By on May 1, 2007

4sq2.jpgSometime between the sale of the first Model T and now, the automobile business has come to represent all that is wrong with sales, marketing and advertising. According to the surveys that track respect for professions, automobile salesmen are bottom feeders, swimming just above the mud with politicians and marketing folk. Do new and used-car dealers deserve such scorn? Absolutely. The truth about car dealers lies far closer to the stereotype than what they’d like you to believe.

I used to produce TV commercials for a chain of Texas dealerships. On my first shoot, I noticed a quarter on the asphalt. Naturally, I bent down to pick it up. “What are you doing?” the cameraman whispered. The sales reps had “seeded” the lot with pocket change to stop customers from literally running away from an approaching car salesman. 

Virtually every TV ad I made highlighted misleading or downright deceptive “offers.” How about a new Ford F-150 for $10 a day? While $300 a month IS ten bucks a day, dealers use this psychological ploy to lure low-income customers who would balk at a higher (though empirically equal) number. It gets worse from there. How about a special offer?

Fancy a Dodge Caravan SXT minivan for $19 a month? Bob Saks Dodge of Farmington Hills is happy to oblige – as long you put $1999 down and lease a 2007 Dodge Ram 1500 SLT Quad Cab for $179 a month. And work for Chrysler. With A Tier credit. And already lease a Chrysler, Dodge or Jeep vehicle. And pay all taxes, destination and “acquisition fees” and other “routine charges” on both vehicles. And don’t drive either vehicle more than 10,500 miles a year.

Then there are mega-clearance sales. The dealer has trucked in (at great expense!) a lot-load of used cars (starting at only $99!). “No offer will be refused!” “Every application will be accepted!” “Agents are on-site to accept your financing!”

To avoid arrest, the dealer only has to have ONE vehicle for $99 on his lot on the first day of the sale. Obviously, this loss leader will be gone before you get there –  if it even existed and you'd even want it.

Customers falling (and falling and falling) into the bad credit category get loan shark rates and/or an extremely limited selection of beaters to buy. True: the dealer doesn’t refuse any offer. They just never promise to accept any offer. And so it goes: amazing deals married to astounding fine print.

And speaking of credit scores, do you know what yours is? If a salesman reappears from the Finance Guy’s lair and tells you your credit score leaves something to be desired, if he’s inadvertently downgraded your credit, your payments will go up, right along with the dealer’s profits. Strange that.

Those zero percent finance offers sound great, but you're often better off with a higher rate. If you factor in the rebates on offers— which are not available to zero percenters— it’s usually true. Bottom line: If you’re paying $199 a month on a $35k car, there's a reason. Eventually, inevitably, somehow, you’re going to have to pay off the principal.

To hide this fact, dealers play Three Card Monte with the three major transactions involved with buying a car: selling your old car to the dealer, buying the new car and financing your purchase.

As seen on “The King of Cars” reality series (and dealerships throughout America), the salesman divides a piece of paper into four squares: trade value ($3k for your trade-in guaranteed!), price, down payment and monthly payment. He fills out the boxes with some insulting numbers and then encourages you to focus on the monthly payment – forgetting the fact that he’s stiffed you on your trade-in and listed the highest possible “price.” 

If you insist on a higher trade-in value, he’ll bump up the price, down payment or monthly payment. If you say the starting price is too high (i.e. wrong), no problem! The monthly payment goes up. Up, down, move it around. Numbers are “dragged” from one box to the other. The deal doesn’t get much better, but it's made to look more acceptable.

At some point, the Sales Manager strolls in and says he can do the deal for $10 or $20 or $30 more than the monthly payment on the “four square.” Bingo! The dealer just added another $1k – $3k (over five years) profit to the “deal.”

The battle lines are drawn. The dealers have created an adversarial relationship with customers. They’ve armed themselves with every dirty trick in the book and they have experience, time, and greed on their side. You are but a lamb to the slaughter; an “up” that becomes a grease pencil mark on a tote board, and with any luck, another checkmark on their way to “Salesman of the Month.” Caveat emptor, pal.

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112 Comments on “Car Buying Tips: The Games Car Dealers Play...”


  • avatar
    dwford

    No facts, no data, not even a personal experience

  • avatar

    dwford:

    This article begins with the author’s personal experience, cites a published deal (fact checked by TTAC) and describes well-known and researched industry practice.

    And then there’s the photo of an actual four-square.

    We stand by this article in both concept and detail.

  • avatar
    philbailey

    It seems that discrimination against women in the auto industry is just as rampant as ever.

    Some time ago now, the CBS programme 60 Minutes, ran an item wherein they sent two of their producers into a dealership.

    One was a man and the other was a woman.

    The woman went in first with a camcorder hidden in her briefcase. After much bargaining, she finally was able to obtain a fixed
    price for a certain model of car.

    A while later, the male producer went into the same dealership and his STARTING price, before any bargaining began, was better
    than the best price the female producer had been able to obtain after two hours of intensive discussion.

    Naturally, 60 Minutes went back into the dealership and confronted the sales manager with the video of both negotiations.
    The manager said something along the lines of “We need to have a larger profit margin when selling to women, because they’re
    so much more trouble when they come into the service department”.

    Another example is a personal one for me in which a lady came to us complaining that her almost new car was very difficult to shift.
    The manual gearbox wouldn’t go into first gear and second gear was also difficult without the age old technique of double de-clutching.
    She then showed me no-charge invoices from the dealer with such remarks as
    “This lady must have short legs” and
    “This lady needs to learn how to drive”.

    But something was definitely amiss inside the gearbox, so I referred to another dealership that customers had told me were very
    good to deal with. This dealership installed a new gearbox under warranty no questions asked.

    This week comes another example of the same sort of discrimination.

    A regular customer of mine is looking for a late model used car. She went to a local dealership and found one that suited her, but
    was told that a test drive was not available(?).

    However, after much discussion, she was given “The very best price we can possibly afford to sell this vehicle for”.

    The car had a strange and distinctive abrasion on the rear bumper which she had noted when discussing preparation of the car for
    delivery. Two days later, she saw a (male) tenant in her apartment block drive into the underground garage with the very same car.

    Out of curiosity, she asked the man what he had paid for the car.

    The answer was about $3000 less than “The very best price we can possibly afford to sell this vehicle for”.

    Infuriated at the obvious sexual discrimination, she phoned the salesman involved and berated him about his misogyny.

    No apology, just an offer to “Come back in and we’ll see if we can do better next time”. In your dreams, buddy!

  • avatar

    ‘Cause you drove a Hyundai to get here tonight, I drove a eighty thousand dollar BMW. That’s my name! And your name is “you’re wanting.” And you can’t play in a man’s game. You can’t close them. And you go home and tell your wife your troubles. Because only one thing counts in this life! Get them to sign on the line which is dotted!

    –David Mamet, “Coffee’s for Closers“, Glengarry Glen Ross

  • avatar
    craiggbear

    If anyone wants to get the salemen point of view and “experience” detail, they should also see Edmunds.com’s “Confessions of a Car Salesman” Bang on.

    Between the Edmunds article and the “King of Cars”, I now relish the thought of going into a car dealership and messing with them. The most important thing ANYONE can do is understand there is ALWAYS another deal – so be VERY prepared to walk out of the dealership at any time. And never give them money (credit card or whatever) until the deal is done…or they have you

  • avatar
    Zarba

    Edmunds’ article is great.

    These are the reaons that I used strictly internet shopping for my wife’s new Honda Pilot.

    We did our research, lined up the financing, and had already decided what we were doing with her old car. We made the deal, and the only time we stepped into the dealership was to sign the papers and drive away. Painless.

    Check that. We did go to one Honda dealer to test drive the Pilot and Odyssey to choose between them. We alo took out two kids, aged 2 and 4. That really helped when we wanted to make our escape. “Sorry, the kids are hungry. We’ll call you!”.

    I work in a credit union, and I see bad deals every day. I’m amazed that consumers shop for cars as impulse items, not doing any research or comparison shopping before they venture into the lion’s den. They’re going into a gunfight with a water pistol.

    An empty water pistol.

  • avatar
    olddavid

    Anecdotal, at best. This belongs with crocodiles in the sewer as urban legend. Granted, there are neanderthals still out there, but it is changing, if only because of demand. National statistics show dealers net per car in the 30-50 dollar range. Somebody is getting the shaft, but the consumer has a gripe with the manufacturer, not the dealer. Besides, who has the most to lose? Obviously, the guy who lives and works in his own town. 

  • avatar
    Sid Vicious

    I’ve posted before – that I’ll walk into the dealer and when the guy approaches me and starts his speil the only words out of my mouth are “I’m buying an XXXXX, cash deal, no trade. What’s your best price?”

    I get either 1) Blank stares, 2) “Uhhhh…”, or 3) “Get the hell out of here!”

    Dealers can’t live with making some of the money. They want ALL the money. Sickening.

    Internet pre-buying is the only way to even consider buying a new car.

    • 0 avatar
      Dr89

      I’m not trying to be smart here, but I can tell you that’s the absolute worst way to get the best price on a car. I sell cars and we do NOT make much money at all up front with these vehicles–to be competitive today you just can’t leave that much mark up in them. To old school sleazy salesmen, someone who says they have cash just put a big target on their own back.

      The backroom type dealers will make their money on the back end, and almost nothing up front. So if you say you have cash, 1) they know you can buy now and not only are they NOT going to give you their best price, but they’re going to give you a price even HIGHER than MSRP, so that when they negotiate it looks like they’re taking off even more. And 2) when you have cash if they’re going to make any money at all it HAS to be up front…so you’re not going to get as good a price as someone who finances.

      We see people like you everyday that think they can walk in and “jew us down” but thats just old school thought and it doesn’t work like that anymore.

      Here is your BEST bet if you’re a cash buyer–finance the vehicle, check edmunds and other places for invoice prices, pay invoice or even under for the vehicle, then go home and payoff the bank that has the loan. You got the best price AND didn’t pay interest.

      Here is your best bet if you’re not a cash buyer–know what you want to spend, get pre-approved through your bank or credit union, know the term of the loan with them, the interest, and the exact payment. Have this with you when you go to the dealership, and then finance through them (if they beat the loan terms which they almost always will).

      So nice try but if you’ve ever done what you said above–then they took you.

  • avatar

    olddavid: National statistics show dealers net per car in the 30-50 dollar range.

    Well, can you back up your seemingly anecdotal (at best) statement?

  • avatar
    bfg9k

    Years ago my (pre-marriage) wife was in the process of replacing her dying Chrysler K-car. At one dealership she walked into the salesman informed her that he had cars in quote, “many pretty colors” on the lot. She left. She ended up buying a Corolla from a little indy dealer that treated her with respect.

  • avatar
    dolo54

    I’ve experienced these sort of things at every car dealer I’ve ever been to… is there anyone who hasn’t??? I actually will probably never buy a car on credit because I don’t want to deal with the bs involved. Of course no dealer wants cash up front. I don’t think they would even take it if you waved a briefcase full of cash in front of their faces.

  • avatar
    Gardiner Westbound

    I had two brief negative buying experiences in the last half-dozen car purchases. The others were businesslike and pleasant. Prices paid equaled or were less than broker quotes.

    An Audi salesman so grossly over-priced his car it took my breath away. I involuntarily exclaimed, “That’s crazy!”

