How to have the easiest, fastest pain free buying experience and get the best deal!
First of all, understand that the dealership has to make a profit to stay in business. Did you know that the average profit per new vehicle sold at a volume new car dealership in this country is less than $600? Have you ever thought about the expense involved in running a car dealership? Did you know the average commission for a sales consultant per car in this country is less than $300? Did you know that the sales consultant is paid commission on the profit made on the vehicle, not on the total saleprice of the car like it is on a house? Did you know that the only department that keeps the dealership profitable is the parts and service department? The sales department is typically run at a loss every month! But, you have to have a sales department to have a service department at a new car dealership.
Here are some ways to ensure you have the best car buying experience ever.
Do your research first. Use credible sites like Kelley Blue Book and Edmunds. Be careful of "what your friends paid" or web forums and blogs. These sources are not credible. Anyone can say anything on those sites! A 14 year old can log onto a sight like that and say that he paid $20,000 for a $45,000 car. The people on those sights might mean well, but usually the information is not correct and gives you a false impression of what the car can be purchased for. Besides, would your friend tell you that he over paid for his new car? Of course not, he is going to take pride in telling you how much he saved wether he did or not!
Narrow your search down to 2 or 3 cars that you would like to test drive. Make sure you have printed out from credible sources about what these cars are selling for. These sites will also have information on any incentives or special financing available to you. Test drive the cars you want first. Do not get into price at this point.Price is not important until youare ready to buy. Let the sales person know what cars you want to test drive up front and that you will get back with him or her if you decide on the make that they sell.
When you have decided what car you want, go to your local dealer first. It just makes more sense. You might as well buy from your local dealer, keep your money where you live and after all, you will probably service with them. Make sure you have printed off pricing information, incentives, rebates and special financing information on the car you want. Consider if the car you are buying is mass produced, is it hard to get, are there tons of them on the lots, is it popular etc. Are you looking at the only car in this color on the east coast? This will help you be able to offer a fair price and get a good deal on the car.
Test drive THE CAR you want to buy. Once you have selected the right car it is time to work out the price. Let the dealer present their price first. Who knows....it might be lower than what you were willing to pay! At this point if the offer is not lower than what you expected to pay, you need to use your credible sources to make an offer. Do not make a low ball offer hoping the dealer will be asleep or come down to their lowest price right away. A low ball offer will make the dealership think you are not serious and both parties will end up parting ways. This is what frustrates the customer and the dealer. Negotiations should take no more than 15-20 minutes if the dealer and customer are reasonable. There is also nothing wrong with asking to see the invoice on the car. (Unless of course you are buying a car that would not sell for anywhere near invoice because of the type of car it is.....you may have expensive taste!) The dealer does not like negotiating anymore than you do. So both parties should be flexible. Do not get caught up in the fact that the car you are buying may cost $18,000 but the piece of the pie that you are negotiating over with the dealer may be less than $1,500! The rest of the money goes to the company that built the car, not the dealer!
What you should expect.....
You should expect to be treated with respect and dignity. You should expect excellent service from the dealer. You are in fact the one spending the money!
What the dealer expects....
To be treated with respect as well and to make a profit....even if it is just a small one! We are one of the only industries that allow customers to negotiate. Most everything else you buy, the profit margins are set and if you want the item, you have to pay the asking price.
"What about getting various quotes from several dealers through the internet?"
That is fine.....but, get "Out The Door" quotes including all taxes, tags, processing fees, destination/freight, appearance packages and dealer installed accessories. If you just get a sales price and try to shop based on that you are in for a bad experience. I have seen $2,000-$3,000 worth of "Fees" added to an Internet quote. So only ask for "Out The Door" or" What could I write you a check for and take the vehicle off you lot?" prices. Find out if the dealership is including any additional perks with their price quote. It may sway you one way or the other. Be careful of contacting the one dealership who's price appears a lot lower than every one else's quote. If it looks to good to be true, it usually is.
"What if I have a trade?"
