Author Topic: 10 rules for dealing with a car dealer (Read 16946 times)

Snowman · « **on:** March 02, 2005, 10:28:10 am »

10 rules for dealing with a car dealer
Wednesday March 2, 6:00 am ET
Paige Kroger
Haggling is virtually essential, or you'll pay more than you really need to. And then you'll pay interest on that higher price.
Dealing with a dealer scares a lot of would-be customers when it need not. The key is doing your research on the vehicle of your choice before you go to a lot.

When you are dealing with dealers, it's hard to recall every fact you've researched, but keep these 10 key points in the back of your mind:

•   Dealers have a profit margin commonly between 10 percent and 20 percent. Usually, this is the difference between the sticker price (the price they want you to pay) and the invoice price (the price they paid for the car).

•   If you don't see exactly what you want on a new car lot, consider ordering it. This may take time, but at least you'll be paying for what you want and not paying for extras the salesperson talked you into.

•   Now reverse that last idea. If you are sure of what you want and don't budge, a dealer may offer to let a car go cheaper if it is "almost" what you want. Have an idea in your mind of what your second choice would be, and if the offer comes you'll know whether to say yes or no and won't be confused. Here's a chance to pay a lot less and get something very close to what you wanted.

•   Emotions can cost you money. If you let a dealer get you too "high" on a vehicle, if you reveal you have to have a certain vehicle or if you are excited but not well researched, you'll almost always pay more.

•   Do not be too embarrassed to walk out. Many dealer tricks are designed to keep you in the showroom.

•   Consider beginning the process by phone -- getting some competitive prices is your first step, but there's no need to get involved with a salesman just for that. Don't accept a refusal to talk over the phone. A dealer who demands your presence before offering any numbers is not speaking your language.

•   Get all the dealers you talk with to use the same figure. Use the factory invoice price as a basis. Then each dealer must give you a number you can compare to other dealer prices (every dealer pays the same for the same car -- the factory invoice price).

•   Dealers sometimes get extra factory incentives and may be able to sell below factory invoice price.

•   Negotiate for a price, not a monthly payment. Price first, then payments!

•   Don't pay for things you don't have to pay for. Be prepared to pay extra for taxes, registration, licenses and destinations charges. Don't pay for delivery, promotion, handling, sales charges, floor charges or any other fancy words the dealer is using to have you pay for something you don't have to pay for. Be prepared to turn down fancy extras like rust proofing and pin striping. They're expensive and you don't need them.

Any comments?....additions to be made?...etc?

fishman · « **Reply #1 on:** March 02, 2005, 10:56:41 am »

I am new buying or leasing, I am looking to lease since I need to keep my cashflow low for a while. I am curious about the last comment

Don't pay for delivery, promotion, handling, sales charges, floor charges or any other fancy words the dealer is using to have you pay for something you don't have to pay for

What is freight considered delivery or destination charge and why would you not have to pay for them. Is it because the dealer gets paid byt the manufacturer for preparation charges?

Thanks

weebl · « **Reply #2 on:** March 02, 2005, 11:56:33 am »

I always used to send out an invitation for dealers to bid - I told them up front there is no trade, and that there's a competitor's model I am considering too (even if my interest in the other car is only lukewarm), specifed the exact trim level an options, and told them to fill out the following for me:

- MSRP + freight/PDI (I'll already know this anyway)
- manufacturer's cash rebate (I find these out ahead of time too)
- their cash selling price (bottom line)
- financing rates from the manufacturer, and the price if I take that option
- their calculation of taxes
- what extras they want to give me so that I pick them over the dealership down the road

I find that some won't bother responding, some will only quote MSRP, some give a nominal discount, and there are usualy a serious two or three that are close in price, usually significantly less than the others.

In the meantime, I'll go around to other car lots to see what they will give me for my car to get an idea of the value I can expect.

From there, I go into the showrooms to get my last kick at the can in haggling them down further, then when I get them to rock bottom, throw in that I am now considering a trade-in and get that value from them. It keeps the two transactions "separate" in terms of figures, so that they can't do a smoke and mirrors number by playing with the selling price and trade in value.

Bullet Blue · « **Reply #3 on:** March 02, 2005, 08:44:42 pm »

Good post snowy, I particluarly agree with doing research before hand. When a salesperson sees that you are not prepared/know nothing about the car or the buying process, they will eat you up in a second.

exserviceguy · « **Reply #4 on:** March 03, 2005, 09:20:20 am »

Hi Snowy, As a fomer dealership manager I think your list is great with one exception. The profit margins for dealers left the 10% to 20% range years ago and now hover around 5%-10% depending on product line, etc. A metro area dealer's bread and butter is the fast moving entry level vehicles and with the hard competition in this segment $750 is the average gross profit today on a car of $15K. A recent US study revealed a return on the dollar of around 10% to a dealer owner for the entire operation.

stodge · « **Reply #5 on:** March 03, 2005, 10:31:50 am »

Good tips.

