The following guest post was written by Jim Edwards, a former car salesman, familiar with the ins and out of the industry. Jim has spent a majority of his career helping businesses with product planning and strategic marketing. You can read more from him as his website, EverydayChristianFamily.com.
As a former new car salesman, I’ve found many prospects want the “lowest price” confusing it with the “best deal.” Generally, they haven’t done their homework or are in a hurry. You can be in control and get a great deal. To help you obtain the very best deal, I’ve developed the following formula:
C + CD + SB + SD + S + TI + LP + LIR = Great Deal
Buying the Car you really want from a Convenient Dealer with Solid Benefits, excellent Service Department, a Salesman you’re comfortable with, getting a fair “Trade In” combined with a Low Price and Low Interest Rate equals a Great Deal. To make this happen you need to first do your homework!
Here’s the process I’d use to get the best deal on a new car:
1 – Select your new car requirements including price range, dependability, safety, performance, transmission, budget, interior (cloth or leather) etc.
2 – Select the brands that meet your requirements. Research using the Internet, magazines, etc.
3 – Price models online with TrueCar.com and/or Edmunds.com. You’ll get MSRP (Manufacture’s Suggested List Price) and Invoice Price (Actual Sales Department cost minus any manufacturer incentives.) TrueCar also shows average prices in a “bell curve” others have paid.
4 – Next, find the trade-in value on KBB.com (Kelly Blue Book). Look under “Used Cars,” then select Trade-in Value. Hint: Expect that 99% are classified as “Fair” or “Good” condition.
5 – Can you afford the car you want? Answer the question, does the cost of this car fit into my budget? A rule of thumb is your payment will be about $20 per $1000 for whatever you borrow. So, a $25,000 car will cost about $500 per month.
6 – Giving preference to those closest to you, Call dealerships selling your target vehicle(s) and ask their salesman (besides his sparkling personality and price) why should I purchase from your dealership? Write the reasons down. These may include FREE car washes; FREE 2-year service; fabric protection, on-the-road service, etc. Hint: Choose dealers with the best offers, who are close enough for you to take advantage of these FREE services.
Hint: Salesmen ask many questions. In particular they want your name and contact information. Be firm but pleasant. Give your first name only, then ask his full name and days and hours he works. Tell him you’re interviewing dealerships. Later, if you like the dealership, you can choose to use or avoid this salesman.
7 – If possible make a definite appointment at your target dealerships to see the exact car you want.
Allow a maximum of 1-1/2 hours. If you see a salesman you’d like to do business with, walk directly up to him, avoiding all other salesmen. Dealerships may have an “Up” system giving you no choice. If you immediately don’t like one, ask the receptionist for a different salesman.
Salesmen want to close the deal NOW, so explain you’re not buying today – just getting acquainted with the salesman, dealership and car. NEVER discuss price or payment, but get information on any interest rate special. Note: You may be the salesman’s only customer that day, so give him a good opportunity to earn your business with a thorough demonstration, Service Department “walk through” and test drive (black and red cars drive exactly alike.)
Choose a salesperson and give your contact information to them only. Stick with them, so they get 100% of your commission. (Diminished commission by 50% means poor assistance.) They will or should follow up with you to see if you’re ready to buy the car. Advice: Don’t avoid the call! Answer and be completely honest. He’s just trying to make a living. If you’re going to purchase another car tell him or he’ll keep calling. Otherwise, give him your timeline and when the best time to call.
If the salesman shows you a new feature or accessory you really like, re-contact the other dealerships to make certain it’s available there as well and is included in their price.
8 – From the comfort of your home, get the internet quote from local dealers you’ve disqualified,
including the exact model, color and accessories you want. Warning: If you check the Internet Price at your dealer, the Internet Sales Manager (who has time to give lowest prices – so won’t/can’t take time to troubleshoot or explain all the car’s features – gets the sale and your salesman may get nothing! Hint: To check the validity of the price, go to TrueCar.com and Edmunds.com.
9 – Contact your bank, credit union or financial institution to get their loan rate on the car you’d like to purchase. You are now armed with the approximate cost of the car and trade-in value.