    Flashing his cheesiest smile he said, “You don’t have to buy it.”

    I replied, “You’re right,” and walked out.

    An Acura salesman wanted to photocopy my driver’s license before the test drive. I told him he was welcome to examine it, but photocopying was impermissible to preclude identity theft. He went verklempt. A stern caution car dealer nonsense would not be tolerated and was jeopardizing the sale brought immediate relief.

    I bought a 2007 Infiniti FX from a helpful young salesman who deserves to do well in the industry.

  • avatar
    mdanda

    I just hired a professional auto broker to negotiate my new Sienna. When you factor in the trade-in, he saved me $2,000 over what I would have considered a “fair” deal. Not too shabby.

  • avatar
    yournamehere

    my girlfriend just bought a scion xA a few months back. i have an xB and im huge into the whole scion scene. well needless to say i knew more about the car then the salesmen. she did alot of the test driving and research herself and was sitting down to figure out what she wanted on the car. the salesmen told her the car came with keyless entry. I said it doesn’t, its included when you get the security system. Well we went back and forth for a few min. he calls over his sales manager and asks. Sales manager says “all scions come with keyless entry”. So I said, “When her car comes in and doesn’t have it are you guys going to install it” the manager laughed and agreed. I made him put it into writing and when her car came in she got a free $500 security system with keyless entry because I was right…

    one of the things that makes me lose confidence in a salesmen/dealership is when I know more then them. its there job to sell me a car and they don’t even know the standard equipment?

  • avatar
    murphysamber

    I’m guessing i’m not the only “bottom-feeder” that reads this sight daily. The truth of where I work is much different from what I see here. Maybe it’s because we are better trained. 4 squares are designed to confuse the salesman and customer alike. Like mushrooms, your keep ’em in the dark and feed them s$%t. If the salesperson doesn’t have a grasp of what is really going on in the deal, then they have plausible deniability when you ask them what the selling price is. And the washout rate for car salesman is asstounding. Most people don’t make it past 3 months. Of course you would feel like they are lying to you.
    I’m lucky in that I am an internet salesman, and for a foreign store at that. I don’t have the time or energy to try and sneak an extra $100 gross in here and there. What’s the point? It’s a hard enough life without trying to be a rat bastard.

  • avatar
    McGilligan

    re bfg9k:

    Jeep is currently running a commercial for the Wrangler Unlimited in Canada where the first words out of the dealer’s mouth are “it comes in many colours.”
    And he is speaking to a couple- not just a lady.
    I know at one time (if not still) the Unlimited had zero day’s worth of inventory- is this the best that can be said about it?

  • avatar
    citroensm

    I do not defend the despicable tactics used by many dealers, but this constant whining about them taking advantage of women grows tiresome. Like it or not, buying a car involves “making a deal”. Auto dealers are in business to make money, and if women (in general) will accept a higher transaction price, so be it. Some of the folks (men) that brag about their prowess on the forecourt might do well to consider that there was room for you to negotiate your price downward on a certain afternoon, because that very same morning, a female customer paid considerably more for a similar vehicle. If we’re so concerned about “fairness”, shouldn’t we savvy fellas offer to pay more, so that the dealer can feel a little more generous toward the next (possibly less than competent) buyer? Preposterous you say? You’re right! Caveat emptor, folks.

  • avatar
    yournamehere

    i heart pure pricing….scion made life so easy when buying my car. none of this BS. soon enough some of the big hitters will get into this game and when they do there sales will sky rocket because it makes the whole process easier.

  • avatar

    Thank you “yournamehere” I also have a scion Xb. I’ve posted it before and I will repeat myself. Contrary to what car salespeople and dealers say, the vast majority of people hate dickering because by its very nature it brings on, and encourages these games because THEY (THE DEALERS) MAKE MORE MONEY PLAYING THESE STUPID GAMES.

    I would love to see another manufacturer pull a Toyota Scion deal. Create a new brand specificlly that had no haggle as the selling method. If someone wants to be a dealer thren they have to sign on board from day one.

  • avatar
    indi500fan

    One of my daughter’s college buddies dropped out and started working the “pre-owned” lot for a local Toyota dealer in Indy. He was doing great after about 6 months, but quit after a year. He said he just couldn’t stomach screwing people day after day.

  • avatar
    Chaser

    Scion’s pure pricing was one of the major deciding factors for me when I bought my xB. Had Mazda used this approach, I would have had a tougher decision between that and a Mazda3. As it was, I didn’t feel the 3 was good enough to justify dealing with the somewhat sleazy dealership. Buying the Scion was one of the easiest and most enjoyable car buying experiences I’ve had.

  • avatar
    gotsmart

    Wasn’t it Saturn that started the whole “no haggle” pricing policy? Do they still do that?

  • avatar
    mikey

    Great piece Brad and very accurate.One thing the domestics have in common with non domestics is the dealer experience.
    If your buying a car/truck new, used,import or domestic do your research.
    The internet is a wonderfull tool,an untold of amount information on every vehicle out there.
    I know a lot of dealers /salesmen.These folks thrive on uninformed buyers.
    No money down, 0% finance, top dollar for your trade
    Take the advice from one of the previous posters.
    Get your financing somewhere else, find the car.tell the guy/salesman.I’ll give you x amount of dollars for this car OUT THE DOOR!all included.
    Hand him your phone number and walk away.There is hundreds of deals out there.

  • avatar
    yournamehere

    as far as i know Saturn still does the pure pricing but i dont think they advertise it nearly enough though. GM needs to adopt this as a company wide thing. that would eliminate alot of the competition between dealers also…why drive across town for a better deal if you know the one right down the road has the same car for the same price?

  • avatar
    NickR

    I’ve never leased a car, but from what I have observed, it seems to offer even more scope for sleight of hand (or outright deception). I’d be interested in hearing some discussion of that aspect of car buying.

  • avatar
    partsisparts

    What about the way customers lie! “My trade has never been hit”. A major consumer magazine tells the customer to lie to the salesman about trading in thier car. Remember to a car dealer, “buyers are liars”.
    Dealers are not doing anything the consumer does not do.

  • avatar
    Sajeev Mehta

    Internet pre-buying is the only way to even consider buying a new car.

    Well said, Sid. After meeting a fleet manager (no commission, cars sold at dealer cost) via Autobytel.com I will never walk up to a salesperson again.

    Buying a car on the Internet is much, much cheaper. You may not get the car at dealer cost (depending on who runs the website) but its better than the alternative.

    Of course this only applies to mainstream vehicles, most luxury marques are tight when it comes to dealer haggling.

  • avatar

    When we went to purchase a new Honda in 2006, one dealer we went to tried to run the “Four Square” system on us. As we were paying cash, we ended their little game before it got beyond the drawing of the 4 squares on a piece of paper.

    We bought our new car elsewhere-via the Internet.

    From: “RealityCheck – Your Source for Real Consumer Information”

    “The Four-Square System
    The salesperson divides a piece of paper into four squares and then asks for your “wish list.” What do you want to pay a month? What do you want for your trade? What do you want to pay for the new car? However ridiculous the sums, each are written in a square. Then they ask for a large deposit, and then they ask for your signature in the fourth square.

    Then they begin to “work” you on each square separately. You wanted to pay $20,000 for the car? They ask for $40,000! Very slowly the salesperson negotiates down, constantly scratching through figures. By the time they finish, the paper is illegible, you’re frazzled, but the salesperson is smiling. You’ve agreed to pay an additional $1,200 to $1,500 profit.

    The four square system is probably the worst system in use today because it was designed solely to confuse you and so produce some very nice profits. Don’t deal with dealerships that use this system.”

    Auto dealerships/car salespersons (or “order takers” in many cases) are not on your side. Ever.

  • avatar
    Bob Peters

    My family has bought many cars in the last 20 years. We’ve never (not once) had to deal with a four-square.

    We buy at dealers that EARN our business. As in, they don’t pressure us to buy a car on the spot, they always let us take test drives when we want, and if we need to take some time to think about it, they don’t call every day.

    …of course, we’ve been buying from the same family-owned group of dealerships, but thats the trick-find a place thats customer oriented, not a highway store.

  • avatar
    partsisparts

    I have sold cars for 26 years and I can tell you that I have heard more lies from customers than from salesman. The buying process is like this because of the consumer. Do you look up invoice when you are buying furniture? Do you haggle when you are buying a lawn mower. Dealers have to fight for every dollar they make. Would tou sell a 30 thousand dollar product 200 dollars over you cost? I think not.
    Remember to a dealer “Buyers are Liars”

  • avatar
    jaje

    I bought my last 3 new cars using this method:

    #1 – RESEARCH!!! Be realistic!!! If the car you want is the hot commodity – you are going to pay more. Be smart. If you are impulsive enlist the help of a level headed friend. If not then you’ll be the next big conquest.

    #2 Shop the dealers and test drive the car you are looking at. Do not sit down to talk pricing or financing or anything. Make it clear you won’t deal now and will take several weeks to think.

    #3 Line up credit for car using equity in the house intead of in the car. You’ll get a much better rate in the long run as you factor in the extra tax deductions.

    #4 Sell the car you have first. You will always get much more selling privately than on a trade in. Post it on Craigslist for free. DO NOT OVERPRICE YOUR CAR! Always provide a fair offer (the # of buyers you get is considerably larger). I also always keep a maintenance log and all receipts for proof the car was cared for. I also run a one time carfax and include that. If you’ve modified your car – remove all modifications and put back to stock. They will not increase the price of the car. Sell them seperately as you will come out much farther ahead.

    #5 Deal only with Internet Sales Departments – pick your car and options and ask for the OTD (Out The Door) price. Make sure you send that email to competing dealers so they can see they have to provide best pricing. Do not do phone calls. If you are a female use an initial for your first name and full last name. From the offers pick the best one.

    I tend to deal with a dealer that I respect (ask for references…if they balk at that idea then they are likely the “deal”er you don’t want to buy from. A good (and trustworthy) dealer usually charge more and won’t budge on pricing as much but their sales staff is much nicer (less pressure) and supportive service department make a world of difference. They also don’t use the bait and switch pricing tactics. Instead I’ll deal with the dealer I trust and bring in the pricing from the low ball “deal”ers (take note if dealers that live by offers and depend on lowest pricing advertising / deals – which tells you that they have problems keeping customers and always have to earn new ones rather than keep a loyal customer base). I work out a middle ground with them and come to a fair deal for me and the dealer (the sales guy needs to feed his family too – but not lobster!). I also offer to provide recommendations and send people their way. The one saleperson I dealt with did a good job and I sent him 4 real customers. I still get a card from him even though I moved cross country.

    My method has never failed me (well I used to work for a new car dealer and have been a gear head for as long as I can remember). My method basically gets you with right knowledge then takes away the major elements of the transaction where a dealer can confuse the transaction and pad their margin. Financing by your home or other secured interest means you do not need to borrow from them. Selling your car before you buy will teach you if it’s worth it (car may not sell meaning you’ll get an abysmal trade in which tells you to rethink your decision). If it does sell then you have the $$ in your pocket or the lein paid off. If you will have negative equity – you overpaid for what that car was worth.

    I’ve had a customer at one time with a Ford Taurus with $10k in negative equity and her car was breaking down all the time. She was literally ripped off when she bought the car. 60 month loan for a base taurus – dealer made the monthly payments work for her as that is all she bargained.

