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When I bought my used Mini Cooper in April, things didn’t go exactly as I’d planned. Part of this was because I hadn’t done enough research. But a lot of it was because the dealer had some tricks up its sleeve and I did not.
At Car and Driver, Jared Gall has compiled a list of car dealer tricks to watch for when buying a vehicle. He says that the following are common practices:
- Juggling the foursquare. The “foursquare” is the worksheet on which the salesperson jots down the terms of the deal. It’s an easy way for her to manipulate one factor (purchase price, down payment, monthly payments, trade-in value) or another.
- Profiting from rebates. Gall warns that salespeople often use the presence of a rebate to manipulate buyer psychology. Don’t let that happen to you.
- Inflating payments. The more you’re willing to pay each month, the more room the salesperson has to work. The article recommends ignoring the question of monthly payments until you’ve negotiated the price of the vehicle.
- Fees and extras. “If it’s anything he offers after you’ve negotiated your sales price, you don’t need it and shouldn’t pay for it.”
- Interest-rate bumping. Gall recommends shopping for your own financing before you shop for a vehicle. He also warns that “it is not uncommon for the dealership to secure financing for you at one APR but offer you a rate one percentage point higher — and then pocket the difference.” Be careful.
- Altering the bill of sale. Some dealers will leave the contract open-ended. Don’t allow this. Don’t sign anything with blanks or undefined terms. Be sure the paperwork is complete before you leave the lot.
Gall says there are several other tricks that dealers use, though these are especially underhanded. “If a dealership pulls any of these stunts on you, it doesn’t deserve your business,” he writes.
- Ransoming your check.
- Eavesdropping.
- Lying about your credit score.
- Misplacing trade-in keys.
For more information on these tricks and how to cope with them, check out the full article at Car and Driver.
The dealer trick that got me isn’t on Gall’s list. When I went to look at my Mini Cooper, I was greeted by a young man who’d only been on the job for two weeks. After I test drove the car, we sat down to negotiate. I talked him down from $17,000 to $15,000 and was very pleased with myself. But then he fetched the “closer”, whose sole task was to talk me up from that $15,000 number. I had essentially told the dealer how much I was willing to pay, and the closer was there to get me to pay more. And I did. I paid $15,600.
The young salesman did a follow-up call a week after I bought the car. He was doing a survey to ask me about my experience. I told him it was fine except that I didn’t like dealing with the closer. I felt like I had been manipulated by him. “Yeah,” he said. “You shouldn’t listen to him. He talks a lot, but he’s full of shit. He wants to sell that car. You had more power in that situation than you think.”
Lesson learned.
June 23rd, 2009 at 5:19 am
“He talks a lot, but he’s full of shit.”
That describes just about every successful sales person I’ve ever met. And I mean that in the nicest way possible.
The most effective way to deal with them is to get out of your seat and head for the door. The only thing that will change their tactics is when they realize, “oh crap, I’m about to lose this sale.”
June 23rd, 2009 at 5:26 am
Remember, to offset the dealer’s asymmetrical information balance, the internet is the dealer’s enemy, and your friend, when buying a car. If there’s any way for you to have internet access while at the dealer, do it (bring a friend with a laptop if you don’t have one). You can check prices on similar cars at other locations either online or by calling, you can check for rebates so you’ll know what the dealer should be able to offer, you can shop interest rates, and you can read reviews of the dealership and tactics dealers may be using on you in real time. It definitely gives you something to do when they’re “icing” you in the sales booth.
Having said all that, remember that the biggest power you have is the power to walk away. Never show up at a car dealer needing to buy that day.
And don’t blame the dealers - it’s their business model to get the maximum profit from each deal. Underhanded (or illegal) tactics aside, if you don’t enjoy negotiating, get someone else to do it for you (Costco, USAA, and many other car-buying services exist).
June 23rd, 2009 at 5:38 am
I’d like to know how he talked you into paying $600 MORE than you already negotiated? Please give us a few more details about that so we can avoid it ourselves…
June 23rd, 2009 at 5:44 am
Car salesmen hate me! I do three things (besides the obvious things like doing your homework on the car and being willing to walk away, etc.) that give me the power:
1. I never use dealer financing. I call my credit union and have the loan pre-approved at a very low APR before I walk in. I refuse to discuss payments, only the price of the car.
2. I never trade in. I sell my old car, or usually keep it until it’s junk. (Obviously I don’t buy a lot of cars!)
3. I refuse to negotiate anything but “on the road price”. This is what really infuriates them. I demand that the car be priced with everything, taxes, filing fees, the whole works and then negotiate from there. Many refuse and I walk out. But most will do it that way if they want to make a sale badly enough. That eliminates playing with the numbers, adding on crap after the price has been negotiated, etc.
My method demands patience on my part. I look at it as a game and enjoy the process. It won’t work for everyone, but it has worked well for me.
June 23rd, 2009 at 5:48 am
@Martin: This is why I avoided any face to face interaction with a dealer until the last possible moment. Why even go through the effort of playing hard to get in person?
Before I had even stepped foot in a showroom I e-mailed every Honda dealer in the area for a quote, and then took the best quote back to all the others (this happened for a few rounds) until I had reached a bottom.
THEN i came in, e-mail in hand, ready to test drive.
June 23rd, 2009 at 6:11 am
And car salespeople wonder why they’re hated by most of the population!
The fact is, most of these tactics are in use by any number of retailers. Preparation is the key … and the willingness to walk away from any deal that starts to go in a direction you don’t want.
Hint: read Secrets of Power Negotiating by Roger Dawson. That book is worth thousands of dollars in what it can save you!
June 23rd, 2009 at 6:13 am
Michael (#3) wrote: I’d like to know how he talked you into paying $600 MORE than you already negotiated?
It was a thing of beauty on his part — or a thing of idiocy on my part (or both).
After looking at the car and test-driving it, I sat down with the young salesman and we went through negotiations. His rebuttals and counter-arguments seemed week, which I attributed to him being on the job for just two weeks. He had a piece of paper on which he wrote the figures we were discussing. When we got to $15,000, he told me he’d go get his boss.
His boss came out and shook my hand and looked at the piece of paper. He told me he was glad to hear that I wanted the car, and that he was here to settle the price. I told him I thought we’d just done that. He smiled his smarmy smile and told me that yes, I’d been discussing possibilities with the salesman, but that he could not possibly sell the car for less than $16,500, and that the salesman had no authority to set a price. He had just been trying to get an idea of what I could pay.
I was dismayed, but by this point, I had already been sold mentally. After I “bought” the car at $15,000, I felt ownership. I was emotionally attached. I wanted to fight to get the closer down to $15,000. But it was impossible. He was starting back at his original point ($17,000), and I was now starting from $15,000. I couldn’t say, “No, I’ll only pay $14,000″ because I’d already admitted I would pay $15,000.
In retrospect, I should have got up and left. But I didn’t.
Fortunately, I do not regret the purchase. I love the car, and I feel like I got a fair deal. But it really would be nice to have that $600. I think of it as payment for a life lesson.
June 23rd, 2009 at 6:14 am
To avoid all this, because it is real and many of those things do happen, I plan to do my homework, then buy from private individuals. I know I will save money that way, and I can save to pay with cash, or get my own financing. I wouldn’t have any qualms test-driving some cars though at dealerships, to help me decide which one to buy, but not from them!
June 23rd, 2009 at 6:18 am
I think you’re looking at a unique situation with your Mini vs. the average purchase. Most people are buying transportation and they can follow strict rules about not being sold on the car before they walk on the lot. In the case of someone shopping for a specific car, you’re going to end up paying a little more to get what you want (though with patience you can still avoid being taken for a “ride”).
After I climbed out of debt and resigned myself to mundane daily transportation I was able to save up and pay cash for a shiny new Toyota Corolla. Any efficient and affordable sedan would do and my only requirements were reliable, manual gearbox, four doors. I had a lot of power. I walked out of several dealerships when they wouldn’t agree to my price. They all wanted the big four square worksheet so they could pad their profits. With me, selling my old car meant that box was out. No financing meant that square was out. Refusal to buy things like rust-proofing meant that was out too. So much for their power!
Bringing your own financing (if you aren’t a cash buyer, ugh) is great advice. It seems like everybody I know who does this winds up with a dealer who finds and equal or even better rate (so they can get the fees, kickbacks, etc).
Last summer I decided I needed a fun car for the weekend, a toy. I decided on a lust of my youth (I’m not THAT old) and went looking for a used Pontiac Fiero. I wanted a specific vehicle. Red or Black, final model year, 5 speed, T-tops preferred but would settle for a sunroof.
So much for having power. I still didn’t pay much but when I finally found the car I was looking for it was clear that I wasn’t going to break the guy. He knew what he had was appealing to a lot of specific people (as was the case with your Mini, JD). Still, because I had saved the cash and really kept my financial house in order–this wasn’t a big deal. I ended up paying $9,800 for it after my first offer of $7,000 was rejected. He was asking $10,500 though so I managed to get him down enough to cover sales tax and registration.
