Month: February 2019

There’s more to getting a good deal than just paying the right price for your new vehicle. Obviously no one wants to be taken advantage of, but in the finance managers office, things can get confusing. We’ll go into more detail on another page, but here are the main things of which to be aware. 

1. Watch out for “leg” – Also known as payment packing. I give an example on the Finance page.  
2. If you don’t understand, ask questions, get answers. 
3. Don’t sign what you don’t understand. You’ve been there a while, they try to wear you down. Hang in there.
4. Look at the bottom line purchase price. Make sure they don’t slip something in without you knowing about it. Some dealerships include extras in the purchase price. These may include window etching, alarms, exterior protection etc… These should all be optional and not automatic. Don’t pay for them if you don’t want them. If they won’t exclude them, go somewhere else.
5. Remember your budget. 

You’ve done your homework, figured your budget, you’re ready to take the plunge. You pull up to the parking lot at the dealership and you’re not sure quite what to expect. I worked at a fairly large store with 40+ salespeople and depending on the day of the week and time of day, the number of people standing outside would vary. We had three teams of salespeople but only Friday, Saturday and Monday would all 3 teams be on hand and with staggered shifts. I worked in Colorado and there are no car sales on Sundays. We used no system of “ups” so it was just up to the salespeople to determine who would greet the guest. That worked out pretty well. Some people would make comments that we looked like a bunch of vultures standing out there. Don’t say that. Believe it or not, car salespeople are humans with feelings, trying to make a living. The better relationship you have with your salesperson the smoother the deal will go. No sense starting out with name calling. Again, salespeople are humans, most are nice, friendly and easy to get along with. But as in all walks of life, you don’t get along with everyone. If you feel like the salesperson isn’t doing it for you, you can always request to work with someone else. That didn’t happen very often at our store, but it did sometimes. If you’ve read the other sections I’ve written, hopefully you took my advice and contacted the internet department of the store. You’ll get the best pricing that way and they should set you up with a salesperson with whom you would have already spoken, and they may have a car or two ready for you to look at. Communication is very important when purchasing a vehicle. Make sure the salesperson listens to you and understands what you’re looking for. If they’re doing their job, he/she should be asking questions like, who’s going to be the main driver, what will you use the car for etc…  

Once you’ve been through the pleasantries and taken a look at the car that you will possibly purchase, the next step is to go for the test drive. At this point you’ll be asked for your drivers license and some stores will ask you for proof of insurance. Standard procedure. They will probably have a standard route they take people on, but don’t be afraid to ask if you can vary from that. Once you return to the store, you’ll give your opinion and if it’s the car you want, the salesperson will ask if you’d like to take a look at some numbers. Hopefully you’ve done your homework, have a budget and a pretty good idea of what the payment is going to be. You’ll be asked if you want to put some money down, what kind of term(months) and probably what you think your credit is like. At some point in the process if you decide to proceed, they will have to pull your credit, but that’s not necessary at this point. Typically the salesperson will come back with 2-3 options. Perhaps 48, 60 and 72 month terms, with different down payment options. At this point, the more homework you’ve done, the better off you’ll be. Did you run some payments on a payment calculator? You can find these easily online, and in fact, most dealerships will have one on their website. If you did, are the payments in line with what you thought they’d be? They should be close, probably a little higher than what you had looked at. Especially until they’ve actually seen your credit. They probably figured the payments on the high side. They would rather figure the payments at a higher interest rate and then give you good news when they find out you have really good credit than figure them at a low interest and then find out your credit sucks and your payment is going to be $65 higher. Now it’s time to start getting serious. Remember, HOMEWORK. Is the price at or near what you thought it would be?  Could you do a little better? If your research shows that you should be able to buy this vehicle for $27950 plus fees and taxes and you’re at $28500+,  tell them what your research says. If you’re at $27950 or less, you’re in good shape. You’re probably not going to do much better. It doesn’t  hurt to ask but keep in mind they do have a bottom and if you’re at what you think it should be, you’re not going to squeeze much more out of them. Many times people would want another $100-500 off and say “What’s $500 to a store like this”. Well, we sold between 600 and 700 cars a month. If we gave just another $100 off, that would be $70,000 profit out the door. Another $500 off would be $750,000 out the door. So once they’ve gotten to what their bottom price is, they’re not going to be willing to give up much, if any, more. Now you’re happy, they’re happy, you’ve bought yourself a car. Well, not quite yet. Now we start the paperwork. 

