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Buying a New Car? Here's some help!

Discussion in 'Off Topic Threads' started by johnjohn91387, Apr 13, 2009.

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  1. johnjohn91387

    johnjohn91387 TS Member

    Jan 29, 1998
    Buying a New Car? Here

    7 ways dealers make you pay extra

    Winning strategies for playing the car-buying game to win.

    Your goal is to get the best car at the best price. The dealers goal should be to help you do this, but too often its simply to make as much profit as they can. As a smart shopper, you need to know the common strategies that dealerships use to pad their bottom line--from tricky negotiating tactics to trying to sell you unnecessary extras--and how to avoid playing their game. Consumer Reports auto-test staff, which buys more than 50 vehicles a year, has had hundreds of dealership experiences. Following are some of the most common things you could encounter and CRs advice on how to avoid falling prey to them.

    1 Mixing negotiations. Salespeople like to combine the vehicle price, trade-in, and/or financing negotiation, often asking you what you can afford to pay per month. This gives them more latitude to provide a favorable figure in one area while inflating figures in other areas. In the end, this could cost you more overall.

    Avoid this trap by negotiating one thing at a time, starting with the price of the car. Approach this as if you were paying cash, with no trade-in. To get the best deal, you should go in with a starting price thats based not on the vehicles sticker price but on how much the dealer paid for it. The dealer invoice price is commonly available on Web sites and in pricing guides, but that isnt necessarily what the dealer paid. Behind-the-scenes bonuses, such as dealer incentives and holdbacks, give the dealer more profit margin--sometimes thousands of dollars--which gives you more room to haggle. To help, Consumer Reports New Car Price Reports (available via ConsumerReports.org) includes the CR Bottom Line Price, which is the dealer invoice minus any incentives, holdbacks, or rebates. A reasonable starting price is 4 to 8 percent over the CR Bottom Line Price, depending on how much demand there is for the model.

    Make it clear to the salesperson that you want the lowest possible markup over your starting price, and that youll visit other dealerships selling the same vehicle and will buy from the one with the best price.

    Once youve settled on a price, discuss financing and any trade-in separately. This makes it easier to get the best deal at every step of the transaction.

    2. 0 down, 0 interest, 0 payments for one year. This may sound good, but there are downsides that can cost you money. After the first year, you still owe all the monthly payments youve delayed, often at a higher-than-necessary interest rate. In short, you end up owing much more than the sticker price on a vehicle that is now a used car.

    Consider this kind of deal carefully. No down payment, for instance, means youll have to finance more, which makes the monthly payments higher and increases the amount you pay in interest over the life of the loan. Be sure you know what the interest rate will be after the first year, and compare with rates that are currently available. Keep in mind that many buyers dont qualify for zero-percent loans and other low rates. Knowing the current rates can also help you avoid being talked into a rate thats higher than what you could get elsewhere.

    The leasing game. Many leasing customers assume that the monthly payment the salesperson quotes is a nonnegotiable figure. Thats not true. The figure is often based on a vehicles sticker price with no discount, and can be negotiated just as if you were buying the car. In fact, to keep the transaction simple, you can negotiate the vehicle price before mentioning that you want to lease.

    Other negotiable lease items include the down payment, annual mileage limit, and purchase-option price. Just as when buying, you can have dealers compete against each other, giving your business to the one that offers you the best deal.

    Financing and your credit score. Dealers like to arrange the financing for your vehicle because it gives them another source of profit. But the interest rate they offer may be higher than you could get elsewhere. Dont make financing a purchase-time decision. Before visiting the dealership, make sure you know how youll pay for the vehicle. Call ahead to find out what the dealers rate is, and compare it with what you could get from banks, credit unions, or other lending institutions. If you are preapproved for a loan, you can keep the financial arrangements out of the negotiations.

    Remember that your credit score will affect what interest rate youre offered, so its good to know it in advance. Ideally, check your credit score a couple months before buying the car so that you have time to correct any errors in your report.

    Knowing your credit score can also protect you if a disreputable dealer tries to give you a higher interest rate than you deserve. Any score over 700 should ensure you the lowest rates. A report with a credit score costs $15 or less at each of the major credit bureaus: Equifax, www.equifax.com, 800-685-1111; Experian, www.experian.com, 888-397-3742; and TransUnion, www.transunion.com, 800-888-4213.

