Dealing with a Used Car Salesman. Some tips to help get the best possible deal!

Negotiations

 

To read part three:   http://hubpages.com/hub/Dealing-with-a-Used-Car-Salesman-Part-3

Once you have picked out the new vehicle that you would like to own and you have come to terms on the price it is time to discuss your trade in if you have one. Always leave the trade out of the picture until the price is agreed upon. Doing this will let you know exactly what the dealer would be willing to buy your trade for. You may be surprised at what your trade is actually worth to a dealer. Once you find out you may want to donate the car to a charity to help with your taxes. You could give the vehicle to someone you know that could really use it.

If the dealer asks about your trade and if the salesman is any good he will ask, tell them you are giving it away whatever to push the subject off until later. there is a reason for this. The dealer will discount the vehicle you are trying to purchase and tell you they are giving you the discount as value for your car.

Example 1: Vehicle cost $20,000

No trade price: $17,500

Example 2: Vehicle cost $20,000

Price after trade $17,000 + your trade

The dealer will tell you he is giving you $2500 for your trade when in reality he is giving you only $500.00 for your car. Perception is reality and a lot of people are so happy with the amount of money they are being deceived into believing they are getting for their trade that they stop negotiating and lay down for the close.

Get your keys back as soon as someone from the dealership appraises your car. You will be held against your will by the dealer misplacing your keys. "Oh my manager has them in his pocket and we are trying to find him." If this happens freeze, do not discuss anything else with anyone until your keys are returned.

You should do your research on your vehicle's value before you enter into negotiations. North American Dealers Association or N.A.D.A. is what banks and insurance companies use to value a vehicle. Your dealer uses the same book. Now the book value is a guide, if your trade needs tires or has body rot, if your vehicle needs repairs or is just in overall bad condition you will never get book value for your car. If your car is perfect and needs nothing you could expect to get higher than the book value.

Do not be afraid to ask to see the N.A.D.A. book to see for yourself to see what the value is of your trade as well as the vehicle you are buying. You can also inquire with your insurance agent what the replacement value would be for your car. Your bank is another source for this information. Take the time to inform yourself as much as you can concerning what your trade is worth as well as what the vehicle you are trying to purchase is worth.

 

Four Square System

Once you agree on the price with the trade it is time to negotiate payments if you are financing through the dealer. To keep the dealer honest you should always check with your own bank to see what rate they would be willing to give you.

Rate is the percentage of interest that you will pay on the principal of the loan. Term is also important as you should try to get the longest term at the lowest rate possible. Term is the amount of time you will have to pay back the loan.

When you start negotiating with the dealer you will notice that there are four separate things that are the tools used to maximize profits for the dealer.

BOX ONE: The price of the car the dealer wants to stay away from this one as any lowering of price obviously lowers profit.

BOX TWO: The value of your trade, another one the dealer uses to commit you but any rise in the value of your trade also lowers profit.

BOX THREE: Cash down, the more cash you put down the easier it is for the dealer to hold to the price as cash will lower payment naturally.

BOX FOUR: Payment and term, The higher the payment over a longer term will mean profit to the dealer.

The first box and the second box are your boxes. Try to lower the price or up the value of your trade. Do not get tied up with financing until you can come to an agreement on price.

Once this is established and you are ready to talk about financing (hopefully you have already researched your own financing) ask what rate the payment is calculated at by the manager.

The salesman will tell you he cannot discuss rate. The reason for this is after you are worn out from negotiating the price the dealer has a well rested fresh Finance Manager to start the negotiating process again. Do not allow this to happen as by now you are probably a little stressed. When you are presented terms on a loan ignore cash down.

Cash down will lower your monthly payment once everything else is settled. You can ask this question: "How much will one thousand dollars lower my payment?" This way you can calculate for yourself how much cash you would desire to put down to get the payment to a comfortable level.

Bring your own calculator. You will find every calculator in the showroom disappears when you ask for one. Do not allow this form of control. Bring your own.

When you are presented with a payment you should be told three things.

What is the monthly payment?

What rate did you use to arrive at this payment?

How long is the term of the loan?

