's asking price and the final negotiated price. But the fee will never be more than $399, Carsala says.
Carsala CEO Tyler Elliston created the company in 2008, following his own troubled car-buying experience. Although he says he doesn't mind negotiating, he had found the search process frustratingly time-consuming. While doing research, he determined that a car's time on the lot was an important factor in pricing. He compiled a list of cars, reverse-ordered them based on their on-sale date and began making calls. One Missouri dealer was so desperate to sell a slow-selling car that he shipped the vehicle to Texas, where Elliston lived.
"I was in graduate school at the time and I was looking at different business opportunities where technology could fundamentally change things," Elliston recalls. "I thought, 'If you could scale my experience and use technology the way I did, that would be really powerful for locating used-car bargains — and it could be the model for a business.'"
Elliston sent out an e-mail to 50 family members and friends. From those e-mails he did 20 deals over the next six months to test his plan.
Elliston says many people think that Carsala essentially is a car broker. But there is a fundamental difference, he says. Brokers are really external salespeople. "They are getting their commission in the form of a fee and they are sourcing their cars from their buddies who are selling cars," Elliston says. "They won't necessarily get the best deal for you."
Case in point: Jim Strawbridge asked a car broker to find a used car for his teenage daughter, Sarah. Weeks later, the broker said nothing was available locally. Strawbridge turned the search over to Carsala, which found a 2005 Volvo S60 only 10 minutes away.
The Carsala concept focuses on a little-known aspect of the car business: the profit possibilities of used cars. Dealers acquire them at very low auction prices or they lowball owners on the cars they trade in. They then give the cars a quick detail and raise the price to whatever they think the market will bear. Carsala's three staff negotiators — all former car salespeople — exploit the dealer's buy-low, sell-high strategy to the benefit of their customers.
David Jacobs was shopping for his dream car, a 2008 Porsche 911 Carrera S Coupe, when he found one in Northern California that he thought he wanted. Carsala negotiated $5,000 off the asking price of $77,000 and prepped Jacobs for the dealership visit. Ultimately, Jacobs passed on the car because he didn't like the color. But he did like Carsala.
"They knew the pricing of the cars, what the dealers bought it for at auction and what to expect in terms of bargaining," Jacobs says. "When I didn't buy that car, it wasn't a day before they gave me about 30 alternative cars for me to review."
Ralph Holstein, a contractor who lives near Colorado Springs, says Carsala helped him find a 2007 Toyota Sienna XLE with all-wheel drive — an extremely rare car in his snowy, mountainous state. He saved several thousand dollars, which he termed a "spectacular deal" in his area.
Mike Rabkin, president of another car buying service From Car to Finish, says that having a professional negotiator is valuable — as long as it's someone who knows his stuff and knows who to talk to at each dealership to get the best price possible.
Carsala negotiator Carter, who spent seven years selling General Motors and Honda vehicles in Michigan, says he definitely remembered working with Linda Wilson to get her the Honda. He says he's glad to be working on the consumer side of the sales equation.
"I'm still in the car business, but I get to help people," he says. "I'm one of the guys who wants to be able to look at himself in the mirror in the morning."
Not every car buyer will see the value in using Carsala or a concierge car-buying service since it involves paying someone for something that (in theory) you could handle yourself. A few questions can help sort out whether such a service would make sense for you:
- Are you short on time? Experts find, negotiate and present a prearranged deal. All you have to do is make the final choice of a car, give your approval and go to the dealership to sign papers. This could save 20 hours or more.
- Do you hate negotiating? If so, that's a good reason to use a service like Carsala. Elliston said Carsala's negotiators often save buyers $2,000 or more, making the $399 fee well worth it.
- Do you know the automotive market? If you don't follow it, a car concierge service might make sense for you. These experts know the entire car market, including newly introduced models. A consultant could find a car that better suits your needs than the one you think you want.
- Can you spot a bargain? Some people like scanning Web sites and lists of classifieds, searching for a gem. If you don't enjoy the hunt, it might make sense to have an expert handle it. He'll know what to look for and what the likely selling price will be.
- Do you know what to expect at the dealership? If you don't, experts can prepare you to take delivery of the car without making any last-minute mistakes, such as being drawn into buying extended warranties or alarm systems.
