I sold cars for nearly four years. Before you head to the dealership, you need to be prepared. Here's some advice that every shopper should know before setting foot on a car lot, whether it's a buy-here-pay-here joint or a fancy downtown Jaguar store with all-you-can-drink espresso. Ultimately, it's all about streamlining the process and scoring the best deal, so pay attention.
10. Salesmen aren’t car experts
I know. Shocking. But yeah, most dealer salespeople aren't enthusiasts. Worse, a lot of them aren't well-educated about the products they sell. They know just enough to move the product effectively, especially to the uninformed customer. If you've ever visited a dealer and realized you knew more than the smiling "expert" who tackled you as you walked in, you know exactly what I mean.
But wait—don't manufacturers require product knowledge training? Of course they do. But in the business of selling cars, money talks and time is precious, and an industrious staffer can make a lot of cash on the side by taking other staffers' product information tests. At my dealership, there was one guy who did pretty well for himself doing exactly that.
Of course, the customer loses as a result. I had to listen to veteran salesmen spout nonsense like, “Heck yeah, you can put a lift kit on this Denali and still get great gas mileage. It’s only a V6."
The sad part is, many customers don't know any better. So arm yourself with knowledge before you visit the dealer.
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9. Salesmen aren’t your friends
No one gets a good deal from a car salesman. Even when I sold cars to friends at what I thought were rock-bottom prices, there was still profit for the dealership built in. Being friendly is a sales technique. Period. It lowers barriers and fosters acceptance. If you believe the salesman is your friend, you're more likely to believe that he has your best interests at heart. Newsflash: he doesn't.
One of my worst days wasn’t actually on the car lot. It was listening to a friend talk about the "great deal" he got on a used car. He was amazed that the salesman had been so friendly and helpful.
“Hell, he even took me out to lunch while they prepped the car,” he said.
He regaled me with the story like he’d just bagged a 10-point buck, but the reality was a horror show: he paid over blue book, the dealer stuck him for an extra point on his APR, and he sold him an extended warranty that didn’t cover a $1500 brake job he needed 1000 miles later. But hey, the salesman was a nice guy!
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8. History reports aren’t gospel
History reports like those provided by Carfax and Autocheck are not foolproof. At best, they’re a way to double-check what a dealership is telling you. At worst, dealers can use them to artificially increase the price of a crappy car.
Remember that these services only communicate information that was reported by previous owners. For example, my car has a clean Carfax, but judging by the signs I've observed after the fact—overspray, different indication of wear, etc.—it's pretty evident that the car was in a front-end collision some time before I got it. But it was never reported. I didn't follow my own advice and I didn’t look closely before I bought it. As a result, I've been chasing wreck-related demons ever since.
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7. Buy what appreciates, lease what depreciates
You're at the dealership, and you're thrilled at the prospect of buying a car. Sure, that low monthly payment dragged out over a completely absurd 84-month term may seem attractive on its face, but it's a trap. In the end, you'll probably get burned. Once the car is out of warranty, whatever remaining value it has will be eaten up in repair costs. The solution? Lease. Leasing can keep your payments manageable and let you get in a new car every few years. These days, many leases include standard maintenance, and all you have to pay is depreciation. If you must buy, you're better off buying used.
In 2006, I ignored this rule. I fell in love with a Midnight Blue Metallic 2005 Pontiac GTO. I didn’t lease because I wanted to modify the car, and I was too impatient to wait for a used example to pop up. I got lucky. After four years of massive payments, I broke even. Not everyone is so fortunate. If you roll in negative equity from a previous loan, or if the car you're buying doesn’t randomly turn into a collector car when the company unexpectedly folds, you can find yourself in a tough spot.
6. Dealers aren’t charities
Financing companies work with car dealerships because it makes them money, and dealerships recommend certain options because—wait for it—it makes them money. Find your own loan before you arrive, or at least research which rates your bank or a credit union will give you so that you can compare them against the loans offered by the dealerships.