10 – Call the dealer. Armed with copies of the best internet quotes from your area, the expected trade-in value from KBB, all the benefits promised, after the 15th of the month, call the 1st choice dealer/salesman for an appointment for car appraisal and purchase the car. Be very open providing copies of pricing you’ve been quoted. Explain that you expect all fees including the Document Fee to be included in the final price.
11 – Make the deal, getting everything in writing including the interest rate before signing the final contract. (I wouldn’t worry if the price is a couple hundred dollars higher than the Internet price, because you’ve got all the other benefits (demo assistance, prior inspection of the vehicle, lower interest rate, after the sale assistance) that the Internet salesman rarely offers you. Naturally, if the price is not even close to the Internet price, they haven’t earned your business.
Note: All businesses deserve to make a profit, so the owners can give to their favorite charities. You just don’t want to be taken advantage of. If customers take out all the profit, the dealership will close, providing you zero benefits in the future. If the salesman makes no profit, he gets minimum wage of $7 an hour for all the work he did for you. There are places later in the deal so safe unwarranted fees.
12 – Inspect the vehicle thoroughly making certain it’s free of scratches, dents and everything works perfectly. This is you’re last power position in the deal. If the car is not perfect, DO NOT proceed to the Business/Finance Office.
13 – The last place for the dealership to make sneaky profit from you is in the Business Office, sometimes known as Finance. Here, you’ll get pressured with extended warranties, special coatings, insurance products of all types, and on and on. Pretty generally, I’d say don’t buy anything. All these have much less value than the price they ask you to pay.
What you want to know is; what is their interest rate and who is the vendor from whom you are borrowing. If you’re not comfortable from the Loaning Agency or the interest rate, you can fall back on the best price from your bank/credit union/lending institution. Smile. At this point the Business Manager will generally find a way to lower his interest rate.
C + CD + SB + SD + S + TI + LP + LIR = Great Deal
Congratulations! You’ve purchase your new car at a Great Deal, because you’ve done your homework. You’ve bought the Car you really wanted from a Convenient Dealer with Solid Benefits, excellent Service Department, from a Salesman you’re comfortable with, got a fair “Trade In” combined with a Low Price and Low Interest Rate with all the promises in writing.
KEY: This, however, is not the time to quit. After happily driving your car for a week or so with no problems, return to the dealership and give your salesman a nice gift for his work on your behalf, such as several dozen homemade cookies, a nice fruit basket, fancy candies, etc. You are now earning good will from him. He’ll bend over backwards to help you with all other issues in the future.
For more, check out New Car Buying Myths.
Photo by wishymom (Stephanie Wallace Photography)
{ 17 comments… read them below or add one }
That’s good advice!
Great advice. We are currently shopping around for minivans to accomodate our expanding family. I am so glad I read this! Thanks!
SalesMAN? Come on. What century are you in?
This has nothing to do with getting a good deal.
Your post only serves to make a New Car Salesmen job easier and more comforting. The only purpose this serves is to help your buddies who rip people off. I simply tell the dealer I want below invoice price and that is it.
I will not pay MSRP or dealer mark-up. Dealer’s get kick backs(1,500 to 5,000) from Mfg. so to sell at or below invoice is still profitable for the dealer.
I have purchased more than 4 vehicles at or below invoice in the past 20 years.
My advice on buying a new car-DON’T
You are losing thousands of dollars just driving it off the lot. It’s all about getting you hooked on the latest new model just like a drug. How many times have you bought than new car to only a few months later see the new model come out and pass you by. Then you think-I should have waited and bought that one. It never ends. Its how they hook you like a drug. Cars are like furniture a huge depreciating item. My advice, find a good used one one or two years old with few miles. Let the other guy take the hit in the shorts. If you do insist on theat new model send me a check for the loss after drving it off the lot. I’ll be happy to oblige you. I’ve know many car sales people over the years and they tell me most really can’t afford the new car. But dealers will be happy to put you in one. It’s a big tax on their budget due to how much these little gems cost now even with 0% financing. .
This is very Helpful am going to look for a new car this year.
