11 Tips You Should Know Before Buying a Car
- Steve Diggs No Debt No Sweat! Financial Seminar Ministry
- 2006 13 Feb
Last time, I shared my history as a car salesman and encouraged Christians to be shrewd in their dealings with the world - especially in regards to their finances. Now, I want to share some tips on the right way to buy a car based on my own sales experience as well as the experiences of others. Knowing the best way to go about making this important purchase will help you and your family be better stewards of God's resources.
1) Show Up Near the End of the Month. Car dealers are like most other businesses — there is often a mad dash in the last few days of the month to "make the numbers." You may find that the dealer will bend a little further in the closing days of a month to put another sale on the books. Remember, the best time to buy a car is when the salesman wants to sell it worse than you want to buy it.
2) It Is Hard to Know What A Car Really Cost the Dealer. Don’t be too trusting when a salesman vows that he’s "giving it to you at cost." To begin with, his idea of "cost" and yours may not be the same. When you hear "cost" you probably think of the amount the dealer paid to buy the car. On the other hand, the salesman actually may be referring to what he paid for the car, plus other "little incidentals" like shipping, undercoating, dealership overhead, profits and commission.
And, even if the dealer is willing to discuss his "invoice price," there may be more here than meets the eye. Despite some very helpful tip books and internet sites that disclose dealer costs on cars, it’s still not always easy to get to the bottom line. One reason has to do with a thing called "holdbacks." This is a practice that allows some dealers to get an additional 1% to 3% discount from the factory — taken off the invoice price they may show you. Being aware of this may help you negotiate a better deal.
3) Don’t Let Your Emotions Take Over. Nothing toughens a salesman’s pricing resolve more than a customer who is drooling on the hood of one of his cars! These guys are pros. Just like a dog can sense fear, a car salesman can tell when you have "car fever." Be cool. Be nonchalant.
4) Learn the Negotiating Game. Just like football and basketball, the game of car selling has its own set of rules. The better acquainted you are with these rules, the better your car buying experience will be.
Frequently, it goes something like this: You come onto the lot. Based on a rotating system between the sales staff — you are assigned to the next salesman as his "up." With a happy smile and a firm handshake, the game begins. When you become interested in a particular car, the salesman will invite you into his office. Once you’re seated (usually with your back to the door), he has your full attention. Now, it is his job to get you to make an offer, preferably in writing, that he can "take to the manager." If you fall for this, you will be in a position of weakness. By making the first offer, you show your level of interest and your financial starting point.
Now all the salesman has to do is "present your offer to the manager." Momentarily, he comes back telling how his manager (who may not even be involved) is crying and saying it would bankrupt the dealership to sell you the car at that price. But, glory be — his manager has agreed to sell the car at a price that’s only a couple of thousand dollars higher (which is curiously close to the original sticker price)! From here, it often is just a waiting game to see who blinks first. Their job is to keep you on the lot until you buy the car. By the way, if you have made the mistake of handing them the keys to the car you’re trading — you may have a long wait while the used car manager "appraises" your car.
My approach is different. When I come on a lot I move fast. I like to see how many cars I can look at before the sales guy gets to me. When he arrives, I’m friendly but noncommittal. He doesn’t really know what I want, or how badly I want it. If I find a car that interests me, I ask him for the price. If it’s too high (and, it usually is) I tell him so. Then, despite his protests, I refuse to go to his office. I simply pull out one of business cards and jot my cell phone number on it (as I’m walking back to my car). I hand him the card and say something like, "Look, I know you’re going to have to get with management on this because I’m not willing to pay anything close to your sticker. I’m going to be visiting some other car lots in the area. Why don’t you guys figure your best price and give me a call in a few minutes. If you’re in the ballpark, maybe I can drive back over and we’ll talk."
By doing it this way, I have reframed the transaction. The ball is in their court. They know I’m serious, and that if they don’t deal I’ll probably find someone else who will. So the pressure is on them to perform.
Does this always work? Of course not. Often, they don’t call back. But if they really want to deal with me — they’re the ones who have to come up with a starting price. Then, I can negotiate from a position of greater strength.
5) Beware of Add-ons. Car dealers love add-ons. They can be big revenue generators for the dealership — but, not always so good for the buyer. I know one luxury car dealer that puts expensive, non-factory tires on its new showroom cars. Why? Because if a buyer either likes the special tires, or is too inhibited to tell the dealer to pull them off and replace them with the original factory tires, the dealer makes an instant $800 extra on the sale.
