Negotiating and Other Dealer Tricks

There are as many negotiating tricks as there are car salespeople, but here are a few of the big ones to watch out for.

Never, ever take the car off the lot on the very same day you make a deal. It's best to sleep on it first. It won't hurt the dealership to see the vehicle on the lot a few more days.

• "IF I COULD, WOULD YOU...?" You'll hear this repeatedly from every car salesperson you visit. It is an old routine and one that is unfair to you as a consumer. The salesperson asks you if he or she can do one thing (i.e., obtain financing, etc.), will you agree to buy the car? Examples include:
  
  
  • "If I could get you the car for that price, would you take it home today?"
  • "If I could get you that payment would you buy it right now?"
  • "If I could get the car in that color, would we have a deal?"

  This gives the saleperson an unfair advantage during negotiations. He or she puts you in the position of committing to something while the dealership commits to nothing. Each time you respond "yes" to one of these questions, the salesperson uses that commitment to manipulate the offer, ultimately earning a higher profit margin. You actually reduce your negotiating power when you say "yes" to these questions, and the saleperson will keep asking them until you say "NO".

  
  
• "SPLIT THE DIFFERENCE" Here's the scenario: your price offer is $2,000 less than the salesperson's. The " friendly" sales manager comes over and politely says, "I'll split it with you 50/50. Fair enough?" To you it sounds fair — after all, you're only a few thousand dollars apart, right? WRONG! The dealer didn't give you a thousand - you gave him a thousand!



• "THE TAKE AWAY" This technique is particularly bold because it plays on your emotions and ego. Let's say you've been negotiating for a new sport utility vehicle. You've negotiated the price into a comfortable range and might think you have the dealer on the ropes. Suddenly, the salesperson says, "Maybe we're looking at the wrong car. I've got another one with less equipment. It's not the color that you want, but I think I might be able to get it for you at the price you suggested." WHAM! Just like that you see your situation change from having negotiated a good price to losing the car you really want. Don't fall for it — this is PRECISELY the response the dealer is looking for!



• "I'M ON YOUR SIDE" This technique is an "oldie but goodie" and is taught to all car salespeople the first day on the job. The salesperson acts as your advisor, helping you figure out what's a good deal and what isn't such a good deal. No matter how friendly the salesperson seems, his or her job is to get you to pay more for your new car, and he or she is always working with the manager to get more money out of you!



• "THE MANAGER TURN OVER" At some point, the sales manager will become involved in the negotiating process and attempt to close the deal. Sales managers fall into two basic categories — The Charmer or The Intimidator. The Charmer will smile and strike up a conversation about any topic other than the car. He or she is looking for acceptance as your friend. After all, who wouldn't want to buy a car from a friend? The Intimidator may be physically intimidating or simply have an intimidating presence. He or she might try to bully you into buying the car or make you feel like you MUST close the deal. Regardless of which one you have to deal with, remember that they both have the same job - to make you pay more for a car.

Watch Out for These Other Dealer Tricks...

The following tricks apply to buying cars in general. Read them carefully before you purchase your next vehicle because, almost certainly, you will encounter a few of them. Remember, all dealer tricks are based on a basic truth that has been exaggerated for the saleperson's benefit.

The Spot Delivery

The spot delivery is the most powerful tool in the salesperson's bag of tricks. A spot delivery occurs when a customer selects a vehicle, negotiates a price, finances the vehicle, and takes the car home, all in one visit. The dealer will try and push you into taking a spot delivery by saying, "At this price, you'd have to take the car off the lot today!," or, "This incentive ends today!" to pressure you into an immediate delivery. All the salesperson is doing is making sure you don't go searching for a better deal!

DON"T GET SPOTTED!! Before you sign the agreement, take some time to shop around and check the price of your particular make and model here. You should look into other financing options — you might be pleasantly surprised. Purchasing a car is one of the biggest investments you may ever make, except for a mortgage. At the very least you should sleep on it!

Remember, a spot delivery gives the dealer EXTRA profits off of your sale!

Dealer Invoice

Dealers negotiate around the invoice, leading you to believe it's the lowest price any car is ever sold for. That is another exaggeration. The fact is, the dealer invoice is NOT RELEVANT to the price you pay for a car.

Vehicle invoices are real but do not reflect what the dealer is actually paying for the automobile, and will not guarantee that you are getting the best price on the car. There are additional deductions that decrease the price a dealership pays for its inventory. Most factory invoices have built in charges like the WHOLESALE FINANCE RESERVE and DEALER HOLDBACK, which are generally removed from the dealer's actual cost once the car is sold.

For example if the dealership's invoice price is $18,625, with $273 going to the wholesale finance reserve and $365 in a dealer holdback charge, the price the dealership actually paid for the car is only $17,627. If you agreed to pay $1,000 over invoice (which probably sounded like a good deal at the time), you just handed the dealer a $1,638 profit, not a $1,000 profit!

Furthermore, "factory-to-dealer" incentives add profits for the dealership since the manufacturer is paying it a bonus to sell the cars. This means that even if a dealership sells you the car at invoice, it could still receive thousands of dollars from the factory as additional profit. This money is also open for negotiation.

