When you are looking to buy a car it can be very aggravating dealing with car salesmen. They are well trained in negotiation, proven sales techniques and communication. They are fast talking and create a surreal environment where you know nothing and they have something so valuable that you want, you are willing to do almost anything to get it. The car salesmen have been doing the same things for years and they do it because it works. With a little information you can be more prepared to handle them and get a better deal.
Making friends. This is the first thing the salesman does when you walk onto the lot. They greet you and probably give you a compliment and then offer you a cup of coffee or a soda if you’re inside. They talk soft and nice to you and show you a few cars on the lot. It is human nature to want to reciprocate friendship. If we are given something by a stranger we automatically feel as though we owe them something. This is the first step to drawing you in to sign a bigger loan contract. Don’t be drawn in by this. You can and should be your normal pleasant self but don’t be afraid to say “no, I don’t see any car here that I like” and leave. Always remember that once you leave that car lot you will probably never see that person again. A cup of coffee and an hour of a salesman’s time do not obligate you to buy a car from them.
Drawing up the plan. Once you have found a car and taken it on a test drive you “head into the office”. In the office the salesman pulls out a piece of paper and writes some numbers down on it. He writes down the full price of the car and then may write down the “discount” that they are giving you just because you’re a great person and they really like you or it’s a “sales bonanza” or whatever. This tactic is used to draw you in to thinking that if you don’t buy right now you aren’t going to get this great deal and save all this money on the car. They ask you “how much can you afford?” You may say $300 a month. They write all of this down and ask you to sign the paper saying you agree you can afford that payment and then tell you “I’ve got to go and talk to my manager and see if we can do this” and then they leave you sitting in a little room with big windows to the show room. These tactics are set up to do several things. First, when the paper is filled out with all the numbers it is meant to draw you into thinking about big numbers and then they scale it down to make you think you’re getting a good deal. It also makes the deal seem more real.
They ask how much you afford so they can see how much you’re comfortable with and then try to get a little more. They have you sign the paper to get you comfortable with signing papers. This is not a contract and seems harmless. You don’t have to sign it and you can say “I don’t see any reason to sign that, if you could just have your manager let us know if the deal is acceptable I would appreciate it”. I have had a car salesman tell once that I was obligated to buy a car after I had signed one of those forms. This was not true but I was young and didn’t know any better. Once they leave the office to go talk to their manager they leave you waiting for several minutes sometimes up to 15 or 20 minutes.
All of these things work psychologically to put stress on you. They have you wait for a long time because this shows that they are in charge of your time. You want the car and they make you wait so that when they put the paperwork in front of you you’re so tired and want to get things done that you just sign it. Also, they use their manager as a way of giving them “limited authority”, meaning they aren’t the ones that can even sell you a car. The car salesman talks about how he is working for you and really fighting because he wants you to get a good deal on it. Next they will come back after a while with a payment that is a bit higher than what you said you could afford but not enough to really worry about. They said that is how much the manager would be willing to sell the car for. Once you say “yes, I can afford that” they head back into the managers office. At this point they may even run your credit. Then they come back and may talk about how you had a late payment on a credit card five years ago or something similar. They start talking about how great their finance guys are and they are in good with the finance companies so they are going to fight for you, but you may not be able to get the car financed, so you should be prepared to not get it. Another tactic is to tell you “someone was in here an hour ago looking at that car and they are coming back later today to buy it”. This is called “the take away”. At this point you kind of wanted the car but now that you may not get it you want it even more. This is a psychological tactic that works on people of any age. You tell people they can’t have something and they will do whatever it takes to get it. You’ll be so happy that they got you approved that you sign a contract with an outrageous interest rate. They are able to get anyone with an income a car loan. If they think they can’t get you financed they wouldn’t spend that much time working with you.
Getting the loan. After they have worked the payment up to something that is $50 or even $100 more and you agree to it they go in and make up the paperwork. The interest rate is relative to what you are willing to pay. Basically they use the price of the car to make a base price. Then the salesmen add on “fees” and interest rates to essentially sell you the car for a few thousand more than you think you are going to pay. The finance company gets a higher interest rate this way and the car lot gets to sell you an overpriced car and you are stuck with a car payment that is higher than what you may want to pay or may be able to afford to pay. This is not to say every car lot does things this way but it is a sales model that many follow because it works!
So, now that you know how the negotiation is going to go on at the car lot what can you do to get a better deal? First, do some research on the car that you are looking for. If you want a used SUV figure out which one and look at the Kelly Blue Book price guide to find an average price on the year and model you want. Look around on craigslist and do some research on what’s out there and how much they are selling for. Next, don’t be in a rush. Car lots make a lot of money off of people that are spontaneous buyers. People get caught up in the moment and want that shiny new car and make uninformed hasty decisions.
Don’t let the sales people tell you what you want to buy, you tell them what you want and what you can afford. The car dealers buy a majority of the used cars at auctions for reposed cars and they get them fairly cheap compared to what you are going to pay so they have the ability to work out a good deal for you. They love to tell people that they “aren’t making any money on this deal” when in fact they are making quite a bit.
Remember, they want to sell you this car probably worse than you want to buy it. Put them on a time crunch. Let them know that you have other things to do and can’t spend all day waiting for them to run back and forth to their sales manager. If you are made to wait too long don’t be afraid to leave. You can leave your number with them and tell them that they can call you once they get things figured out. This tactic lets them know that your time is just as valuable as theirs if not more. Just be aware that they will probably try and keep you there. Some sales people will get aggravated with you and act as though you have wasted their time. This is to try and make you feel as though you owe them your time since they have given you theirs. They are working trying to get your business so don’t be pushed around. When sales people are leading you through the sales process many of them use the term “the parent child relationship”. This means that they are taking on the role of the parent in the relationship and telling you what is best for you to do even though it is not always in your best interest.
When it comes to the payment, stick with your guns on this. Have a deal figured out before you go in to look at the car. If you want a full tank of gas in the car and oil changes for a year make sure you put that in the deal at the beginning. If you don’t ask for it you won’t get it. When you ask for extras on the deal it gives you more leverage. Always remember that if they aren’t will to work with you and give you a little extra that there is a salesman out there that will. This can give you bargaining power later on to keep the price down if you knock off a few extras. They won’t lose the deal over a tank of gas or $100 in oil changes. Don’t go in and make a ridiculous offer but make sure that if you say you can afford a $300 a month car payment for the next four years that that is what you end up paying. $300 a month for four years is $14,400 so you should be able to get a $10,000 to $13,000 car with interest. This is an average estimate and it is going to depend on your credit score. If the sales people are able to talk you into an extra $50 a month that turns into $16,800 for the same car, an extra $2,400 for them or the finance company.
When people get rushed and tired they make hasty decisions. These hasty decisions are what the car dealers bank on. If you take time on the deal and keep in mind what it is you want and what you can afford you can find a good deal on a car. If you are talked into a payment that you can’t afford you will be stressed every month trying to scrape up the money for the payment. If something goes wrong and you lose the car your credit will be impacted for at least the next seven years.