ALT-2 How to Save on Car Truck Suv
The Auto Buyers Friend
Hello and welcome. As an experienced auto salesman since 1988, I believe that I can offer the average consumer knowledge and insider tips that can effectively save them hundreds or even thousands of dollars on their next auto purchase or lease. I am not in the employ of any dealer or manufacturer nor do I own any substantial interest in either. My article is meant to be strictly for information purposes and may not be copied or redistributed, in part or in whole, for any purpose except that you may print out for individual use part or all of the content of this article.
I will soon offer my new ebook "THE AUTO BUYERS FRIEND" for a modest fee, and will also have my eNewsletter available for a very modest subscription fee. But this article is freely given advice and you will never be charged any direct fee for it. I accept gratuities, honorariums and fees for ebooks and enewsletters on my Paypal.com account, which I recommend as one of the safest and most effective ways to handle financial matters over the internet.
THE FIRST TIP
The first tip I will cover today, deals with what you should know and do prior to visiting any dealership. All too many consumers like to wander onto the dealers lot to "just look" at the new offerings to help them make their choices. This is WRONG!
You are exposing yourself to one of the most organized and focused sales forces that you will ever encounter; who work in total harmony to achieve the specific purpose of selling you a vehicle, while maintaining the highest possible profit margin for the dealership.
And each of them; salesman, closer, sales manager, product manager, general manager, and business manager(aka F&I manager, Finance & Insurance ) earns their income based on a percentage of profits on each transaction. To go on a lot without knowing the exact make, model, features, and options that you want is almost a guarantee that you'll end up with the latest version of the famous movie "Truckster" foisted onto Chevy Chase's character in the National Lampoon Movie some years ago.
The salesman is thrilled to sell you the vehicle which has a special extra bonus to him of $500 or $1000 over and above whatever commission he makes on it. This usually means very old inventory, high demo miles, a minor booboo or two, or a soon to be discontinued model. So, remember the very true old saying: " If you fail to plan, you plan to fail!"
You should always do your homework and research and know exactly what make, model, features and options you want, need and can afford. Also you need to research the M.S.R.P. (maroney sticker) aka Manufacturers Suggested Retail Price, as well as the Dealer invoice price on the specific choice. NADA.com (National Auto. Dealers Assn.) and Kbb.com (Kelley Blue Book) are excellent resources as well as Consumer Reports and Auto Magazines such as Car & Driver or Motor Trend, which are also good references for necessary information.
Also, make yourself aware of all Rebate programs, National, regional and/or local. You should also investigate financing options and disposition of the vehicle you are replacing prior to visiting your local dealership. Dealerships have a very heathy profit program based on financing and insurance such as gap insurance, accident, health, disability, life insurance, plus extended warranties and a variety of other local or regional add ons that will add greatly to what you eventually end up paying for that shiny new ride.
DISPOSING OF THE CURRENT VEHICLE
In 18 years, I've only witnessed a handful of people actually get more for their trade in than low wholesale. I've witnessed countless trades where the dealership was able to obtain the trade in at a ridiculously low cost. In almost every situation imaginable you are much better off disposing of Ol' Betsy on your own, prior to visiting the dealership. A dealership, of a neccessity cannot afford to pay anymore than low wholesale (closed dealer auction) price LESS the amount the dealership normally adds to each vehicle(lot fee, dealer prep fee) to cover for getting the vehicle ready for resale, I've seen a low of a few hundred dollars up to over a thousand dollars for this charge depending on individual dealer policies.
So, I highly recommend that you dispose of the old vehicle before you go to buy the next. Step one in disposing of the old is establishing the true value. Caution: what you might still owe on the vehicle has nothing to due with the value! You will have to arraign to payoff the vehicle before you can reassign it to someone else. This can usually be accomplished by working with the lender. Despite Dealers advertising , "We will payoff your trade no matter what you owe" , the fact is that if you owe more than the dealer actually sets as the true value of the vehicle, the difference is added back into the deal either by the sales manager on the deal itself or by the Business manager while they are massaging the numbers for your loan.