@Ryan: The email quote suggestion seems like a good idea. If I ever wear that Corolla out I will have to try that. Did you tell them all you were emailing several dealers for a quote and planning to visit the one who gave you the best offer?
June 23rd, 2009 at 6:19 am
When I bought our Car, i did my research and then fax-bombed all the dealerships in our state. I took the best offer to the dealership nearest us with the best reputation, and asked them to beat it. Further, I had a check filled out with the amount I wanted to pay. My pitch was that all they had to do was put their name on it, and its their’s. It saved me alot of hassle of the pressure sales after the sale and paperwork, though I did nearly walk out because the sales manager didn’t think I was serious at first.
Carbuyingtips.com is an excellent resource to use when you are considering buying a car.
June 23rd, 2009 at 6:19 am
Other tips:
1. Sell your car rather than trading it in. You’ll walk in with cash and won’t have to take a bath on your used car.
2. I’ll echo the “monthly payment” thing. Never, never, NEVER, NEVER let a car salesman know what you can pay per month. Figure out what you can afford and run the numbers before you walk in, then work on the car price. Because the payment thing leads right to leasing … which leads to #3.
3. Avoid leases like the plague. You end up with nothing at the end of the term, the terms themselves are not subject to the same truth-in-lending as a “real loan”, the APR for the lease is insane, etc. If you can’t afford the payment on the loan, you can’t afford the car (and some would argue, you can’t afford the car if you can’t pay cash).
4. Walk out the door if you don’t like something. Most people live in metro areas with several dealers for one brand. There’s no need to put up with crap.
All that said, I started setting aside money already for my next car purchase … which is probably 5-7 years away. I’m letting compound interest work for me, and I’m paying cash. I’ll likely favor a private party-sale, too, which generally works out best for the seller (who doesn’t take a bath on the trade) and you (you generally get a better price), plus you can look for cars with maintenance records and so on.
June 23rd, 2009 at 6:20 am
How do these people sleep at night? I could never work at a job that requires me to deceive unsuspecting customers all day long.
When I bought my first car, I didn’t know anything at all. They tried to sell me on 7.5 percent interest, telling me it was a great interest rate for someone so young. My dad said to call my credit union, who offered at 5.25 percent, which the dealership quickly offered to match. It’s disgusting.
June 23rd, 2009 at 6:23 am
I the world before computers I did my research by phone. I was in the Army at the time buying my first car. I asked the guys on base which cars they worked on the most what ones seemed to run better and ended up choosing the Toyota. I called several dealers getting quotes. Called my bank, drove to the one with the lowest price along with the “guys on base”. Color did not matter to me.
At that time radio and AC were options.
I began the interaction by asking for the car I was quoted the price over the phone on. It sat the looking pretty and I talked the price down a little. Having three GI’s looking over the beige car at the same time helped. I then was assigned the “closer” here I asked what kind of price I would get if I paid cash. (Now I had the bank check in my purse for the limit I wanted to pay. He proceeded to show me a cash price vs the actual price ($ 350 price difference). I then asked to test drive the car. Yes they had not offered the test drive.
He dug out the keys and proceed to let me drive. Now the car would not start, the battery was dead! I said I wanted to drive the car before I bought it. He offered to let me test the “ugly yellow one next to it” while they charge the battery. He got the keys, I got in and it started, the test drive went well. I said I’d take the yellow one since the beige one was not running. He jumped on my decision to change cars. Proceed to tell me I would have to pay extra for the added on AC, and radio. I said I was not interested in those option he could just remove them.
He said I had to pay for them. I would just have to take the car with the dead battery. I said I would not pay for a car that would not run and probably had an electrical problem since the battery was dead. I actually started to leave before he stopped me.
Needless to say I ended up with the running vehicle for my original quote. They left the radio and AC in as it would have cost more in labor to remove them. I did enjoy the AC but did not use it much as the gas mileage dropped off when it was turned on, and froze any passenger I carried, it was installed below the dash on the passenger side. the radio I used once it awhile but preferred my cassette player, Texas was a big place to drive with lots of open spaces.
This blond likes to think she actually got a good deal. I at least got a good story about buying my first car.
Oh the loan for the car I paid two payments the first month, and rounded up the payments to the closest round number I had it paid off in two years instead of three.
I still shop by phone before I drive and now add in the computer searches. And always rounded up payments. I pay things off early or pay cash. Most of the time cash. (the house is a loan)
June 23rd, 2009 at 6:32 am
I’m approaching the time period when I will have to start looking for a new car. The article & follow-up comments have been very helpful. Completely new to me was Pete’s term “road price”. I really like that concept & plan on working for that. My most successful negotiation was my last one where I had secured low APR financing from my credit union up front & did not have a trade-in. That said, I was taken advantage of when the salesman promised to add on factory cruise control, but when I picked it up, they had installed a cheap after-market one. Since I had made the fatal error of driving it off the lot when the paperwork was done (before the add-on had been done), I was locked in. My next vehicle will have everything I want on it or I won’t consider it at all. And yes, closers are very slick, but finance managers (the paperwork people), they are infuriating. Twice I got up to leave, because the finance/paperwork woman was attempting to bully me & the second time she had to literally run to the closer to bring me back. After that she stopped bullying & in what I can only describe as barely controlled angry contempt, she completed the paperwork. I had heard people advise to go & test drive models & get brochures until you decide on exactly what you want, then leave the dealer. Go home & begin negotiating strictly on the internet or via E-mail until you have the best deal in black & white. One of you suggested negotiating prior to test driving?
June 23rd, 2009 at 6:32 am
another truly dirty trick dealers will play on customers: they’ll claim the trade-in has been sold. this often happens before everything is finalized. they seem to use this tactic on those who are less well informed.
June 23rd, 2009 at 6:35 am
If you find a deal on the internet, print it out and take it in with you. Don’t get it out until they tell you that they couldn’t possibly go below “x.” These tend to be near rock bottom prices, because their focus is on getting you to the lot. Keep yourself armed with that. At that point, they’ve put themselves in the position that JD was in - we’ll sell the car for this, and they can’t make a higher offer than that.
June 23rd, 2009 at 6:40 am
There was a great article on edmunds.com awhile back called “Confessions of a Car Salesman.” It’s under the Tips & Advice tab on their site, along with some other good articles about negotiating. In the “Confessions” article, an edmunds.com reporter went undercover and actually became a car salesman. You’ll learn a lot.
June 23rd, 2009 at 7:03 am
The best way to avoid these slimy tactics is to not buy from a dealer. Save yourself tons of of money and buy used cars from private sellers. Or, save up the cash to buy a car from a dealer. Then you never get screwed on financing.
Unless you are stupid, my step dad works for a BMW dealership and convinced a doctor (who had planned on paying cash for his BMW) to finance it instead. Told him that he was probably making more on his money in savings than he would be paying in finance charges. Unreal. Never mind the risk involved in borrowing and the taxes he has to pay on earnings.
Car salesmen are so slimy.
June 23rd, 2009 at 7:04 am
My favorite story about buying a car is when we had already settled on a price (it had the manager’s signature on it) but the salesman added a sneaky $795.00 charge to the final number. When I asked about it he told me it was for automatic transmission and he knew I wouldn’t be happy with a manual transmission. Huh? The car we were looking at only came in automatic. I told him that and he replied with something about “how did I expect him to make a profit on the amount we agreed on”. It was a filthy dirty trick - I told him that and walked out the door, leaving him and my husband sitting there with their mouths hanging open (the salesman because he was surprised I had caught it and my husband because he wished he had noticed and walked out too). My husband told the guy he thought this would be the last time we would ever shop there and joined me outside. We left and no, we never did go there again, and won’t. We ended up buying a different model from another dealer, and the salesman wasn’t slimy in the least.
June 23rd, 2009 at 7:06 am
I agree with those who say to obtain outside financing first. I bought my Mini new and it was all pretty low pressure except when they tried to get me to use their financing or lease the vehicle. I refused and explained I already had financing in place. I just wanted to find a car I liked.
My situation was a little unusual in that I went to buy one of the new redesigned 2007 models after they had only received their first shipment of them. There were only about 8 on the lot and another 50 or 60 on order. I ended up buying one that was on the boat from England. I had a price negotiated and a deposit on that car before I even brought up the trade-in. We drove to the dealer in my wife’s car (a 2002 Mini) and made it clear that car was not being traded in.
Another thing that was different than others’ experiences here was that they sent the closer out not to talk the price up, but to get me to take one of the cars on order even though they had options I didn’t want. They wanted to sell those cars rather than have me order exactly what I wanted.
June 23rd, 2009 at 7:09 am
When I purchased my car, they agreed to $1000.00 for my trade-in but only put $800 on the actual paper work.
These dirty tricks are why people don’t trust car salesman.
June 23rd, 2009 at 7:10 am
A year and a half ago I bought my first car from a dealer. I had always bought my mom’s old car from her when she got a new one. Unfortunately, I was in a position where I NEEDED a car immediately. My car was leaking brake, and transmission fluid, and either one of them could go any minute. In fact, when I pulled on the lot to pick up the new car, my brakes BARELY stopped the car.
