In visiting numerous dealerships seeking candid advice on how buyers can best prepare themselves for the showroom experience, we encountered several salespeople who were reluctant to speak to us, apparently fearing they would be caught in underhanded activities. More often than not, however, we found sales personnel who were willing - under the condition of anonymity - to impart their wisdom to the consumer.
To help you understand showroom sales strategies and take control of negotiations, we've compiled the following tips from new-car dealers.
Know your price before you shop
Tell your salesperson exactly what you're looking for, the target price, and that you don't intend to haggle. You no doubt will still end up doing some negotiating, but this will make it clear that you aren't willing to sit for hours while they wait for you to tire. While a dealership wants to eke as much profit from each vehicle as possible, the sales staff appreciates a serious customer who can make a rapid, efficient purchase, saving them time to pounce on other, probably less-prepared customers.
To trade-in or not
Do not disclose upfront that you are trading in your current ride. Negotiate the price for the new vehicle before introducing a trade-in. This will allow you to focus on each step of the overall purchase, limiting the dealer's ability to shift profit from one aspect (new car) into another (trade-in or finance rate).
Say no to dealer markups
Markups are one of the biggest reasons consumers are so suspicious of dealers. Boldly displayed right next to the manufacturer's window sticker may be another price list (high-profit add-ons or a nebulous fee) that the dealer has tacked on. This markup is simply more money in the dealer's pocket. If you want the car badly enough, they figure you'll pay the extra amount. We've seen this often occur with limited-edition and high-demand new models. If you're willing to leave without the vehicle, tell the dealer to remove the markup. If he won't, walk out.
These markups almost guarantee a poor return on investment when, in a couple of years (or even less), the demand for the vehicle has faded. It happens over and over again with hot new cars every year. Do not put down a deposit on a vehicle you've ordered unless you have the negotiated price in writing. Otherwise, when the car arrives the dealer can charge what they want for it, and they still own your deposit money.
Financial Independence
Arranging your own financing with a local bank or credit union, or even a reputable online finance company, can help you avoid being ripped off in the dealership's F&I department. Even if you don’t use it and go with dealer or manufacturer financing, at least you will have more options available as you’re getting ready to sign on the dotted line.
If you're going after one of those special manufacturer-backed zero-percent deals, get your own credit report and credit score beforehand. Salespeople can - and do - lie about your credit score, saying that you don't qualify for the special rate. If you know your score is 700 or above, get up and leave; you're being scammed. In fairness, dealers often do offer appealing finance rates, but it's important that you not feel committed to a vehicle then find yourself trapped with a poor interest rate.
In addition, definitely don't leave the dealership with the vehicle, or having signed a contract, before the financing is resolved. Otherwise you may find yourself committed to purchasing a vehicle without knowing the true finance cost - a recipe for an expensive disaster.
Don't fall for "The bank says you must"
If you opt to go with the dealer's financing, make sure you don't fall for "the bank says you must" con. Here, the dealer representative tells you the bank won't make the loan unless you buy the extended warranty, life insurance or some other extra. The only thing the finance company will insist on is that you carry insurance on the car. If you already have auto insurance, bring a copy of your policy with you. If you don't already have insurance, contact an insurance company beforehand and tell them you're planning to purchase a vehicle. They'll advise you on the correct way to proceed in this situation.
Avoiding Dealer Add-Ons
A dealer may try to charge you as much as $400 for an interior or exterior protectant, when one of these "treatments," including labor, can be purchased at mass-merchandisers for $20 or less. Another add-on that has cropped up recently is to have the vehicle identification number (VIN) etched into the car's window glass. A $500 etching from the dealer can cost just under $30 elsewhere, and its benefits are debatable. Ever known someone who reclaimed a stolen window because it had the VIN on it?
Likewise, don't go for the so-called upgraded alarm system. Here, the dealer claims they have installed an advanced system better than the original manufacturer's. First of all, an original-equipment alarm system is engineered to work with your specific model and is backed by a full multi-year warranty. An aftermarket system likely won't perform any better and may cause a warranty conflict. Some dealers don't even install a different alarm, but charge you as if they had. If the model you're considering doesn't come equipped with an alarm, a mobile-electronics specialty shop should be able to install a leading-edge, feature-rich system for less than the dealer would likely charge for a crude, outdated setup.
Unless you want to give away money, don't fall for these underhanded sales techniques - and make certain before you sign any papers that these add-ons have been removed from every copy.
Get it in writing
Just as important as the equipment on the vehicle are those items or services that the dealer promises during negotiations, such as throwing in floor mats, repairing a scratch, or giving you free oil changes. Get them in writing on the contract or a "due bill," a slip of paper from the dealership stating that you are owed some sort of extra that wasn't available at the time of purchase. Without paperwork to back up your claim, you're leaving it up to the dealer's good will to ensure that you get what you were promised.
Reporting Unfair Dealer Practices
The Federal Trade Commission is hosting a series of roundtable discussions that are free to the public. Beginning in April 2011, their goal is to gather information and discuss unfair and potentially discriminatory practices by dealer sales staff.
The first roundtable will be held at Wayne State University Law School in Detroit on April 12, 2011. You may contact the FTC directly at 877-382-4357. For more information on the roundtables, where they are located, and how to register or attend one, visit ftc.gov. In the meantime, the FTC also maintains a complaint assistant website at ftccomplaintassistant.gov.