Smart Buying Essentials
ShowRoom Strategies
How to win at the dealers' games
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 eek 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 up front 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). (See our "Trade-in, Sell, or Auction story in this issue for more details.)
Say no to dealer markups
Markups are one of the biggest reasons consumers are so suspicious of dealers. Boldly displayed right next to the manufacturers' 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 years, the demand for the vehicle has faded. It happened with the Chrysler PT Cruiser, Ford Thunderbird, and Volkswagen New Beetle, all now readily available and experiencing soft sales. At the time of this writing, we found a $10,000 markup on a Chevrolet SSR. Would you be willing to bet $10K that the SSR won't depreciate in three years? That's what you'd be doing if you were to accept that markup.
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 (finance and insurance) department.
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 walk out; 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.
And 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 such 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.
AVOID 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 backup your claim, you're leaving it up to the dealer's good will to ensure that you get what you were promised.
Confessions of an Auto Salesman
It isn't easy to find sales people in the auto industry eager to talk candidly with the media about what tactics they use to separate buyers from their hard-earned money. We found one veteran, however, who was willing, on the condition of anonymity, to tell us some of the things he's seen during his more than 30 years in the business.
IntelliChoice: What sort of things have you done to get more money out of a buyer?
Salesman: You always try to get people into a more expensive vehicle. If you don't help them, they will normally gravitate to the expensive model, even if they know they can't afford it. I can usually get them into the car, but they'll be upside down in their payments fairly quickly.
IC: What about the high interest rates?
S: Look, there are a lot of people out there who have lousy credit and can't get financing, let alone a good interest rate. If we have to work the deal, limited by a lousy credit rate, we get paid for that. If it is seven points over the loan, what's the harm, as long as they get their car.
IC: So, what have you done to get more money on the deal?
S: I can make a lot of money by getting folks to buy the extras, like paint treatment. It used to be corrosion protection, but that isn't used much. Window etching and extra insurance are also good money-makers.
IC: Isn't it hard to get people to go for these extras?
S: With the Internet, it sure is. It's been the worst thing to happen to salespeople. This is the only business in the country where people can find out our cost for our product. It makes us have to work harder to make money, but we can still do it.
IC: What would be your best advice for someone about to buy a car, so they don't get ripped off?
S: Don't buy a vehicle.
IC: Seriously, what would you tell a good friend?
S: If they research their vehicle and know what the average pricing is and get their own financing, they're pretty safe. And just say no to everything the sales and F&I guys try to sell you.