Thank you
Written like a true car salesman (salesperson) – first, most car sales people do not last very long at dealership, so the salesperson is not very relevant in the process; his/her only point is to sell the vehicle for the highest price possible, as is the sales mangers job; they want to put you in the car of their choice at the price they choose. The best approach is, 20% off for any used car, this gives you a great deal, gives the dealership a profit and allows the sales person to make a nice commission; for new cars, use the sticker price from the factory, minus the stuff like transportation charges, etc., and take between 10% and 15% off, this too gives you a nice deal and lets the dealership and the sales person make a profit. Point to remember about new cars, the more options it has the bigger the discount you can get, say for instance that options cost are $5000, you can cut that in half and the dealership will stay make a profit; options are marked up steeply. I was a car salesman ( I am a man) and this is how I purchase all my vehicles
I would also consider myself an expert in the auto buying industry. i have worked as a salesman/manager for over 10 years. And I think these steps are exactly what the doctor ordered. Its all about educating yourself as a consumer, knowing what a fair deal is before going into the dealership and planning your budget before hand.
Most of the time when i read these “tips on buying,” the advice generally teaches you to play “games” with dealers, never buy a car on your first visit, dont believe anything anyone tells you, blah blah blah.. In reality if you followed that type of “playing game” advice you will never end up buying a car.
Salesman today are happy selling a car. Even if it is a slim deal. Infact, many dealership are using a flat commission now, and because the margin are so low, the majority of salesman receive the bulk of their pay directly from the manufacturer in the form of flat volume based spiffs.
Here is an sample of how a honda salesman might get paid. $50 per car from the dealership + an additional $50,$100, or $150 per car from honda directly depending on total volume. and ofcourse there are always bonuses, say $500 if they sell 15 cars in one month etc.. So the incentive for the salesman lies in selling a car, regardless of how much profit is associated.
I just wanted to provide a little insight on the current climate of the car business from the other side, because i actually think this article provides great advice if you are looking to make sure you get a great deal.
I have been working at a Ford Dealership for over 20 years so I know what im talking about. And also, there are no secret kickbacks. And salespeople do not come and go IF you are shopping at a quality dealership. If the dealership is an excellent place to work, few people leave, end of story. This article is a very strait up and honest assesment on how to purchase a vehicle the right way. the way that saves the buyer the most time and money. New car dealers ALL pay the SAME price for the SAME vehicle. Its the people, dealer, and treatment of the customer that makes the biggest difference in a happy, long term customer. The best salespeople are in this for the long haul and want your loyalty above all else. Its all about relationships and years and years of repeat business and referrals. The only customer I cant tolerate is the one who believes a dealer shouldnt make any profit. Try that at wal-mart, gas station, or Dr’s office. Its the profit that allows the dealer to "take care of you" and stay in business, just like the business the customer works at or recieves a pension from.
If I was a salesman, and someone came back and gave me homemade cookies, they would go straight into the garbage pail.
I’d recommend checking Consumer Reports advice on new and used car buying and especially their frequency of repair ratings for various makes and models. Most public libraries have copies of the Consumer Reports print magazine, and the yearly April issue has all the latest auto ratings. The ratings are also available online at ConsumerReports.org, but access to the reports online requires payment. Consumer Reports also offers a paid service that provides the “cost to the dealer” pricing for specific makes models and accessories that’s very useful for negotiating new care purchase. Consumer Reports is non-profit, conducts independent testing, and does not accept any advertising or cars for testing. They purchase cars for testing independently. I have no affiliation with Consumer Reports other than being a satisfied member/subscriber for many years.
I strongly suggest that people DO NOT follow the advice in this article.
It is a self-serving plan to separate you from as much money as possible.
A MUCH better plan is laid out on the famous Motley Fool financial site:
http://www.fool.com/car/car.htm
It is a bit old, but just change the word “fax” with “internet”.
The plan keeps you out of the saleperson’s grasp and gets you the best package deal.
“And also, there are no secret kickbacks.”
Glaringly erroneous statements like that are what causes public mistrust of car dealers. 20 years in the dealership? Where? You either didn’t understand the deals or are being disingenous with your comments. Sorry. Truth. Handle car dealers the way you would a dangerous animal – with extreme caution.
