Starting Out
Ten Dealer Tricks and Traps
Don't let a slick salesperson steer you into a bad car deal. Here are ten common come ons and ways to defend against them.
By Erin Burt, Contributing Editor, Kiplinger.com
April 21, 2005
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When it comes to buying a car, salespeople have more pitches than a Little League tournament. But you need to keep your eye on the ball: getting the right car at the best possible price.
You have enough questions to answer when shopping for your first car -- New or used? Lease or buy? Rebate or low-rate financing? You don't want to worry about whether that sweet-talking salesperson is playing straight, or thowing out a bunch of junk.
Before you venture out in search of your next car, keep your ears open for some for the lines salespeople will throw at you, and arm yourself with the comebacks that will help you keep control of the situation. Buying a car is a big decision and a huge financial responsibility. Make the purchase on your terms.
1 | "Have I got the car for you."
There's a big difference between buying a car and being sold a car. When you buy a car, you know what you want and you call the shots. When you're sold a car, the salesperson is in control every step of the way.
The key is knowing what you want. Research different cars online using sites like Edmunds.com and Cars.com. Narrow your choices down to one, two or three cars and put together a folder on each one, including information on standard features, options, pricing, rebates and incentives, etc.
This way, when you walk on to the lot and the salesperson approaches you to ask what you're looking for, you'll be able to say the make and model and ask intelligent questions.
Just rambling off a list of general features you like gives the salesperson a chance to take control and steer you toward a car that may be a bit out of your price range.
Even if you know exactly what you want, the salesperson will probably try to get you to test drive a more expensive car -- perhaps the exact make and model you wanted, but with more options and extras than you can afford. Don't even get behind the wheel. If you decided beforehand that you didn't need leather seats, a five-disk CD player or a DVD navigation system, stick to your guns. Dealers know that if they can get you spend just a few minutes in a glitzier car, you might get comfortable and decide you can't go back to the basic model. Ka-ching!
2 | "How much can you afford to pay each month?"
Before you head to the dealership, you should know how much you can afford to pay each month. But never disclose that figure to the salesperson. You should negotiate the price of the car only -- monthly payments should never enter the equation.
There are a number of ways salespeople can meet your monthly payment requirements, such as inflating your down payment or stretching out the term of your loan. They may also try to switch you to a lease and raise the price of the car because the monthly payments would still fall within your budget.
Also, make sure you negotiate the price of the car separate from the financing and the value of any trade-in. Those are three separate transactions. If you negotiate on the basis of a monthly payment, the lines between the transactions blur and it's difficult to tell if you really got a good deal. And remember, if you can't get the terms you want or an explanation about any part of the process, walk away.
3 | "This car is a babe magnet."
Beware of flirt-, er, flattery. Dealers know that buying a car is an emotional experience and they're ready to dish out all the reassurances that you're making the right choice -- with plenty of boosts to your ego.
A friend of mine in college actually bought a sports car after the saleswoman told him he looked "hot" behind the wheel, and that it was a "babe magnet." And I've had a dealer try to butter me up by saying a car "matched my eyes," (it didn't), and that a car "must have been made for" me because I "looked perfect" in the driver's seat.
Give me a break. Lines like that belong on a junior high school dance floor -- not the showroom floor. Don't let a little sweet talking from a flirty salesperson drive you into a car you don't want -- or can't afford.
4 | "Your credit isn't good enough to get the best financing."
This is an easy line for car dealers to pull off with young adults in particular because most of us, admittedly, have minimal credit. But don't take the dealer's word for it. Make sure you know your credit score before stepping foot on the lot. You may have a better record than you think. If you have student loans, a credit card and utility bills in your name, you have some credit. And if you don't miss payments, and you haven't applied for a slew of credit cards lately, your score is probably in good shape.
If you live in the West or Midwest, you can get a free credit report under a new law that allows you to check your credit for free every year. (If you live in the South or East, the law doesn't reach you until June and September, respectively.) The report won't tell you your credit score, though, which is what dealers use to calculate your loan rate. But you can use the details in the report to estimate your score, or you can order your actual score for $15 from myfico.com. You should be able to get the best auto rates with a credit score in the mid-700s. (Learn more about what to make of your credit score.) Also find out what rate your bank or credit union will give you and compare it to the dealer's offer.
If you don't have any credit, you might want to hold off buying that new car for at least six months until you can establish a record for yourself. A good way to do that is to get your first credit card. But remember: You don't have to carry a balance in order to build credit. You just need to show that you are dependable enough to make on-time payments. If you need the car sooner, you could ask a parent co-sign the loan.
5 | "It's impossible to buy this car at that price at any dealership."
Don't take the salesperson's word for it. Shop around. It could take quite a while to visit all the dealers in your area to find the best offer. So call them first. Negotiating over the phone is a lot less intimidating than doing it in person. Get the sales manager to put his lowest price in writing via fax or e-mail. Then call a few more dealerships to pin down the best deal.