    Loading on the options. Salespeople will sometimes try to make up for a low price on a vehicle by talking you into a lot of optional equipment. Do your homework, so you know what options you want and which you can live without. Many options are available separately, but others can only be bought as part of a package. Consider these carefully. Option packages can make you pay for features you dont need to get a few you want. Its best to choose a vehicle trim level that gives you most of the options you want, then add other options separately. If a model doesnt have the features at the price you want, consider another.

    Remember that you can negotiate the price of options. Various Web sites and Consumer Reports New Car Price Reports give you dealer invoice price for all available options.

    Extras you dont need. Another profit source for dealers is extras such as rustproofing, fabric protection, paint sealant, and etching your Vehicle Identification Number (VIN) on windows to deter thieves. Sometimes, these types of charges will simply appear on your bill of sale without anyone having mentioned them to you. Dont waste your money. What could cost the dealer about $90 can cost you $1,000 or more.

    Vehicle bodies are already treated to protect against rust. Upholstery is typically treated at the factory, or you can do it yourself with a can of spray-on fabric protectant. Paint sealants and waxes are available for under $15 at any auto-parts store or supermarket. Some states do require dealers to offer VIN etching, but none require that you buy it from them. If you want VIN etching, you can do it yourself with a $25 kit.

    Dealer prep fees--such as checking tire pressure--should be included in the purchase price, not listed as extras. If these items are on your bill of sale, refuse to pay for them.

    The question of extended warranties. At some point in the buying process, the dealerships financing manager will try to sell you an extended warranty, which can cost hundreds of dollars. Consumer Reports does not recommend buying an extended warranty unless you plan on keeping a trouble-prone vehicle for an extended time after the original warranty runs out. Most manufacturer warranties are sufficient, with bumper-to-bumper coverage of at least three years or 36,000 miles and powertrain coverage thats often longer. If you want an extended warranty, ones offered by the auto manufacturer are typically better than those offered by third-party companies. Although the finance officer / manager will also make a profit on anything he/she sells you that is over and above the actual cost of the extended warranty. Check around for the best deals on extended warranty programs, some of them are 25% of the price the dealer "offers" for close to the same coverage.

    Some disreputable dealers may tell you that you must buy an extended warranty because the bank requires it. In fact, lenders typically don't require it, and making you pay for one under these pretenses is illegal in some states.

    I sincerely hope this helps you in your next car buying experience. Try to remember that everything is negotiable, including the price, the accessories, the warranties, and the financing and interest rate.

    Try to remember to do your homework in advance; a car is usually the second most expensive thing people purchase in their lifetime; it pays to research this before you walk into a dealership.

    The dealership's job is to relieve you of as much money as possible, and they are usually very, very, good at it. If you don't do your homework and research in advance, you are losing your hard earned dollars, regardless of what brand of car you are buying.

    The sales contract or other documents usually have some form of this disclaimer: "Nothing else is included or promised unless specifically in writing".

    We would all do well to remember that.

    And last but not least, do you really really need a $2,000 extended warranty on a Toyota Camry? Arguably, it's one of the most reliable cars in the world? Insurance companies and credit unions sell the same extended warranty; most of them offer the warranty at no mark up, unlike the dealer.....for whom the difference is pocketed as profit.
  2. W.P.T.

    W.P.T. TS Member

    Jan 29, 1998
    I cut through the chase and buy a car that has 10 year / 100,000 mile warranty and pay cash, no more problem ... I make an offer they take it or leave it, thats all there is to it ... The cars come dressed out and all options are on it and included (for the most part) except for maybe a moon roof and leather interior which is not an opiton in this house ... Thats a lot of good information John and can be helpfull if someone is out shopping ... WPT ... (YAC) ...
  3. JH

    JH Well-Known Member

    Jan 29, 1998

    Thanks for the general tips.....most people buy on impulse and are IGNORANT when buying a truck/car...paying too much is common but there is no excuse....Consumer Reports, Edmunds, etc. all have detailed information regarding "slippery" dealer practices...when you buy, where you buy and what you buy are also fundamental considerations....

    Those who are well informed, can inhibit impulses and shop around get the best deals!
  4. johnjohn91387

    johnjohn91387 TS Member

    Jan 29, 1998
    It goes back to a couple of things I learned;

    1st, car buying is a barter transaction, NOT a retail transaction. You CAN negotiate the price of a car; but you can't negotiate the price of socks at Sears, for example.