  • avatar
    Bob Peters

    NickR-
    Leasing isn’t that hard to understand. The bank says a car will depreciate a certain amount over a certain time. You pay for the depreciation. You’re always under warranty, and you always get a newer car. (Also, you never need to worry about a trade-in.)

    My family has always leased. Once the price of the car is set, there isn’t much more the dealership can make.

  • avatar
    50merc

    No-haggle one-price to all at company-owned dealerships was one of Jac Nasser’s initiatives while he was CEO of Ford. I loved the no-pressure atmosphere (well, you still had to hear pitches for service contracts and financing) and bought a couple of cars that way. But an area dealership that didn’t become an “Auto Collection” outlet advertised that buyers could still come to his store and negotiate a deal. There must be some people who think they can beat a pro. And across the country, dealers hated retail competition from the factory. Soon, Jac and his Auto Collections were history.

    Initially, cars were ordered from the factory and there was no used car market so fixed pricing worked well. Arrival of the dealer system changed everything. Dealership price-cutting and trade-in allowances complicated the deal. The Internet may lead to more uniform pricing and separating the buying and selling components.

  • avatar
    yournamehere

    Dealers have to fight for there money…great…what about me? my personal finances are in a sense a business on a smaller scale…im going to fight just as hard to keep my $500 as you are trying to take it…and in the end $500 to a dealership is nothing when $500 to the Smiths might make a difference. which is where i think alot of peoples dislike for dealerships stem. They see them as these big companies that are trying to take their hard earned money. Why should I give you my $500? Because it’s a slow month? Well what about my electricity bill? If I wanted to do charity work I would look for a much better recipient then a sleezy car dealership.

    Pure pricing is the answer. the only reason I want to talk to the salesmen is to get the keys for a test drive and to do all the legal BS. After buying my scion I may never buy another car that doesn’t work on this system. I get my car. they get there sale. Everyone is happy. None of the “im going to get screwed” BS on either side.

  • avatar
    Karthik

    I’ve bought two cars in the U.S. (one as a student, and one after graduation), and my local university credit union was immensely helpful with those. I got pre-approved for financing from them, so no hassle with the dealer’s finance department. I sold my used cars by advertising on Craigslist and got much better value than any dealer could offer me.

    And one more thing I found very useful — UFCU has a really great car buyer’s guide called “Wheels 101”: http://www.ufcu.org/learning/vehicle/wheels/index.php

    It is a pretty comprehensive guide with these chapters (including an “available cash” calculator). Here are the guide’s chapters:

    * Chapter 1: What’s Really Happening at the Dealership?
    * Chapter 2: How Much Can I Afford to Pay for a Car?
    * Chapter 3: How Can I Find the Right Car? Research Made Easy!
    * Chapter 4: What are My Financing Options?
    * Chapter 5: Negotiating the Best Warranty, Insurance or Other Add-Ons.
    * Chapter 6: You’re Ready to Go! Negotiating with the Dealer the Right Way.

    (hey — now that I read all I’ve written, it sounds like an ad for UFCU, but it really isn’t — i swear!)

  • avatar
    Claude Dickson

    There was a time when I would have sided strongly the consumer against the dealership. Much harder to do now. The uninformed will always be prey, but in the age of the internet, there is just no excuse for it. Edmunds, to take one example will not only tell you the price for your car, but also what others in your area are paying and put you in contact with a dealer. There are TONS of buying services, usually with deals such as $750 over invoice. Then as if that isn’t enough, there are car forums which will give you tips for particular OEMs.

    There just isn’t much of an excuse for walking in and dealing from ignorance.

  • avatar
    Claude Dickson

    Karthik:

    You did 2 things right from the start that most people don’t do:

    1) arranged your own financing; and

    2) sold your old car on your own

    As a result, the only thing left to haggle was the purchase price. Makes things a lot simpler. These days, most car dealerships have an internet salesman. You can negotiate your price without ever leaving the comfort of your home. Ain’t like it used to be.

  • avatar
    TexasAg03

    I agree that dealers and customers lie during car deals. I am unsure which came first, but both will screw each other when possible.

    I will say that I have always been honest (probably too honest) with dealerships. I can attest to the treatment described in the article with one exception. I purchased a certified BMW 325i and was treated with respect and no pressure.

  • avatar
    Ralph SS

    Thankfully, for all the car salesmen (and women) out there, there are numerous new professions that working to lower the bottom of the cess pool, essentially raising their level, making the care sales profession look better. Credit card fine print editors and the like. Oh, yeah, and medical insurance “adjusters”.

    Of course, we’ll always have lawyers and politicians.

  • avatar
    MW

    Partsisparts: “Do you look up invoice when you are buying furniture? Do you haggle when you are buying a lawn mower.”

    If I knew the list price for those items was only paid by suckers, I would. Or better yet, I’d buy from a store that would give me an honest price up front. That’s how I’ve bought my last two cars — done the research online, then called every dealer within an hour and asked “do you have one, and what’s your price”? In each case, the one who gave me a reasonable price up front got the business. The ones who quoted MSRP or said “when can you come down to talk about it” got a dial tone.

    Some dealers get it. Some don’t. Which do you think will still be around in 20 years?

  • avatar
    jthorner

    There are good dealers, bad dealers, terrific dealers and horrible dealers out there. After awhile an highly trained customer learns how to tell the difference, but most people have no idea.

    Don’t believe for a minute that dealers are living on pennies per car. They have holdback allowances. They make a killing on extended warranties. They sell “interior protectant” for hundreds or even thousands of dollars which costs them 10s of dollars to put on. They get a kickback on the financing and the disability insurance. They sell all manner of services in the shop which the manufacturer neither recommends nor approves.

    Most dealerships are playing the carnival huckster game and look at the customer as the mark. Luckily the ‘net has changed the balance of power in a huge way for those who want to move above being the mark.

    My father was a car salesman and worked in a lot of different shops. I spent many an evening and weekend in my younger years tagging along to work with him. There is no question that this article speaks the truth. Not the whole truth as there are salepeople and dealerships who stand out for integrity and fair dealing, but they are the exception, not the rule.

  • avatar
    GMrefugee

    Bob, be careful telling folks:
    “Once the price of the car is set, there isn’t much more the dealership can make.”

    That statement is not true. A lease has the same opportunities for dealer’s to make money as a purchase, perhaps even more. The residual which is set by the lender can vary. The lease rate. (Yes, dealer’s can mark this up for more profit!) All the same services and warranties that most of us shun, especially in a lease. How about rebates and other discounts? Be sure they are properly applied. Watch the final contract for additional profit padding. My salesperson had to reprint my lease 3 times before I finally got down to one with no BS.

    Q> “what is this line for $400?”
    Salesman> “that is the dealer reserve”
    Q> “what is that, I don’t want it”
    Salesman> “It must be left from the previous lease, I’ll take it out”

    Yes, dealer reserve is PURE PROFIT. They just stuck in in there without any description. They had also marked the lease rate up which I had them reduce to the rate offered by the OEM. Problem is the lease rate is typically not advertised so you will have a hard time knowing what they are using and what is the lowest offered by the lender. Good Luck!

  • avatar
    nonce

    I liked the four-square photo as part of this article better:

    http://consumerist.com/consumer/four-square/dealerships-rip-you-off-with-the-four+square-heres-how-to-beat-it-248445.php

  • avatar
    hltguy

    The Ford delaership at Page,Arizona has been running an advertisment, I kid you not, for the following: “Test drive a new vehicle and get a bale of hay”, “buy a new vehicle and get a free goat” I am not kidding, a goat (not a GTO), a living, breathing goat. True, absolutely true. That area is in the middle of the Navajo nation.

  • avatar
    Martin Albright

    For those who tout fixed pricing, the problem is that it can only work with new cars. For those (like me) who refuse to buy new and only buy used, we have to dicker and negotiate because every used car is unique. Ditto for your trade in.

    That’s the bad news. The good news is that the internet has changed things, permanently, I think. For one thing, it’s given buyers a much larger “statistical universe” in which to do their research.

    One comment that I haven’t seen is regarding the trade in. Yes, it will make the transaction less complicated if you sell the car yourself, but the assumption behind that recommendation is that there is little “cost” associated with selling your own car, and I disagree: The time and money it takes to list a vehicle, to wait around for prospective buyers who may or may not show up, who ask if you’ll “take payments” (yeah, like I’m a bank) whose personal hygeine makes you want to steam clean the seats after they test drive it – not to mention the risks of the test drive itself. All of this has a cost. Of course there is also the time lost when you are waiting for the vehicle to sell if you need the money from your sale to help pay for your new purchase. When you trade in, you have the convenience of completing both transactions (the sale and the buy) at once. How much is this convenience worth? Each buyer has to answer that for him/herself, but for me the figure I came up with was about $500-$1000 off of what I thought the car would sell for if I sold it myself.

    But the internet is a big help here, too: It allows you to do research on the car you are trading. Not just “blue book” value (which I regard as highly suspicious) but also sites like Craigslist, Autotrader, Cars.com, and your local classifieds to find out what others are asking for the same vehicle in approximately the same condition. Once you are armed with this information you can decide on the value of the “convenience” of not having to sell the car yourself, and when you walk into the salesman’s office, you will already know how much you are willing to take for your trade in. If you know how much you want for your trade in, and how much you are willing to pay for the car you are buying, and have arranged your own financing (almost anyone with good credit can beat the financing “deals” the dealers have) then you have all the information you need to make a deal and the salesman can write whatever he wants on his 4-square piece of paper.

  • avatar
    hltguy

    Gotsmart: From persnal experience I can tell you the Saturn dealer I dealt with definitely does price negotiating, they came down immediately $500.00 on a car I was looking at. Not too mention the constant offers I get from GM to buy another Saturn, i.e. low interest, rebates, pay off lease early etc.

  • avatar
    Dave M.

    I could write volumes on this topic. I work with 200+ women, and often offer car buying and maintenance clinics for free. On a weekly basis I answer 3-4 questions about a potential vehicle purchase. As a ‘hobby’, I often accompany or outright handle the purchase negotiations for my ‘clients’. I do this as a sport, since 25 years ago I was royally screwed on my first car purchase and I vowed never again.

    Some thoughts –
    1. There should be state if not national legislation about standards for auto advertising. Every one of the practices you cite are not only common tactics, but fully designed to take advantage of the unwary customer. These slimeballs sell cars for a living….and we as the customer only go through the process once every 4-7 years, which puts us at a complete disadvantage. And yes, I’ve see the slimeball tactics at Lexus and MB dealerships as well….they’re just a lot more polite with better clothes/smells/vending.

    2. Your greatest friend is the internet. KBB, Carsdirect, Edmunds and a host of others will give accurate pricing info for your region.

    3. Your second greatest friend is Carmax. Not only do they have set pricing (if you’re a huge fan of this no-dicker sticker, this allows you to avoid having to buy a Saturn ;), but they’ll offer a fair price for your trade-in regardless of if you plan to buy a new vehicle from them. If your trading a beater, consider donating it and taking the tax write-off.

    4. You can walk out. Really. They’ll call within 48 hours if the deal was at all do-able.

    5. Conduct your negotiations by e-mail with the internet salesperson. This is good only if you’ve decided on a specific model and specific trim level.

    6. After they “assess” your trade-in, get your keys back BEFORE you start negotiations. A frequent tactic is to practically hold your keys hostage.