Get this in writing before signing contracts.  The salesman will not give up his worksheet but you need to demand a copy of it.  Front and back because if you are doing a good job the dealer should be writing all over the paper and probably in different color inks.

Red is a color used to psychologically trick you into believing that it is time for you to stop.

The dealer will not be able to answer these questions exactly until they obtain an approval from a bank.  You will have to fill out a credit application to find out exactly what the terms of the loan will be.

Hopefully this advice will help you in dealing with the car dealer.  I will discuss the inner workings of finance and other subjects in upcoming hubs. Thank you for reading my work.

© 2010 Arthur Fontes

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Comments 2 comments

sklein profile image

sklein 5 years ago from Atlanta, Ga

I would add that the calculator you take with you to the dealership should be an amortization calculator. As well as when you're working a deal with a four square, make sure you work the deal with a drive out price. The dealer won't disclose the drive out figure when working a four square. Once you get the drive out price, you can then take your amortization calculator and figure out your actual payment as the dealers have a way of "packing"the payments. If you don't know the drive out figure before going back to the finance department then you're setting yourself up to get mislead (screwed might be a better word).


joeaverager 3 years ago

All the more reasons to start at your credit union, find out the maximum amount you can afford and what those payments will be. Then take your old car to a professional detailer and get it cleaned up inside and out for something less than $100. Then find the car you want and learn all about it on the web so that you can quietly gauge the salesman's understanding of his products (and thus the value of his statements) ahead of time. You the dealer for test drives only b/c most salesmen I have talked to didn't know very much about their products and are good at tell the customer what they want to hear. Is this product durable? Why certain, it's the best product the company has ever made... ;)

Anyhow go to the dealer knowing what you want, confirm it with test drives, and then tell the salesman they have 30 minutes to give you a solid price. Use your credit union ahead of time to establish what the invoice price should be and then give them 3% profit. If you like the buying process (they are friendly and helpful) let them talk you up towards 5%. Understand that they might also be getting additional money from the manufacturer that they won't tell you about so don't worry - they are making plenty of profit 3% which is $1000 on a $20K car.

Get a firm out the door price and if they can't or won't do this in 30 minutes, then walk out b/c there are plenty of other dealers, plenty of other vehicles to choose from. Tell them you'll bring them a cashier's check - they don't need to know that you've financed it or whether you are bringing them a cashier's check based on cash money in your account. They just don't need to know.

Here is the cr I want, I liked the test drive, I know all about the car now, and the final price out the door is $XX,XXX. When can I pick up the car? No I don't want nor will I pay for any of the extras like paint coatings or glass etching or undercoating. You can do that yourself later if desired. This keeps them from padding the numbers to your detriment.

It's a shame that people can't just walk in and get a fixed price. Instead everyone can pay the inflated price and a few folks can drive that price down if you are firm enough or savvy enough. What a shame. We got our current car in 1999 and 247K miles ago for roughly $2500 less than our in-town dealer who had a salesman that was just weird. 14% interest he quoted us. I think not... Then he said since we wanted a manual transmission and they so rarely had one on the lot - he'd just come over and borrow the car when he needed to demo one and he'd wash it before bring it back to us. I think not pal...

We saw it all during that two month odyssey. Salesmen who had literally bugged their offices. Salesmen that literally had web-cams hidden among the books on their shelves. Salesmen who stalled and tried to wear us down. A salesman that literally had a little hissy fit when I pushed a little on the price. All I said was that I was willing to start negotiations at 3% over the invoice price and this guy walked out of the office saying "he didn't have to take this..." ?!?!?! Another batch of salesmen actually heckled us all the way across the showroom when I decided I didn't like how they were padding the price with add-ons. We were polite and said I'll just keep looking and we walked out. They heckled us across the showroom and I watched a wide-eyed customer sitting at another salesman's desk watching this unfold. I've often wondered if she walked out too later. They dealer went out of business the next time I drove through that town. They also ran my credit without my permission. Odd experiences.

The final attempt to buy what we wanted took 30 mins and we got a fair price and a friendly salesman. Our old car sold for double the highest trade-in value that we were offered (we were getting offers whether we wanted them or not).

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