Recently, the wife and I found ourselves in the new vehicle market. New for me is a used vehicle. New for her is brand new. Either way, dealing with a car salesman can be tricky, frustrating, and downright fun if you arm yourself with the proper knowledge. I will be describing our recent experience in detail below followed by some helpful tips that you may or may not know. Please add any helpful ideas you have in the comments so that we can educate the consumer and stop them from being consumed.
Car #1 2013 Turbo Beetle. Found a vehicle the wife just had to have. Internet price was a good one and it offered 0% for 60 months. Thing is, unbeknown to us, this was an either or special. First off, the offer way less on trade in than it was worth. Second, they threw out a price on the car that didn’t match what we read on the internet. “That price is without 0% interest financing.” From my calculations, there was a $4,500 difference between what they were offering and what we were willing to accept. I told him the price I was willing to pay and how I calculated hold back and showed him NADA trade in on my car. They realized that they didn’t have a sucker on their showroom floor. He went to run the numbers again and came back with a lower price on the car and more money on the trade in. He closed that $4,500 gap by over $4,100 dollars. That’s right. If we would have said “OK, we’ll take it” they would have made over $4,000 more profit off of us.
Phase two, financing. I went in this fellow’s office with a paper containing all the prices we figured in the showroom and exactly what the monthly note would be. There are four ways to get over on you at a dealership-trade in, sale, financing, and the insurance policy. They failed on the first two, 0% was the financing rate, so they only had one more chance to get over on us; the insurance. When we got to his office, he went through his whole sales pitch on dent protection, towing, repair costs, etc... When he was done, he just implied that we were going to get the insurance and started typing away. I said I did not want it. He tried talking me into it and I stood my ground. “Well, I have to get authorization to get this taken off the note.” They had already attached it on thinking I was just going to give in.
Here comes the financing manager. He starts in on why we should get this insurance and I am still not budging. He starts getting mad and pounding the key board fiercely. I have never been so pressured into buying anything in my life. This guy was unbelievable. He looked just like Principle Rooney from Ferris Bueller’s Day Off and about as mad. He was telling me all sorts of baloney about how my insurance wouldn’t cover damages and the cost of service to the vehicle. Ridicules I tell you.
I could see how an uninformed shopper would be taken advantage of. They will get you any way they can. Another note about the financing guy, he mentioned that the insurance was only $30 more a month which would put the note at such-n-such a month. That was about $70 more than what it should be. How is $30 a month insurance adding $70 a month to the note? I told him what the note would be and he just kept typing away saying something about the new program or what not. They had inflated the price per month from the show room to the financing room. I tell you, if I hadn’t enjoyed getting over on them so much, I would have walked out just on principal. These cats were trying to screw us every time we turned around!
Car #2 2000 Corvette. I have always wanted a Corvette and decided to finally get one. I had a 2003 Tahoe Z71 that I wanted to sell before getting the car though. I had no use for both. I use NADA and KBB to establish the value of my vehicle. It came in at around $11,000 retail and about $9,500 private party. I was offered $3,500-$5,000 on trade in at multiple locations. Trade in was at about $9,000 according to my sources. I refused to take that big of a hit so I decided to sell it out right. After a couple of months of using several free internet websites posting the Tahoe for sale, I finally sold it in my front yard for $7,200. I started off at $9,500 and worked my way down slowly to $7,500 asking price and settled on $7,200. After looking around at what other comparable vehicles were going for, this price was not that bad. The local market was that much lower than the sources I was using. No matter what any site says something is worth, it is only worth what someone is willing to pay you for it.
Used cars are a lot simpler to buy. It is pretty cut and dry. You can’t access their invoice before going to the lot to know what they paid for it. They have an asking price and you negotiate from there. Do your homework and find out what it is worth, how much they are selling for in the area, how much individuals are selling them for versus dealerships, etc… I was looking for a unique vehicle with a criterion of low miles. I only found three vehicles in a 200 mile radius that met my requirements of miles and price cap. I drove to West Houston, 150 miles or so, to get it. With no trade in, it was a fairly simple transaction. I did get the internet special price which knocked off a couple of hundred dollars.
The dealerships go off of what they could get for it at auction for your trade. They pull the sales records of the last month and see what that particular vehicle was getting at auction and then offer you less. Depending on how hard up they are for sales will determine this price below auction prices.
Hold back. A dealership buys a car from the manufacture. The manufacture marks up the cost of the vehicle by a certain percentage (hold back) and sells to the dealership at this new price (this is above and beyond their profit. Hold back is just a way for the dealership to make MORE money in a back door deal with the manufacture). When the vehicle is sold, the manufacture cuts a check for the holdback to the dealership, usually quarterly. That is hold back in a nutshell. There are lot more facets but that is basically how it works. That means that you pay the dealership the hold back amount plus they get the hold back amount from the manufacture. Double dipping in my book; those rat bastards! Each manufacture has its own percentage for hold back. You can find this info on the internet. Also, each manufacture figures the hold back differently. For example, Toyota may figure the hold back at 3% from invoice price. This is prior to any add-ons, destination charges, etc… Others work off of the MSRP. You have to get all this info prior to walking into the dealership. For the last two new vehicles I was involved in buying, I got the car for invoice minus hold back. A substantial discount from the asking price or the MSRP. Do yourself a HUGE favor and read up more on hold back.
Shop at the end of the month. Everyone has a quota to meet. From the salesman on the floor to the manager of the dealership, they have a certain number they must meet. If sales are slow, they will deal more in your favor. They would rather the sale and smaller profit than no sale at all.
Always get a second opinion when it comes to your trade and the price of a new car. Shop the internet and find “internet special pricing”.
Shop at the right time of the year. Right before or after the new models role out. Nothing worse than selling 2013 models when the lot is full of 2014 models. They know this and want those units gone.
Always remember that you are in control. You didn’t walk to that dealership and you won’t be walking home. You prefer to drive home in a new car but your old one will do just fine. The “deal of the day” may be gone tomorrow. Oh well, do not buy on impulse or emotion. Always do your homework and know what it is worth.
There are basically four ways the dealership can make money off of you-trade in, sale, interest rates, and protective insurance. Don’t let them take advantage of you because they will.
Resources to better arm yourself with.