In December of 2006 my wife and I had an experience with new/used cars that we'd like to share with everyone. My there be lessons learned here.

Originally Posted on my personal blog on Tue 12 Dec 2006. Moved to ConnectorLocal.com for more visability.

We're considering replacing my wife's car and visited a Mazda dealership over the weekend. We found a 2006 Mazda 3 Sport Hatchback demo vehicle with 14,000 km. It was in excellent shape and had all the fixings (moon roof, manumatic transmission). The only reason we didn't buy it was because we weren't big enough suckers for the dealership.

Here's the offer we made for the car-- do you think it was fair?

UPDATE: We originally thought that Mazda marked up their vehicles by 12-15%. This information came directly from the Lemon Aid Guide to New Cars. I turns out that the true markup is only about half that-- 6-7%. I confirmed this three ways. First a dealer told me the exact "DEALER invoice" price which I then confirmed using CarQuotes.ca. Lastly, using my anonymous connections I was able to verify the dealer's price one more time. Since all three matched to the last dollar, I'm confident this is true.

I won't update the numbers below because the story is about the offer we made.. not the one we really should have made. This might explain the rejection of our offer as well.

In closing, I've posted a story shortly about using a fax/email bargaining technique that ultimately saved us $1000 off of our new car. We included the 2007 Mazda 3 in this process and most of the dealers we dealt with were fair and honest. The dealer we made this offer to was from the east side of the GTA.(End Update.. back to the story.)

They were asking $24,595CDN but were willing to waive the freight charges, pre-delivery inspection fee, air-conditioning tax and tire tax that would have been added to a brand new car. This adds up to about $1800 and would have been on top of the asking price.

However, they didn't account for the fact that the car had been on the road for 11 months, had accumulated over 14,000km on the odometer and was nearly 1/3 into the warranty. So we did.

After reading about demo vehicles in Phil's Lemon-aid guide as well as on a few reputable new-car-sales-watchdog sites we concluded that the going rate for loss of warranty was about $100 per month the vehicle has been on the road. Therefore we subtracted $1100 from the asking price.

We also did some research to find out how the mileage* should affect the price. We couldn't find any single concrete source, so ended we up using two common figures in combination. The first was that demo vehicles should typically have about 7000km/year (unless the sales people used them for personal vehicles). The second was that the corporate reimbursement rates for travel usually include about $0.10/km for "wear and tear" on the car (the rest is gas, insurance, maintenance etc). Therefore we subtracted $0.10/km for every km over 7000 (personal use that shouldn't be our problem). This worked out to just about $700.

Lastly, since the dealership was insistent on selling it as a "new car," we were insistent on negotiating the price as if it was a new car. Our research suggested that new Mazdas are typically marked up by about 12-15%. We set out to keep a solid 10% of that markup.

Here was our final offer:

$24,595   The asking price
$300      Misc fees we didn't want to argue about
-$1,100   $100 for each month of warranty that had expired
-$700     $0.10/km over 7000km
------------------------------------------------
$23095
-$2309    (10% off)
------------------------------------------------
$20786    Final offer (obviously we'd pay PST and GST on top of this)

We submitted this offer to the dealership on Sunday via email and phone and got a call the next day. The basic gist of their response was "It's a bit low as is, but in general it's fair. However, we know we'll be able to sell it at just under the asking price so we don't need to sell it to you. We can wait." That's their decision and I understand the value of waiting. All in all the whole thing was enlightening and the only part that rubs me the wrong way is that some other person out there will pay more than they should simply because they'll be bigger suckers than us. I sure hope no one pays sticker price (for any car... ever).

Anyway, that's my story. How was your weekend?

* Regarding "Mileage": It's strange that we still use this word in Canada.. but kilomerterage just seems so wrong.

Since this article is a transfer from my personal blog, here is a summary of the comments that used to apear there... Maybe they will get the discussion going again here.

  • Demo cars are almost always abused and generally are a bad purchase. Same for ex-rental cars.
  • Some people were angry that they had bought "new" cars that had less than 100km on them. An argument ensued about "used" vs. "new" and it ended up with a general agreement that anything under 200km was reasonable as "new" since the dealers had to be able to move the cars around their lots as well as off of trucks etc.
  • My wife and I ended up buying a 2007 Hyundai Elantra and generally love it. There are some cheap parts, and the dealer service people aren't great, but in general we're happy for the price we paid.