I had done very little research, and was undoubetdly taken advantage of. I don’t think I came out too bad on the actual car price, according to KBB it was pretty much average price for the car, a Toyota Corolla.
However, I did get suckered into buying the extended warranty for an arm and a leg. After dealing with a car that needed regular, and costly repairs, the idea that I wouldn’t need to worry about it for 3 years appealed to me. Without considering that the amount of the warranty would likely have covered the repairs to begin with, I bought it.
Oh well, I’m considering a “stupid tax”, and moving forward.
One sales trick the deal pulled on me, which I didn’t like, was when I mentioned what my asking price was, he just stared at me for at least 15 seconds. Almost walked out right there and then.
June 23rd, 2009 at 7:12 am
It is crazy how many hoops we have to jump through when buying a car!
Love the follow-up comment from your salesman.
A great book with tips on the process is Don’t Get Taken Every Time by Remar Sutton. It follows a car salesman named “Killer”, and makes for an entertaining read.
June 23rd, 2009 at 7:17 am
I can’t believe that on a personal finance blog there are some many people talking about financing a car like it’s no big deal. Buying new cars is just stupid. Buying used cars on payments means you’re buying too much car and you can’t afford it.
I would think it might be OK to borrow $2-3k for a really basic car in certain situations but borrowing 5, 10, 15 thousand dollars is completely ridiculous.
Seriously, can you do math? Didn’t J.D. save and pay cash for his mini? I think that’s a great story and an inspiration for all the people who think they have to get a vehicle on payments.
June 23rd, 2009 at 7:18 am
I think salespeople will always have the upper hand, mainly because they do this ALL DAY and also have knowledge the customer does not have (like how much they paid for the car). The above suggestions help even things out a little, but I don’t think they can even be even. One other suggestion: go in as a team with spouse or friend. the spouse or friend can be the bad cop. This creates a bit of asymmetry and can also counter the salesperson/closer duo.
June 23rd, 2009 at 7:27 am
It’s a game, pure and simple - you are there to obtain a vehicle while separating with as little cash as possible, and the salesperson is there to make sure that you are separated with as much cash as possible. However, know this - the salesperson does not know what you are WILLING to pay, and you do not know what the salesperson is WILLING to accept for the car. Those are the only variables.
That being said, go into the purchase with as much information as you can - internet, Consumer Reports, etc. Don’t go in there blind because you will be eaten alive. Some strategies that have worked well for me:
* As some of the readers have stated - negotiate the “bottom line” or “drive away” price which includes tax, tags, title, fees, etc. If you don’t, you could end up with a negotiated dealer price which additional (read profitable) fees and charges are added on. Some are legitimate such as taxes, but others are pure profit. If you are negotiating with all of those in, the dealer does not have room to wiggle them in.
* Always buy the car with cash. If you cannot, buy with as little financing as possible (i.e. put down as large a down payment as possible). KNOW what type of interest rate that you will be able to get on the open market. If you can get 3% through your credit union or bank, why would you pay the dealer 7%?
* Never negotiate on monthly payments - go with the “bottom line” price. You can figure out what the monthly payments are based on the amount that you are willing to pay for the vehicle. If you are constrained to a monthly payment, figure out what that payment is and then go online to figure out how much car you can afford for that payment. If that number is $350, don’t let the salesperson bump you up to $400.
* Stick your ground. If $15000 is what you can afford, stick your ground. Don’t go into more debt because the dealership wouldn’t budge, but don’t expect that they’ll sell you a Ferrari F40 for that price. Be prepared to walk away, and I do mean walk away. I’ve done it.
Hope this provides some of you with some valuable information
June 23rd, 2009 at 7:28 am
I honestly think articles about being wary of car dealers just set a person up to lose before he or she walks into the showroom. Just by trying to figure out the dealer’s game you’ve given up your own power (you’ve got the money and the choices!) and conceded to play by the dealer’s rules.
JerichoHill has the right idea:
Know what you want to buy before you go.
Know how much you want to pay before you go.
Get quotes to remind yourself you’ve got options (and bring them with you to remind the dealer of your options, too).
Tell the dealer you’ll *allow* him/her to sell you a car only if your conditions are met.
Stick to your principles and walk if you don’t get your deal.
Full disclosure: I’ve never bought a car from a dealer as I’m a buy it used and pay cash kind of linear girl. I have, however, witnessed someone use the above tactics quite successfully.
June 23rd, 2009 at 7:51 am
I disagree with part of your posting. The only reason that things “didn’t go as planned” is because you didn’t do your research, NOT because the dealer had a “trick” that you didn’t. You spent over a year researching the purchase of a new mini. You spent next to zero time researching the purchase of a used mini and essentially did it by the seat of your pants even though it’s the biggest purchase you’ll make outside of a house. An hour of internet research would have revealed every “trick” that a dealer could have used on you. Buying from a private party would have avoided massive dealer mark-up and tricks. Doing better research on prices and taking more time to look at more Minis that were for sale in your area would have given you more negotiating leverage. Getting a car inspection would have protected you.
Car dealers are gross. But with all of the information available to consumers these days, it’s entirely our fault if we let ourselves get manipulated or make a bad purchase. Best of all, avoid dealers, buy from private parties via craigslist or newspaper ads, get a car inspection, do your research, and save some money.
June 23rd, 2009 at 7:51 am
@Jason W.:
When talking to dealers subsequent times, I explicitly mentioned the other dealer’s name who gave me the best offer, what their quote was, and the fact I was interested strictly in price, and not incentives (in the event that they couldn’t match the price but tried to offer additional warranties).
It was usually just a short e-mail like “I’ve been looking around, and [Other Honda Dealer's Name] gave me a quote of [amount], which is lower than your previous quote. Can you beat their figure?”
You pretty much just do this until none of your dealers can go lower. That’s the point where you pick a dealer to move forward in the process with.
June 23rd, 2009 at 7:53 am
Always shop for a new car (or any large purchase for that matter) as close to the last day of the month as you possibly can.
Before you start negotiating the price always ask the person if s/he is authorized to actually make the deal. If not, ask politely to speak with the person who can.
Inadvertently I learned a new trick on my last purchase. Look at a clunker, “It’s what I can afford,” then fall in love with the newer more expensive car you’re really looking at.
My last car purchase was about as pleasant as car buying can be. I had gone in looking for a used car and had test driven a Cavalier when the Scion caught my eye. The Scion was twice the price and twice the gas mileage. I looked it over, sat in the driver’s seat and inhaled that new car smell. I asked about the price and the salesman told me the price on Scion’s were factory set and that they couldn’t come down on the price. All the way to the office I kept looking back at that shiny new car. We sat down to talk price on the Cav and yet I kept looking out the window at that new car. “Are you sure you can’t come down on the price of that Scion?” “Sorry, no.” “Maybe I”ll wait and keep saving until I can afford the down payment on the Scion. Do you have a business card?” “Let me go talk to my Sales Manager.” “Let’s both go talk to him.” The price we settled on was nearly $2k off the sticker price. Most of that was because I agreed to finance through them. I’ll finance my next car as well if it will get me a better price. I just wont tell them that I’ll be paying it off the following month.
June 23rd, 2009 at 8:06 am
I like JerichoHill (#10)’s idea of walking in with a check already made out, and they only have to put their name on it to close the deal. That is powerful, and I haven’t heard of that before.
We finally replaced our 1990 Honda Civic last week with a 2009 Honda Civic. There are lots of Honda dealers within a hundred-mile radius, so I got e-mail quotes from a handful, went two rounds with a couple of them, then went for a test drive in the car we were pretty sure we wanted.
It turned out we wanted a slightly different model than the one I had the quotes on, so I did another go-round and got multiple quotes by e-mail.
Finally we took the best quote to the same dealer — and the same salesman! — we bought our last car from in 1990. We thought he was a stand-up guy then, and my husband had kept in touch with him over the years when our car went in for major servicing, and we wanted to give him our business again. (We actually made an appointment to see him and told him exactly what we wanted to buy and when.)
He beat my best quote by a couple hundred dollars; I proposed a couple hundred lower, and that offer was accepted. He didn’t play games with us, and we got a great car with a minimum of haggling.
Maybe it was not the VERY best deal, but it was a very good deal, done with good will on both sides. (We joked that we would buy another car from him in 19 years when this one gives out.)
It is not an exciting car, and this is not an exciting car-buying story, but both I think are solid and straighforward!
When I have to replace my ‘89 (in a year or two maybe?), I don’t think I’ll do too much different!
June 23rd, 2009 at 8:15 am
Good article. When I bought my first car I made every mistake in the book and got completely fleeced - I walked into the dealer needing to buy a car that very day (because my company car was being returned), I overpaid for the car I selected, and then got put on a horrendous finance plan with worse-than-credit-card interest rates and huge admin fees for early payment (meaning refinancing was expensive). Unsurprisingly, the dealership sent me a Christmas card that year.