Some states still have usury laws that cap the interest that can be applied to a loan, but the 21 percent interest that the “special finance” division in my dealership ended up requiring is still 21 percent interest. So get financedbefore you set foot on the car lot.
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5. Beware the extended service contract
In many cases, you won't get your value back. The service contract is offered because it's a profit bonanza for the dealer. They're typically issued by external vendors that work like insurance companies. Like an HMO, each service contract vendor will have preferred care centers. The dealership will probably try to convince you to service through them exclusively so that they can capitalize on their premium labor rates. After all, the service department is where any given dealership really makes its money.
Dealerships charge a hefty labor rate because, well, they can. They're supposed to have better-quality technicians, and a vehicle maintained at a brand dealership typically has a better resale value. Just remember: You don't need to buy the service contract, no matter how important the salesman makes it sound, and you have final say in where to have your car serviced. Don't let anyone tell you otherwise.
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4. No-haggle pricing is for suckers
No-haggle pricing is a marketing ploy designed to ensure the dealership wins. If you agree to a no-haggle price, you're agreeing to an unknown profit margin for the dealership. Game over. Worse, unless you're forking over cash, you’ll still have to haggle when it comes to financing your purchase, anyway. You're better off steeling yourself mentally and negotiating a deal the old-fashioned way. There's a reason dealerships love no-haggle pricing, and it has nothing to do with saving you money, time, or hassle.
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3. Knowledge is power
When a dealers says it can’t show you some bit of information pertinent to the car you want to buy, it’s doing so because it doesn’t want to, not because it can’t. Short of the previous owner’s personal service records, the dealer can show you everything about the car, including invoice price, holdback, and even the money spent on repairs if they performed the service. You’ll have to harass the salesperson to get this info, but the knowledge gained can be invaluable.
My favorite example is “Pay 310.” Pay 310 was a line on General Motors invoices just for holdback. Holdback is a a charge—a percentage of the price built in by the manufacturer to help dealers defray the costs associated with advertising and marketing their products. Customers who asked for the invoice knew to look for this line, and haggling over it generally saved them hundreds of dollars.
Ask for invoice information late in the deal as a closing negotiation. Assure the salesperson that you recognize there has to be profit in the deal but that you want to know how much profit. Don't be taken advantage of.
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2. If it seems too good to be true ...
You know that 22,000-mile Subaru WRX STI you found at the scuzzy bargain dealership under the overpass that seems to have a new name every three months? Either the car won’t be there anymore in the two or three minutes it’ll take you to drive to the dealership (this is a bait and switch, and it is common), or there's something seriously wrong with it. The same goes for oddly cheap Benzes, BMWs, Cadillacs, and so on. There's an ocean of difference between a cheap car and an inexpensive car. You want the latter.
Dealerships aren’t exempt from this little rule when quoting trade-ins. I had a manager who lusted after all things Toyota. He made a fortune in Arizona strong-arming old ladies into Camrys and the like, and he believed that any Toyota, no matter how cheap, was worth its weight in gold. So when a customer came by promising a 60,000-mile Toyota pickup as a trade, the manager fell all over himself to give the buyer $3500 for the unseen truck. He figured he was stealing it. The customer drove off in a new ride, and our best lot tech left to pick up the trade-in. He barely made it back alive. The Toyota could barely hit 45 mph, it had a visibly bent body and bed, it ran on three cylinders, and it had a screwdriver for a key. But it was too late. The papers were signed.
1. There are no great deals
There are relatively good deals that get you a good car for a period of time, relatively bad deals that leave you underwater when you want to trade in the car, and there are deals where you get screwed, plain and simple. If your salesman high-fives a colleague while you're in “the box”—aka Finance—chances are you're among the latter.
Do your best to prepare beforehand, stay calm, be reasonable, and try not to forget these rules when you go in to buy a car. The experience will be better for you.