INFORMS Open Forum

Please help me make a smart decision. My 2016 Kia Sorento, bought used in 2019, recently experienced engine failure at only 88K miles. Long story short, we'll likely replace it soon. (Side note to Kia/Hyundai owners – Google engine problems if you don't already know.) 

My husband and I were talking about our options, and he commented that he wanted to make a "data-driven" decision. I said, hey, I happen to know a few thousand people who do that!

As a data expert, when you go shopping for a car, how do you approach the decision? What do you do that the average consumer wouldn't think of? Can you recommend any tools or resources?

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Tracy Cahall
Member Engagement Manager
INFORMS
Catonsville MD
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Hi Tracy,

  Given where we are with car inventories not anywhere close to what they were pre-COVID, negotiations will be tough. What I've read is that inventory may be better by late summer. My go-to has been: Fighting Chance: Your Customized Solution to Getting the Best Car Deal. You have no negotiating power (despite what the they tell you) at the dealership. Try to do as much as you can beforehand including researching your vehicle, dealerships, and financing. And, you can always walk away, too. Good luck! Keep us posted on how it goes.

-Murray 

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Murray J. Côté
Associate Professor
Texas A&M University
College Station TX
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Hi Tracy,

My approach is to handle most of the negotiation via email. This is assuming you know the car you want. So the first thing to do is to find out the make and model of the vehicle you are shopping for. Check if the make and model has active recalls for repairs. You can find that information online. The number of recall campaigns can be a good indicator of the quality of the vehicle.

Once the vehicle is selected, you can contact the dealership(s) and ask for a drive out price for the vehicle. This will be the final price of the vehicle with taxes etc. This will be the amount you will be financing. This is the number you will use to compare vehicles and to find the best deal. You can also use this number to negotiate between dealerships. 

Shopping towards the end of the month will give you the best deals. During that time sellers are more likely to work harder to get your business if they need to meet their quote. Also, ask for the VIN number and run a car fax for used vehicles. Finally, if you are shopping for a Japanese vehicle, I would look for a vin number starting with J. Those vehicles are manufactured in Japan and typically are more reliable than those manufactured in other countries. Good luck!

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Eduardo Perez
Associate Professor
Texas State University
Kyle TX
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Original Message:
Sent: 02-23-2023 09:31
From: Murray Cote
Subject: When data professionals go shopping for cars…

Hi Tracy,

  Given where we are with car inventories not anywhere close to what they were pre-COVID, negotiations will be tough. What I've read is that inventory may be better by late summer. My go-to has been: Fighting Chance: Your Customized Solution to Getting the Best Car Deal. You have no negotiating power (despite what the they tell you) at the dealership. Try to do as much as you can beforehand including researching your vehicle, dealerships, and financing. And, you can always walk away, too. Good luck! Keep us posted on how it goes.

-Murray 

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Murray J. Côté
Associate Professor
Texas A&M University
College Station TX
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Thanks for initiating what I hope will be a very interesting discussion!

I believe most people, including data scientists, don't make full data-driven decisions about cars. Emotions associated with things like style preferences tend to drive decisions and choice of colors. BTW, I learned that for a given model, year, and mileage, used care resale prices are better for black, white, and silver cars.

You might start by listing the factors that mean the most to you and then weight them. Include things like style along with qualitative and quasi-quantified factors like ride comfort, noise, and reliability found in Consumer Reports, for instance. Rate a few of your top possibilities according to this method and see how they do.

As a second step, perhaps as a sanity check, you might estimate the total cost of ownership for your top choices. I think this is a good measure, since it takes into account things like purchase price, resale value, financing cost, operating cost, insurance, property taxes, and maintenance. Most of these are readily available data, except maintenance. I personally like to buy an extended warranty on my cars, usually for 7 years and 100,000 miles. I know this will cost me more than I would likely pay for maintenance, but I feel it has peace-of-mind value. The cost of such warranties varies significantly by manufacturer and model. I think it's a good indicator of expected maintenance costs.

After combining these two views, it will be interesting to see if data makes a difference in your final decision. 

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Norm Fujisaki
Broadlands VA
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Hi Tracy,

This thread is particularly interesting for me, because we provide decision intelligence for car dealers.

Here's an outline of a buying decision process:

1. Rough-cut analyses to select a set of models that you would consider driving. Build your criteria-set. Use publicly available data to create consistent scores.
2. Test drive the selected set of models, to find the models and trim-levels that you would buy.
3. Buy-analysis with a criteria-set that allows you to select between the models and trim-levels that you would buy. Price and availability (waiting period) factor into this. The complexity in price is that the vehicle-price is a subset of the total-price-paid. To keep it a 2-dimensional model of options (rows) and criteria (columns), suggest expanding the options (rows) to be like Model-Trim-Finance-ESC-Insurance-Accessories-TradeIn so that you can score the effects of different financing and extended-warranty options. The dealers make profits in all these pools, so your negotiating position with dealers becomes better if all these factors are in play (e.g., if you have financed and insured elsewhere, they don't have leeway to reduce your vehicle price and gain profit from financing). It's useful to have your options prepared so that you can distinguish between reasonable & unreasonable offers.

Car dealers are used to people prepared for negotiations about vehicle price, but unprepared for (i) model-trim selection (therefore discussions single-thread on a selected vehicle) and (ii) add-on discussions, making it on-the-fly (and stressful) negotiations about the plethora of Financing, Insurance, Warranty, Accessory, and Trade-In options. You should, for example, know how much down-payment and what monthly-payments you can afford.

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Rahul Saxena
FrogData.com
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Hi Tracy,

This online tool by Market Insight Corporation (MIC) at the link below might be helpful... It's market-data-driven. I used to know it as "MyProductAdvisor" (going back to 2005 or so / during my US years -- I'm now hailing from Australia)...  Seems there have been some changes/upgrades to it, plus an auto-specific name given.

Disclaimer : I'm not --and have never been-- part of MIC.

All the best,

Ercan Tirtiroglu

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Ercan Tirtiroglu
Professor Emeritus
Campbelltown SA
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