    7. There are awesome salespeople out there – sadly, they’re often crowded over by the hacks. In the metro Houston area, I have established a network of salespeople that I can confidently send a friend or acquaintance to for a decent, no-ball breaking buying experience. It has taken me 20+ years to gather these contacts however.

    8. Contrary to rumor/experience, there actually are decent Toyota dealers – or at least one of the 8 in Houston are superior to all others. Toyota was the hardest brand to find a good dealer in this area since the car essentially sells itself, and the dealers in the area seemed to have a competition as to who can come with the most obnoxious tactics/habits/’pad-on’. But once I established a contact, that dealer has sold my family 3 Toyotas, my extended family 14 Toyotas, and friends/acquaintances over 25 Toyotas, all at a fair price for both parties, and with tremendous service to boot. Can’t beat that.

    9. Finally, dealers are in business to make money. They’re not going to lose money. Be reasonable about your expectations on a deal, and go in armed with infomation.

  • avatar
    Hippo

    What is new?

    Car salesmen, real estate, brokers, Ivy league MBA’s?
    It’s the American way. In a environment where everyone wants something for nothing fraud is going to be rampant as long as regulators allow it.

    If they tried this in Europe or Japan they would be locked up.

    The scene “Coffee is for Closers” is the biggest truth here, except that it works for both sides, you can beat them if you have the resources and the attitude, they typically feed on the ignorant and defenseless.

  • avatar
    craiggbear

    oldavid – when was the last time you buoght a car? I have bought 4 in the last 12 months – two for myself and two for(with) friends. Unless you live in a small town, the dealers are STILL as decribed in this piece. Not all dealer and not all makes, but many!! This is not to say things haven’t improved, but this has been by force of nature (Internet), not a natural evolution. You may not always see the 4 square, but it’s there. Just try a trade-in and see.

  • avatar
    radimus

    When it comes to buying used cars a tactic that has worked for me is to put down a small deposit on the car, arrange my own financing, and then sit down and deal. By a small deposit I’m talking about $100 on a credit card. Especially if I’ve found exactly the car I want. The small deposit helps ensure that the car won’t go anywhere before I get back with a pre-approved loan. Once I’ve got the loan check in hand, it’s time to get down to the deal. Because I already have financing we can just talk about the actual price of the car and the heat is on the dealer to make it work out to my satisfaction. If the dealer isn’t willing, I get my deposit back and go home. If the dealer decides to be a jerk and not refund my deposit I can just call up the credit card company and dispute the charge.

  • avatar
    socsndaisy

    Im a buyer by profession and I buy over dozens of vehicles in a calendar year.
    Some salespeople, and I do mean car sales, are wonderfully helpful professionals who DO ADD VALUE to a transaction (and THAT is what you are paying for, not only the product!).
    WHERE YOU BUY can be just about as important as WHAT YOU BUY.
    I realize that this isnt the focus of the editorial, but I would be curious to hear where folks believe the responsibilities of the consumer begin and end lie.
    Like it or not, when a dealership rolls out the weinie-roast stand and inflates the twenty-foot gorilla, the masses come runnin. Brings to mind the old saying…”Nobody ever went broke underestimating the the taste of the American public…” Could THIS be what the car buying public wants???

  • avatar
    Hippo

    To socsndaisy:

    Fair question, I also buy many more cars then I would like to, but with three daughters and two ex’s what are you going to do?
    I understand that we have to pay for the service of not having to sell trades and for a reasonable profit for the dealer. This varies on the vehicle.

    The one thing I really want out of the deal is to be done in 15 minutes and never have to hear about it again for the life of the car. If there is a problem with the car, put them in a rental and fix it the first time.

    Once you find a good dealer/salesman, they are worth their weight in gold because they provide a service efficiently and are so rare. If it costs a little more no big deal, it’s just the ones that try to chisel you that you beat into the ground (figuratively speaking).

  • avatar
    Bob Peters

    GMrefugee-
    There are incentivised leases from the manufacturer that the dealership can’t mark up. Also, as for the reserve, once the car has been in stock more than 3 months, the reserve is already spent by the dealer. (It costs them money to keep cars in stock.)

    Dealers have no say in the residual value. The only thing that can change it is the amount of miles a customer needs.

    Rebates and discounts are often only available on finance or cash deals, not leases (better ask around first.) And if you’re ever given the choice between a special finance rate or cash back, take the cash.

  • avatar
    50merc

    Good to learn from Dave M that there are some decent Toyota dealers. My experience locally has been very negative. No other Toyota dealer for 20 miles, the kind of community that’s pre-soled on Toyotas, a strong economy, vastly overpriced Distributor-installed and Dealer-installed mandatory “extras” on every car, turnover so fast the average lot life may me about 3 weeks, and a shark-like sales force. That store must be more profitable than the US Mint. Well, there was a time when VW Bugs sold that way, so maybe there’ll be a day of reckoning for Toyota.

  • avatar
    Hippo

    50 merc,
    You want to see the real jokers? Go to a Harley dealer and watch them selling to “wild hogs”.

  • avatar
    yournamehere

    Hippo-

    i agree 100%. i would pay more for good service than get a “good” deal and have to deal with a bunch of cavemen

  • avatar
    Terry Parkhurst

    Frank, while $20 to $30 might be a tad low, a former neighbor of mine – Steve Bell – was working at Land Rover of Seattle a few years back and told me that, “since Ford bought Land Rover, no one is making any money.” He explained that “no one is making any money” meant that the sales person got just $100 to $200 – much less than when BMW owned Land Rover. (How much less I admittedly didn’t ask.) When I said, “Reall?” he took me into the sales manager’s office and told him, what I’d been told. He then offered to show me the proof, but seemed so pissed off, I took him at his word.

    Steve Bell is now the sales manager at Saturn of Bellvue in Bellevue, Washington. I don’t have an e-mail for him but the phone number of that store is (425) 746-6462. Steve has also sold, going back in time, Land Rover, HUMMER (circa 1995 to 1998) and before that, Fords. He has always seemed a straight-up guy to me, and everyone else who has dealt with him. Steve was also an early adopter of the Internet for use in auto sales. In fact, Steve sold a H1 to Nathan Myfold (sic) who was a major developer within Microsoft for most of the Nineties.

    I am not trying to be smug or confrontational
    here, just give you someone to talk to who can confirm that sales people at dealerships have to work deals hard to make a living. The way to get beyond this is for dealerships to do away with the strickly commission method of payment. If the sales crew was paid a salary, and then paid something on top for closing, it would be much easier for everyone at dealerships.

    But as another person has pointed out, by intoning the speech made by Alex Baldwin in “Glengarry Glen Ross,” that seems unlikely. There’s a certain machismo still involved with sales, of all high-end retail items, that makes getting respect as a customer usually a lot more work than it should be.

  • avatar

    Normally, I’m just a lurker on this site, but this topic just cries out for a comment. I’m a small retail merchant–I am NOT a car salesman. Many of the goods that I sell are also sold on the web (similarly to automobiles.) I cannot tell you of the many tiems that “customers” have come into my store, tried out items, picked my brain, decided which specific item to purchase, then gone on the web and bought the same item at a lower price.

    I think it is unethical to go to a car dealer, take the salesman’s time, encourage him/her to think he’s going to make a sale, when you have absolutely NO intention of purchasing from that person. Sure, take a test drive. Sure, see what price they’ll give you, but don’t waste a man’s time and get his hopes up; don’t take advantage of his hard-earned knowledge; don’t just USE him and the dealership as a no-cost test-drive facility–that just isn’t right!

  • avatar
    Lumbergh21

    “Sid Vicious:
    May 1st, 2007 at 9:06 am
    I’ve posted before – that I’ll walk into the dealer and when the guy approaches me and starts his speil the only words out of my mouth are “I’m buying an XXXXX, cash deal, no trade. What’s your best price?”

    I get either 1) Blank stares, 2) “Uhhhh…”, or 3) “Get the hell out of here!”

    Dealers can’t live with making some of the money. They want ALL the money. Sickening.

    Internet pre-buying is the only way to even consider buying a new car.”

    I know the feeling. I’ve always paid cash for my cars as well. The look on the salesman’s face is usually akin to a frozen computer. Some can’t seem to grasp it and continue with the spiel about what kind of car are you driving now, with a down payment of X, your payments will be Y, etc. The best line is, “this is the best deal I can do” (usually folowing several trips to “argue” with the boss, who isn’t going to go for this). If you follow this up with an I’m sorry and start walking out the door, they usually find that they can knock at least a few percent off that “best offer” price.

    Because of these personal experiences and others related to me by friends and family, I have no problem playing hard ball with dealers anymore. I even got my current car by doing an internet inventory search when the original dealer said he didn’t have the car I wanted on his lot but could get it from another lot. I knew it had to be nearby, and sure enough, I found it in another city about 40 miles south. After I test drove the car, I was able to negotiate a selling price with the dealer that actually had the car that was over $1,000 off the first dealer’s best price.

  • avatar
    Lumbergh21

    “Gardiner Westbound:
    May 1st, 2007 at 9:25 am

    I bought a 2007 Infiniti FX from a helpful young salesman who deserves to do well in the industry.”

    Just about the only good experiences I have had with car salesman were with young guys who were still “learning the ropes” (I guess that would be how to cheat and steal the customer blind). They seemed to have a genuine passion for cars and an honest up front approach. They said I don’t know rather than trying to bluff there way through it, and actually let me have some peace and quiet while I was checking out the car rather than the endless jabbering you get from some salesmen.

  • avatar
    poozinsc

    Years ago there was a book written called “Don’t get Taken Every Time” by Remar Sutton (I think). The book described in great detail many of the sales methods used at the auto dealers at the time (early 80’s). I read the book and insisted my wife read it before we went to purchase our new car. Sutton was ahead of the Internet in that he insisted on using the Edmund’s books to find out true prices before you went in, arrange your own financing and such.

    Anyway, reading the book made the car buying experience really enjoyable since in every dealership we visited, the salesmen followed the “script” perfectly. The salesman would leave the cubicle and my wife and I would look at each other and crack up because we knew what was coming next. And yes, one of them did pull the four square method on us. He didn’t have a lot of answers to our questions and comments. Using the advice from the book, we were able to get a new car at a fair price to both us and dealer.

    I’ve had my kids read the book, particularly the chapter on advertising, then have sat down with them with the Saturday paper and read the ads, looking for the gotchas.

    Today, the Internet is full of the information you need before you start. Most of them have been already mentioned above. The bottom line is simple — you need to be an INFORMED consumer before you making your purchase.

  • avatar
    Lumbergh21

    “partsisparts:
    May 1st, 2007 at 11:23 am
    I have sold cars for 26 years and I can tell you that I have heard more lies from customers than from salesman. The buying process is like this because of the consumer. Do you look up invoice when you are buying furniture? Do you haggle when you are buying a lawn mower. Dealers have to fight for every dollar they make. Would tou sell a 30 thousand dollar product 200 dollars over you cost? I think not.
    Remember to a dealer “Buyers are Liars””

    No, but I have bought more than one house, an even more expensive proposition, and haggling over the price-offer, counter offer, etc.-is part of that buying experience as well. I have also haggled over small items purchased at flea marts, roadside businesses, etc. And, you know what, haggling isn’t something that I particularly enjoy. If car dealers hate haggling so much, they could institute a “no haggle” policy as well. I think there are many customers who would enjoy this as long as it was the truth. For instance, Saturn won’t haggle over the price, but if there is a trade-in, let the haggling begin.

