Using Game Theory to Buy a Car

Here's an interesting approach to buying a car, created by Bruce Bueno de Mesquita, a professor of politics at New York University and a Senior Fellow at the Hoover Institution at Stanford University. The professor says he has used his method "to buy eight or nine cars in the past, saving myself thousands of dollars."

It works like this: He first decides on a make, model, and trim. The he gets on the phone and calls every dealer in his area and gives them the following spiel:

“At 5pm today, I want to buy a car (Mazda, Ford, Fiat, or whatever). I am calling every dealership within a 50-mile radius of my home and I am telling each of them what I am telling you. That is, I will come in at 5pm today with a cheque to buy a car from the dealer who offers me the best price.”

A few dealers tell him to take a hike, and that just means his technique really works. Most dealers will give him a quote on the phone, because they don't want to lose a sale. He writes the price next to each dealer on his list, and when he's done, he heads over to the dealership with the best deal.

The author of this article in The Irish Times put Professor Bueno de Mesquita's technique to the test, and saved €2,450 off the opening price on a used car.

I've written about buying cars on CreditBloggers in the past: See Car Dealers' Tricks -- and How to Dodge Them. My favorite method is to use a car broker, who basically does what Professor Bueno de Mesquita recommends. I pay him a few hundred dollars for the service, which is well worth it for me.

By the way, Credit.com offers a wealth of information about buying a car and about auto loans through Credit.com's partner company.

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.