As a car salesman, I would like to help car buyers everywhere get a great deal. If you are wondering why I would write such an article as a car salesman, I am wondering the same thing. You see, car salesmen usually get paid a percentage of the gross profit. Gross profit is total amount paid for the car minus taxes, fees, and the cost of the car itself. So as you can see, the more expensive we can sell the car for, the more money we make. So you can’t blame car salesmen for wanting to sell a car at a premium, but that doesn’t mean you have be taken advantage of. Here I will list ways you can get your next car for as low as possible, it is possible to get a car for less than factory invoice or less than what the dealership paid for a used car.
1. Do your research. This is common sense, but you won’t believe the number of people that come unprepared and buy on an impulse. Car salesmen try to sell on emotion. If you go to a lot thinking that you’re just going to “look,” that look can turn into a test drive. Test drives are when you are most vulnerable. I have seen it first hand. People that come determined not buying today end up taking the car home, usually at a very bad price (for the customer). Factory invoices are available on sites like edmunds.com, make sure you get your facts. Use kbb.com or nada.com for used values.
2. If you have a trade-in: I strongly suggest you get a trade-in appraised separate from when you purchase a car. You want to haggle for your trade BEFORE you even look at a car. If there is a Carmax near you, get it appraised there as they tend to give more for their trade. Now, know that your trade IS negotiable. After you get your trade appraised in writing, LEAVE THE DEALERSHIP. I see so many people get fooled into thinking they got a good deal. The dealership gives a great trade-in value but sells the car at a premium. If you separate the two transactions and negotiate them both separately, you’ll get a much better deal. Now, you don’t really have to leave the dealership… but do make sure that you are not negotiating your trade and the car you are buying at the same time. It is a good time to grab something to eat and come back.
3. If you are leasing a car: If you are leasing, the only thing that is negotiable is the total price of the car. If the salesman tells you that the car is not negotiable on a lease, he is lying and get someone else. Always try to get the car for the factory invoice. Dealerships are more than willing to sell it at that price. The reason is, they usually have a 3%-4% hold back, so even if they sell it at the factory invoice, they are still making money. Additionally, they get incentives from the factory for the number of units sold. It could be a good idea to negotiate the car as if you were buying it outright. When the price is agreed upon, you can tell the sales person that you would like to lease. Also, you don’t have to put any money down if you want to, again, if they say you have to put money down on a lease, get someone else.
4. When you get to the dealership, tell them that you are “just looking.” They should still be more than willing to help you. You should already know the car that you want because you researched online. Go on a test drive. The salesman will most likely ask you a question that goes something like this: “is there anything I can do to earn your business today?” And this is your que: tell him that if you can pay x for it, then you’d take the car home today. Now, I see a lot of times, customers think that if they are paying in cash, they would get a better price from the dealership. They couldn’t be more wrong. Dealerships prefer those who finance with them, the reason? They make money off of the interest. Also, a lot of salesman try to sell people on the monthly payment. Do not fall for this, you might have an ideal monthly payment in mind, but long term loans at higher apr’s, you’ll be paying more for the car in the long run. This is particularly bad if you wind up wanting to get out of the vehicle in 2-3 years. You will be so far upside down in your payment that you would either lose thousands or be stuck in the car until it’s paid off.
When you are making an offer, you can offer around $4,000 less than the sticker price. That is a good place to start because on average, that is the markup on a used car. If you are buying a new car, then offer BELOW factory invoice. Now, you can’t low ball them too much because then they will try to put you in a different car. After your initial offer, it will be very rare that they will accept it. If they do accept it, then you could have gotten a better deal. The manager will come up with a counter offer. Whatever that counter offer is, do not take it. Offer$500 more than your LAST OFFER, if they don’t take it, thank them for their time and get ready to leave. Now, when you leave, dealerships do what is called a “T.O.” It stands for “take over.” The sales manager will come and greet you and try to close the deal. Sales manager will usually tell you their best offer, but just in case, counter offer about .5%-2% less (use your judgement here because percentages differ vastly depending on how much the vehicle is). If he doesn’t take it, then accept his deal, it’ll be the best one. There’s no need to leave the dealership at this point, you are just wasting your time and everyone else’s if you do.
5. Don’t forget the “we owe’s.” A lot of times, especially if you’re buying a used car, the car will have some imperfections. Walk around the car before you sign any paperwork. Mark anything that you would like to get fixed and get it in writing. They will try not to fix anything as it costs them money. Since you negotiated the car first, the dealership cannot reverse the price or change their rock bottom price for fixing up whatever you are pointing out. If they are not willing to fix something, then walk out. They will change their mind (in most cases). Also, you might have seen and pointed out something when you first looked at the car. The salesperson can say he would fix it, but if it isn’t written down on the “we owe,” then good luck, it’s not going to happen.
6. Negotiate the APR. As long as you have decent credit, the APR can be negotiated. Now, if your credit is 520, take whatever you can get. Negotiate this BEFORE you get to the finance department. Here’s the reason: finance people get paid on the higher APR. The sales managers could care less compared to selling the car. Get the rates with the sales manager, again, he will get you the best APR.
7. After you are done signing paperwork with the salesman, you will see a finance manager who will take care of your loan/payment. Here, they will try and sell you warranty, maintenance, etc. Save yourself time and hassle, tell them straight up that you are not interested in additional products or services. My wife actually ended up buying dent/scratch protection service for $3,000 when she bought her BMW. When she tried to use that service to get a scratch touched up, it was such a hassle that she actually never got around to touching up anything. Don’t be fooled and don’t be taken advantage of.
Now, to answer my own question in the beginning, I am writing this because even though I am a car salesman, I am not one that likes seeing people pay $4,000 – $5,000 more than they should for a car. Salesmen get a minimum amount no matter what price they sell a car for. I get $300 flat even if I sell a car for below what it is worth. It is possible for me to make $1,000 from a single car sale, but it is not a good feeling for me. By the way, salesmen have no idea what the prices of cars are or how low they can sell it for. Only managers know the price. Salesmen are the middlemen. It is still important to find the right salesperson because there are some who are like me and there are others who want to sell the car for as much as possible (I think that would be most). When the salesman is on your side, it makes negotiating a whole lot more easier.
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