    I have never lied to a car dealer. I have never lied about my intentions when I come on the lot, and I have never lied about the condition of my current car-the one time I traded it in instead of selling it myself.

  • avatar
    LoserBoy

    Not to be callous, croatoan, but I really don’t see the problem with that sort of behavior. Any useful information the salesman gives up, he or she does willingly. It’s not the consumer’s fault if you work on commission (or have high fixed costs or whatever) and someone else doesn’t.

    Really, it’s no different than any other form of comparison shopping. Talking to Salesman A and then using that knowledge to buy on the Internet is no different than talking to Salesman A, then driving across town and using A’s knowledge to strike a deal with Salesman B. I don’t think you’ll gain a lot of traction in this forum arguing that the latter is somehow unethical.

    Of course, I could be wrong.

  • avatar
    86er

    Whenever I visit a dealership I disarm the salesperson by casually informing them that I used to sell cars.

    I do this often when I accompany my partner on visits. Any spiels or pretenses quickly drop because the salesperson is self-conscious that I am scrutinizing their approach as they speak to my partner.

    And I am.

  • avatar
    TheNatural

    “I have never lied to a car dealer. I have never lied about my intentions when I come on the lot, and I have never lied about the condition of my current car-the one time I traded it in instead of selling it myself. ”

    Then you will be one of few. Car shoppers could make life alot easier just being honest up front. Someone like that will get along alot easier with me, and I work at Saturn too!

    Like the guy said earlier, why buy a $30,000 investment, pay taxes to keep it on the lot, then sell it for $200 in profit? It doesn’t make business sense. Would you go to work and want someone haggling your wages down to find the bottom dollar you will work for? No.

  • avatar
    philbailey

    If you get a chance, buy or borrow a book called “The Insolent Chariots” by John Keats.

    Published in 1958, its’ section on dealer tactics relates what goes on behind the facade at your friendly dealer, and illustrates that nothing much has changed and that the “death watch” is as much a dealer problem as that of the manufacturers and the UAW.

    The book asks the question “When you buy a car do you know how to penetrate the Byzantine snarl of auto “financing”? Is our marriage to the automobile part of our greatness, or is it a disaster — and what can we do about it, anyway?”

  • avatar
    Dan

    A couple quick comments on buying a new car and trading in an old one:

    – Always take your old car to CarMax and get an estimate. It only costs you an hour of your time, and you get a nice, printed estimate that says “we, CarMax, will pay your $X within the next three days, for this car, assuming you don’t trash it.” This is ammo for you later on.

    – I found the Internet experience to be ineffective. When I was looking for an Acura TL in 2005 with a manual transmission, I emailed every dealer in my state. While telling me they could make me a deal, nobody was willing to give me a VIN number and a hard price.

    – The local dealer, who had exactly the car that I wanted, initially tried to lowball the trade-in and over-charge for the car. I walked out.

    – We ended up going back to the local dealer with the CarMax thing in hand and negotiated a price that was reasonably close to the invoice and a trade-in price that was slightly higher than the CarMax price. (We were paying cash, simplifying things down to a single number for the negotiation.)

    Lessons learned: Get up and leave if they quote you a stupid price. Arm yourself with other data, like CarMax estimates. Don’t assume that the Internet will solve your problems. Keep getting up and leaving until you get what you want.

  • avatar
    Martin Albright

    don’t take advantage of his hard-earned knowledge;

    That’s got to be one of the funniest things I’ve read. The salesman’s knowledge? The day I meet a car (or motorcycle) salesman who knows as much about the products he sells as can be gained with a half hour of research on the internet, I’ll die from shock. In fact, I often ask the salesman questions that I already know the answer to just to see if he’ll try to BS me. And you know what? They always do!

    With some retailers, I agree that it’s unethical to take the time of their employees and then buy the stuff off the internet. But with car dealers, anything goes, because those whose only ethic is “how can I get the most out of the customer” have no ground to stand on when the customers do the same thing to them.

    And to the salesmen who complain about how hard it is to make a buck in the car business, or what a bunch of liars the customers are, all I can say is: Boo Hoo Hoo. It was auto dealers and salesmen who created this amoral, anything-for-a-buck business atmosphere, so I have zero sympathy when the customers turn the tables on them.

  • avatar

    Terry Parkhurst: He explained that “no one is making any money” meant that the sales person got just $100 to $200 Terry, if you go back and read what he said in the original post:  "dealers net per car in the 30-50 dollar range," and my response, we weren't talking about what the SALES PERSON gets. We were talking about what the DEALER makes on a car. They aren't the same thing.

  • avatar
    rtz

    The one that burns me up the most that I see every time I pick up the paper or turn on the TV is “$10,000 off MSRP!”. MSRP!!! It might as well be a billion off MSRP. The price is still MSRP!!

  • avatar
    LenS

    This whole system is just insane. Just look at the attitude of salesman poster above — it’s literally “the customer deserves to be taken for a ride”. It leaves the customers feeling dirty and ripped off. It’s a pity that none of the foreign car makers chose to set up a distribution system that they owned, instead of copying the dealer mess.

  • avatar
    AGR

    Its always surprising that “empowered and informed consumers” presumably get mistreated and lied to by car dealers. If the consumer would not want to be treated as such they can get their voices heard by the respective manufacturers.

    In a Web 2.0 environment it should be easy for any consumer to be heard by the manufacturer and the dealer. Its not the case.

    How much money dealers make take a look http://autoretailstocks.com/Auto-Retail-Informer/The-Auto-Retail-Informer–April-30,-2007/
    scroll down it will tell you the gross on a new deal and the gross on a used deal.

    From these figures which are from the biggest dealers in the USA, it begs the question “Who is buying at invoice?” From urban legend everybody does a deal at invoice.

    From one comment “when the hot dogs and inflatable gorilla comes out….” or having cars on the grass with all sorts of numbers plastered on them. Its a good indication of what works with consumers.

    The spread between MSRP and cost is usually 9 points the holdback is usually 3 points. Its not rocket science to quickly calculate how much money a dealer is making on a sale.

    If manufacturers did not have all these programs and come ons, numerous consumers could not do a deal, many upside down in their trades selling it themselves is out of the question.

    Yes, take the cash rebates to unbury the consumer out of his trade, and then proceed to try and do a deal.

    The “average informed consumer” just loves the goings on at the dealer, if they did not love it, dealers would not be doing it.

  • avatar
    dwford

    “I used to produce” when was this again?

    “Virtually every TV ad I made highlighted misleading or downright deceptive “offers.” How about a new Ford F-150 for $10 a day? While $300 a month IS ten bucks a day, dealers use this psychological ploy to lure low-income customers who would balk at a higher (though empirically equal) number” $300 IS $10 a day, so what is the deception?

    “And pay all taxes, destination and “acquisition fees” and other “routine charges” on both vehicles. And don’t drive either vehicle more than 10,500 miles a year.” Name a business that doesn’t advertise the most advantageous terms? For lease terms, taxes vary from state to state and town to town, so how can a dealer advertise is payment that includes these variable charges? Yes a 10,500 mile lease is cheaper than a 15,000 mile lease – you are using less of the car.

    “Those zero percent finance offers sound great, but you’re often better off with a higher rate.” Very true, it depends on the amount financed. Often giving up the rebate for the low interest is cheaper, especially if you are upside down on your trade. And you would be surprised at how many people are!

    “And speaking of credit scores, do you know what yours is?” If you don’t, you should!!

    “..dealers play Three Card Monte with the three major transactions involved with buying a car: selling your old car to the dealer, buying the new car and financing your purchase.” Truth be told, some customers are “trade number” buyers – they want to see the high number for their trade. Some are “bottom price” buyers looking for the most off MSRP, but most are “payment buyers” most interested in a set monthly payment. It is the salesman’s job to figure out which type a customer is. The bottom line will work out the same, the numbers are the numbers. There is only so much gross profit in a car – new or used – with which to work a deal. You can’t burn a candle at both ends.

    I have often found that the customers that pay more are often more satisfied than the ones that ground out a $100 over invoice price.

    Very few cars have a huge markup anymore. You can check the Edmunds numbers, they seem to get the invoice prices correct compared to the invoices I see at work.

    I agree with many of the comments that say know what you want, and communicate that to the salesperson. An honest salesperson will proceed with sales presentation with that in mind. I find it much easier to get to the point of the transaction when I know where a customer is coming from.

  • avatar
    GS650G

    I traded a high mileage Sable for my current ride. The dealer offered me 400 in trade for a vehicle that booked at 1000. I let him have it because the car I was buying was mine for 400 over invoice and I got the .9% financing I wanted.

    Maybe they should have at least driven my trade rather than just lowball me because they probably would have noticed the slipping transmission so common in these cars that precedes death. But they didn’t ask, I didn’t tell, and they insulting offer was my idea of them getting what they deserve. Maybe they are the ones that should be more careful. IF they rejected my trade Kidney Cars was ready to take it as a tax deduction.

  • avatar
    AGR

    GS650G,
    Arent’you fortunate they did not drive your car, if they would have you might have had to pay the dealer to take it off your hands.

    The donation would have been a nice gesture on your part…you derived more enjoyment sticking it to a dealer.

    Surely when the dealer figured what was wrong with the transmission, the dealer also formed an opinion of you.

  • avatar
    starlightmica

    50merc:

    We bought (actually, custom-ordered at no extra charge) 2 Toyotas from a local dealer (fitzmall.com) that posts prices on the web for all to see. There’s a dealer closer to our house, but they’ve not been straightforwards to work with. We test drive cars there and give them our service business, which is where they make the big bucks anyway.

  • avatar
    Terry Parkhurst

    True enough, Frank that the store makes more than the salesperson him or herself – at least, from what I am given to understand, also. I apologize for not noting that in what you wrote and was written.

    Still, I am glad to have gotten Steve Bell’s comments into the discussion. I will also say that a lot of what people are talking about, was something that Steve also once admitted to me still went on, at some stores; and that is the old System House method, using sales techniques started by Hull-Dobbs, a Ford dealer in Memphis, TN, just after WWII. It main proponent of thought was that anybody who walks into the door of the dealership, owes you a commission. The second item of thought was that the customer was essentially larcenous, and thus, could be treated in as shabby a manner as deemed necessary to close a deal.

    The late, great Leon Mandel, who himself sold cars – Morris and MGs – in Monterey, CA before using his journalism degree from Columbia to become the editor he became, wrote a great piece about it all called “The Okie Charmer,” way back in 1970.

  • avatar

    dwford:

    I spent almost two years (2003 – 2004) working for an in-house ad agency owned by a chain of new car dealers in the Texas Panhandle. While there are laws in the State of Texas that regulate what we could and could not say in an ad, the simple truth is that virtually every dealer operates as close to the edge of what is permissible as possible – at least as far as advertising goes. There are honest sales reps in the business, but the odds are against the average customer, because the house (dealer) stacks the deck against the consumer, in much the same way that the house always wins in Vegas. The industry-wide problem is that the games, the tricks, and the deceptions are desperate attempts to compete. With too many dealerships, too many brands, and too much product in the pipeline, it’s too easy for sales reps to take the easy way out and take advantage of customers.
    Here’s what I’d love to see: a dealership that would take the long view, and try transparency as an option. I think most people would buy from a dealer who says, “Look…we need to make a reasonable amount of money on each sale. We train our sales team to really KNOW our products. We want to establish a long-term relationship with you, so you’ll come back and buy again – and refer your friends.” Of course, then they have to follow through with reasonable prices, and avoid the tricks, useless add-ons, etc. like the plague. Legislation won’t make this happen. No-haggle pricing is a nice idea, but has turned into just another gimmick by many dealers. The answer is to remake the dealer/customer relationship – and that has to happen one transaction at a time.