On the bright side, it was the last lesson about debt I ever needed and it prompted me to sort my finances out once and for all, and I’ve never looked back. Next time I buy a car, I’ll be playing hardball without a shred of guilt.
June 23rd, 2009 at 8:15 am
I followed all of this advice when I bought my new car in February - except for the paying cash part. Unfortunately, I got in a wreck which totalled my car and I hadn’t saved up enough to purchase the new one I wanted. Armed with information from that helpful article, “Confessions of a Car Salesman”, I got a great rate from my credit union, negotiated prices using quotes on the internet from 5 different dealers, and bought my new Toyota with over 50% down.
I do have one issue with the advice, though. After the price is negotiated and you go to the backroom, think long and hard about some of the “extras”.
That $1200 extended warranty? Definitely worth it. In 7 years/100K, even with a reliable car, something is bound to go wrong and you will regret not having one.
How about $600 for LoJack? Also worth it. It knocks $35/month off my insurance, a complete ROI in under 2 years.
If you stand your ground, read everything carefully, and look at the purchase as a long time deal, you can effectively tackle the “back room”.
June 23rd, 2009 at 8:22 am
What worked for me was, after you get the sales person to as low of a price as you think you can get , let them know you need to do more research on the price of comparable vehicles and you’ll get back to them. When I did this the sales person let me use their computer.
I went to autotrader and within minutes found the exact same car with 10,000 less miles for a cheaper asking price than the negotiated price at the place I was at. I asked the sales person if he knew where such and such dealer was so we could see what we could negotiate with them. He pointed out the window accross the street. What luck. All of a sudden that best price he couldn’t budge on got lowered.
June 23rd, 2009 at 8:30 am
I’m surprised that people get conned time and again on the same old tactics from dealers.
I recently (6 months ago) bought a user Honda Accord. My specs were crystal clear - not more than 20K miles old, not more than 2 years old, Auto transmission, 6 cylinders and not older than 2007. Other features were not that important to me.
I checked all the dealer websites around my area and zeroed in on two finalists. Checked the prices on both over the phone, took written quotes from both and used one to get the other to negotiate down.
And yes, I said - What I want to pay in all is $xxx - including everything - Sales, Tax, Plate, Registration, Kitchen Sink etc etc. When the “Closer” came in, I refused to talk to him and told the sales guy that I was a customer, not his stand-in. I added that I would talk to no one else in the dealership, no matter who it was. I told them they could go talk to the Manager, General Manager or God himself - that was their problem. My price was fixed.
As for the credit, I had a letter of pre-approval from my Credit Union with a certain rate and if they matched that, I’d take it. They did (well, almost), so I cut them some slack and took their financing instead.
The only spot I wavered in was that I almost ended up signing for the Extended Warranty. However, better sense prevailed and keeping in mind the “Don’t agree to something you don’t understand”, I decided to think it over and come back later.
I ended up getting almost a $5000 discount on the price initially advertised on AutoTrader.com.
Edit: I must add that the dealer was fair and nice to work with. At all times, the sales guy took time out to explain what I was signing and was never pushy. Everyone at the dealership was courteous and professional.
June 23rd, 2009 at 8:32 am
I negotiated the price of my 2007 Honda Civic 100% over the Internet. Largely out of fear that I’d allow a salesperson to sucker me into paying more for a car than I was willing during a face to face negotiation.
I learned from an article on Edmunds.com that you should make sure you ask for the “out the door” price which includes tax, tag, title, destination charges, etc. I also made it clear to each salesperson that I would not be paying for any dealer upgrades even if they were already included on the car I wanted.
I’m convinced this is the way to go. Although my 2007 Honda Civic isn’t half the car my 1995 Geo Prizm was, I think I got a good deal on it.
June 23rd, 2009 at 9:16 am
What about the fleet dealer? They are a completely different breed than the private seller or the traditional dealership. Personaly, I’m forcasting that as information becomes more abundant on the internet and the world gets smaller, the traditional “relationship management” of a local dealership is going to become less and less.
This was fascinating read (particularly the comments) since I just bought a car yesterday. I’ve been seriously shopping for the last six months so I felt well in touch with the current market. One thing that I couldn’t find on the internet was how to deal with high volume, low margin, “fleet” dealers. These are dealers that buy off lease vehicles at auction and turn and sell them through a canned internet site or ebay. I found them much tougher to negotiate and generally deal with because:
a) they don’t have the typical people skills of a salesman
b) their prices, by research, are generally better than the traditional dealer to begin with so they have this take it or leave it mentality.
3) the business model is not designed to develop customer “relationships”. Typically they have just a few employees that maintain 100+ cars in their inventory. They don’t want to spend much time with you again, leading to this take it or leave it mentality. It’s completely different from a private seller AND a traditional dealer.
I’ve bought previous vehicles from traditional dealerships as well as private parties but all the variables and judgement led me to buy from one of these parties this time. It was a vehicle I found on ebay but the dealership was local so I was able to see and test drive and get just as much information on the vehicle as if it were my traditional dealership down the street. It was a horribly dirty place but again, they openly admit they’re not designed for the customer experience. They sell cars and people buy them (most of them through the internet)…very transactional based.
Everyone seems to have the secrets of the traditional dealer. I would love to see some information/experiences on some of these fleet dealers.
Thoughts?
June 23rd, 2009 at 9:17 am
A while back my mom sent me to negotiate a new car purchase for her, as she’s (1) routinely treated terribly by salesmen, (2) had been taken badly in the past, and (3) I’m a lawyer so I’m supposed to be able to negotiate — still waiting to confirm that one.
I knew exactly what she wanted, and what options she did not want — in this case, a sun-roof. Not only because we both find them useless, but also because it added about $1,000 to the cost of the car. There were some other smaller options as well, but basically she wanted the 2nd from the top model of the car.
What I pretty much figured out on the fly was that the dealer really wanted to get rid of whatever stock they had on the lot, and did not want to order a car under any circumstances. Seems fairly obvious now, but not something I was actively considering at the time I walked in. Taking a car off the lot would be faster for us, but we were willing to wait if it meant saving money by not going with the useless top-end options she didn’t want.
The dealer just happened to have the exact car she wanted, except with the options added. In the end, I got her the top-end model of the car, for what I considered was a fair price for the 2nd-highest model. I basically took the approach that she was willing to pay X dollars for a car, and because the sunroof and other extras added nothing to the value of the car, she wasn’t of the belief she should pay for them; and if necessary, would wait to order the car or go elsewhere, rather than pay extra to get the car with less hassle. In this case it worked, and maybe it’s worth a try for others.
Coincidentally, I saw the dealer in small claims court not long thereafter, where they had screwed over a veteran pretty badly by not honoring a return policy and by changing his interest rates at the last minute. Needless to say, I don’t think I’ll be going back there, just on principal.
June 23rd, 2009 at 9:17 am
Don’t fall for the “You Win” written next to a new offer. Annoying and I fell for it. Damn.
June 23rd, 2009 at 9:22 am
after 20 years and 6 cars, my recommendations:
1. never buy a new car. too much value loss in the first year. instead buy a used vehicle with 15K miles or less, only one or two years old. still lots of warranty left.
2. buy from a wholesaler. they get their vehicles directly from wholesale auctions (like manheim, adessa, etc) where the new car dealers sell the tradeins, lease expires, etc. its costs $375 over auction price, which covers the auction transaction fee and 200 for the wholesaler.
3. use consumer reports to research vehicles.
4. sell used vehicle via autotrader (i havent had great luck with craigslist)
since the vehicle has a couple years left on warranty you have bumper to bumper coverage for probs. also the auction has a deal where you pay an extra $70 and they give you a week to bring it back for any reason.
June 23rd, 2009 at 9:30 am
As a psych major, I recently took a class on social influence and persuasion. One of the books we read was “Influence: Science and Practice” by Robert Cialdini. I would recommend this book to all consumers (which, really, is everyone!). He discusses the most commonly used (and powerful) influence tactics, how to recognize them when they are being used against you, and most importantly, how to fight against them. It’s amazing how much more aware of these tactics you become, and how easy it really is to recognize them, once you know them. I would consider this book absolutely invaluable!
June 23rd, 2009 at 9:46 am
@Linear Girl - this is exactly right, and is the principle that Malcolm Gladwell advocates in Outliers. Basically, as JD recognizes, we’re the “Davids” in the process and the dealers are “Goliaths” because they sell cars for a living. According to Gladwell, when David plays by Goliath’s rules, he loses. When David ignores Goliath’s rules, he catches Goliath off guard and he wins. Pretty simple really. I agree that so much advice out there is focused on how to beat car dealers at their own game. I like advice that breaks the rules entirely, stuff like:
1) Pay cash - so much of car dealer’s negotiations are centered around the monthly payment that paying cash can catch them way off guard. I once heard a story about a dealership that literally couldn’t accept cash for a car - they had to open a loan for the full amount at 0% interest and then pay it off immediately. Showing up with a filled-out check is a great example of this rule in practice.