How about a similiar list for buying used?

S60 · « **Reply #6 on:** March 03, 2005, 11:33:21 am »

My strategy is to wear down the salesperson and manager with multiple visits.
I start shopping for the next car months after I have picked up my newest vehicle. Once I have decided which car I want and price I am willing to pay for said car. I change my car every 3 years, sometimes 2 years. When the time comes to switch vehicles, the salesperson and manager are so fed up seeing my face, they usually cave in to my price just to get rid of me.

ovr50 · « **Reply #7 on:** March 03, 2005, 12:51:03 pm »

I like your method, S60, I think I'm already doing that too. One has to think ahead these days..........

ghost · « **Reply #8 on:** March 03, 2005, 12:52:27 pm »

guys, sales people are human too. they may have wife and kids to feed.

safristi · « **Reply #9 on:** March 03, 2005, 01:53:50 pm »

That's just an old wives tale..they are ALL ROBOTS from Alpha Centasuxyadri...!!!!!!

neil · « **Reply #10 on:** March 06, 2005, 03:07:58 am »

beep beep bob zurp beep beep

JSCC · « **Reply #11 on:** March 06, 2005, 02:29:15 pm »

Nope, just feeding myself.

For Acura, they told me it was 6-8% gross margin depending on model.

I once overheard a customer ask for $10,000 off on an MDX.
We were laughing hard after the customer left.
One salesperson actually felt the customter dis-respected our products by asking for so such.

Maybe in the future, cars will be sold in Walmart and you won't be asking for discounts anymore.
Most products in Walmart, Future Shop, and Best Buy have insane gross margins, 50-200%.
But most people never ask for a discount.
In terms of cars, people spend days and weeks for just 1-2% off.

Does that make sense? Yes and no.
Since on average people buy cars every 5-7 years, they tend to grind for the best deal.

Would you ask for a discount in Sobeys, Loblaw?
In the long run, you are paying way much more money than you should to these companies compared to the auto dealer you buy from.

Snowman · « **Reply #12 on:** March 06, 2005, 02:52:52 pm »

I shop around when buying big ticket electronic items. I have found a local store here in Sudbury called MoonRocks. They can’t match the big box stores on a $400 items but I bought my home theater system and saved $600 on a $7000 purchase. The sales guys at the Future Shop would not move on their price.

Even If I pay $20 more on a $200 item I go to MoonRocks. It is when you show up with an emergency fix request that the small retailers shine….”we will fix that right now in the back Mr. Vaillancourt”. That is what I want to hear.

2% on $40,000 is $800….that is a lot of money from where I come from.

JSCC · « **Reply #13 on:** March 06, 2005, 03:10:00 pm »

600 off for a 7,000 system is about 8-9% off.
But I can tell you they are still making at least 1000-1500 profit from you.

8-9% off a 40,000 car would be 3,200 - 3,600. The dealer would be selling you the car below cost.

Which company do you think is riping you off?

But my question is why wouldn't you try to find out the cost of food, clothing, electronics or even a house and ask the sales/retailer to give you that price? The same way most people (including myself) would do when they buy a car?

safristi · « **Reply #14 on:** March 07, 2005, 10:29:55 am »

Too much work for too small return on a cabbage or a shirt...which we in Canada already get at the Worlds cheapest prices.Electronics are a fad buy...must have the latest toy and $50 fer a gameboy/computer
game is small potatoes and even tho the markup is high ON MANY of the above the middleman makes the killing...Farmers make peanuts,Zehrs 1-2% the middleman most of the profit...BUT YOU DON"T SEE or deal with him..so he is haggle/hassle free....

Cars are BIG BUCKS items (as are HOUSES) and we seem to concentate on the profit margins here more.Supply and demand for houses and gov l;and policies and hidden taxes and our liking for BIG houses on BIG lots drives the Price.At least houses increase in value..cars depreciate big time
so why NOT save $800 if it's on the table...either you get it or the dealer/salesperson.....for $200 I would rather have better service and an honest effort to deal with any faults with my car and would willingly leave that on the table over and above a decent profit (1-2%..IF Zehrs makes millions on that so should car dealers..cars are a
consumable product after all......)we chew and spit them out after 4 years(leases) or 5 to 7 years bought....

JSCC · « **Reply #15 on:** March 07, 2005, 12:52:37 pm »

True, true.
I would pay $20 and spend and an hour or so with CarCostCanada, in order to save 1000 or 2000.
But would I spend 4 hours at a dealership just to get an extra 100-200 off, no!

