Car shopping thoughts.

Every once in a while I get a question from someone about cars, or the buying process.  Since I spent every day on a car lot, I forgot how intimidating it really is for a lot of people to go shopping....but I certainly dealt with the side-effects of the stress...

Customers, for example, would react to a friendly introduction and outstretched hand by turning, walking away, and throwing a 'fuck off' over their shoulder.  No kidding, that happens lots.  But salesguys know this, and are actually trained how to deal with it.

In my view, it's better to have an educated customer who is more at ease with the process, but lots of the articles on the process are written by non-salesmen, usually adversarial in nature, and geared toward getting you the 'best deal'.

I'll let you in on a little secret...if you grind the salesman down to the last penny, everywhere you can, then I can guarantee you there will be no 'goodwill freebies' down the road.  I can guarantee you will be paying full retail for anything they can sell you after that, and should something go wrong, you can bet they will make you pay every dime of the cost they can.  It's not to be mean (although nobody likes to be told their work is worthless, which is what you are telling a commission salesperson when you complain about price), it's because they have to make up lost profit somewhere.

There's more dollars of profit in your average laundry pair than there is in a small car, after all.

So what is the result of these negotiations?  Well, let's see...

If you are looking at buying a new car, you are 80% (at least) likely to be a 'payment buyer'...aka, you are financing the car somewhere along the line.  At 0% interest, the rule of thumb is 15 dollars for every thousand in purchase price, over a term of 60 months.  The average right now is actually closer to 1.9% over a term of 72 months (in Canada), but if you are that price sensitive, you can always find a car for 0% that will serve your needs - although you will have to shop several brands.  In Canada, Mitsubishi and Hyundai group are the best bets for 72, or even 84 months at 0%.

So, how much profit is in a car?  Well, a Chevy Impala, here in Canada, has 2200 dollars from full MSRP to dealer cost.  Yes, there are holdbacks and all the rest, but I have yet to see a dealer willing to include those in commission calculations...so for all intents and purposes they don't exist.

Chances are there will be a manufacturer or two offering 'stackable' incentives (meaning they can be used concurrently with subvented (0%) interest rates) in the neighborhood of 1000-2000 dollars, and this is BY FAR the biggest type of discount available.  I've had some guys come in from a competitor's store demanding we price match an 'equivalent model', and this is again faulty thinking, that makes shopping suck a lot.

Here's how to decide on a car if you're that price sensitive...

Pick a budget, walk into a dealership and essentially ask "what can I get for this much?".  You can try and hide what the real number is, but the salesman is trained (well) on how to get that out of you (not to mention he will mentally select a car 25-50 /month less than the number you specify).  Better to just be straight up.  More often than not, I found myself shortening the term at initial presentations, because the cars were LESS expensive than the customer thought, and perceived value must be maintained.  Even my fully loaded hit figures were often lower than their real budget, unless I shortened the term an extra year.  I had a customer once tell me I was a 'fucking liar', and there was no way we were going to actually sell a car for that little per month without 'fucking him somewhere else'....

As for spending way too much, I have almost never seen a car salesman push a customer into a car too expensive for them, unless the customer essentially made the salesman do it.  If you think this is bullshit just remember...most salesmen get paid a set amount per car sold (not enough profit for percentage commission to be reliably worth it anymore), but they get 'spiffs' (cash incentives) for pre-selling things like Insurances, Undercoating, Paint protector, etc.  They would FAR rather the actual car come in way under budget, so they can fit a fully loaded deal under the wire.

Some of that has value, some of it doesn't.  Better in my eyes to buy more car, than more box-of-air (slang term in the car business for Insurances and Extended Warranties).  You want to throw one over on a salesman?  Tell him your budget flat out first time, and let him think you're just like everyone else and giving a figure 50 bucks a month less than you're really willing to go.

Then, when he sets up the deal to include boxes of air assuming you will move in negotiation, he will likely have set up the deal where if you strip out the crap the car itself will be slightly less per month than you are willing to commit to, and since you already told the salesman your budget, you can look at him and say:

"I told you my budget straight out, and you made me fall in love with this great car and now I want it.  I guess I'll have to buy it without that warranty/car starter/window tint and just get it done somewhere else."

If you do this, you will have just opened up the REAL negotiations and in a manner that gives you, not the dealer, hand.  Now, if you want undercoating or a warranty, they will have to come forward with a wicked deal to convince you to stretch your budget.  I'd say try and fake this...but everyone does, and honesty is easy to spot in F&I.  If you go into it with the attitude that you're going to fuck the dealer, you will get owned.  But if you go into it thinking "I want a car, for this much, and if they want to sell me anything more they'll have to work at it", you'll have a much easier time.

You might even have fun.