    EVERYTHING is negotiable when buying a car, including the price/value of trade in.

    2nd, there is another dealer down the road who WANTS to sell a car; if the dealer you are visiting is not budging on the price of ONE thing, or ANYTHING, then find another dealer.

    You may think it's not worth your time....money, or the effort.......

    How much is your time worth? With as little as 1 hour research time invested, you can save THOUSANDS of dollars; NOW, how much is your time worth?

    Los Angeles county just raised their sales tax to 9.5%. Yes, you read that right. Nine point five percent!

    On a car retailing for $30,000, that's $2850.

    If you, armed with some basic info, buy the car for $26,000, then you have saved $4000, PLUS $380 tax.

    $4380 savings. Pardon me, how much did you say your time was worth?

    The dealer's love to make this personal......for example: "Are you, Mr. Customer, going to let $1,500 come between you and YOUR new car?" They are playing to your emotions, rather than to your logic.

    But you, well armed with the knowledge that there IS another dealer just down the road, counter with this: "No, Mr. Car Dealer. The question should be, are you going to let $1,500 come between you and a sale of another unit?"

    When you get to an impasse, as you generally will, and it's make or break time; get up and walk out.......most dealers will literally chase you out the door to close the sale, and they will give you the price you wanted, when they see that you are serious about buying the car. They KNOW that even if they only make a few hundred on that unit that you drive away in, they are going to make it up many times over on the NEXT customer....

    The sales of multiple units (plural) is what keeps dealers in business, not one individual vehicle. Some dealers could sell every single car on the lot at "invoice" and STILL make a profit, with holdbacks, spiffs, and internal profits from financing, accessories purchased at the time of sale, extended warranties, GAP coverage, fabric protectant, rust proofing, tire warranties, paint sealant, and a myriad of other things specifically designed to part you and your money.

    Dealers will pull the emotional card and play it in a second: "Your taking money off MY table; I have kids to feed, etc., etc." They will act as if they are your best friend. How could that be? You literally just met them! I think that's just plain rude and presumptuous.

    How is it YOUR responsibility to feed THEIR kids??????

    Remember the first test drive, and all the questions that the salesman asked while you were driving? There is a reason that they want you to test drive the car; it takes away part of your resolve to keep the sale business like, and makes it personal. Who DOESN'T like that new car smell? (it's the carpet glue; that's why most new cars smell the same, they all use the same glue to hold down the carpets) The salesman is asking those questions for a reason....

    When you go on a test drive, YOU control what information the salesman gets; simply tell him that you are not ready to talk about financing, trade In's, cash, extended warranties, and all the rest of that stuff. You can do this, because he NEEDS to sell the car, and YOU, literally, are in the driver's seat.

    I have some experience in cutting deals for my insurance customers, my family, and several neighbors. I have been able to save all of them money, because for me it was strictly a business deal; it's not personal, like Michael Corleone says.

    I am fortunate to live in Los Angeles, where there really is another dealer down the street....40+ Toyota dealers in the Los Angeles area. FORTY!!!

    Yet, some customers continue to fall into the biggest traps; "just tell me what my monthly payment is".....and end up buying "the works", giving the dealer thousands of dollars more than need be, PLUS OUTRAGEOUS interest rates for financing. I have personally seen sales contracts for new cars at 22% interest.

    Do some homework, keep it a business transaction, don't impulse shop, and dress for business. Be prepared to walk out if your terms are not met. YOU are literally in the driver's seat when it comes to buying a car; the dealer NEEDS to sell a car, but you DON'T have to buy that specific car, when there is another one right down the road.

    I hope this helps.

  5. omgb

    omgb Well-Known Member

    Jan 29, 1998
    Santa Clarita, CA
    I begin by research. I know what i want and I know what the availability is within 50 miles of me (SoCal). I get a print out from Consumer Reports for my area. I know the hold backs, special pricing, delivery fees etc. I set a price range in my mind giving the dealer 3-8% above his real cost. You have to be ready on this one because I have yet to find a dealer who will agree with CU. All claim their cost is much higher.

    I try to buy in the late afternoon on a Sunday toward the last 7 days of the month. Prices get much better as you get toward all of those dealer hold backs and month-end bonuses.

