Buying a car

[kwillia]

My son was a car salesman. He explained the WHOLE process. I got a lot of good deals as did other family members and a few friends.

Now, we deal with his former boss, the sales manager, and we continue to get great deals.

They make money on all deals, be it with the financing package, the extended warranties, etc.

You have to educate yourself.

Hmmm... so if I have a "dealer friend" say the price of the car will be just 200 beyond invoice.... I should get that figure first before I tell him I want to pay cash, don't want the extended warranty and won't have a trade in, right...

 

[Nickel]

Hmmm... so if I have a "dealer friend" say the price of the car will be just 200 beyond invoice.... I should get that figure first before I tell him I want to pay cash, don't want the extended warranty and won't have a trade in, right...

When we bought my XTerra, we got it at $500 under invoice...no extended warranty, outside financing, etc. I'm sure they somehow still made a pretty profit.

 

[Bruzilla]

So Bru... what's your take on a "dealer friend" who says... "I can sell it to you for 200 over invoice"...

When you're talking about new cars, there are several prices that come into play. Going from high to low:

MSRP: This is an arbitrary price that's set by the manufacturer and changes throughout the model year. You can buy an Edmonds, KBB, etc., guide that was printed at the start of the year, and one that was printed later that year, and the MSRPs for the same make/model/year will be different.

Invoice: This is the price that the dealer is charged for the vehicle, but not the actual cost of the vehicle to the dealer. Dealers get various discounts, incentives, etc., off the invoice price that they can choose to pass along to the consumer or not pass along.

Plan Price: This is the invoice price minus a plan discount. This price is usually reserved for employees or corporations that have agreements with the manufacturer.

Fleet Pricing: This is a negotiated price offered by a specialized fleet salesman to a fleet customer.

Generally, the actual cost to the dealer is the invoice price, minus factory incentives and discounts, and minus a dealer "hold back" that represents the minimum profit for the dealership. The "hold back" is very, very, rarely ever given up. If you do not qualify for a negotiated discount (like X Plan for Ford for example) then $200 over the invoice price is about the best price you're going to get.

 

[Bruzilla]

When we bought my XTerra, we got it at $500 under invoice...no extended warranty, outside financing, etc. I'm sure they somehow still made a pretty profit.

There are a couple of reasons why a dealership will allow a car to go out under invoice cost. The first is that they need to get the car off the lot because it is an "aged" unit and they are having to pay interest on the money they borrowed to pay for it (which eats into profit). Another is that the model is a slow mover, and XTerra is a slow mover, and the manufacturer is offering a big incentive to get the cars off the lots (which at $500 under invoice I would guess this is why you got the price you did).

 

[kwillia]

If you do not qualify for a negotiated discount (like X Plan for Ford for example) then $200 over the invoice price is about the best price you're going to get.

All of that was good info and matches what I have heard from others. What's the deal on the adds I see from some of the larger dealers where they can take a $24,000 vehicle and mark it down to $16,000 because they wanna clear the 2006 models. I haven't found the "trick" in that yet...

 

[Nickel]

There are a couple of reasons why a dealership will allow a car to go out under invoice cost. The first is that they need to get the car off the lot because it is an "aged" unit and they are having to pay interest on the money they borrowed to pay for it (which eats into profit). Another is that the model is a slow mover, and XTerra is a slow mover, and the manufacturer is offering a big incentive to get the cars off the lots (which at $500 under invoice I would guess this is why you got the price you did).

I know why we were offered under-invoice pricing, I was just explaining that even at that "discount", I'm sure they made a considerable profit.

 

[kwillia]

There are a couple of reasons why a dealership will allow a car to go out under invoice cost. The first is that they need to get the car off the lot because it is an "aged" unit and they are having to pay interest on the money they borrowed to pay for it (which eats into profit). Another is that the model is a slow mover, and XTerra is a slow mover, and the manufacturer is offering a big incentive to get the cars off the lots (which at $500 under invoice I would guess this is why you got the price you did).

This may have answered my most recent question...

 

[Ponytail]

When we bought my XTerra, we got it at $500 under invoice...no extended warranty, outside financing, etc. I'm sure they somehow still made a pretty profit.

"Invoice" is not what the dealer paid for the car. It sounds like it is, and thats' why they use it. With the press of a button on the sales floor, a new invoice can be printed.