While that may be a more creative type of add-on than some dealers come up with, add-ons are by no means a new idea. Beware of these budget busters when you buy a car. Little things like extended warranties, rust proofing, credit life insurance, and dealer-added accessories should be bought with caution, and a full awareness of what they do to the total price.
6) Learn How Trade-in’s Work. There are different strategies about trade-ins, but my experience selling cars taught me that trade-in pricing is often used to flatter and confuse prospective buyers. Here’s what I mean: Suppose you are interested in buying a car with a $20,000 sticker price. The dealer might offer you $6,000 trade allowance on your old car, leaving a trade difference of $14,000. Feeling pretty good, you say to yourself, "Wow, $6,000 for that old junker—that’s more than anyone else will ever give me! I’d better take this deal while it’s still on the table!" But in the rush of the moment you forget that you’re basing the trade-in value against the full, non-discounted price of $20,000.
If you really want to know what your old car is worth to the dealer, there’s a better strategy. Start your negotiation by telling the salesman not to factor your old car into the trade yet. Instead, ask for a price based on a "straight" sale without a trade-in. Then, when you finally hammer out a price of $18,000, say, "If I wanted to trade my old car in on the deal, how much would you give me for it?" Now, he’s stuck and has to tell the truth that the bottom-line is still $14,000 — and that they’re really only allowing another $4,000 for your old car.
It may hurt your feelings a little, but it will help you make a more informed decision. You may decide to sell your own car at a price closer to what the dealer would turn around and try to retail it for.
7) "Bait-and-Switch" Is Not A Forgotten Art. Have you ever seen a car dealer billboard or newspaper ad promoting a vehicle at an unbelievable price? Don’t be surprised if you arrive at the dealership only to find that "we sold the last one of those just last night, but I have something else that you’re going to like better." Then you find out that the "something else" is not only better — it’s also a lot more expensive.
Low-balling and bait-and-switch games are still around. Don’t let new car fever short circuit your common sense.
8) Don’t Put Too Much Trust In "Book Value." I am not convinced that a book value always has much relationship to what a car is truly worth in the real world. Remember, a car’s value is what a motivated and informed buyer is willing to pay for it. Book values can be based on wholesale value (what a dealer might pay to buy a car before he adds his retail mark-up). This number may not help if you want to know what your car may be worth to a retail buyer.
Some experts suggest that the best way to determine the actual value of your car is to do your own research. Check car magazines and newspaper classifieds in your area to see what similar cars are selling for.
9) Remember: Dealers Don’t Arrange Loans Just To Be Nice. Financing has become a big part of the car business. It is not unusual for a dealer to make more money on a car’s financing than on the actual sale of that car. That’s often why a salesman may push his financing plans even after you have told him that you’re going to pay with cash.
10) "No Haggle Pricing"—Another Way of Saying "It’s Our Way or the Highway." In the last several years there has been a trend by dealers to promote what they euphemistically call "no haggle pricing." Well, duh! That’s the way it has always been. As long as you were willing to walk in and pay the full sticker price — there never was any haggling. The only kind of "no haggle" policy that would interest me is if a dealer will let me come in and announce my own price with no haggling. So far, I’m unaware of any dealers who take that approach. So until they do, I want the right to haggle!
11) Research the Dealership. Chances are, you will bring your car back to the same dealer you bought it from for repair, maintenance, and warranty work. Ask around about the company’s reputation. Check with the Better Business Bureau or other reporting organizations. Beware of the dealer’s claims of great service or customer satisfaction awards. Some of these may be self-awarded or given by the manufacturer who sells cars to the dealership — hardly an unbiased source. (Do you remember the old story about the fox guarding the henhouse?)
Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.
A complete financial compendium, 19 chapters
• What you can do today to get out of debt and kill the Debt Monster
• A,B,C's of handling your money God's way
• How to save, invest, and retire wisely
• How mutual funds work
• How to stop fighting over money
• What to teach your kids about money
• Learn how home & car buying, college financing and insurance work.
• How to develop a budget that works -- forever!
• Features simple charts, graphs, and easy-to-use forms.
Click here to learn more or to order.