Dealer holdbacks are not new and a quick google search will explain what they are to all but the most hard-headed. Doesn’t mean you can drive the dealer down to the last penny but the dealer is not “losing money” on your deal if you try to negotiate.
You need to do your homework before buying a car to get hosed. Dealers do need to make money but in the homework phase, you should be able to calculate a ballpark figure that works for you. Stick to the ballpark figure because you are going to get hammered at the finance office. One dealer tried to sell rust protection to me in California. I don’t live at the beach or in the mountains and they already knew this. Why do I need rust protection? No more dealer car alarms either; they’re half price (ie, reasonably priced) off the lot. Think McFly, think!
Also, it matters not whether the dealer is local. Free car washes and oil changes? Big deal. An opportunity for the dealer to fleece you more for something else. Got a hose? Wash your own car. Buy where the best price is. My girlfriend’s last car came from the other side of Los Angeles. All local dealers were persistent on contacting her but inflexible on price. I don’t care if you’re local; buying a car is not a charitable endeavor. What’s more, even if you bought your car from another dealer, you can still have a local dealer service your car. You won’t get to see the guy/girl who sold the car to you but they might remember your name 30 days after the deal so what do you care? This is business, not “let’s be friends.”
I have even known the salesman (from college) and still nearly got hosed. Buying the particular Honda I was interested in at a BMW price point made no sense. Trust one person in a car deal – you.
As for the trade-in, another place to get hosed. Sell privately if you can. What a dealer gives with one hand (supposedly generous new car deal) he/she takes with the other (lowball trade in deal).
New cars are worth buying when they hold their value (Honda, etc.). Used cars are worth buying if you’re looking at foreign “exotics” (ie, Mercedes, BMW).
In short – watch out. Truth.
This is excellent thank you. I also think the part about treating a good salesman with respect is true. To me it is all about service. If I get good service then I want them to know how much I appreciate their efforts. Good service is a dying art and few recognize how important it is.
Nice article — too bad it doesn’t discuss the most important part of making a deal — negotiating the price. Fact is, the salesman/dealer will offer you a price — usually an inflated one. You make a counter-offer, and the dealer will refuse. The only way the dealer will come down in price is when you say, “thanks for your time, but no thanks,” and walk out. Once you walk out, the dealer will reduce the price.
For step#8 (get Internet quotes), it’s really not sufficient to simply ask for quotes and then go back to your friendly dealership and hope they can beat your best quote. First off, over 50% of the Internet quotes you get will simply be an email with a new salesman’s contact info. Instead, plan to email each of these dealers back and make sure you get a real quote.
Once you have quotes, email each of the dealers and ask them to beat your best quote. After you’ve worked your way through all of them and gotten a good price, THEN you can go back to your friendly dealership and ask him if he can beat your best deal. And if he can’t, don’t feel obligated to go with him, you did give him a fair chance. BTW- You can absolutely inspect a car from an Internet Salesman before signing. You only do the negotiating online, you still go into the dealership to sign the paperwork.
To make your life easier, here are some car negotiation email templates (http://www.findthebestcarprice.com/negotiate-step2.html#email1). If you plug in your name and the type of car you want, it will update the template and you can simply copy and paste into an email response to any Internet quote.
Has anyone ever heard the saying “Full price is a fair price”? Ask yourself this question, if someone came to your work and Told you that to earn their business you had to discount your wage or product how would you feel? Salespeople work hard at what they do and are happy to help anyone who is willing to do business with them. Why is it that we as a society have the Entitlement to get a discount just because we want one. Remember the Old saying “you get what you pay for”. You want service after the sale? Go buy a car below invoice and then turn around and ask the dealer/salesperson to help you with a problem. You think you deserve the same treatment as the person who paid MSRP? Why? Are you entitled to it? Or did you pay for it.
I know some will disagree with me and that’s fine. Just ask yourself this before you post what your thinking. Would you do the same job you already do for less money? So if you currently make $10.00 an hour would you do the same thing for $5.00 an hour?