    I'm the cold-hearted guy, my wife is the friendly but adle-brained wife. I "let" her pick a couple of cars in front of the salesman. We test drive...never her, just me. She rides in the back. i grunt as the salesman tries to make light conversation. She prattles on like an idiot and gushes over the car. I find faults.

    We go into the "room" to work the "numbers". I never mention trade in. If the dealer asks I say no. We dicker. He throws out payments and I insist on talking price first....i tell him i have my own financing (which I do).

    This whole process takes a couple of hours. It's getting late, way after 7 or 8 PM. The wife leaves the room or I get the salesman outside and tell him to help me out, the wife is killing me. She has repeatedly thrown out low-ball prices well below what I am willing to pay. (remember, we know the real value of the car) Finally, I tell the salesman that if he goes with such and such a price (the one I am willing to pay) I can get my wife to go along. Naturally, the salesman goes "I'll have to take it to my manager"

    He comes in and says he can't go that low. he needs to make some money. I say thanks, grab the wife and go out to the car. By the time I grab the door handle, the manager or the salesman or both come out to get me. Another hour or so and we have the deal. In the finance department they try and pitch extended warranties, fabric coating all sorts of crap. I listen and say no to everything. They try and guilt you, make you afraid etc but I hold on and never cave.

    That has worked like a charm for the last 7 vehicles I've bought including my son's two cars...both of which were Subaru STis ...very high demand autos.

    I've had to leave a couple of dealers outright but so what. This is LA, city of airheads and there's always another dealer right around the corner.
  6. fortwtlkqa

    fortwtlkqa Member

    Sep 6, 2008
    Here's a tip. Just get online and look up 3 or 4 dealership's that have the
    car you want. Have them quote you on the exact car you want. Then, once
    you've got the information you need, go to the dealership that has given you
    the best price.

    Check with your credit union as to what rate they will give you for the exact car you are looking at. Then if the dealer doesn't beat it, use your credit union.

    Car buying is really simple, if you are an educated buyer.

    Curt Kinsey
  7. Tom @ Athens

    Tom @ Athens Member

    Nov 24, 2008
    Timberfeller; You are the type of buyer that every salesperson prays for when they go to sleep each night. You don't care what the car cost. You don't care what the interest rate is. You don't care about dealer added options or what they cost. It has to work for you , it can't fail, you get make a monthly payment for the rest of your life. One of my college buddies has 3 new car dealerships. He tells me 70% of his buyers are only interested what the payments are. He said they paid for his last two dealerships. People like John, they dread him walking in the door. If you use John's way the payment might be $10.00 more a month. But they probably end 2 or 3 years sooner.
  8. LABS4U0

    LABS4U0 TS Member

    Mar 15, 2007


    Any Tips on buying one of these? I need one. Darren
  9. Big Al 29

    Big Al 29 TS Member

    Jan 29, 1998
    When the salesman pulls out the 4-square tell him you know the game and to put it away.

    That usually sets the mood that you are not a sucker, you did your homework, and you know the games they play.

    Talk one price at a time.

    Never settle at the first visit.

    Take your wife and small kids and let them run all over the place. I did this once not knowing the value but it was great with 2 small kids crying, begging to leave, etc.... moved things on very easy and made both my wife and I very abrupt and put the salesman on the clock.

    Go in with YOUR PRICE and only pay it.

    Look for "ADM" Additional-delaer-markup. This is total BS and means absolutly nothing ohter than more money out of you pocket.

    Transfer your tag. They get the profit if you buy a new tag and they will push you into it. IN PA at least you can trasfer.

    ALL GREAT ADVICE THOUGH especially brining in a dealyou got from another dealership. Get it on e-mail, print it out, bring the salesman's name and have them call them if they think its bogus. That works too.

    Great stuff though. I love buying cars and bullshitting the bullshitter.

    Edmunds has some great calculators, articles and tips to read.. Edmunds is not in line with the car dealerships like Kelley's is. Use NADA or Edmund's numbers and shy from Kelley's.

    mash the link above. It is written by an undercover guy who infiltrated the "car salesman" world then published all the bullshit they do and how to counteract it. Easy read and VERY thorough.
  10. cementman

    cementman Member

    Jan 29, 1998
    Milford, Michigan
    How about if I am looking for a General Motors vehicle and can qualify under the GM Employee discount. Always been told that the price is set with no further discounts. Is this true, or can a better deal be made?????????
  11. 635 G

    635 G Well-Known Member

    Jun 30, 2008
    In the region where I live all the dealers try and charge a $300-$400.00 administration fee. Is this BS ? I shopped on line & beat the local guys price by 3k. But they still got $398.00/admin fee.