  • avatar
    chris2

    Brad Kozak:

    Interesting perspective, however I wonder how much of the BS could be eliminated by the manufacturers. They hold the power to grant and pull franchise/license agreements…you’d think that they might see this as an opportunity to improve the car buying experience for the consumer and thus encourage a drastic increase in foot traffic on the lot on days that don’t begin with “Sun-“. Saturn tried to hang their hat on it, but let’s be honest, you can’t expect much from a GM turd.

    Just today I was on a VW lot and was amazed to see “market adjustment” on a couple of GTI window stickers…I laughed and thought “it’s a $25K GTI sitting next to 35 other GTIs…it’s not an Elise or Veyron”. It’s incredible to me that dealers still have the balls to try shit like that.

  • avatar
    Landcrusher

    There seems to be some serious mythology here.

    First, I can’t believe 4 square is back. If you actually see a 4 square sheet, just leave. Wanna get really burned, lease. The sheet for that could easily have 8 squares (don’t go there unless its for the tax benefits). Are you a complete idiot? Borrow money on a car. Okay, some of you are young, and want nothing more in your life, but if you are over 30 and still borrowing for cars you are cheating yourself. Pay cash, or keep driviing what you got.

    Second, I have seen the books of many car dealers. Back in the mid nineties, they were making $1500 to $2000 on an average sale at ford and chevy dealers. If they made any less, they would likely go under. It costs a lot of money to keep those places going. Some guys went the real high volume route and took it down to $800, but that was rare.

    If the salesmen are jerks, it’s the dealers fault. If you don’t like the sales person leave. If you go to a second dealer of that make and still are not happy, give up on that make, or complain to the manufacturer.

    The sales people cheat only when they are motivated to do so. The dealers almost universally cheat their sales people. If you go in educated on the car, and willing to pay a fair price, and don’t tell stories yourself, then you can get in and out easily, and likely only paying a few hundred more than the best negotiator. Spare yourself the stress, or hire someone to do the deal for you. These services are available.

    Don’t like it, BLAME YOUR STATE LEGISLATURE. The system of car dealers are legislated into law. The free market would have eliminated this stuff years ago.

    Last insider tip. If you are silly enough to borrow, write down each monthly payment you are quoted to the penny when they quote it (try to be casual about it). Ask for a different down payment amount to see how it changes, then ask them to forget that and go back to what it was. See if it didn’t increase. The cheat I worked for fixed the software we sold so that it would raise the interest rate by a small fraction whenever something else was changed. If this happens, leave.

    Did I mention that the dealership system is MANDATED BY YOUR STATE LAW? Yes, voter, you are to blame for your own frustrations.

  • avatar
    Landcrusher

    Someone actually fell for the no commission sales people fallacy, so I will also debunk that.

    If a sales person is paid commission, then he only gets paid if you buy. This does a lot to get rid of complete losers, so you don’t have to deal with them. It also limits how much of the huge idiocy they will pass on from the dealer and his managers. Commissions empower the buyer, not the sales person.

    Now, there are “no commission” dealerships. They generally have plenty of incentives for paying the good salespeople. Some of this is often tied to profit, but also “customer satisfaction”. Not if customers are happy, but if they answer certain ways on the survey. In other words, they survey buyers to see if the sales person used certain tactics on you, not really to see if you are happy. It’s all very scientific.

    Lastly, the “no commission” shops are a new twist on an old game called a “turnover shop”. They hire cheap clerks to show you the car and sell you on the basics. They then offer you a fairly fat deal. If you take it, great for them, you paid extra. If you don’t, they turn you over to a highly paid professional closer/negotiator. You see, they didn’t want to waste this sharks time on showing cars when he could be squeezing every deal for every penny. And by the way, that guy makes more than 99 percent of car sales people, and you are paying for him.

    Commissions are good for buyers, don’t get fooled. “No commission” shops make more per deal than peers who pay commissions.

  • avatar
    Humourless

    A couple of years back I was in a bit of a financial crunch and hit upon what I thought was a good one at the time: trade my then-current (and still very new) car, which had about $27,000 of value with $8,000 of debt (net equity $19,000) on a $19,000 new car. I’d pick up the additional two years+ worth of warranty, be debt free in that one particular area (and avoid the corresponding monthly payment), and still have decent enough ride. I wasn’t going to haggle with them. Honour the fair market value for the used car, assume the remaining debt and in turn I’ll buy a car at MSRP.

    Simple enough, I thought.

    I went down to a local Mazda dealership and put the proposal to the salesman. I said (twice), “If you can do this deal, great. If not, please tell me now and we won’t waste each other’s time.”

    “I’ll see what I can do.”

    I should’ve left at that point. Instead, he sat down with the magic piece of paper, and proceeded to ask “what are you willing to spend?”

    For the third time I reiterated that no money was to change hands. This was a swap: one more expensive almost new and (then) still hotly selling car for something much more modest. This seemed to blow his mind. In the salesman’s defence he was a young fellow just starting out, but his sales manager seemed just as “confused” by the offer.

    Again I restated “if this deal cannot be done on those terms, tell me now and we’ll shake hands and part company”. Meanwhile I had foolishly let myself be parted from my car keys while they “inspected” my car. I should’ve seen that ploy coming (restrict the ability of the customer to leave). Mea Culpa. My wife and I cool our heels while the salesman and manager confer. She’s becoming very irate, and I’m developing a banging headache.

    Finally, salesman returns with a big smile on his face, plunks down a piece of paper on his desk with the number “8,500” written on it.

    The number? The rats had the gall to suggest trading in my car, taking the new one, and assuming $8,500 of debt against the new one…. $500 more than what I already owed.

    Words cannot describe the vehemence I used to then get my car keys and leave.

  • avatar
    dwford

    Like you said, Brad, the states regulate the content of the ads to minimize the deception. Also, how are car ads different than Circuit City with the fine print exceptions and mail in rebates etc.

    I have bought 5 cars in the last 15 years and never have seen the 4 square – lucky I guess. I can’t say each time I made the best deal, but I got the car I wanted at a price I was comfortable paying – isn’t that what everyone wants in the end?

    Where I work, we pride ourselves on getting referral business from current customers – and actually pay the customer $100 for every referral they send. We wouldn’t get very far by screwing them. Also, we are paid bonuses for top scores on Ford’s CSI surveys. We recently took a salesman from another Ford dealer, and they never made him even take all the product knowledge courses. I guess the didn’t care about CSI. Needless to say, we beat them in sales last month.

    Your article paints with an awfully broad brush, we are not all scumbags.

  • avatar
    partsisparts

    I am reading these posts and I cannot believe what I am reading. Phrases like a “what i am willing to pay” or “give the dealer a fair price”
    Since when does the consumer dictate what is a fair price? You’re willing to let the dealer make a profit? Gee thanks. Do you negotiate the price when you buy gas? How about furniture?
    The manufacturer thinks a fair price for the vehicle is on the window sticker.GM tried to end negotiations in dealerships with Saturn in the early nineties. It didn’t work. People still wanted to negotiate. It is a game on both sides. You play your side the sales people will play thiers. May the best man win.

  • avatar

    dwford:

    My apologies if I’ve tarred you and other ethical dealers/sales reps with the same brush as your mendacity-prone brethren. I’m not coming into this fray to engage in character assassination, but to try and shed light on what I’ve realized is a widespread problem. Your guys may be ethical as the day is long, but as long as there are lots of dealerships that aren’t, it’s everybody’s problem. Unfortunately, perception IS reality, and as long as there are dealers pulling these kind of underhanded tricks on the public, perception will curse the entire barrel, no matter the ratio of good apples to bad. Sadly, it’s not enough for a single dealer to shine, ethically. It’s going to take an industry-wide paradigm shift of ethical behavior before the stereotypes of sleazy salesreps and underhanded dealers to be washed away.

  • avatar

    partsisparts:

    Automobiles are not furniture, nor are they gasoline. And they are not sold that way. A better analogy would be a home purchase. As you know, most homes are still sold on commission, with the price being negotiated, based on location, condition, comparable prices, and the skill (and patience) of the parties involved. Like when buying a car, most people pay way too much to the real estate agents for value received. In many ways, it might “civilize” the auto-buying process if people could hire agents to represent themselves when buying a car.
    I don’t see a compelling argument for maintaining or defending the status quo, here. The system is broken, and I’m not just talking about the bass-ackwards manufacturer practices, bloated union contracts, or boneheaded marketing. The sales process has a lot to do with why the industry is on life-support. If there’s a way to change this adversarial “win-lose” structure, it would be a win for dealers, salesreps, and customers.
    Frankly, I’d love to give my (repeat) business to a dealer that treats me with respect, gives me a fair price (where he makes a profit on the sale), and lets me know I’m not just a checkbox on his quest to win the Salesman of the Month trip to Maui. I’d be happy to pay a little more for that kind of mutually-beneficial relationship.
    When I find one, I’ll let you know.

  • avatar
    AKM

    I actually wish car buying was more like furniture-buying than house-buying. unfortunately, it is rarely the case.

  • avatar
    Gardiner Westbound

    Consumers are better informed. The market is more competitive. Automobile dealer economics are changing. New car margins are skinnier. Serious money is made on financial services, used cars, parts and repairs. Nonetheless, don’t delude yourself into thinking you can hoodwink a dealer. The salesman does this several times a day; you do it once every few years. You’re swimming with the sharks!

    Welcome to the Wild West! Car buying is one of the few transactions where old fashioned horse-trading is the norm. Obtain the true dealer cost including holdback and hidden rebates, impute a fair markup, and negotiate from the bottom up. Discount the freight and handling charge, reject non-statutory documentation charges, and refuse added dealer services. Don’t discuss trade-in, financing, or leasing vs. buying before receiving a firm price. Walk out if the sales manager bumps it up. Give a minimum deposit, and then only after the dealer has fully signed-off on the deal.

    Anybody can pay full price! A car is worth what the market will pay, not a penny more. Transaction cost is the sole measure of a successful negotiation. Treat assurances of service department superiority with profound skepticism. The manufacturer won’t honor dubious warranty claims and it will charge premium rates for everything else. Paying too much improves neither ethics nor competence, just profit. The dealer won’t close the transaction unless he can live with the terms, nor should you.

  • avatar
    partsisparts

    Gardiner proves my point to a tee. He is basically saying lie to the salesman and then dictate how much the dealer can make. I throw guys like that out. I don’t need they’re business. I am legit all the way. Guys like that belong in stores with the 4 square process.
    BTW why should we discount freight? We pay it!

  • avatar
    mikey

    Humourless
    Take this advice from an oldtimer and fellow canuck.
    Never ever! try and trade down you will get screwed 100% of the time.
    Your selling wholesale and buying retail.
    it just don’t work.

