When it comes to people you can trust, car dealers are right up there with politicians. How that ever came to be I cannot say. Car dealers are notorious for being aggressive, ruthless and untrustworthy and they usually wear way too much cologne. It is an unfortunate reputation and of course there are some genuine sales people who actually care but they are far and few between.
In this article I teach you how to buy a car from a dealer – like a pro.
As a professional car buyer I am in the dealer showrooms on a regular basis. I consistently see good people who fall smack dab into the dealer trap. People seem to know they are going to be taken for their money and even though they know this they still enter into the lion’s den.
When I see people with their heads in their hands I always think to myself “if they only knew the basic rules to dealing with the dealer”.
So here it is: The 5 mistakes most people make.
Or more accurately, The top 5 ways dealers will try and screw you.
1/ Negotiating on the monthly payments.
This is the most obvious sleight of hand that the dealers will use to conceal the true inflated price that you are paying. Monthly payments are a result of the negotiated price of the car. It follows that the better the price of the car the better your monthly payments will be. Dealers will keep trying to wrap the negotiation into the monthly payments saying things like “what payments are you comfortable with” and the like. Be tenacious and do not fall for it. First comes the negotiated price. Then comes everything else. By the way most dealers will settle on making a few hundred bucks from the deal. If you are buying a new car you should know what dealer invoice is. Go to True Car for the best pricing guidelines on the net.
If it is a used car you are buying then keep in mind that the dealer paid wholesale for the car and will be will eventually settle on making a couple hundred over that just to make a sale.
Lesson: Never negotiate monthly payments.
2/ Not having a backup plan for financing
Dealers are in the business of extracting as much money from you as they can. They have many strategies that they employ. Jacking up the financing rate that you pay on a loan is extremely common.
The other day I was making a purchase for a client who had a credit score of 725 (not bad but not great). As the paperwork got processed, the dealer threw a completed contract with 6.99% percentage rate on the table. Luckily I had advised my client that this would happen and we told the dealer that we were already preapproved at another bank for a much lower rate. We did not have to back up that statement. He just shredded the contract, changed the APR to 1.9% and without even blinking threw the new contract in front of us. This change took less than 1 minute and yet the savings were substantial for my client.
The key is that you will need to know your FICO score to be able to have some leverage in the deal. You can obtain your credit score absolutely free at Credit Karma. It is a wonderful service.
Lesson: Have a backup plan for financing in case the dealer plays you for a chump.
3/ Not knowing who to deal with at the dealership.
Most people will waltz into a dealer without realizing that who you work with will make the biggest difference in the negotiations. The way to get the best deal is to know which person at the dealership will be able to close your contract without getting some upper management person to “approve” the deal. It is a complete waste of your time unless you get to the correct person right from the beginning. Otherwise you will be at the mercy of someone who has no authority to cut through the bullshit. The solution is to simply call beforehand and ask to speak to a manager. Once you speak to them make an appointment with that person. This is far better than showing up on the lot and getting hit up by some lot person who has the least tenure on the lot. Ask for a manager. Demand it.
Lesson: The right person will save you precious time and a boatload of money.
4/ Falling prey to the expensive add-ons
Back-end profit. That is the term given to the expensive items that you will be presented at the close of the deal when you are exhausted and not thinking too clearly. The person in charge of closing your deal, “The Financer”, will make you believe that you cannot live without these things. Remember this: There is nothing that they will offer that cannot be bought the very next day for substantially less. The most outrageously priced add-on is the extended warranty. I have witnessed people going to extremes haggling over the price of the car only to throw on way too much on an extended warranty. If you really want to have the extra peace of mind then remember, that the cost of the warranty is extremely negotiable. Not once in all my years of buying cars have I ever seen a dealer fail to bring the cost down substantially after we said “no” to it. Other items that they will try and upsell you on is, window etching, LoJack, fabric protection, rust-proofing and overpriced security systems. Most of these are nearly worthless and cost the dealer next to nothing. They are all highly negotiable.
Lesson: Know beforehand that you will be presented with expensive add-ons. Say “no” to them and watch the price drop.
5/ Losing control of the process
Dealers are trained in the art of manipulation. The entire process from start to finish is set up to make you feel out of place. From the suit coats that they wear, the code language that they speak, the forms that they have you sign and the psychological leverage that they regularly employ are all designed to make you powerless in the process. What buyers forget is that they have all the power. The dealer needs you way more than you need them. After all, there are many dealers to choose from.
The simplest way stay in control is to have a plan with very specific parameters regarding price, how you expect to be treated and what the extras are that you want on the car. Also have a Carfax in hand. Then remember the 3 most important techniques. They are: get up, turn around and walk out. The power of having this strategy in your plan is that you will take away their biggest leverage.
Lesson: Have a definite plan and if things do not go according to it, simply walk away.
Greg Macke is a professional car buyer and consumer advocate. He has worked closely in the industry to improve the buyers experience. Visit his website at yourcarangel.com
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