First of all, do not ask a dealership to appraise your car over the phone or internet. This is unfair to the dealer and to the customer. The only way to get an accurate trade evaluation is at the dealership. Now, how do you know that you are getting the most for your trade? Do some research first. Use KBB, Edmunds, Blackbook Online Etc. I would not recommend NADA as a source to value your trade. They tend to be on the high side and I never see customers receive NADA for their trades so why use it? The number one thing to remember is that your car is only worth what some one else is willing to payfor it! Do not look at what others are asking for cars similar to yours. Your condition, miles and options could vary and someone can ask a million dollars for their car, but it does not mean they will get it. Also, try to understand that when you sell your car to a dealer, they are going to pay wholesale for it. It is kind of like taking something you own to a Pawn shop. You will get instant cash, but it is never what you thought it was worth or could sell it for on your own. I have never met anyone that got more than they expected for their trade. Is your car popular? Are there tons of them out there for sale? Do you have a color that you like but most people will not? What can a dealer buy a car like yours at the auction for?
"Why does my trade value vary so much from dealer to dealer?"
The only way to know exactly what your trade is worth is to have it appraised at a dealership with no intention of buying a new car from them. Otherwise, this is where the numbers game comes in. One gives you more on the trade, but the price of the new car is higher or the exact opposite. The best thing to do if you have a trade in is to get a bottom line with all tax,tags and fees on the new car minus your trade in value. Then compare the bottom lines.
"Why does Carmax sometimes pay more than other dealers for my trade?"
Simple, they pay more for yours and they sell their cars at higher prices than other dealers and they do NOT negotiate. However, most dealerships will match a Carmax appraisal. So bring it in with you. If the dealer offers you less than your Carmax appraisal, ask the dealer to match it. What if I just want to sell my car to Carmax? That is not a problem as long as you have the title. If you don't and you owe more on your car than it is appraised for, you will have to write a check on the spot for the difference. Are you in a position to do that? If you trade your car at a dealership, they can re-finance some, if not all of your negative equity into the new loan with no cash out of your pocket.
"Why does it take so long to buy a car? I signed less paperwork when I bought my house!"
That is a great question. When you buy a house, it typically is the largest investment you will ever make. It takes the average person 3 months to sell their current home. It then takes the average person an additional month or so to find their new home. If you are building a home it can take from 6 months to a year! Then you apply for the loan. They ask you for everything under the sun shy of a blood sample. Once you are approved, they set a closing date usually 30-60 days out. If everything goes well and their are no issues, it takes about 45 minutes to an hour to sign all your documents. Then, you have to move! This can take weeks. Let's compare this to buying a car which is typically the 2nd largest purchase you will ever make.....
You show up at a dealership hopefully prepared to do business if everything works out. You have to pick out the car you want, test drive it and then work out the figures. If the dealer has the perfect car, the perfect sales person and you and the dealer are flexible on price all of this should take about an hour to an hour and a half. That is if it is a rainy Tuesday morning! If it is a sunny Saturday around 2 pm, this could take 3 hours. If you come un-prepared and are unsure of what you want this could take twice as long. Once these steps are completed, the car needs to be cleaned and gassed up. This takes 45 minutes to one hour. While that is being done, the paperwork is started. It takes no less time to complete this transaction regardless of how you are paying for the vehicle. Most of the same paperwork has to be completed on a cash deal as on a finance deal.
"Why do I sit and wait after I have agreed to buy the car? Why does it take so long to see the finance guy? After all, I am just writing a check! Why do I have to fill out a credit application if I am paying cash?"