Two excellent sources for establishing the real value of the vehicle is: http://www.NADA.com and http://www.KBB.com. NADA is based on what vehicles are actually bringing at auction or as reported by dealers on actual trade-ins. KBB is based more on reported retails and loan values as well as auction prices. The primary thing you must realize is that it is imperative to be brutally honest in your evaluation of its current condition. If its been repainted, had bodywork, needs repairs, shows any wear & tear from normal use, it will affect the value negatively.
KBB (Kelley Blue Book) shows Dealer Retail value, Tradein value and Private Owner Sale value. Dealer Retail is always high. Tradein value is probably higher than your local dealer is willing to put into the vehicle (remember lot fees?), and Private Owner Sale value is usually between the other two. Of course, you've got to advertise, have the vehicle detailed, and make obvious repairs to sell the vehicle yourself, however, in most instances you will still be hundreds of dollars better off.
Taking the trade in out of the transaction not only gives you a higher value for your vehicle but it also eliminates a major opportunity for the dealership to add additional dollars into their profit margin on your new purchase. There are other ways that you can obtain a better value for your current vehicle and other ways to research its actual cash value, but I'm limited somewhat by article length. I will cover everything in more expanded detail in my eBook and my eNewsletter. Both will be available soon.
NEVER UNDERESTIMATE A SALESMAN
In a recent discussion, with a rather bigoted elitist, I was informed in no uncertain terms that auto salespersons are basically too far down the evolutionary ladder to be able to chew gum and walk at the same time, or something to that effect. Well, if thats your belief, thats fine, and any self respecting salesperson will be more than happy to reinforce your delusions. Your sense of superiority practically guarantees a more than healthy commission for that poor dumb salesman, who seemingly gets dumber as you get smarter. Or at least until you're "bustin bugs" with a new car you didn't plan to buy!
A majority of auto salespersons with whom I've worked were college educated, as well as being additionally trained specifically in automobile sales and negotiation. And being dumber than the customer is a highly recommended tactic for a successful salesman. Its always a good idea to be non-threatening, and even better to be an object of sympathy as a salesman. The bank never asks their IQ when accepting those large commission checks! Being able to allow another to feel superior in a negotiation is an exceptionally profitable ability for an enterprising salesperson.
Allowing a customer to believe that you are not involved in the actual negotiation is an even better situation. A good salesperson is always on "your side" to assist you in getting a "good deal" from the dealership, so being subservient and even displaying an attitude of being awe-struck by your intellect is a useful approach with a customer that displays an inflated ego.
What I preach over and over to buyers is never underestimate a salesperson's intelligence or cunning. They are trained to observe, identify and exploit your weaknesses to their own profit. They are paid a handsome commission based on the amount of profit on each transaction. Don't be mislead by their acting ability, which is a substantial talent of most good salespersons.
Always assume that you are dealing with the most successful and talented salesperson you've ever encountered and you stand a much better chance of negotiating a better deal. Nobody is immune to flattery, whether deserved or not, and so, by turning the tables on that salesman, you are disarming one of their best tactics.
FINANCE, INSURANCE & WARRANTIES
Continuing with our tips. This tip can save you the most money of all! Dealerships use the Business manager(F&I manager) to sell you on a variety of insurance and warranties that add a large amount of profit to their sale, and that cost you a large amount of interest if you finance.
The dealership makes around 40% of the cost of these add-ons as well as a percentage of the interest charges, so you can believe that they work hard to sell these programs. The practice is to set up the original financing arraignments to include the full package of health, disability, accident, life insurance as well as extended warranties on the vehicle and a new twist call Gap insurance, which covers the difference between payoff on vehicle and depreciated value basically. All this is wonderful to have and can be a real blessing should something happen while you're paying off this vehicle, but you should really investigate purchasing this thru your regular insurance agency prior to visiting the dealership. As an add on to existing insurance, it can usually be had for hundreds of dollars less. At least you will have a firm price to compare with what the dealership offers. And remember, everything is negotiable at an Auto Dealership!
