FIVE THINGS TO KNOW BEFORE YOU BUY A NEW CAR
Aug 09 '01
The Bottom Line Save Money on Your New Car Purchase. My Five Tips From an Insider Will Help You.
Is the Salesman's hand in your pocket... (or is he just glad to see you?)
I've done it. I've been the guy who took advantage of the young, of the old, of the feeble of mind. The widow and the orphan were no exception; if they came into my dealership unprepared... they were fair game!
Now that I've repented of such a life... now that I've moved on to better and more worthy crusades in life... part of my penance should be to alert as many as I can to the dangers and pitfalls that await in the arena called "The New Car (or Truck) Showroom!"
Follow THESE Five tips and you will save money and get a good deal... somewhere, if not at that dealership, then at the next one you visit!
Tip # 1: Do NOT under any circumstance pay sticker price! The new car market is not a department store or a grocery store. The price they have advertised is a point to begin negotiations. Regardless of what they might tell you, they expect to sell the vehicle for less than what they have boldly painted on the windshield!
What is fair? One of the beauties of buying a new car is that there is this huge and available paper trail regarding the price of the vehicle. Unlike used vehicles, where the amount of money the dealer has in the vehicle is subject to fabrication, there is a set amount that the dealer has paid for the vehicle. It's called "invoice" price.
Most dealers will gladly sell you a vehicle for $500 over that invoice price. And why not? They are making far more than $500 in such a deal.. (This is where your knowledge comes in as well...)
Tip # 2: Knowing how to read the invoice. The biggest secret that is tucked away on the invoice is not how much each of your added features cost the dealer... it's not how much the car costs to ship from the factory to the dealer... it's hidden usually under the initials H/B... it's called Hold Back.
Hold Back is the amount of money that the factory has "held back" by over-charging the dealer on the invoice... think of it as a pre-paid rebate check the dealer gets after you buy the vehicle. For smaller cars like the Chevy Cavalier, it might be as little as a few hundred dollars, but for larger, pricier vehicles like a Pontiac Trans-Am, it could be well over a thousand!
This money is "built-in" to the invoice to make sure the dealership doesn't go bankrupt... car dealers will give all their profit away to make a deal if need be! Part of the game is numbers... ESPECIALLY if there are several competing dealers within driving distance... you might consider offering $200 over invoice for a lower-end car and find that they will jump at the offer... (They might not show it, for the sake of negotiations, but inside they're dancing for delight...)
Tip # 3: Now that you've negotiated a "sweet deal" for your car... don't let your guard down... the SECOND source of income (in fact, the PRIMARY source for some dealers...) is their used car lot. IF you have a trade in that you need to get rid of in the deal... to have them pay it off or just because you don't need two cars... be aware that when the "used car manager" gives you an appraisal of your vehicles value to them he's built in a cushion.
Upon rare occasion, they might "give you all there is" but usually you'll be able to either negotiate a few hundred dollars more for your trade in OR find that the new car manager will play with the numbers and find you that "few hundred dollars" in the new car price! Here's how it usually works:
The salesman (person) who is working with you will drive your car "across the street" or "around back" where the used car manager will look the vehicle over. Depending on it's age and condition will determine how closely he looks... and he's going to try to point out as many flaws or blemishes as he can. (If by some chance, you can see what's going on from the window, you'll notice the manager pointing at vague parts of the car and "shaking his head sadly"...)
Regardless of what the salesman says to you, know that any used car manager worth his salt will have built in at least $500 extra profit if the vehicle is worth more than $2500 or so... (on the chance that your trade-in IS junk... well, you need to be honest about that with yourself!)
Let's say you've got a two year old jalopy that is in good shape and runs good. You've not beat it up or wrecked it. You've changed the oil every 3K miles or so... and they come back with an "appraisal" of $9,000... it's time for YOU to do the "sadly shaking your head" thing! Tell them you gotta have $10,000 for your trade... unless you're trading them a car that they have 20 of on the used lot OR buying a hard to find item (like a limited edition or anniversary edition of a vehicle...) then they will, at least, split the difference with you...
Trust me... unless it's that rare car I spoke of, you can walk out, and go to their nearest competitor... and they know it! Dealer's are ranked and rewarded based on volume and on annual increase in sales! If you're looking at a basic Ford Taurus, no frills and nothing to make it "special", it's just a car... a car that the next Ford dealer will have as well! If it was a used car, they'd tell you "there ain't no used car factory"... but this is a new car, and guess what? There IS a new car factory!