If you want to make sure you are getting the lowest price, and not paying overpaying at the dealship, check the real price of the make and model you are purchasing and never assume you are getting a good deal because you are paying close to dealer invoice.

The Bump

Once you've finished haggling with the salesman there are many more ways the dealer can "bump" you for more profits.

Have you ever thought you'd closed a deal with a salesperson, only to find out from the finance office that your credit doesn't qualify you for that payment you've just agreed to? Perhaps the salesperson tells you (unexpectedly) that the car you are planning to purchase isn't available, but there is a slightly more expensive one that is ready for delivery. If you are buying into a lease, he or she might tell you at the last minute the tax was not included in the quoted monthly payments and that needs to be added. You've just become a victim of the bump!

The classic bump happens when the sales manager approaches you after you've supposedly made the deal and says, "I'd go broke if I sold the car for this price". Even though the salesperson shook your hand and said it was a deal, he or she plays the game that the big boss wouldn't give the final approval. This is a classic "good-cop, bad-cop" technique! DON'T FALL FOR IT! Let the salesperson know you expect the dealership to honor the FIRST deal you made, and be prepared to walk away if any changes are made.

You will be very pleasantly suprised when the dealership accepts your terms if faced with losing the sale!!

The Bait And Switch Routine

Does this sound familiar? "Better hurry, this sale ends today! Huge liquidation sale, hundreds under factory invoice!" The prices in the ad are too good to be true (your first clue!), but you inevitably go to the dealer's showroom to check out the inventory. When you arrive all the best deals (along with the free hot dogs and soda) have mysteriously disappeared.

Dealers use what is called the "bait and switch" routine; that is, they advertise a few extremely low-priced cars (known as "loss leaders") to draw customers into the showrooms. Unfortunately for the consumer, it always works!

Once customers are in the show room the well-trained sales staff propels them toward the higher priced inventory, and uses their sales skills to lure unsuspecting customers toward vehicles that are more profitable. The dealership counts on the fact that customers will want something more upscale than what is advertised.

One tactic dealers use with the bait and switch is the Spot Delivery. If you look at the fine print in the ad, it usually says that you must take immediate delivery.

I've actually watched a customer walk into the showroom with the local newspaper ad rolled up under his or her arm, intent on buying a loss leader. But instead of asking the dealer to sell it at the price in the ad, the customer starts negotiations all over. Don’t be afraid to ask for it for the advertised price. If the saleperson knows you are ready to do business, he or she will give you the deal.

Salespeople can make cars appear more attractive than they really are; that's what they're paid to do. They all know if they sell the specially marked "loss leaders," they will soon be specially marked themsevles--as in needing to find another job! The truth is that the dealership would be out of business if it sold all its inventory at those extremely low prices. After all, it has to somehow find a way to pay for those fancy showrooms!

If you want to find a deal, stick to the quoted prices and don't let potent sales magic determine what car you take delivery of. Take advantage of extremely low prices as advertised in the newspaper — legally the dealer must sell you the car at the price quoted in the ad!

You can also check car prices online right here before you go to that "big sale."

Packed Payments

Another questionable tactic is the "packed payment" scheme, which incorporates several other techniques already mentioned on this site. Here's how it works:

A salesperson shows you a payment of $427 a month on a car you are interested in buying. You tell him or her that the payment is out of your price range. You're looking for something under $400.

The salesperson responds with, "Let me get this straight. If I could get you this car (which you are already in love with) at a payment under $400 a month, then we have a deal (a variation of "If I can, would you?) ?" The salesperson has already created the illusion that he or she is giving you a deal. Since you feel your price has been met, you confidently say, "Yes."

The salesperson goes to check with the manager, and comes back a few minutes later to offer you the car for $397 a month if you take delivery right away (a spot delivery).

The salesman might make it sound like you're getting a great deal. He or she is acting like the sales manager is really sweating this one out. BEWARE! What caused the dealership to bring down the price? Were you given more money for your trade, or was the price of the car reduced..the answer is? Neither.

The original payment was almost certainly calculated using a high interest rate and included credit or disability insurance as well as a warranty. If you'd said yes to that payment, the finance/business manager would have informed you that all of those extra features (a warranty and credit insurance) were included at "no extra charge." However, because you said no the dealer simply removed the features and offered you a lower monthly payment. The dealership didn't actually lie, but you were not told the whole truth!

You didn't gain anything when the salesperson offered you the lower payment; instead, you actually lost features. Now, he or she can try and squeeze more money out of you by pushing the "extras" originally included in the first price that was quoted.

Make sure you are negotiating the price you really want to pay with your salesperson if you want a good deal. Don't fall into the trap of negotiating your monthly payments. There are too many variables like interest and warranty options that will affect the final amount.

On the other hand, if you are negotiating a lease make sure you focus on the monthly payments and not the actual price of the vehicle, because your final cost for the vehicle is your monthly payments. There are other charges that might apply during a lease that can be added on top of your monthly payments.

The "Packed Payment" scheme is illegal in most states but is very difficult to enforce. Know your rights!

Also, be certain the dealer does not add any other products you didn't ask for before you finalize any deal.