"Employee Pricing" was a scam too. Although the prices were lower, and usually lower than "invoice", it's still higher than "cost". The manufacturer and dealer gets their money, one way or another. They have a bottom line on what they will each take on profit for each car. Anything above is a bonus.

if the dealership salespersons are telling you upfront that they can knock $4000 off the top since you don't have a trade-in, they're stupid. Plain and simple. They are on the verge of getting themselves in trouble for false advertising. I'm sure it is covered in fine print, but it's been in the courts before...fine print is not distinguishable if mentioned at all on the radio ads.

I've heard those "$4,000 push in, pull in" trade in ads, and I know they're BS. They have to be. The dealer will not give you $4000 for a car that he can't get back out of. Just like at the Casino's, the dealer ALWAYS gets his money, one way or another. It's a profit driven business, and to give those profits away to make a sale at a loss is ridiculous.

Shopping around is the best way. Don't haggle. Walk in, either ask for the no BS bottomline OUT THE DOOR price, and walk out. On to the next dealer. Play at least 2, I prefer 3, off of each other, and make them call you back. It may take a week, but they do call. It's amazing how much lower the prices get. I've gotten calls as late as 3 months after I have purchased a vehicle. The higher the price range of the vehicle, the more calls you get.

If you DO have a trade-in, do your homework. know what the car is worth, and know that the dealer will have to sell it and make money on it. This is negotiable also, but I found the best way is to tell them what your bottom line on the car is, and what you are willing to pay for the new one, and stop there. Either they take it or they don't. Walk out if they don't, but if they seem interested, leave your number telling them that you'll be shopping around.

 

[Nickel]

"Invoice" is not what the dealer paid for the car. It sounds like it is, and thats' why they use it. With the press of a button on the sales floor, a new invoice can be printed.

I'm fully aware, and that was my point. At any rate, we weren't aware of the under invoice pricing until after we'd decided we wanted the vehicle. It happened to be the only XTerra on the lot for a considerable length of time (just under 60 days), and they wanted to move it.

 

[Bruzilla]

Hmmm... so if I have a "dealer friend" say the price of the car will be just 200 beyond invoice.... I should get that figure first before I tell him I want to pay cash, don't want the extended warranty and won't have a trade in, right...

One mistake that buyers are making is thinking that there's still a premium for paying cash. There isn't. Back in the old days a dealership preferred cash customers because they got the money immediately rather than having to wait months and months for the money to get moved through the mail. But since the edvent of electronic cash transfers there's very little lag in getting money moved, so a dealership can get it's receivables quickly and not need to make concessions to get cash.

I always pushed buyers to buy extended warranties, but only the ones that covered the drivetrains... which really pissed off the finance folks. If you just get the basic extended warranty and your tranny or engine goes out after the factory warranty expires, you're covered from those enormous repair costs. If a power window motor goes out it might cost you $200 or so to fix, but that's cheaper than paying a lot more money for a comprehensive warranty.

I also highly recommend buying gap insurance, which covers the cost difference between your car's payoff amount and worth if you have an accident and the car gets totaled. It's cheap and much better than having to keep paying for a car that's been totalled. Most major dealerships offer gap insurance when you buy your car, but you can usually get a better price by buying it through your auto insurance carrier.

 

[baileydog]

The original Chrysler-Dodge dealer next door to Aldrich was the crookedest (is that a word) dealer to ever do business in LP.

Steve Baker Chrysler. Oh my gosh, bought my Spirit from them. God, they sucked but I loved that car.

 

[Bruzilla]

"Invoice" is not what the dealer paid for the car. It sounds like it is, and thats' why they use it. With the press of a button on the sales floor, a new invoice can be printed.

"Employee Pricing" was a scam too. Although the prices were lower, and usually lower than "invoice", it's still higher than "cost". The manufacturer and dealer gets their money, one way or another. They have a bottom line on what they will each take on profit for each car. Anything above is a bonus.

if the dealership salespersons are telling you upfront that they can knock $4000 off the top since you don't have a trade-in, they're stupid. Plain and simple. They are on the verge of getting themselves in trouble for false advertising. I'm sure it is covered in fine print, but it's been in the courts before...fine print is not distinguishable if mentioned at all on the radio ads.

I've heard those "$4,000 push in, pull in" trade in ads, and I know they're BS. They have to be. The dealer will not give you $4000 for a car that he can't get back out of. Just like at the Casino's, the dealer ALWAYS gets his money, one way or another. It's a profit driven business, and to give those profits away to make a sale at a loss is ridiculous.

Shopping around is the best way. Don't haggle. Walk in, either ask for the no BS bottomline OUT THE DOOR price, and walk out. On to the next dealer. Play at least 2, I prefer 3, off of each other, and make them call you back. It may take a week, but they do call. It's amazing how much lower the prices get. I've gotten calls as late as 3 months after I have purchased a vehicle. The higher the price range of the vehicle, the more calls you get.