  • avatar
    steve2112

    Great article that tells it like it is. For those interested, a GREAT movie is “Suckers”. It is pretty much this article in a 90 minute movie (not documentary, but close enough)

  • avatar
    Pch101

    Not to make this The Truth About Furniture, but I find it funny that some claim that furniture prices aren’t negotiable, when they are actually highly negotiable. As is the case with just about any other durable consumer good, the margins are high enough so as to allow for substantial discounting, and you’d be a fool not to haggle when buying these kinds of products. Just about everything is negotiable — I’ve haggled for the purchase of furniture, appliances, A/V equipment, musical instruments, you name it — and there is no good reason not to.

    I am personally uninterested in paying a “fair” price. My goal is to pay as little as possible, even if that means that the seller takes a loss. (His loss is my gain.) The seller is presumably an adult, and is perfectly able to judge for himself whether my price is acceptable. If he doesn’t want my money, he is free to get it from someone else.

    On the other side of the table, the seller’s goal is to make as much as he can. The commission structure of the car business motivates your typical salesman to go for maximum profit per deal, at the expense of good customer relations or other concerns. That’s fine — my job is to get the best price that I can, not to reform their business, so I play the game accordingly.

    The tactics that they employ are easily managed and turned against them if you understand what they are doing and why they are doing. As Herb Cohen points out in his excellent book You Can Negotiate Anything, a tactic that is understood is not a tactic.

    It’s nice to make friends, but a dealership isn’t the ideal place to do that. It’s highly unrealistic to expect the sales system to change simply because many consumers don’t like it, when the system was created by and for the benefit of the dealers and the manufacturers, not for me. The four-square is a tool specifically designed to both confuse and gain control over the customer. Personally, I’d recommend bringing your own pad of paper, a pen and a financial calculator with you to the dealership, and tell the salesperson to put that thing away…

  • avatar
    Gottleib

    In conclusion the car buying process is as adversarial as most other business/legal relationships in this country. As is often stated and assumed in most transactions, “Buyer Beware”. If you think buying a car is cut throat, try negotiating medical service fees for a hosptial. Or better yet, what kind of discount are you getting from your friendly family phsycian?

  • avatar
    ihatetrees

    Not all dealers are bad. However, consumer behaviour and the system encourage bad dealerships. Part of the system is state franchise laws that prohibit direct (from manufacturer) car sales. Also, even low-reg states (such as Texas) have laws that give auto franchises more protection than a chronically drunk domestic auto worker.

    That said, the internet IS changing things. When Ford or GM file, it’ll be interesting to see if they develop an internet direct strategy and start whacking degenerate dealerships.

  • avatar
    jck42straw

    Ok after reading the article and all the coments I have to put in my annoying 2 cents. I have been involved in auto sales for almost 12 years right after I graduated from college.
    I have worked the floor,internet,finance and manager, I now own my company that is basicaly a car buyig service to help the consumer.
    First when it comes to buying everyone is a liar both consumer and sales person, lets face it you have different goals one to mae money one to save money.
    Second the internet, yes it is a great tool but it is not the holly grail, just becasue you see it on the net dosent make it true. Edmunds and KBB are prime examples, the invoice prices that edmunds shows are rarley correct. A good ballpark figure but never the real invoice cost, and KBB is almost never correct with what market value of your trade really is.
    More important is useing the interent to buy your car, sites like autobytel,dealix and the dozens of names they advertise under are simply lead generators, they promise you the best price but do nothing to actualy help you get it. They are simply selling your information to a dealership.
    Remember you will only be contacted by a dealership that is willing to pay for your info, not all the competing dealers in your market area.
    Finally the reason you dont see universal 1 price shopping is consumers dont like it, almost every dealer that has experemented with 1 price shopping has gone back to the old format. If you go to a 1 price dealership there is only 1 thing you can guarantee you paid to much

  • avatar
    Landcrusher

    Partsisparts,

    I think you mischaracterized Gardiner’s post, exactly where did he say to lie to the salesman? (that was my system, and it has worked for me) I don’t know how many dealers you have worked for, but I have worked with and trained hundreds of car salesmen, and dozens of other dealership employees. Lots of dealers pad freight, documentation, and other things, but that doesn’t matter.

    It’s a negotiation. The only thing that matters is the bottom line, not what the buyer decided he was unwilling to pay for. If you want your business to work like other businesses, then stop adding fees on top of the price. Just quote a price, and be done with it. Since you guys are not transparent on your costs, why should the buyer believe you?

    The market will decide whether it likes your way better or not.

    BTW, if I am treated well from the get go, I get a lot less aggressive with my buying strategy. I can almost always give up a percentage point or two when I am happy. That makes a huge difference when talking about cars and planes. Also, I always give a guy who was straight with me first shot at the next deal.

    Lastly, if you think dealers are all so wonderful, go back and audit your commissions on the sales over 60 days ago. Dollars to donuts – you were cheated. Check all the actual invoice values and costs against what your statements say. It’s called “worming the commissions” and it is fairly standard accounting practice in dealerships.

  • avatar
    Gardiner Westbound

    Two visits to the dealer are required; the first for information gathering and test driving, the second for deal-making. I favor dealing the last weekend of any month, particularly a Monday evening if it is the final day or so of the month. Sales promotions are often targeted for weekends and the following Monday. The dealer principal, management and staff are under pressure to make quota and bonus. The final hour before store closing is optimum.

    Revealing your buying strategy is analogous to showing a poker hand. It is the salesman’s job to make the offers. Reject them until he reaches your target price. Many salesmen find an educated consumer intimidating. A bulging file folder is an ideal prop. Do not disparage the product. Why would you want to buy a lousy car? Though salesmen characteristically have limited appreciation for truthfulness, avoid making dishonest statements. Falsehoods are readily detected, damaging, and squander the moral high ground. Avoid killer phrases like, “Would you throw in floor mats?” An easily declined would ya telegraphs submission. Instead, clearly state complimentary floor mats are to be included. Be aware the closing office may be miked. The last minute walk-away is a dramatic gambit. The salesman will almost certainly pursue you offering amends. Regardless, you can return and resume where you left off.

    Smart buyers wait for the new model sales frenzy to dissipate. It also gives the manufacturer time to resolve the inevitable design and production bugs that plague introductions. If purchasers are busting down the showroom doors for a hot model the dealer has little incentive to accept a low-profit offer. However, if there is inventory he may grab the quick, easy revenue and skin the next rube particularly at month-end when bills and quotas are due.

    Winning the deal is about information, confidence, strategy and timing.

  • avatar
    vento97

    Just today I was on a VW lot and was amazed to see “market adjustment” on a couple of GTI window stickers…

    A more accurate term would be “wallet adjustment”…

  • avatar
    partsisparts

    Landcrusher: If you find trained salespeople you know that one of the first things you find out about is trade. Gardiner says do not discuss it. How does he answer my trade in questions? Maybe using the term lying is a bit strong but omitting is just as bad.
    BTW I have audited every comission I have earned for the last 26 years. If I am not comfortable I question. I don’t work for houses that play that game. That is for green peas. I don’t steal from you, you don’t steal from me.

    If everyone would like to be treated fairly I have one piece of advice. STAY OFF THE HIGHWAY.
    Highway stores and stores on “dealer rows” tend to be aggressive in sales tactics. They hire young trainees and teach to try to cream everyone that walks in the door. I work in small dealers where service is excellent and the sales departments are honest and knowledgeable. The way it should be. 50% of my business is repeats and referals.
    Notice to all: IF YOU ARE NOT COMFORTABLE WITH DEALER YOU ARE IN GO SOMEWHERE ELSE!
    If you have to negotiate for hours to get a decent deal you are in the wrong store. On new cars I hit people at $500 over invoice. Therefore they are not insulted at my initial number and it gives me a little room to negotiate if the customer is still not happy. I even tell them it’s $500 over and offer to show them invoice if I feel they are not comfortable. Doing this puts all parties at ease. The dealer I work for has a good pay plan with a generous mini-deal commission so I have no problem doing this.
    The sale does not have to be a fist fight. I don’t deal with customers that come in with an attitude of “you are not going to make money on me.” Sometimes I politely say “Sir I see you came in for a good buy. Good Bye!”

  • avatar
    Gardiner Westbound

    A car dealership makes money on new car sales three ways:

    1. The difference between what the dealer pays the manufacturer for the car and the delivered price to you;

    2. The add-ons you might buy with your new car including rustproofing, extended warranty, financing, life and disability insurance, and fabric protection;

    3. The used car you bring to the deal. The dealer buys it from you at wholesale and sells it for the much higher retail price.

    Buyers improve their ability to negotiate a best deal if they know the dealer invoice price and are up to date on any factory-to-dealer incentives, cash manufacturers pay to dealers, and the holdback percentage. Holdback is a discount from the factory invoice paid to the dealer by most manufacturers after the retail sale.

    The invoice is a willfully misleading fictional document that significantly overstates the dealer’s real cost. Deduct the holdback and rebates, if any, from the invoice to determine the dealer’s true cost. Calculate a fair markup. Be wary of excessive freight and PDI charges, mandatory dealer options, and bogus administrative and non-statutory costs.

    Now for the Sancta Sanctorum, the greatly marked-up freight and PDI levies commonly misrepresented as chiseled in granite. Often the salesman, in an Oscar-grade performance, will recoil at the suggestion they are negotiable and intimate the manufacturer will wreak terrible vengeance upon the dealer for reducing the published amounts. It has never happened and will never happen because it would violate federal law. Every advertisement and manufacturer website contains the legally required notice, “Dealer may sell for less.”

    Buy nothing more than the car from the dealer. His miscellaneous wares are typically unnecessary, grossly overpriced, and poorly applied or installed. Dealer provided life and disability insurance are generally cruel hoaxes.

    Achieving the minimum effort lowest transaction cost is paramount. The holdback, secret commissions, and excess levies, fees, freight and delivery charges yield generous average dealer profits. The salesman’s share is beyond my purview.

    I am persuaded some car buying services and brokers are financially and psychologically cost effective. Most of my purchases are prearranged and confirmed to minimize dealer gamesmanship.

    Excluding complimentary and warranty items, I rarely utilize dealer maintenance and repair services. They are generally overpriced, often incompetent and frequently dishonest.

  • avatar
    partsisparts

    Dealers in my area will not go into the holdback, period. Why should we sell you a car and not make money. Do you work for free?

  • avatar
    AGR

    The biggest dealer groups are public companies, its easy to peruse their reports and figures to arrive at gross profit amounts.

    AutoRetailStocks reviews the reports from all the public dealer groups http://autoretailstocks.com/

    A quick example:
    Asbury Group
    Gross Profit per New Unit: 2,410
    Gross Profit per Used Unit: 2,147
    F&I Gross per Unit Retailed: 946

    Auto Nation
    Gross Profit per New Unit: 2,252
    Gross Profit per used Unit: 1,881
    F&I Gross per Unit Retailed: 1,109

    These are averages per unit these dealer groups have franchises from most manufacturers, some franchises make less others more than the average.

  • avatar
    partsisparts

    Gardiner:
    As far as your sancto santorum in 26 years I never even heard of it. Do you tell your doctor want you want to pay for his services? I mean you would not want to over pay him to right?