While you are waiting the DMV paperwork is being done. Car insurance is being verified. Your drivers license is being checked that it is valid and current. Your credit is being checked for your security as well as the dealerships to prevent identity theft. We check that you are who you say you are. If you are applying for a loan, we get the loan approved while you are waiting. If there is a pay off on your trade we are verifying the amount and where to send it to. If you have your title and registration we are verifying that you are the only owner of the trade. We make sure you have a valid social security number and are legal in this country. We are printing anywhere from 10-15 different forms you will have to sign. We prepare your temp tags or transfer your old tags. All this can take 45 minutes to an hour to make it all legal. At this point you go into the business office to sign the legal documents and go over your financing options. This can take 20-45 minutes. Once completed, your sales consultant goes over your new cars features and delivers you your new car. This can take 20-30 minutes. So.....if everything goes perfect and you are the only customer at the dealership on a rainy Tuesday......expect 3 hours of your day to be consumed for the 2nd largest investment you will ever make. If is is the last Saturday of the month and there are 25 customers in the showroom, expect 6-7 hours of your day to be consumed. It still beats months to a year of your time spent buying a home!
"What can I do to make the process go faster and what should I bring with me to the dealership?"
Bring your insurance information that has not expired, your drivers license, your down payment, title and registration to your trade as well as the trade itself. Bring anyone with you that will be on the paperwork.
"What if I have credit issues?"
Bring in your most recent pay check stub and last years tax returns. Bring a copy of a utility or phone bill. Bring in a list of 6 references with full names, addresses and phone numbers.
"Why do I always have a bad car buying experience? I hate car dealers!"
If ALL your car buying experiences are bad this is typically self created. You go into it with the thinking that it will be a negative experience and usually what you think becomes a reality.
Do you play one dealership against another? Do you go from one dealer to another and shop price? Will you leave one dealership and buy from another over a $100 or so dollars? Do you get your trade appraised at every dealership you go to? Are you getting figures for all different kinds of cars? Are you un-realistic with your price expectations? Trade value expectations? The more dealers you get involved the more confusing things get. Do you go into the dealership with your defenses up? These are just a few of the things that can create a bad experience.
"Why can't the dealer just give me the bottom line or their best price up front?"
Simple answer. What ever price the dealer gives you, the customer thinks there is more room and will ask for more off! It happens every time. Then, when the dealer has no more room because they have given it all up front to the customer, the customer leaves because the dealer will not negotiate further or take the customers counter offer! It is a lose lose situation. Both parties in any sale have to come to an agreement somewhere. Starting at the bottom for any dealer never winds up in a sale.
"Sales people are liars!"
This is the stereotype for sure. This stereotype started many years ago and it has been a long up hill battle to change the spoiled reputation. Most of today's sales people are kind, hard working people just like you with families and kids. It can be a very rewarding and fun career. It is also a very tough career and the hours some of these guys work are long. Sales people have a saying as well you may have not heard...."Buyers are Liars". Why? Because customers will say and use what ever information helps them get the best deal. The sales person understands that because a salesperson is like a psychologist. They are problem solvers, great with people and they know what you are going to say before you say it. Trust me when I tell you, there is NOTHING that you could say that a veteran sales consultant has not heard 1,000 times before. They are human lie detectors. They can tell by your body langauge, tone and actions if you are telling the truth. About what? About what you received for your trade at another dealer, about the price quote you received from somewhere else, they can even tell in the first 5 minutes if you have credit issues! So even know you may have purchased 5-10-15-20 cars in your lifetime, they sell that many cars in 1 day! Veteran sales consultants are very good at what they do. They are professional and count on repeat and referral business. Also the company expects their sales consultants to completely satisfy their customers as high as 100% of the time! So the expectations from the dealer about their sales staff is very high. So in more cases than not, dealership personnel are very friendly people.
"I have heard horror stories about leasing!"
This is because of open ended leases done years ago. Now, all leases are close ended and it can be the best way to purchase a new vehicle. Why lease? A vehicle depreciates the minute you take it off the lot. It will never be worth what you paid for it. So why not drive and pay for the car during the best years of it's life. It is always under the factory warranty when you lease. You never have to worry about what the vehicle will be worth at the end of the term. You have more options when you lease. The payments are typically less, you can sell it or trade it in at any time just like a conventional purchase. At the end of the lease you can turn it in and walk away, buy or lease a new vehicle or you can purchase the vehicle at the end for a pre-set amount. If it is worth more than the pre-set amount you can sell it and pocket the difference. If it is worth less, that is the lenders problem, not yours! Some of the most financially sound and smart people know that leasing is the best way to purchase a new vehicle.