If you DO have a trade-in, do your homework. know what the car is worth, and know that the dealer will have to sell it and make money on it. This is negotiable also, but I found the best way is to tell them what your bottom line on the car is, and what you are willing to pay for the new one, and stop there. Either they take it or they don't. Walk out if they don't, but if they seem interested, leave your number telling them that you'll be shopping around.

Ponytail is just the sort of "informed" customer I used to love see come into the dealership.

First off, unless you're dealing with a really unscrupulous dealer, there is no magic multiple invoice prices. The invoice price cannot be changed by the dealership as it is issued by the manufacturer and is a legally-binding price. I used to bring up the original invoice on my computer and show it to folks like Ponytail to show them that they are wrong.

Fine print is 100% legal in all 50 states. You can't use confusing terminology in the ad, but as long as the conditions are clearly and plainly written out, it's all good. As for radio ads, they usually don't have anything in them that isn't covered by the "with acceptable credit" caveat at the end. Also, you can advertise any deal, in any media, as long as you have just one of them on the lot. So a dealer can advertise a Ford F-150 for only "$10,999 OUT THE DOOR" provided they have one such truck on the lot. If that truck sells the first day of the sale there is no requirement for the dealership to offer additional trucks at that price... only to show that one was available and was sold.

As for knocking cost off the price, thre's a difference between new and used cars. New car dealers often knock a big chunk of change off the MSRP as a sle price, dealer discount, etc. The MSRP is an arbitrary number so you can do whatever you like with it. Used cars can also get a big chunk knocked off based on how overpriced the dealer made the original price.

Dealerships can give you any amount they want for your trade, it's strictly up to them and how much money they want to make. But yes, if you're getting $4,000 for a POS you're not going to get very many other discounts.

Trying to pit dealers off one another works if you're trying to get different makes, but doesn't work well between dealers of the same make. When a buyer came in and would tell me that another Ford dealer was offering them a deal I could pull up the vehicle in question on my computer, see what the invoice and dealer costs are, and know right away whether the price was legitimate or BS.

One thing that bad dealers will do is if they get a customer like Ponytail who comes in and plays the "I know all about this game" routine, they'll go along with whatever the customer wants. If the customer says "I want this car for $400 a month and I don't care if the price and my credit shows I'll be paying $600 a month!". The dealership will say "Ok, sign here and you've got a deal." Then the customer calls me up and says "Hey, this other dealership is offering me the same car you want $600 a month for for only $400. You want to beat that?" I say "no and good luck" because what's happening is that the buyer will take the car, get used to it, then get a call a few days later from the dealership saying that their financing has been turned down and they have to bring the car back. Then they have a choice of either giving the car back or paying the $600, and most accept the higher payments because they've gotten used to the car. And this is 100% legal for the dealership to do because you signed the form saying that the "agreed to" price is tentative pending approval by the finance company.

 

[Bruzilla]

I'm fully aware, and that was my point. At any rate, we weren't aware of the under invoice pricing until after we'd decided we wanted the vehicle. It happened to be the only XTerra on the lot for a considerable length of time (just under 60 days), and they wanted to move it.

Invoice may not be what the dealer paid for the car, but it is what they were charged for the car, and that price cannot be changed.

One of the smartest things a person can do when they go car shopping is look at the dealer stock number that's usually written on a sticker on the windshield. Look for the lowest number available as that'll be the most aged unit on the lot, and that's the one they're worried about getting out of there as soon as possible.

 

[kwillia]

Invoice may not be what the dealer paid for the car, but it is what they were charged for the car, and that price cannot be changed.

One of the smartest things a person can do when they go car shopping is look at the dealer stock number that's usually written on a sticker on the windshield. Look for the lowest number available as that'll be the most aged unit on the lot, and that's the one they're worried about getting out of there as soon as possible.

I am soooooo gonna remember all this next time I visit my dealer's show room...

 

[Nickel]

One of the smartest things a person can do when they go car shopping is look at the dealer stock number that's usually written on a sticker on the windshield. Look for the lowest number available as that'll be the most aged unit on the lot, and that's the one they're worried about getting out of there as soon as possible.

That's a good trick, and hopefully I remember it in 5+ years when it's time to buy another vehicle.

 

[Bruzilla]

All of that was good info and matches what I have heard from others. What's the deal on the adds I see from some of the larger dealers where they can take a $24,000 vehicle and mark it down to $16,000 because they wanna clear the 2006 models. I haven't found the "trick" in that yet...