2) Use “guerilla” tactics like email reverse auctioning (like Ryan mentioned), stuff the dealers remain one step behind on.
There’s probably more ideas, but I’m at work and should probably just submit this and be done with it.
June 23rd, 2009 at 9:49 am
@Michah d - I’m also surprised at just how casually everyone is discussing financing one the most highly depreciable assets available. Between this and JD’s podcast on “how important your credit score is” (answer: not at all if you don’t buy stuff with credit), I’m starting to feel I’m in the pages of SmartMoney.
June 23rd, 2009 at 9:53 am
The last car I bought was purchased through my credit union’s auto buying service. They called around for the best price (on the then-new honda civic, in demand at the time) in the state and got me the *exact* car I wasnted for a price well under sticker when most dealerships were trying to charge *over* sticker.
The entire process was hassle free, and the car was even driven to me. I had the pleasure of sitting at my kitchen table, filling out the paperwork in the comfort of my own home.
I doubt I’m going to bother with dealerships any more. I felt dirty the last time I bought a car at the dealership. I got a good price, but it was such an ugly process.
June 23rd, 2009 at 9:57 am
We just bought a new 2009 Honda Odyssey.
I had been studying for a while, getting quotes, etc, and told the dealer that we weren’t in a hurry. I did everything I could to give him as least leverage as possible.
I told him that I was not interested in discussing monthly payments and that I wanted to negotiate only in “out the door” prices with full disclosure of all associated fees in that cost.
They must have wanted to sell vans pretty bad; I got the van “out the door” for over $6k less than sticker.
June 23rd, 2009 at 9:57 am
@heidi - i looked this up on amazon - great recommendation. apparently there is another version of the same book “Influence: The Psychology of Persuasion” that is cheaper since it is not the text book version. @12.23 on amazon.
June 23rd, 2009 at 10:01 am
Davidson07 wrote: Between this and JD’s podcast on “how important your credit score is” (answer: not at all if you don’t buy stuff with credit), I’m starting to feel I’m in the pages of SmartMoney.
Ouch! Tough crowd.
June 23rd, 2009 at 10:04 am
I DISAGREE WITH OUTSIDE FINANCING - there I said it, now that I have your attention. A reputable dealer may be able to save you some leg work in finding the best rate. I recently was quoted 5.7% for a 2006 used vehicle from a major bank. I told the dealer not to bother with a credit app but he said he would tell them my quoted rate. Assuming you have good credit, I told the dealer they would have to beat 5.3%(why not?!) and they came back with 5.04%!!! I don’t disagree with shopping rates, but don’t count out the dealer - who has more access to financing and leverage than you alone!
And echoing others, use YOUR budget, not the bank/dealer’s.
Edmunds.com has a great (long) article about what it is like working as a salesperson and is definately worth reading before you head off to negotiate.
To all the “financing a car haters”…I wanted to use cash - but when your old car doesn’t have A/C in 105-110 degree index…ouch, a little sooner than planned
And don’t rule out leasing. It involves a lot of math but if you truly understand what a lease is/means…it may be right for you. You are financing the use of the car rather than the cost. No you don’t have anything to show for it after 3 years, but the dollars saved from a smaller monthly payment could be invested in risk free returns which I’m sure is better than a savings account that loses value!!(Traditional Car Financing)
June 23rd, 2009 at 10:10 am
Great info. Another article on car buying tactics was on Edmonds.com called “Confessions of a Car Salesman”. It is a bit long, but the journalist went undercover as a salesman at 2 car dealers and reveals all the underhanded tactics they use. These salesmen lack integrity to be considered human.
June 23rd, 2009 at 10:10 am
I have bought a few cars (all used) in the past year with varying degrees of pressure and sneaky tactics. Two I purchased from a high school friend - these were the easiest, and the transactions that I felt were the most honest. I paid $4000 less than asking price on an 8 year old truck ($5000 plus tax) and $1000 less than Blue Book private party value on a year-old sedan.
In both of these instances, I think the stars were aligned… The salesman told me they basicly stole the truck on a trade-in, they offered him about $4000 for a trade in on a new vehicle (he paid sticker on the new one) and he took it.
On the sedan, it had lingered on their lot for about 4 months, and they really wanted to unload it. I ended up paying less for it 3 months ago than I have seen anywhere since!
I’m not sure my experience is repeatable though…
On another experience, the young salesman started “working” me… Telling me that a car is an investment… So I asked him if he wanted to invest in MY product that is guaranteed to lose value and can lose as much as 50% in the first year… He said no?!?!
Then he asked what I wanted my payment to be… I told him “cash”… then he started to catch on and he quit the BS, and I actually enjoyed talking with him and looking at a couple of other cars…
June 23rd, 2009 at 10:20 am
@JD - it’s only tough love, and consider it more of a compliment on the overall quality of the site (ie, significantly higher than the financial cotton candy that you find in basically everywhere else).
June 23rd, 2009 at 10:31 am
I have learned the hard way that there are a lot more dealer tricks than just those mentioned in the Car and Driver article. http://www.insidercarsecrets.com/ has a ton of good information on buying a car in general. http://www.negotiationdynamics.com/newcar.asp provides a really comprehensive plan for negotiating with the dealer.
June 23rd, 2009 at 10:34 am
While living in Hawaii all the dealers added $1995 to the MSRP, because they could. Everyone (all dealers) did it because they were all in cahoots. I got taken with that. The only one I know who got a good deal was a friend that borrowed the amount he wanted from the credit union and took cash, $100 bills, fanning them in front of the salesmen until they met his price for the cash he had. He said that they saw the cash and wanted it so bad they were almost salivating.
June 23rd, 2009 at 10:35 am
Here is the LIE I let myself believe,(YES I really wanted the car and let that over-ride common sense!): Just make your payments on time for 2 years and you’ll have no problem getting the car refinanced at a lower interest rate. It is 2 years later and I owe almost 14k on a car I could buy brand new (a model 3 years newer!)for 10k today. NO ONE will refinance an upside down car loan. I’m paying 14.75% interest because I hadn’t done the research back then. 4 more years of 407 a month payments on a KIA means I’ll be paying over 30k for a car worth about 1/3 of that new. Buyers beware!
June 23rd, 2009 at 10:50 am
Ok, as someone who works at a car dealership, I am pretty irritated by this set of comments. Yes, there are sleazy, dishonest car salespeople out there. Just like there are sleazy investment professionals. And personal finance writers. And… the list goes on.
I’m sorry that so many people had negative experiences. But that doesn’t mean that every single dealer in the world is a crook. I mean, the markup percentage on a vehicle is much less than on a TV at Wal-Mart, and I don’t see anybody having a fit about that. (Before you flame me, I realize that a car is a much larger investment).
As far as dealer financing, because I work with many different lenders instead of just the 4 available in our town, I typically can get my customers a lower interest rate than they could on their own.
Its just like anything else. You have to know what you’re buying, what the price is, and how you’re paying for it.
A large part of the blame does indeed lie on the shoulders of dishonest dealers and salespeople. Just remember not to paint us all with the same brush.
June 23rd, 2009 at 10:57 am
Unfortunately for most folks that sell cars it is just a job - which they hope is a temporary one till they can do what they really want to do - just a way to make some money till a better job comes along.
What you experienced was a inexperienced nice guy trying to get a “commitment” from you to buy a car. It was to make sure this was the car you wanted. Where he went wrong with his inexperience was failing to clearly communicate the “if” before the $15,000. So you thought the price was already agreed upon. Then the experienced “closer” came in to put the deal together. You may or may not have been able to get the Mini for $15,000.
Cars are one of the few items in our society that are negotiated. Consumers from the USA have little experience negotiating. Car sales folks however do it every day. Car Sales Professionals have a home field advantage. As professionals with a home field advantage I think we are only good at our job when we do it with integrity, and honesty. If we do not provide this we may get the sale, but that is all. When I am negotiating with a client I am not thinking as much about getting this sale as I am my long term income. I am making sure that I am going above and beyond in service, expertise, listening and providing of knowledge. I am confident I am giving a fair price that works for the client and the dealership, that the transaction is quick and fun. I am devoted to making sure that the client is getting the right vehicle, the right equipment and the right financing for their needs. I consider myself more of a educator, and entertainer than a salesman.
I am an artist by nature and I use selling cars to express my artistic nature through creating an extraordinary experience for my clients. Cars cost a lot of money. If I am not adding to the value of the car - why I am doing this? If cars sales representatives do not master their craft buying cars will become just another transaction - a quick and efficient do it yourself process. If sales reps are not adding value to the customer and the dealership they will cease to exist as information, automation, and online interactions become the core of our purchasing society. If I help the clients know what they want, get it at fair price, save time and have a great blast in the process they will buy agin and agin and send their friends. My online reputation is great and I do not have to waste time energy and emotions dealing with drama that I or the dealership has created.
I hope that the future of car sales will change. If not more companies may follow Chrysler and GM, and car sales folks will be a thing of the past.