"What about the mileage restrictions on a lease?"
Typically a lease is set at 12,000 miles per year or 15,000. Did you know you can set the miles per year up much higher than that the up front if you want. The payment will be more, but you can still have the advantages of leasing the car!
"But I don't own the car when I lease it."
Miss a payment or two on a conventional buy and see who really owns the car! It is no difference on a lease. It is the banks car either way until you finish paying for it!
"Should I get an extended warranty? I have been told not to."
It depends. Ask yourself.....am I going to own this can longer than the standard warranty? Do I want a loaner car when I come in for service? Do you want roadside assistance? If the answer is yes....an extended warranty is a great investment. You would not drive your car without car insurance would you? Extended warranties can cover you up to 8 years or 120,000 miles! They are affordable and in the long run will save you money.
What is Gap Insurance?
If you get in an accident and total your car, your insurance company decides what your car is worth. If you owe money on your car and it is more than what the insurance company is willing to write a check for, you have to cover the difference. This amount can be quite large in some cases. With Gap insurance, the Gap Insurance company covers the difference between what you owe and what your insurance company says your vehicle is worth. If you are rolling over negative equity into your new loan or you are not putting down at least 20%, you should consider Gap Insurance.
I got ripped off last time I bought a car!
How do you get ripped off? Did you feel ripped off paying $600 for Playstation 3 when it came out and now you can buy it for $300? With all the information available to the consumer on the internet (correct and incorrect), with the price of the car on the window sticker, with all the incentives and special interest rates posted everywhere, how do you get ripped off? Maybe car dealers should stop negotiating. That way, everyone would pay the same price! A good deal is perception only. It is a fact that the happiest customers pay the most profit! They send the dealership the most referals, they service with the dealership and if anything goes wrong, the dealership will bend over backwards to help the customer. The customer that is miserable, complains through the whole process, thinks he got ripped off pays the least profit and in most cases the dealer lost money on the transaction. This person never sends the dealer referals, does not use the service department and only returns to the dealer when their is a problem. And guess what.....how much help do you think the dealership gives a guy like that? It has to be a win/win situation for both parties involved.
"I know Invoice is not what the dealer pays!"
Yes and no. Invoice is what the dealer wrote a check for to buy the car. That is true. After a dealer sells a car they do receive Holdback. It is typically $300-$1,500 depending on the price of the vehicle. It is a very small percentage of the cost of the vehicle. It helps pay for the floor plan expenses that the dealer absorbs by paying interest on the inventory. If a car sits long enough, that money is long since spent! What about any cash to dealer incentives? These are usually posted on the internet for the consumer as well. However, sometimes a dealer has to sell a certain number of units to get that money or they received nothing! So, If invoice on a specific car is $18,500, holdback on that car is $600, there is a $500 cash to dealer incentive and the dealer sells that car within 90 days, the dealer net owns that car for $17,400. Anything above that number would be profit for the dealer. But remember, the sales person gets a cut, the sales manager gets a cut, the General Sales Manager gets a cut, the General Manager gets a cut, the Owner gets a cut and they still have to pay the mortgage, pay utilities, pay for accounting personel and all the hourly employees! The amount a dealer makes on the sale of a car is not even enough money to keep the lights on! Compare that to the fact that your Real Estate company you choose to sell your home can make on one sale $10,000 to $15,000 to $20,000!! Yet, car sales people have worse reputations!
Last but not least.....price is important, but it should never be the most important reason you buy one car over another car or over another dealer. Consider the location of the dealer, the quality of the product you are buying, the service you receive, the sales consultant you are dealing with and any perks you receive from the selling dealer. PRICE IS ONLY IMPORTANT WHEN YOU STROKE THE CHECK. After that it is all about the service you receive and the enjoyment of the new car.
I hope this helps you have a better car buying experience. Good luck and........have fun! After all...... you are getting a new car!