  • avatar
    AGR

    From Wards Dealer Business an informative article on dealer groups.

    http://wardsdealer.com/reports/2006/megadealer/future_dealership_consolidation/

  • avatar
    partsisparts

    Benzopf: How am I a liar? What have I said that was untrue? I never said all buyers are liars. This board is full of people insinuating all sorts of things about sales people without ever sitting on the other side of the desk. The truth is I have had men of the cloth lie to me. After all the years I have in the business it hardened me a bit. You said it yourself in your post you have only the scantest of evidence. A major consumer magazine in their car buying issue tells the consumer to lie to the salesperson. Plenty of people come into my store look at cars get a fair price, purchase the car and leave very happy. That sir, is the name of the game. The select few come in with a different idea. ( just like unscupulous sales people) 

  • avatar
    chris2

    I never said all buyers are liars.

    partsisparts – you insinuated exactly that on several occasions in this thread: Remember to a car dealer, “buyers are liars”.

    Re: “I (sic) major consumer magazine in thier (sic) car buying issue tells the consumer to lie to the salesperson.” What infinitesimally small % of car buyers read AND heed every bit of info from whatever mag you’re supposedly quoting? It’s a straw man argument AT BEST.

    I’ll avoid the name calling, but you are the quintessential car salesman that little old ladies and other sitting ducks ought to worry about. Not everyone can be fully armed for dealing with you and they don’t deserve to get shafted just because they can be and because you’re capable of doing so. Shady car dealer tactics didn’t evolve from consumers saying “hi, please take me to the cleaners”. They evolved from dealership owners doing whatever possible to confuse buyers in order to maximize profits. The mountain of paperwork and endless number of line items serve a purpose, and it isn’t for the consumer’s benefit. Hell, just today I passed a Ford dealer with a 50′ long banner on their roof that said “we sell every car below invoice!” The term “invoice” in the car dealer world is an epic load of bullshit that should be ignored completely. It means precisely NOTHING.

    And FYI – “men of the cloth” lie to everyone. You are not special.

  • avatar
    tms1999

    The biggest problem with these sales techniques is that they work. Otherwise the salesmen would change their tunes.

    It’s amazing that potential buyers are treated so badly just because they have an emotional attachment to the item they have their eye on. “If only that mean salesman did not stand in the way of the car of my dreams!”

    You can always walk away. There is an infinite supply of other cars waiting for you from other sales people, other dealers, other brands.

    I only got screwed once when I bought my first car. I got screwed good and it taught me a lesson: don’t play the game. Buying the second car was much easier (especially since it was going to be my wife’s, no emotional attachment for me). I stated what I wanted. They tried to forcefeed me sonething else (wrong trim, options, colors).

    I walked away. They grabbed me as I was passing the door, and magically they found what I wanted.

    Another round for the price. I paid the price I wanted (15% under MSRP). And got good financing.

  • avatar
    Landcrusher

    Parts,

    I will negotiate for hours if it seems sporting. I know of small dealers who treat people right. I also know dealers that don’t. I can’t understand on the one hand your comments disparaging negotiation, and on the other hand your saying you always start with 500 over invoice.

    Also, some dealers do go into hold back. While I never saw one take a loss, I hear it happens on cars that have been on the lot too long.

    If you know that there are dealers that try to cream everyone who walks in, how can you be upset with buyers who have the same attitude on the other side?

    The last guy I bought a car from got within 250 dollars of the difference I wanted on the deal. He was being a really good negotiator, and while I can’t remember what he said, I just told him he charmed me out of $250 and shook his hand.

    OTOH, I have sat in a dealership from 3 PM to 10:30 PM to get a marginally decent deal from a serious jerk because I knew it was the last day for a factory incentive.

    There are almost zero absolutes in the dealership business.

  • avatar
    partsisparts

    I feel staring at $500 over is fair. I don’t like the people who come in with the attitude “you are not going to make money on me”. We need to make money on everyone, just like any other business. As I said I have a huge following in my store,because I treat people with respect. Most people are looking for a place where they can buy a car and feel comfortable. I give them that. The deal works for both sides. They get a fair deal and I make a little money. That is the way it is supposed to work. Not one sided to either side.

  • avatar
    allen5h

    I can remember the very first time I tried to buy a new car. I was dealing on a ’stang, and the deal died just as soon as the Sales Prevention Officer showed up. The SPO put a white piece of paper on the table in front of me with some hand writen numbers.

    “You see these numbers.”

    Yeah, I see ‘em.

    “Well, these numbers is the stock number of this vehicle, and these numbers backwards is our cost on this vehicle.”

    He realized I was a lost cause when I never bothered to try to decipher these numbers backwards, as I immediately knew I had to get out of there. His mouth was running a mile a minute, but whatever he was saying was going in one ear and out the other. Eventually, there was a lull and I seized the moment and picked myself up and left.

    I was a very young and inexperienced new car buyer back then, but that did not mean that I was stupid. This presumption of stupidity has had a long lasting effect on me, so much so that I could never go back to a Ford dealer. I have tried, but as soon as my four wheels are on the Ford dealer’s lot I get panic stricken and have to drive off.

    I have had even worse experiences at other dealers, including the local Toyota dealer.

    Would you buy a new car from this Lexus-Toyota-Acura-Honda dealer?

    http://tinyurl.com/27jkez

    But this Ford thing has left a mark on my psyche for no other reason because it was my first time I went “mano-a-mano” with a dealer’s SPO and was totally unprepared for battle. I will have to live with this for the rest of my life. I do not forsee ever driving a new Ford product anyway, (I now prefer Honda products) so there is no loss there.

  • avatar
    Crutty

    Confessions of a Maniac

    The purchase of a new car represents the second largest consumer purchase, behind the household. (which includes improvements ad repairs) The research and preparation that go into these purchases should resemble this magnitude, and determination.

    The intention of the New Car Dealer (dealer) is to move as much product as possible, while maximizing all incentives and opportunities. These opportunities include, but are not limited to:

    Daily targets
    Weekly targets
    Unit targets
    Model targets
    Finance/Lease targets
    Accessory/Warranty targets
    Volume targets

    All profit centers of the dealership, other than Service and Body Shop are in tune with a New Car Sale. They all have a secular motive, and are willing to deal amongst each other to further it. The internal dealings are a benefit to the customer that is focused and prepared. Preparation is key and will e revisited.

    The reason for coming to the dealership is to purchase the car. There is nothing else that should be acquired at transaction time by the customer. This fact is misconstrued by the public as an adversarial restriction on the conversation, and give and take with the dealer. Just as the dealer wants you to feel comfortable and confused, you want him to feel the same.

    Comfort for the dealer is that you are a qualified, easy going customer who is open to his advise, and willing to invest in the new vehicle. The source of the investment is you ability to pay, and the provider is the other departments of the dealership.

    So. The final person at the dealership that says that a deal will occur; the person you always want to meet, is the General Sales Manager. The GM directs all the departments of the dealership. He looks at the sum of the deal.

    Your objective is to make the sum of the deal as broad and large as possible. Sounds stupid, but keep reading.

    When a car deal engages multiple profit centers of a dealership, they all will lobby (on your behalf) to have the car price approach cost. This was the objective. Right?

    The items that appear on the Sales contract are cash. Treat them as such. If the deal says that they will give $1500 dollars on your $11,000 trade that is a great spot to be in. Why? Because, you have used your $1500 down payment, to relieve pricing pressure on the new car. (They will allow the new car price to fall, because they will make money on the trade)

    The same goes for the accessories, and financing. Agree to that 17% 72 month car loan, initially. The undercoating and Simonize stuff too.

    The deal is set once you sign. The only thing you sign for is the car.

    To execute these deals you must go to the dealer prepared to buy and finance. Plan to spend the evening. 2 to 4 hours. Go damn near closing, on a midnight sale if you can, and stay until it is signed.

    You must have your own financing approved and waiting. Get the name for the rep that you are dealing with, it comes in handy sometimes.

    So here are a few example deals, they are real, so try them at you own peril:

    1991 Ford Mustang GT bran new purchase, Crystal Ford Isuzu, no trade;

    I walk in at around 3 pm, the car I want is still in plastic on the back lot, I’ve been stalking the dealers inventory for a few weeks…driving thru the lot occasionally.

    I go in, get a salesman, and stake exactly what I want…Plain GT Black, no sunroof, 5spd. The sticker is near $17k. They don’t have it, they have a sunroof. Not what I asked for, so it has to be free. Cause I really don’t want it.

    They inquire on my trade; I brought a 1978 XJ12 4dr given to me as a wedding present. Good looking car, but completely unreliable…had to go.

    They offer $1,500. Car is probably worth $8,000.

    We talk about financing; I’m just out of school, got no credit, good job….15.5%. fine by me.

    Undercoating? Sure! Simonize? Yeah! I looked at all the accessories possible, picked a few.

    Extended warranty? Oh yeah!

    Time for the financing office. They come with the contract, 4 hours later. The price for the car is I the $15’s now. The rest of the stuff is….a lot.

    I pull my jag from the trade and replace it with $1500 cash, decline the accessories and gu, but still take the financing.

    Leave with the car and call the State Farm agent to move the car loan over to a lower rate.
    Example 2, used car, 2002 Lincoln LS V8, ??? Infiniti, no trade;

    Simple deal. The car that I was purchasing was on the used car lot, after inspecting it I decided that it had been wrecked hard, but fixed impeccably well. The dealer likely did not know or care.

    I secured financing for the car from an online place, cheesy, but I just needed the nod. Went into the dealership, and haggled a bit, no good, the car price was super low to begin with. The opportunity was only in the financing or the accessories.

    So I went into the finance room, and the guy asked if he could earn my business. Of course you can, this cheesy finance place gave me a rate of…insert bazare number here….this is the person who I am dealing with. I had them fax over a letter that said I was approved to buy that particular car earlieir in the deal.

    The finance guy went to work beating my made up number. Got a good rate, and a quality car to boot.

    Example 3; 2004 Mustang Cobra, ??? Ford, trade 2002 Lincoln LS V8;

    I decided that I was not old enough for the Lincoln, and found that I wanted my mustang back. So I took my LS and went to work.

    The Lincoln has a depreciation rate that is relatively stair-stepped. Big percentages off the floor, then a huge percentage as new models come out annually. Eventually you will get stuck in the car. It was time to decide to keep it for the long run or get out. Then you add in the prior years Lease program car return calendar, and the price can plummet very quickly.

    So. Trade your cars before the new NADA or whatever books are published, and whatch what the returns are for leases. Why? The cars value what the book says, but they do have realtime auction websites now, so be prepared.

    The Infiniti dealer couldn’t tell that the Lincoln was wrecked, so why would the Ford dealer be able to. I trade my cars filthy dirty when things are wrong with them. Let them find the flaws.

    End results of this deal was 500 more for the LS (six months after purchase), and around sticker for the Cobra. Refinanced immediately afterward.

    The moral of this story is; the dealer does not expect you to want to make money on the car deal. Be patient, observant, flattering, prepared. Don’t be openly focused on the price. Let the deal unfold. Every time they put the numbers in front of you look for the only one that matters, but only talk about the rest. Expand the deal until the one you want comes down to where you believe it can’t go anymore.

    Remember that the dealer incentives are multi-faceted. Below sticker is possible, but only in combination with the other departments. Also, when it comes time to sign, calmly remove everything but, the car from the deal. The GM and Sales Manager have already agreed and signed. The finance manager can remove the gu on his own. The GM and Sales Manager can’t unsign the deal.

    Happy hunting.

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