JSCC · « **Reply #16 on:** March 07, 2005, 12:56:44 pm »

Oh, for GBA/PS2/XBOX.
The GM is actually 0% after round off.

GBA's were sold at a loss when FS had a 89.99 promo and BB had a 79.99 promo before Christmas.
Maybe they had a manufacuter rebate since the Nintendo DS was coming out.

The software is where the money is made.

toolatecrew · « **Reply #17 on:** March 09, 2005, 07:51:12 am »

Quote

Maybe in the future, cars will be sold in Walmart and you won't be asking for discounts anymore.
Most products in Walmart, Future Shop, and Best Buy have insane gross margins, 50-200%.
But most people never ask for a discount.
In terms of cars, people spend days and weeks for just 1-2% off.

Does that make sense? Yes and no.
Since on average people buy cars every 5-7 years, they tend to grind for the best deal.

Would you ask for a discount in Sobeys, Loblaw?
In the long run, you are paying way much more money than you should to these companies compared to the auto dealer you buy from.

The AVERAGE margin in a grocery store is no where NEAR 50%. Some items have a big margin many don't. You think they are making 50% on surgar or bread?

I would be HAPPY if Wal Mart sold cars.

Every Wal Mart you go to sells the Car at the same price. I'll never by a car from Wal Mart and find out Joe bought the same car 5 minutes after me for $1000 less.

Car dealers make an X% average margin buy selling some cars at MSRP, some at $500 off and some at cost (well they still get their 3% or whatever holdback).

I worked at a dealership. They train people to get the sale and to get as close to MSRP as possible.

Wal Mart pays their employees the same no matter if you buy a $1 bag of candy or a $1000 TV.

I'd love it if Wal Mart sold cars. becuse they are the biggest retailer in the world they always negotiate the BEST cost for products and on main items sell at or below the prices of the competion.

The current Automobile sales system in canada is ARCHAIC! Even in the US you can go to Edmunds and see the "Fair Market Value" for the car which is the price that thr car SHOULD have marked on it becuse its the AVERAGE of the highs and lows. its the price at which the dealer makes a fir profit and the consumer gets a fair deal.

instead you have to decide if you are going to be the guy who allows the dealer to send the next guy a car at cost because you paid too much or if you will be the guy who makes the dealer screw the next guy becuse you got a great "deal".

If the Auto insdutry in canda got on board with the US system their would be alot less dealer level haggling, less time wasted on both sides and more cars sold to more happy customers.

nick53a · « **Reply #18 on:** March 13, 2005, 11:18:27 pm »

Yeah Wal-Mart Service On my Acura too.

I want a 15-16year old kid servicing my 50,000.00 Vehicle.

When you purchase from a dealer. You should be looking at the whole relationship. Parts and service.

Does wal-mart help you out when your warranty expires on your TV? NNNNNNNNNNNOOOOOOOOO!

But we have new ones AVAILABLE?

Good Dealerships Do! I have had it happen to me. I don't pay list price. But do expect a good discount... My dealer give me 3-7% off depending on the vehicle that I am buying. I would rather have all one price. Make it easier, as long as their service stayed the same. But dealers can screw around the numbers if you have a trade!

This is why I lease. I don't fix cars, and I don't have to worry about my trade. Ususally I don't have to worry about warranty as well.

toolatecrew · « **Reply #19 on:** March 14, 2005, 11:54:07 am »

The dealership service department should have NO effect on the price you pay for a car.

Its two separate transactions. If you don't get good service at the dealer you buy from there are other dealers who will give good service who will be HAPPY to take your money or do warrantey repair.

People buy cars an MOVE all the time. They buy a car at a dealer near their home but take it to a dealer near work becuse its more convinient.

The Wal Mart example is a bit far feched but the MODLE of selling goods at a fair markup without the constant haggling is a good one.

I leased my current car but it was THE most pain free car buying experience I've ever had. It was the first time I've enjoyed being a car. Why? I shopped models that I could get corporate X plan (or whatever you call it for different brands).

Now I could have maybe saved $100 (maybe not) by spending hours of my time haggling etc but I knew that I would pay cost plus 2 % for Volvo, cst + 4 for Mazda etc. I knew that my co worker wasn't going to walk in behind me and pay 100s less just because. I knew what the deal was and could deceide based on my test drive and reseasch if the car was a good value.

I determine my budget and what cars with what options I wanted that fit. We were able to test drive with no pressure as the salesperson knew what price we would be paying and that going to another dealer wouldn't save me money.

there was no "I'll have to check with my manager" waiting games. No "we need a deposit to make a deal" no advertising charges, surprise document fees.

If a dealership has a GOOD service department they will get my business. It has NOTHINg to do with where I bought the car.