June 23rd, 2009 at 11:18 am
I had lots of issues with dealerships when I went to buy my car. I went in looking for a somewhat specific list of things, but nothing too crazy — I wanted a corolla that wasn’t white or red. Preferably manual, but either was fine. Wanted at least a tape deck, and CD was fine. None of the dealers could come up with anything. I found cars I wanted on their website, and they would say “oh, that’s not available anymore — our website isn’t up to date.”
Finally, I found a really awesome dealer. He was a guy selling cars out of a little house in the middle of downtown Bellevue, Washington. He only sold used rental cars, so they were all fairly new cars. He had pretty much what I wanted. Better yet, he did no financing himself — HE sent me to a credit union to secure a loan for a better rate than what my bank was offering me. And, as a final note, I wanted to bargain. The car was $14,000, and it was a bit more than I could reasonably afford. So he said “what about $12,500?” Heck, why not? Maybe I could have gotten it lower . . . but that was about blue book price, the car was what I wanted, and my loan was 4.9% (in 2005).
The car is now paid off, and I love it. I’m dreading the day I may have to go get a new car — I hope mine lasts for a really long time.
June 23rd, 2009 at 11:34 am
I absolutely hate buying a new or used car! When I purchased the vehicle I have now, it was at my third dealership of the day. It burns me up when the salesmen has to repeatedly get up from the negotiations to go “talk to the supervisor”.
I like going to the dentist more than buying a new car.
June 23rd, 2009 at 12:02 pm
Wow. So much awesome advice in these comments. As much as I do not desire to be a car buyer in the near future, I’m afraid that my clunker is going to stop clunking sooner than later. I read the “Confessions of a Car Salesman” series a few weeks ago and now this thread. I feel pretty equipped to find a reasonable deal now. It should help that I love negotiating too.
June 23rd, 2009 at 12:50 pm
I read the book “What car dealers don’t want you to know” by Mark Eskeldson. It is a little old now, but the tricks remain the same. I felt like I was in a better position to deal with the salesman. I looked at one car, test drove it, saw some things that I didn’t like about it, but decided to talk with them anyway so I could get an idea of what I could get for my trade in.
I let them have my keys…BIG MISTAKE. After he got his little pad out with the four squares and started to play with numbers, I was ready to go. I told them, I would have to think about it, can I have my keys. Instead of my keys, another salesman pops up, keeps trying to make a deal. I ask again for my keys. Another salesman “Oh, I have seen you here before, blah blah”. I had never been there before. I got my keys, as I left, they were still yelling out offers.
Long story short: these weasles tried everything to sell that car. They failed. I know that if I even said yes to the last offer (about half the price of where we started), they would have pushed it back up.
June 23rd, 2009 at 1:04 pm
The last time I bought a car (8 years ago). After finding the car, I went home and researched. I decided beforehand what I was willing to pay and that they had to install a cassette player. I did not trade in my old vehicle. I did not budge one cent nor on the cassette player. I told the guy when I walked in, “This is it. I will not deal. You go and come back as often as you want, but if you take too long, I’m leaving.” Then I sat back. I paid exactly what I wanted to because I knew if not this car then there’d be another.
June 23rd, 2009 at 1:09 pm
I really, really, really dislike car salespeople. My last car shopping experience was enough to send me to auctions and private sellers. I walked in with cash - not check, not credit card, not money order - cold, hard cash. Knew the dealer invoice, knew the appropriate purchase price (gotten from two experienced salespeople in the area) and got turned down at THREE different dealerships. I walked out - and every time I walked the sales person called out to me. The third time it happened I turned around, looked at the sales person and said “it’s obvious you’re in this for the game, not the money.”
That’s it. No more. A friend purchase my last car for cash at a dealer auto auction; I paid $11,000 less than sticker price. Yes it was used, w/less than 20,000 miles on it.
Did I say that I really, really, really dislike car salespeople? ick.
June 23rd, 2009 at 1:13 pm
What I want to know is how the total number of JD’s readers went from about 80-80K to 65K in a week???
June 23rd, 2009 at 1:25 pm
@Christie - that’s great — you did not become emotionally-involved. The salesmen aren’t, so if you are, they have the upper bargaining power. It’s so true that “there’d be another.” Also, the last time I bought a car, they told me they didn’t have my 1st choice color. They showed me all the other colors they had, but in the end, I didn’t budge, so started to walk. I just knew I’d forever regret it if I didn’t get my 1st choice color. All of a sudden, they said they could call another dealer, who had my color, 2 hrs. away, and they would have my car available to me then in 3 hours. In order to do this, they had to trade one of the cars on their lot for it, which they preferred not to, but yes, to make the sale, but then also said, “it happens all the time.” They just didn’t offer that to me until I thanked them and started to walk-out. So I bought the car, and I was happy because the color was important to me. But, when it came time to pay with the other guy? The hard sell to buy an extended warranty was absolutely unbelievable! I declined, over and over, and in the end did not buy it, but it left such a bad experience that as I said earlier, in the future I will buy from a private individual and just get it inspected by a mechanic - just can’t stand buying cars at Dealerships. I’m not a game player and am honest and straightforward. (Kind of the same reasons, in a way, why I don’t deal with credit cards).
June 23rd, 2009 at 1:41 pm
As Todd (#55) and Chance (#56) said, not all car salespeople are crooks. I should know as my b/f used to work in car sales. I’ve learned a lot about car sales thanks to him, and he did meet his share of sleazeballs while working in the industry, but it’s not all bad. If price is your bottom line, you’re best off going to a large leadership where they work very hard to meet a certain volume every month and are eager to get cars off the lot, but if you’re looking for better service, go to a smaller dealership. And it is a good idea to go at the end of the month. As others have said, first look online and then obtain quotes via e-mail or phone. Before you e-mail/call, make sure you know your credit score and what type of car/model and options you’re looking for; that way you can compare apples to apples. Use the best price to get the other dealerships to negotiate with you.
And leasing isn’t totally bad. My b/f and I are leasing our car at 2.2% for 3 years and plan to pay off the car at the end of it. I’m hoping to drive the car into the ground after we buy it. Since the interest rate is fairly low, we’re placing money we would have otherwise used for the car now in CDs and other savings vehicles with a higher rate of return than 2.2%. Interestingly, this interest rate was even lower than what my credit unions could offer me at the time to buy the car. If I wasn’t buying the car at the end of the lease though, I don’t think I’d want to lease.
June 23rd, 2009 at 1:54 pm
I echo the advice of walking out. They need to see that you are not afraid to pass it up.
I have long ascribed to the strategy of buying low mileage used cars, but was surprised when I went looking last month. Actually bought my first new car since 1992, a Mazda 3, which was advertised at a very low price in the paper. Turns out that only one of the 57 available was at that low price. They immediately tried to steer me away from that one, indicating it did not have power locks and windows. I think they were surprised that that was not a dealbreaker, and kept trying to steer me higher. I was able to get a written “out the door” price, then left to go to another dealership. I bought the car when I came back.
I am plenty happy to buy a new car if I can get it at that price, but suspect those conditions will not last forever.
June 23rd, 2009 at 2:13 pm
I hate car dealerships. Truly detest them. Last time I went to buy a car, I first tried buying one online. I filled out the form, detailing the sort of car I wanted, and what happened when I clicked submit? The form went straight to a car dealership who were on the phone bugging me before the day was out. I’d like to order the car I want online, without all the dealer add-on BS and song and dance, pay for it electronically and go pick it up from a central depot. Zero dealership BS involvement whatsoever is what I’d like. Car dealerships are yet another business model, along with real estate and the 6% commission, left over from WW2 and it’s time for a complete and total change.
June 23rd, 2009 at 2:17 pm
We’re in the process of buying a car right now, a 1999 Saab 9-3 convertible.
one trick that will help in any situation is to bring a spouse, friend or some other impartial party.
The moment the seller opened the garage door and my wife saw the shiny black Saab, she whispered to me “I want it!” He hadn’t even started it, she hadn’t even sat in it!
I worry that if I hadn’t been there she would have bought it on the spot!
June 23rd, 2009 at 2:19 pm
When it is time to get a new car, I like to show up at the dealership in a vehicle that absolutely won’t be a trade-in, like my motorcycle or my Delorean. The Delorean is amazing - the salesdroids fall all over themselves asking questions about it and it changes the entire dynamic of the interaction with them. I’m “the guy with the cool car”, not just another buyer. Sometimes they ask about me trading it, but I just name an outrageous price, like $100k (you can buy one for under $30k) and that usually ends those questions.
June 23rd, 2009 at 3:00 pm
Does anybody have any suggestions for the mechanics of selling a vehicle to a private party in which you still owe the bank? For instance, if I still owe $3,000 on my car, but figure I can sell it for $5,000. I have $2k equity.
Does the buyer bring me a cashier’s check, and I deposit it, and then pay off my loan, and then finally have the pink slip a week later and can complete the sale? How does this work?