    Phil Berkowitz
  12. CO - 369

    CO - 369 TS Member

    Jan 29, 1998
    So if the sticker price is $30,000, what can u expect to buy that vehicle for, paying cash?
  13. crusha

    crusha TS Member

    Jan 29, 1998
    Ah, there's nothing more near and dear to our hearts, than cheating some bastard car salesman out of his bread and butter! Unless it's telling OTHERS how to do it. (SMSnyder, where you at?).

    My parents were in the dealership business at one point, and you cannot believe the "slice of life" that goes on in these places. Typical salesman lasts about 3~4 months, and the general level of professionalism often reflects that. Some of them have been there a long time and are real professionals...but most of them turn over almost yearly, if not sooner.

    As some posters above mentioned...the wife is often the weak point in the negotiation. Salesmen zero in on this. You see some woman in there spewing on and on about how her car just died on her, she needs something reliable, etc. etc. etc. Translation: I have a Deadline - I'm going to buy a car THIS weekend, because I cannot stand to go another week driving to work with this damned unreliable vehicle of mine...etc. And the salesman is just eating it up, because now he knows the customer's vulnerability. Make sure your wife/girlfriend does not go on and on about how sick she is of her unreliable vehicle, even if it's true. Department stores sucker women all day long with this "One Day Only" sales crap, where if you don't buy it today, you don't get it, quantities are limited, etc. The car factories are turning out vehicles every day, so don't let the missus fall into the trap of "artificial time pressure." Deadline pressure is probably responsible for more bad deals than anything else...the feeling that you have to buy now. No, you don't.

    Rule #1: don't wait until your old car dies. The right time to shop for cars is when you don't really need one...but most people ignore this. You'd be surprised how many people are in that dealership because their car died on Thursday, and they buy a new one on Saturday. Dealers positively count on this.

    One thing I always do when negotiating cars or anything I can't pay for in cash, and it's always helped me a lot, is to make up an Excel calculation spreadsheet (in table form). Principal amount down one side, interest rate across the other, and they intersect at the payment...take that sucker in with you, keep it in your shirt pocket the whole time, and refer to it every 20 seconds or so. It makes you look like a "numbers nerd," but hey, everybody hates to negotiate with a numbers nerd. If you know any two of the values in question, you can figure out the third at a glance with no number-punching. With the sales price and the payments, you can figure out what rate they're giving you (eg. you want to check their finance rates against the bank's). If you know the rate and the payment, you can figure out the offer price, etc....and so on. Especially if you're looking at more than one vehicle trying to make the best deal, the ability to make these kind of calculations on the spot is really valuable. The salesman has the exact same type of thing open on his computer, on the other side of the desk, trying to work all angles of the deal and come up with a number you will bite on that still makes him good money. So you might as well have the same thing, and save him (and you) the trouble.

    I have no problem walking away from someone I've spent 3 hours negotiating with. When we first got married, my wife felt guilty about this, like it's some kind of personal failure or something..."He took all that time to go with us on two different test drives, answered our questions, talked to his mgr. several times...he was really working to make the deal for us" blah blah blah. And I'm like, "I'm outta here, are you coming or not?"

    Another tip: salesmen know that buyers rarely buy from the FIRST place they shop at, they usually go to at least one more dealer to compare. So they know if you leave their lot, you're probably not coming back again, because the "second" guy usually beats your deal and gets the sale. This is why dealers go to great pains to prevent you from walking away...especially if you tell them they're the FIRST place you've looked.

    I've also seen them use a surprising trick with pre-owned vehicles...letting the "prospective" customer take the car home overnight to "think" about it, if it already has a few miles on it anyway. Especially with wives, it fosters a sense of obligation...you leave your car at the dealer, take theirs home, the wife gets used to driving it for a day (of course...it's nicer than what she had before). The salesman is secretly praying someone plows into you while you have it, because then they probably just made an easy sale. It's a sucker bet; NEVER take that car home, or allow any family member to form an emotional attachment to it, until you've agreed and signed on a number that's what you want to pay.

    And yes - end of month does matter, sometimes...especially if the salesman is a car or two away from some kind of monthly incentive quota.
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