There's no trick to it. The manufacturers keep a close eye on sales trends on a monthly basis. If they see a model's sales slumping they can offer incentives to the dealership, and sometimes to the salespeople as well. When I was with Ford the Focus was just coming out and sales weren't that hot, so Ford would give dealers a $2,000 incentive for each one they sold, plus sales people got $200 extra for each one they sold. The invoice price stayed the same, but the money that the dealership made increased unless we had to give the buyer some of that bonus money to close the deal.

What used to piss me off is when sales managers would take huge chunks off the price at the start of negotiations. I had a couple who wanted a 2004 Expedition that had an MSRP of $32,000 or so, minus $5,000 in rebates, and they were ready to buy the SUV at the $27,000 price point. Then my sales manager writes up the sales agreement and tosses in a $9,000 discount when the customers were already to sign at $27,000! So the SUV went out at $18,000! The invoice price was around $17,000, so we made $1,000 over invoice plus the hold-back of $1,500 or so, so the dealership made money but I lost a big chunk of my commission.

 

[Bruzilla]

Another thing is to always buy your car on the last day of the month. Dealerships are always in constant competition with other dealerships, and the ability to say that you've sold more trucks, cars, SUVs, etc., than any other dealership is great for marketing... so as you get near the end of the month there's always a push to get out as many vehicles as possible so that the dealership can advertise that they are number one. Also, sales managers have monthly quotas to fill and if it's been a slow month the last day of the month is the last chance for them to make their numbers, so you'll get your best deal then.

 

[Pete]

Hold back is 3-7%. The dealer gets that money back after they sell it.

Employee pricing is typically invoice minus national and local advertising fees.

I bought my first truck by searching inventories. GM offered an extra $1,000 off vehicles on the lot that were delivered to the dealer before such and such a date. I went and found one and bought it. It is a way dealers can move vehicles that seem to linger on the lot for months.

 

[kwillia]

If I get a new car this year, it will most likely be the Chevy Malibu. I am looking for something to replace my 97 Lumina, but I don't want anything too big or fancy as my sone will be of driving age in about two year...

 

[Ponytail]

Ponytail is just the sort of "informed" customer I used to love see come into the dealership. ...

I would never go into the dealership with the attitide that I know what I'm doing, or that I knew the game. I did my homework, and knew what I was willing to pay for the vehicle, and I never used a "monthly payment" figure. That's ridiculous. I'f they agreed, great, then both parties are happy. if not, i walked. It's that simple.

I have had dealerships play off each other for the same make/model. I would never try to BS them. They either want to make a sale, or they don't. The ones that do, call back.

The Dodge that I purchased back in '97 was purchased using an ad for a price that seemed ridiculously low. That dealership was willing to give me that '97 Ram 4x4 LOADED, for $19,999 but said that it would cost me $625 a month for 5 years. hmm...quick math says that that doesn't add up to a very good finance rate. He refused to tell me what the rate was, so I walked.

Next dealer said "No way can I sell a loaded truck for that". I walked.

Next dealer said "lemme check". Came back with "I can get that exact same vehicle from Dealer number 1 for that price. Come back tuesday, and I'll have it here. Sold. Financed through my credit Union at an acceptable rate.

Dealer number 2 called back weekly for 3 months each with a "better deal thatwas just found" till the last call where he miraculously figured out a "way to make the deal at that price".

My buddy just did the same thing for his new Mustang. Did the same thing for the 2000 Mustang too.

I did this when I was shopping for a Corvette, as did my bud. Dealerships were calling us weekly with better deals each time on the SAME CAR, for at least 3 months after we walked in to the showrooms.

When purchased my Harley in '99. I went in with a trade in knew what I was willing to take on the trade and what I wanted to pay for the new bike. After some minor negotiating, we were stuck with our figures $1000 apart. he asked if I could come up with another $1000. I said nope. I'm going to Daytona with my trade-in. have a nice day. "Hang on, hang on...lemme try something" Came back a short few minutes later with "we have a deal" also financed at my credit union, not through the dealer and for the figures that I had in my head when I walked in there. I did this on my latest purchase a few years ago with my '03 F250. Do I feel like I got one over on the dealer? Nope. I KNOW that I got a good deal, quite possibly the best that anyone else could have gotten. I know the dealer got his profit too.

I don't know how you were as a salesman Bruz, but I know how the ones are that I deal with and I know what works for them.

I don't play games. I don't LET the dealer play games either. I'm a no-BS kind of person, and it works. Give me the bottom line up front, or I walk.