Tip # 4: Ok... now you've gotten a fair price for your car and agreed on a fair price for theirs... now you will be dragged kicking and screaming to the "finance manager" and he will do his (or her) level best to boost the company profit margin (not to mention his own) by "finding you the best deal he can" on your financing.
IF you go into that finance office without a pre-approval for a loan, you are at their mercy! He is going to run your credit (actually, it's probably already been done...) and he is going to "shop" you around. He is going to be offered interest rates and terms and HE IS GOING TO PAD THEM!
When he sits down and says "Look, I got you 8.2% financing, it's more likely he got you 7.8% and added .4 percent for the company... of which he gets a bonus and the company has increased it's profit margin... and you've been taken (and after all your hard-nosed negotiating too... :-( )
The best scenario is for you to have a "pre-approval" at a certain rate from you local bank or lending institution. THEN he is welcome to shop all he wants, because he has to BEAT your pre-approved rate for him to make anything above his small flat-rate the company pays him for writing the contracts...
(Here's a point where I suggest not being greedy... IF you've gotten a pre-approved 7.9% loan and he comes back and beats it... even by .1% (7.8%) for the same term... let him write it. Who cares if he's making a little off of you IF he's saved you money off your own ability to find a loan?)
Now IF you're in a situation where you NEED the finance guy to secure you a loan... maybe times were hard a few years back and your credit hasn't healed itself... try to get the lowest rate you can get... know what your budget can afford payment wise... but understand that WHEN this guy finds you a loan... if you don't take it, it will be harder to get one the next time. (Not just because of his attitude, but because every time your credit is "pulled" it lowers the Beacon Score; which is the primary basis by which banks make car-loans...) Do not go thru the process of purchasing unless you intend to (Obviously neither should you accept a deal that you will not be able to fulfill on your part...)
Tip # 5: Two Words: After Market! After Market is what items are called that are "added" to your purchase... be it a paint protectant, or an upgraded radio, or an extended warranty... These are "high profit" items for a dealership and should be avoided or negotiated HARD. Don't let up now, you're almost home with a good deal!
Paint Protectant usually is not necessary unless you live in an area with salt air or lots of chemicals in the air. Most vehicles now have a substantial undercoating package AND a good "rust" warranty. Still, IF you choose to opt for the Paint Protectant (Ziebart was the one my dealerships sold) know that the first offer will be an ungodly markup over what you can get it for. Also know that everybody's got their fingers in this pie, so if you pay that asked for price... well, you will be everybody's friend (sucker) for the day!
At the dealerships I worked at, they usually started out with a $749 special package... and when all was said and done, you could end up with a "lesser" package that did as much good for $300. The biggest difference was that on the $300 package, I made $50 and on the $749 I made $125. The "Special Products Manager" made roughly the same and the house made whatever else "over" the actual amount that Ziebart actually charged... (in the $200 range I think, but never actually saw an invoice...)
Spoilers and radios/cd players are nice but again, if the dealer does it for you it will cost you more (the plus here is that you can then finance it along with the vehicle)
Of all the offered products, I whole-heartedly endorce extended warranties (except for Hyundai, when I know that I'm never going to keep a Tiburon for 10 years) but again I caution you; there are many prices and many levels of warranty. You want "the most for the least" that you can get. Once negotiations on the warranty price have begun, don't let the salesman/finance manager lower your level of service just to lower your price. IF you can get it, you want a bumper-to-bumper warranty that covers EVERYTHING that your new-car warranty covers! IF that's not budgetable for you, make sure you know WHAT you are giving up and what your are willing to give up. Deductibles are one way to lower your price, but if you have too large a deductible you might never see the benefit of having the warranty!
Car salesmen have a saying: "Buyers are Liars" but the truth is that you have to listen to every word THEY say, work hard and question everything THEY promise... get it in writing... and re-read every word written... and don't let your guard down until you've signed the contract and driven your new vehicle home...
I hope these morsels of knowledge from "behind the scenes" will help you save money on your next vehicle purchase. IF it does, please share that wealth with me by reading my future reviews. Most of my reviews will be about the car market or movies & music!
 |
|
|
|
|
|
|
Epinions.com ID:
xcarguy2001
|
|
Member: Joe Schmucatelli
Reviews written: 23
Trusted by: 10 members
About Me:
Former new and used vehicle salesman. Lifelong fan of Movies, TV, & Music!
|
|
|
© 1999-2009 Shopping.com, Inc.