You’ve agreed to a deal. Fantastic. Hand me the keys. Well, not quite yet. We’ve got some paperwork to do. This will take some time. Even if you’re paying cash, there is still quite a bit of paperwork to go through. If you’re financing, there is of course the loan paperwork as well. Are you going to be on title by yourself or with someone? If there are two of you, both will of course have to fill out credit applications. Hopefully you knew your credit score ahead of time and the payments will have been figured pretty close to what they should be. If they pull your credit and find out it’s not so good, your payment may go up. The finalization of all that will take place in the finance managers’ office, not there at the salespersons’ desk. In most stores, the salesperson will help fill out all the preliminary documents then turn it in to the finance manager for printing and preparation of some other documents as well. Once they call you in to the finance office, the manager will typically get the title work out of the way before starting with the loan paperwork. Normally they will then show you a menu of some additional products available for purchase. If you buy any of these, of course they will affect your payments. These will include, as well as other things they may offer, extended warranties, exterior protection, key replacement, window etching, service contracts, road hazard protection for tires along with a few others. Every store is different in how they present these options. You’ll have these presented to you if you’re paying cash as well. They are all optional. Are they worth it? I’ll cover that on another page titled “Aftermarket Products”. I’ll give you my opinion, and that’s all it is, an opinion. Someone else may think differently, but my common sense is pretty good and I’ll let you know what I think of the most popular items. It is the finance managers’ job to sell and they do make commission usually on each product. Nothing wrong with that, but some are more aggressive than others. At times, it might feel like they are beating you over the head to get you to purchase something. Just say no if you don’t want something. I do suggest however, that you do at least look at what they have to offer. Many people go in there with their minds made up to just say no. Again, I’ll go over some of these on another page.

Stores make commission on interest rates. Many lenders allow dealerships to mark up the interest in order to make a commission on the higher rate. Every state has different rules about how much a dealership can mark up the rate. That’s why it’s important for you to shop around for rates before going to the dealership.

EXAMPLE:

You’re financing $25,000. The finance manager sends your deal to 3 institutions. They get an approval back from all 3. Lender 1 has the best rate. They’ll do it at 4.9%. This lender allows the dealer to mark up the rate up to 2%. The finance manager shows you your payment for 60 months to be $494 at 6.9%. You had already agreed to that at the salespersons’ desk so you think it’s all good. Had they given you the approved rate of 4.9, your payment would be $471. Not a big deal. But, $23 a month over 60 months is $1380 in extra interest. The dealer would then receive all or a portion of that back to them as profit. Or perhaps they want to sell you an extended warranty for $1200. You say no thanks. They say, what if I could keep your payment the same and include the warranty. Good deal huh? Well, then they give you the interest rate you actually qualified for and they make their money on the profit of the extended warranty. Not illegal but sneaky. That’s why you should walk in armed with a good idea of what rate you are eligible for. If you know your bank would give you say 5.25%, the dealership would rather you go directly through them so then they give you the 4.9%.

It’s obviously more convenient to go through the dealerships’ finance department but not mandatory. You can always go to your bank or credit union but may not drive home with the car. You have to take the paperwork to your institution and come back with a check. Also, it’s quite possible that the dealership works directly with your bank or CU and at the push of a button they send the paperwork to your institution.

1. Homework – Get a good idea of the vehicle you want including all options
2. Pricing – Check truecar.com, edmunds.com etc…to see what others have paid for the same car in your area.
3. Call the dealerships’ internet departments. This is typically where you’ll get the best price up front. Call several different stores and let them know what prices you have gotten from other locations. They want your business and don’t want you to go somewhere else. All dealerships pay the same price for identical cars. If you bluff them with a ridiculous price, they’ll know.
4. Check your credit score. Pretty easy to get these days
5. Know what the going interest rates are according to your credit score. Call your bank or credit union
6. Know the manufacturers’ incentives. Usually available on dealer web sites
7. Make an appointment. This can shorten your time. Salesperson can have a vehicle or two ready for you to look at
8. Test drive. Always
9. Stick to your budget. Have a tight range of where you want to be, payment/term and stick to it. Don’t tell the salesperson the most important thing is payment. They can always get you to the payment you want, just at a longer term or with more money down.