But before you make any calls and do any bartering, there are two key figures you must know:
- Invoice (what the dealer paid for the car). This is the base point from which you do all your negotiations -- not the MSRP. Tell the dealer you're willing to pay for a reasonable profit, say $500 over invoice. (You can find invoice prices at Edmunds.com.) But note that this strategy may not work for high-demand cars, such as the Scion xB, Toyota Prius or Mini Cooper, for which customers are lining up to pay sticker price just to get behind the wheel.
- True market value (what actual customers are paying for the car). You can't expect a dealer to sell you a car at a discount when everyone else is paying much more. Edmunds.com lists what cars are actually selling for in your neighborhood to help you determine what a reasonable offer would be for you to make.
Bids over the phone really only work well for new cars. Because they all just came off the assembly line, they are all in about the same shape. But if you're in the market for a "pre-owned" car (certified or otherwise), then condition will have a big impact on the price and you can only get a true impression of condition in person.
6 | "This car won't be here tomorrow."
When you're shopping for a brand new car and you hear this line, the appropriate response is, "so what?" You can always order the car with all the features you want if someone else snags that particular one off the lot. The salesperson is simply trying to rush you into making a decision.
The line is often a bunch a bull when shopping for a used car too. You wouldn't believe how many times I heard this the last time I shopped around for a used car -- as if the salesperson was doing me a personal favor.
Impulse shopping is an easy way to get into trouble, so leave yourself plenty of time to shop -- four to eight weeks at least. After you've done your research and determined what cars you're interested in, give them a test drive and then go home. (Take along Kiplinger's Test Drive Scorecard to help you evaluate each car.) After you've had a chance to sleep on it and you've made your decision, then go back and start negotiating the deal.
And if, in fact, the car isn't there when you go back, don't sweat it. It's better to extend your search another week or so than to overpay in the thrill of the moment.
7 | "Everybody gets this add-on."
What would your mother say if she knew you fell for this line?
Salespeople will inevitably try to sell you a bunch of extras you may not need or want, such as extended warranties, gap insurance (which pays the difference between what you still owe on a loan and what a car is worth if it's totaled or stolen), credit life insurance (which pays off the loan if you die) and after-market add-ons such as undercoating, alarm systems and oversize wheels. Such extras net dealers fat commissions. But paying for unnecessary add-ons deflates the deal you worked so hard to negotiate. Don't fall for these sales pitches.
Say, for example, the dealer wants to tack on an extended warranty that would bump up your monthly payment by "only" $20. If you sign a 60-month loan, that means you're paying an extra $1,200, not to mention the interest. And you probably don't even need the extra coverage. Extended warranties are high on complaint lists because prices are inflated, coverage is often limited and the industry has a high rate of bankruptcy.
8 | "That charge is not negotiable."
Bear in mind that you will have to pay a fixed amount for taxes, registration, licensing and destination charges. But after that, almost everything else is negotiable.
If you do opt for some add-ons, or if they're already included on the car on the lot that you want, there's plenty of wiggle room. These are big money-makers for dealers. In fact, the Consumer's Union reports that car buyers overpay billions on dealer add-ons every year.
For example, says Philip Reed of Edmunds.com, a dealer may charge $395 for tinted windows, when a local glass shop would do the job for about $145. Or the dealer may try to charge you a couple hundred bucks for applying fabric protectant to the car's seats, when you could buy a can of Scotchgard and do it yourself for less than $10. When looking at the line-by-line breakdown of each charge affecting the price of the car and you see an add-on that looks a bit over the top, say so. Heck, whip out your cell phone on the spot and call the local body shop for a quote. Then use that figure as a baseline for negotiation.
9 | "I'll go talk to my manager ... again."
You can almost certainly plan on your salesperson to leave you hanging several times throughout the negotiation process. You'll make an offer, he'll take that figure to the manager, then come back with a counter offer. You may negotiate further or ask for the slightest explanation of something, and off he'll go again. The truth is, he may not even be discussing your deal with his manager, says Michael Royce, former car salesman and author of "Beat the Car Salesman." It may simply be a ploy to wear you down. If the salesperson can take up your whole day, you'll eventually get tired and surrender.
Make it clear from the beginning that you're not willing to waste your time going back and forth. If you come prepared, knowing exactly what you want and the price you're willing to pay -- and let the salesperson know you're serious about buying -- they may save their time-wasting tactics for a less-prepared customer.
If you find the process wearing on longer than you're comfortable with, don't cave merely for the sake of putting an end to your misery. You can always walk out. If they don't value your time and can't satisfy your questions about the terms of the purchase, you can find another dealer that will.
10 | "It was owned by a nice old lady who only drove it to church on Sundays."
If this were the case, you'd think church-going elders were the only people who ever got rid of their cars. If you're shopping for a used car, you'll want to have a mechanic look it over before you buy to sniff out any potential problems.
And check into the history yourself by ordering a Carfax or Auto Check report (you'll need the vehicle identification number). Be on the lookout for a mileage discrepancy or a salvage/junk record. Also note if the car has crossed state lines. State salvage laws vary, and a state-to-state move could be an attempt to hide problems. If you're checking just one vehicle, Auto Check and Carfax charge $19.99. But for $24.99 you could do an unlimited number of checks for two months.