As to extended warranties, this is a mixed call. Do you gamble that you will not experience any major non manufacturer warranty while you have the auto? My one rule of thumb is time. If you are not planning to keep the car more that 3 years, you probably won't need extended warranties, although it also may depend on how many miles you drive per year. In any case, warranties are again a profitable sale for the dealership so if you must have it, NEGOTIATE! If they claim they can't, just stand up to leave & watch what happens. The person behind the desk doesn't make anything unless you buy, and they are paid their commission on the insurance, warranties and financing that they they sell.
Finally, your interest rate on a loan is determined by your credit score. The F&I mgr knows what the rates are from a variety of lenders based on the various ratings and simply adds percentage points to that to determine what interest rate he/she will offer you. For example, your score qualifies you at 5% with Lender X, the F&I mgr then inputs your rate as 8.9% in the deal. If you accept their financed deal, the dealership earns 3.9% interest on the amount financed over the terms of your loan. This is a substantial amount of extra cost to you. Of course, you might not get 5% from your own financing source, but you probably would get a rate far superior to the dealerships offering. And you can at least use the rate you obtained on your own to negotiate a better rate from the dealership. Its all a matter of doing your homework before you plunge into that new Auto purchase!
DEALERSHIP PROFITS
Before anyone gets the wrong idea, I want you to know that I firmly believe that the Dealership should be allowed a fair profit on each sale.
My intention is to help buyers understand and negotiate a good deal for themselves and at the same time allow the dealer to make a fair profit on their purchase.
It is in your best interest since you need the dealership to be available for your warranty and service needs. And a Dealership that is not profitable can't survive long in this highly competitive business. And, yes there are other dealerships for your brand available, however if a business is unprofitable, fewer and fewer people become interested in opening new dealerships, and eventually, only the most agressive and hardline dealerships are left.
As to what a fair profit might be, there are far too many variables involved to determine a specific dollar or percentage amount that is fair to all. Age of Dealership, investment in structures, number of employees, land costs, costs of floor plans, number of sales, etc., all must be considered in determining the fair profit amount that each dealer needs to maintain operations.
Each Dealership must be judged on its own merit as to the amount of profit you are willing to allow. It might be worth a bit more profit to you to have a dealership within 10 miles of your home or office as opposed to traveling a longer distance for your dealer needs. Or you might be willing to pay more for a dealer who offers courtesy bus service or even loaner vehicles. And of course a local dealer does contribute to the local economy in a variety of ways that might be of value to you. You must examine and decide on each dealership as to what you consider a fair profit for the particular dealership.
In any case, its still a matter of doing your homework before you shop.
A QUESTION FROM A READER
Recently, I was given a scenario by a car buyer, and asked my opinion of its effectiveness. The Buyer had called a number of dealerships in his area and solicited their best deal on a particluar model. He then visited the dealership that gave him the best verbal offer. Once there, he spent approximately 4 hours completing his purchase. His question, of course, was really merely seeking approval of his completed transaction.
"Did he improve his chances of obtaining the best deal by using this method?". Without knowing the exact details of his purchase, I can really not comment on whether he did get a good deal. I suspect however, that he got what is termed in the industry a "Lowball " offer over the phone. A "Lowball offer" is of course one designed to be lower than any other dealer could possibly match, but one that can be gotten around once it's accomplished it's primary goal, to wit, getting you on the lot! Once you are there, its up to the salesman, managers and Business Manager to make a profit for the dealership. Considering that he was there 4 hours, my best guess is that the dealership made an excellent profit.
Is this an effective method for a buyer? Maybe, as it helps gather pricing information on a particular vehicle, or the availability of same. However, its still leaving far too much to chance in my opinion. There is absolutely no substitute for doing your homework! Research, research, research are the three most important things for a buyer to do. Know, to the best of your ability, what the figures are on the particular make, model, features and options that you want before you go to the dealership. And do not deviate from your plan! When you let emotions enter your negotiations, you lose valuable negotiating tactics. It is why dealers insist on test drives. Getting you emotionally involved in the feel, smell, ownership feelings associated with a new vehicle can be used to cloud your better judgement during negotiations. Don't let the situation be used against you, always keep in mind that "they need to sell to you more than you need to buy from them.
Until next time, "Keep the Shiny Side Up" and Happy motoring!