June 23rd, 2009 at 3:05 pm
I’m not a good negotiator, but negotiating can be fun. I get a thrill from getting $10 off a motel room. (Maybe I should get out more?) But my philosophy in buying cars is to just buy an inexpensive one and I won’t regret not getting the absolute best deal available. That’s not to say someone shouldn’t try to negotiate just becuase they’re buying an inexpensive car, but buying a less expensive car helps take some of the pressure off. Maybe it’s just a psychological trick, but who cares?
June 23rd, 2009 at 3:41 pm
I made over $400,000 last year, and I still drive a now 9 year old car that’s worth 7K.
The secret to my wealth and income is to not spend stupid money on a new car. That is literally the DUMBEST THING to do. Always buy 3-5 years used and let the fool take the depreciation hit, and the lack of satsifaction after owning for more than 2 years.
The problem with America is that everybody buys beyond their means. If you can’t pay CASH for the car, you can’t afford it!
June 23rd, 2009 at 4:27 pm
Sales people definitely had the upper hand when I was shopping for a new car. It was 1998, GM was on strike, and a significant chunk of my car’s price was going to come out of the cashback I’d saved up on my GM credit card. The “there’s always another car” theory didn’t work because there was hardly anything on the lots, and no one knew when they’d start production again.
I didn’t need the car that second; I’d thought that 4-6 months was plenty of time to shop around. It was a bizarre situation.
I got an okay price, though I ended up with archaic “options”. My tape deck has never worked, and I’ve been drenched more than once when it started raining and I couldn’t take my eyes off the road to roll up the passenger window. When she does finally gives up the ghost, I’m going to get a used car with power locks and windows and feel like a rock star.
June 23rd, 2009 at 6:35 pm
@Bulldog Gin Co.
Dude, the crazy thing about America is…you get to make decisions. Thats great you are frugal with you $400,000. I remember purchasing my BRAND NEW Cobra Mustang in 2004…I can tell you there are few things that are as satisfying (to me at least) of the new car smell knowing the history of every mile of my car.
I agree people who cannot afford new cars buy them…and too often that is the case. But to say that it is literally the dumbest thing is immature. What about converting your IRA to gold? Investing in Iraqi Dinar? There are plenty of places to throw money away and a new car certainly is not an investment for retirement but buying used with cash in no way guarantees wealth…a lot of other actions need to be taken. That is all.
June 23rd, 2009 at 6:54 pm
@Tony - #74 - agreed about buying new. I like to buy new and drive the thing into the ground. I’ve still got an 89 Volvo I picked up at the factory, and our 2 Honda’s both have over 100k miles from new, but we know how we drove for all those miles and exactly what maintenance has been done. The last time I took the motorcycle in for service, after a test drive, the mechanic told me he couldn’t believe I had that many miles on it - it felt like a much lower mileage bike. Trading it in every few years isn’t very smart, but buying new and keeping it long term has some benefits.
June 23rd, 2009 at 7:17 pm
Don’t forget that new cars depreciate 25% as soon as you drive them off the lot; by the time 4 years have passed, they have depreciated approx. 70%, so not a smart move when a person is financing it.
Apparently you can buy a car on the internet at the invoice price from http://www.carsdirect.com. Then you go in and get the car and see the fleet manager. (I’ve never done it because I’m happy w/the depreciation I get from used cars, low mileage; my last 2 used cars had just come off of a lease and were in great shape. 5 years have passed, and I haven’t had any major problems.
If you are planning to buy a used car, I recommend that you go to http://www.carfax.com to get a vehicle history report on it, like whether it’s been in an accident, has had odometer problems/rollbacks, any flood damage and so on. Personally, I wouldn’t buy a used car unless I ran it through Carfax’ database.
Edmunds.com is another good website. It has 10 steps on finding the right car for you.
June 23rd, 2009 at 8:14 pm
Tony in KS - Buying a new car is dumb, i agree 100%.
You will go through your motions, but you’ll realize after a while, it’s just a car.
June 23rd, 2009 at 10:13 pm
J.D. That is indeed a negotiation tactic. You should have said “let me bring my boss too” and fetch your wife. She should have said, ok, I can only buy at $14,000. That would have restarted the games evenly and you could bring it down to $15,000 or less.
Another option would be to review the car again and then conclude that the price is not worth and ask them if they wanted to sell the car today you might think again for the price you discussed initially.
The key word in “Always Be Prepared to Leave” is Always, even after you left with the car.
June 24th, 2009 at 2:08 am
when I must deal with salesmen, I’ll do my research before hand. Then I’ll go into the office and give them a piece of paper. The paper will have what I’m willing to pay, in cash for the vehicle, including tax, licensing, registration, etc.
At this point the salesman has two choices: He can accept my offer, or I can leave and try another dealer.
June 24th, 2009 at 4:55 am
You know, there’s more to buying a car than hammering out the absolute lowest, rock-bottom price.
Everyone seems to be completely focused on how to pay the minimum possible for a vehicle. Let me play devil’s advocate for a moment and suggest that I’d be willing to pay a little more for a dealership that’s in a more convenient location (nearer my work/home), or provides shuttle service or loaners over a dealership that does not, or has a clean, well-equipped service garage, or whose mechanics have an excellent reputation, or who just plain treat me like a human being rather than a number (which, ironically, is how most comments here are proposing we treat the DEALERS).
There are a lot of factors that go into selecting a dealership, particularly in this current economic climate, when our options for dealerships are closing before our very eyes. It would’ve been encouraging to see a little broader vision from the commenters, instead of just “how to berate the salesman out of the last few nickels.”
June 24th, 2009 at 5:33 am
I think most people get ripped off their first time buying a new car. I know I sure did! I paid $40,000 for a Volkswagen Jetta, and it didn’t even have leather seats.
It was 6 months after I’d graduated from university and started my first full-time job, making decent money. I felt all grown-up, and decided to buy a car. I went to a Volkswagen dealership and fell in love with a Jetta. The base price was $23,000. Pretty reasonable, for a German car, I thought. Particularly since that price included a lot of fancy features that would’ve been expensive add-ons in other cars, like keyless entry, power windows, power side mirrors, full-size spare tire, and a lot more. We were sold.
I wanted the 6-cylinder engine. No problem, that’s an extra $1,000. I also wanted a sunroof, which meant we had to get the GLS package ($1,000). I wanted a manual transmission, but the salesman said that since it was a new model, VW hadn’t yet figured out how to mate the 6-cylinder engine with a manual transmission, so we had to get an automatic ($1,000). We also wanted the car to be black (Metallic paint: $500).
The dealer found a car that matched exactly what we wanted in a nearby city. The only catch was, it had heated seats ($1,000). We decided to go for it, rather than wait.
For those of you not keeping track of the math, our $23,000 Jetta had grown to $27,500. I was a new-grad, were there any rebates available? Nope, not for the Jetta. Could they come down on price at all? Sorry, it’s a brand-new model, in high demand. Are there any financing deals? The standard rate is 7.9%.
Then they added rustproofing, dealer prep, delivery, admin fee, air-conditioning surtax, gas-guzzler surtax, and whatever else, to bring the total price to $29,500. Federal and provincial taxes (7% and 8%, respectively) inflated the price to $34,000. Minus our down payment of $1,000 (on my credit card, of course), and financed for 5 years, our monthly payment was $656.
That’s a grand-total of $40,360.
And it didn’t even have leather seats.
We learned a lot from that purchase. We made every mistake in the book. But one mistake we WEREN’T going to make was replace it every few years. Yessir, we were going to drive that car until it fell apart. We didn’t plan on buying another car for at least 10 years.
Until it got rear-ended and totaled 4 years and 11 months later (I wish I were joking). Sigh.
June 24th, 2009 at 6:13 am
@Kevin: are you a car dealer? Lol
You can go to any fancy dealer for car service. They will take your business without blinking. Go for the lowest price. The dealer makes money anyway or he wouldn’t sell the car to you in the first place.
Think about it this way: he is making at least $100k / year just by talking gullible buyers into spending more than they need. He won’t go broke by selling you at a thin margin.
Do the math at home and don’t stray from it at the dealership. If the dealer presents you a deal that is not in line with your math tell him you have to think about it and you will get back. Never close the deal right away. If the deal is good today it should be good tomorrow as well or next week. Take that info and shop around instead.
I never bought a brand new car in my life but I went to the dealerships with friends and relatives as a sidekick/cooler. I enjoyed intervening from a neutral position in the discussions. I think the dealers didn’t like me too much and in the end it was always a good buy for the new owner.
June 24th, 2009 at 6:16 am
Thanks, JD, for this post, as I am still in the market for a good used car. The follow-up comments contain a lot of great advice and I can learn from other people’s mistakes.
I actually started looking at the time of JD’s Mini purchase, but car-shopping got put on hiatus because we decided to take advantage of a home refinance first.
For those who have purchased used cars that they saw advertised online, were you able to get them to come down much on the price? I had a car salesman tell me that there isn’t much room for negotiation on internet pricing because car dealerships put pretty much their cheapest price because they want their car to show up on page one of search results. The theory is: If you put your search criteria in, and arrange the results from cheapest to most expensive, the most expensive cars would be listed last and therefore most people wouldn’t even consider it. So to bring the people in, the lowest price is listed. Has anyone had experience in this?? I would love to negotiate down the price of cars with prices listed online, but I’m not sure how much wiggle room I have.
June 24th, 2009 at 2:31 pm
@Budgie: Somehow I find the reasoning of the cheapest price online flawed.
The car sites allow one to select a price range so therefore a car with a price could be in the bottom or the top of the ordered-by-price search results depending on the min/max values the user selected. In other words it is not guaranteed to be in the first page.
June 24th, 2009 at 3:35 pm
And yet car dealerships are going out of business left and right. Seems like poetic justice to me!
I used to LOVE haggling because I’m pretty much a jerk and like the challenge. But the last two cars I’ve purchased, I’ve purchased through Costco’s service. No haggling, and I have saved thousands.
The “trick” is to buy when the new model year comes out. Dealers will do nearly anything to remove the old model line from their lots. Plus, often, you get lots of extras on the car that you might not have wanted (to pay for) but at a price lower than if you would have bought 3 months earlier.
June 24th, 2009 at 8:36 pm
Hey JD,
It’s OK. Owning and driving that car makes you happy. You earned it! Besides, it’s just one thing on your list of stuff that makes life cool for you. You still have plenty of dough left over to do many other things that will keep you happy in the future, so I say you can let go of the remorse. Cheers!
June 25th, 2009 at 1:23 pm
I’d also suggest Costco for those looking to purchase a new vehicle. A relative of mine is a GM at a Toyota dealership and he has told us on numerous occasions that the Sam’s and Costco pricing is the best deal - the only exception is for new “hot” models, when Costco allows for a $200 TMV (true market value) bump. But Costco pricing is reviewed on a monthly basis, so the bump isn’t likely to remain there for an extended period of time.
Costco (I’m not sure about Sam’s) also sends in shoppers to evaluate the overall experience. If the dealership doesn’t meet the criteria, they’re dropped as a preferred dealership.
Finally, Costco provides you with a “support” person to speak with on the phone during the negotiations in order to ensure the price truly is the lowest available.
June 25th, 2009 at 8:40 pm
The most power you have is the walk out. Don’t be afraid to stand up and walk out.
June 26th, 2009 at 11:53 am
2 years ago my old trust 93 Toyota Camry was stolen. The insurance payment I received was far more than I thought it was worth. The truth is that I was paid nearly $500 more than what I had paid for the car 2 years earlier. (Shrug)
Anyway….I had 30 days to find a car and I didn’t want to travel more than 100 miles and I had an absolute ceiling as to how much I wanted to pay. I had enough for a down payment and would find financing elsewhere.
First I found financing at a really good rate considering my poor credit score.
After that I spent about 2 weeks emailing dealers within 100 mile radius. I wanted a specific year, make and model car. This would be the first new car that I’ve purchased that I actually wanted. It took some persistence, patience and work but I shortened the list to 3 dealers with the best quotes. Of those 3 I dismissed one because of it’s poor reputation. I visited dealer #2 who had the best quote. When I got there they of course tried to not only get me into their financing deal but they also didn’t actually have the car that they promised me. I test drove a different color just to get the feel of it. The promised that they would have the car that I wanted delivered within a week. Two things went wrong at this point. The first was that they reneged on the promised price. They wanted way more than they offered. The other was they confessed that the vehicle had a small dent. Then told me that the dent was too big to sell as new so were offering me a different car….then tried to get me into a completely different make! (a Saturn)
I walked out.
I called Dealer #3. Similar situation. They actually didn’t have the vehicle that they promised but offer a different color with different features for ….you guessed it…more money.
Back to square one I spent the next week calling more dealers. Nobody wanted to quote me or respond. Finally the Friday before my deadline I managed to get 2 dealerships to negotiate with me over the phone. I promised the first dealer that if he agreed to my price I would come down that evening, write a check and put it in his hand. He faltered….not really believing me.
I hung up and called the next dealer back and gave him my price and my promise. He sighed….was silent for a minute and said…”Listen …I’ll confess that I need the numbers this month. If you promise to come down tonight and see me I’ll give you exactly what you want. The car we have is what you want but it has a few more features than you wanted. I need a little more for that.” He went over the features and I decided that that I could offer a fair price for it (side air bags and a host of other safety features).
The deal was done and I picked it up that evening. No hassle. I even got upgraded rims and rim lock that was supposed to be extra but was thrown in inadvertently. (He discovered it as he was handing me the keys…shrugged and said it was my lucky day)
I got the car well under MSRP and several hundred dollars under the wholesale price. Didn’t break my ceiling and got what I wanted.
Within 48 hours of the sale I got calls from a few dealers that I spoke with earlier including the first dealer I visited…I took great pleasure in telling them that I found a car from a dealer nearby. I could tell some of them were surprised and bitter at the loss.
June 29th, 2009 at 4:09 am
Thanks for the tips and advice from everyone! I’ll definitely keep this in mind the next time I’m shopping for a car!
June 29th, 2009 at 9:29 pm
@Kevin @all
Wow, VW sure can get us “fresh out of school; just got a first career-track job and and a few good paychecks” crowd to part with our money.
A few years ago, I bought a brand new GTI, top spec (sunroof, leather heated seats, Auto/DSG, large alloy “performance wheels”, etc) except nav/dvd and maybe a few other things. Also, Extended warranty, oil changes for lifetime of warranty, GAP, and im sure a few hidden and non-hidden upsells.
I looked at a dozen cars and dealerships.. test drove 4 cars in the 16-23K range (Subaru, Mazda, Ford, Dodge), then a used 06 GTI (21K asking). I really liked the GTI over the others but I wasn’t buying that day. I came back a week or two later after doing (not enough) research, and ended up in the freshly detailed, just-added-to-the-floor, and nearly top spec 07 model.
All said, I traded in my car at probably 10-20% lower than if I’d sold privately, nearly overdrafted my checking account on the check/cash $1100 downpayment, and opened my first credit card 90% maxed out with a $900 down payment. thank god the credit card was 0% for a year. I financed ~34K @ 8.something (even after trade and down!), ending up to ~41K at minimum payments.
In hindsight, I did everything wrong that has been advised in this and other articles/forums.
- I didn’t have a solid budget and top limit set in my mind yet (because I had no personal finance understanding at the time)
- I didn’t negotiate on price hard at all (a couple hundered off MSRP) “It’s brand new, in demand, only have the one of this style for a month, etc”
- Didn’t walk out when they wouldn’t budge
- Didn’t steer the negotiation away from how much do you want to pay (monthly)
- Didn’t walk out when the manager/closer kept talking me back up or playing with the numbers
- Didn’t walk out when financing got their teeth into me.
- Found out later another dealer across town had a similar car, but listed 200 cheaper and they’d add a satnav/dvd for free if you got the top spec model.
- Found out that “performance tires” don’t work on snowy roads and had to buy second set of tires and rims within a year, and storage for the offseason tires.
- Found out that, yes, premium gas is more expensive, and my mileage isn’t great (partly driving habits I learned later though)
Bottom Line - I was buy-crazy for no good reason other than I wanted a new car because i thought i deserved it and i could afford it. I was high on the satisfaction of landing a sweet job right out of college. Luckily I have been able to afford the car (so far). I’ve always paid more than the minimum and refinanced 3.5 points lower last year, but i’m still in negative equity vs the loan.
I have advised more than a couple friends graduating behind me to save save save their first paychecks, and seriously budget before they start blowing throught their first 2-5 years of hoped for salary in a few months like i did. I wish I’d gotten a more sensibe car and used the other money to save and travel.
In the end though, I love the car. It’s fun to drive, solid, safe, reasonable mileage depending on how I drive it… and I intend to drive it till its not worth it to repair (10yr?) or something else comes up. I almost can’t wait to help my gf buy a car or negotiate for real next time given the painful lesson I am struggling to complete.
October 24th, 2009 at 12:01 pm
Been interesting reading all of these comments. I am a new car sales consultant for a Kia dealership in Southern California. I sleep well at night because I work hard to help people get what they want and I work with integrity. When I follow up with my customers and they tell me how much they are enjoying their car, I feel awesome!
I listen to my customers, I hear what the managers are saying, and if my customer didn’t ask a question that I think would have helped them, I quietly remind them to do so.
I’m on the new car side and see the cost the company pays for the vehicle and our mark up is not enormous. I believe it’s fair. Let’s face it, when you eat at a restaurant the mark up can be up to 70%! All businesses are in business to earn a profit. There is not a lot of money in cars anymore. What you see on the sticker of a new car is pretty much it! At least for Kia.
I agree about the financing… if you can have the amount approved before you come in, it save everyone time! Our finance manager may not like it but, I love it! Now I know what YOU want and that you’re ready to buy and not play games with the whole “I’ve got to see what someone else can do for me and think about it for a while.”
So again, I sleep well at night when I know that I’m making YOU happy with something that YOU wanted. I don’t feel hated by my customers!