When you're looking to get a new car you have a few limited options. You can either buy a car from a private seller, you can go to a dealership, or you can steal one (this method of acquiring a new set of wheels is definitely not recommended). If you choose to go to a private seller, you have the luxury of searching out the car you like from the comfort of your home. Many people find cars on Craigslist, the local newspaper, or even eBay. Buying privately has its benefits. For instance, there are no pushy salespeople, you have a lot more options at your fingertips, and usually you can get a better deal on the car you want
However, sometimes a trip to the car dealership can't be avoided. Just the idea of going to a lot with giant helium balloons and an inflatable gorilla makes a lot of buyers anxious. But if you want a brand new car, someone else to deal with the paperwork, or a vehicle that comes with a warranty, a dealership might be the way to go.
What is it about dealerships that give people that uncomfortable feeling? Why do car salespeople have such a bad reputation? What can you look out for to make the car buying experience better? Hopefully this list can help the next time you head to the car lot for a free hot dog and a new ride. Here are 10 myths about dealerships that aren't true, and 10 that you should believe.
20 True: Salespeople Speak In Code
At the dealership, you might see the salespeople interact with other coworkers. When they do, be aware of the language they use. Dealerships have certain words, titles, and phrases for the customers that they'll use when consulting with the sales manager or the rest of the sales staff. Salespeople use their own lingo to refer to the customer and what type of buyer they might be.
"Up" is a term used for potential customers. For example, a sales manager might say to his employees "We've got 5 ups on the lot. Get out there and close them." If the salesman says "ghost," it means the customer has no credit history. Conversely, a "roach" is someone with bad credit.
A "stroke" is a customer who takes up a lot of time, but just isn't buying. And if you visit the lot without your significant other, you’re “one-legged,” and will likely use that excuse to avoid purchasing.
All of these code words (and so many more) are how the staff determines how to deal with you as a customer. Make sure you have the upper hand by doing a little research first. The better you understand the lingo, the better chance you'll have of getting a good deal.
19 True: They Use Body Language Against You
Humans communicate and send signals through both verbal cues and body language. When you go to a car dealership, the things you do can be more important than the things you say. Albert Mehrabian, a psychological researcher, determined through studies that only 7% of communication are the words coming out of our mouths. The more important part of communication is 55% body language and 38% tone of voice. Car salespeople are trained to observe the buyer's body language and ignore what you're saying.
Something as simple as where you park when you arrive can have a big impact on how you'll be treated by the sales team. If you park far away, out of sight, and try to avoid being greeted by a salesperson, this gets interpreted as a meek buyer. This timid personality is one who doesn't like confrontation, will not try to haggle, and will probably buy the first car that's offered to them. This type of person should expect to be taken advantage of.
A customer saying they're not ready to buy is a statement to be ignored. Most people will say they're "just looking," but dealership employees can tell otherwise. If your car is under a quarter tank of gas, most salespeople will take this as a sign that you're looking to trade in, and drive away with a new car and a full tank of gas.
18 True: You Can Borrow A Car For The Night
Taking a car on a test drive can be the deciding factor in whether or not a car is a good fit. Test drives usually last only 10 or 15 minutes. A quick jaunt down the road doesn't always give you all the information you need. Did you know that not only can you test drive a vehicle, but sometimes you can even take it home for the night?
Taking the car home can be a great option for both the dealership and the buyer. To the dealership, this is almost a guaranteed sell. The majority of people who take a car home will buy.
It shows that you're very serious, and the sales team will often accommodate this type of customer. For the buyer, it gives you the chance to really take your time and make an informed decision, without a salesman hovering over your shoulder. Sometimes seeing the car in your driveway is just what you need to make sure the car is the right fit.
Taking the car home overnight isn't always an option and can be a complicated process. This is usually only an option allowed for brand new cars, and the process of borrowing a car overnight requires a lot of paperwork. There is a lot of risk in letting a stranger take home a car with no money exchanged. Yet if you're on the fence, it might be advisable to ask if taking the car home is a possibility.
17 True: You Should Buy At The End Of The Month
So you've done some research, you've saved up money, and you're ready to go to the car dealership and make a purchase. Timing is key, and it's important to be opportunistic about when you actually step foot onto the lot. Car dealerships are constantly promoting sales and specials to entice the buyer. So when is the best time for you to get the most bang for your buck?
If you want to stretch your dollar, the end of the month is the best time to buy. If you buy your car on the very last day of the month, or at least the last weekend of the month, you are more likely to get a better deal. Car dealerships have sales goals to meet, just like any other business. The end of the month is like a final push to meet those goals. You will often see big sales on these final weekends, and sales managers are often more willing to negotiate to get your money.
If you're willing to wait a little longer, then wait until the end of the month, at the end of a quarter. March, June, September, and December are when each quarter ends. This is the optimal time to get an awesome deal, and it helps the salespeople make their quota.
16 True: Salespeople Lie
The car sales industry has garnered a bad reputation for being sleazy and dishonest. This is why so many people looking for a new car don't like the experience of going to a dealership. It all feels like a big facade, and it's hard to tell if you're being taken advantage of or being told a lie. But do salespeople really use dishonest tactics to sell cars?
Unfortunately, yes. Sometimes it's little white lies, and other times it's fully embellished deceit to make a sale. One of the biggest sales tactics that are laced with falsity is that the deal will expire if you don't buy right away. Every salesperson's goal is to close the deal. Better still, to close the deal as fast as possible so they can move on to another buyer. They will tell you the deal is only good on that day. But If they really want to make that sale, the dealership will be willing to honor a previous price.
Another common lie is that your credit is bad. The salespeople might tell you your credit is 100 or more points lower than it actually is. This gives them the power in negotiation and the ability to tack on a higher interest rate to your loan. Know your credit when you go in, and always take what they say with a grain of salt.
15 True: The Sales Manager Decides
So you've spent an hour or more with a particular salesman. He's built rapport with you, he seems honest and you're ready to buy. You start to negotiate, and he takes off. Why the sudden disappearing act if he wants your sale? Because the salesman doesn't have the power to make any decisions on price.
When it comes down to brass tacks, the sales manager has final say in what you pay for a car. The salesperson is there to entice you, answer your questions and convince you to buy. But the actual numbers are determined by someone in the "tower."
You might meet this person face to face, or you might not. This can be frustrating when negotiating because it creates a lot of back and forth. You might make an offer, and then have to wait 45 minutes for a counteroffer from some unknown person at the top.
This whole process is what makes buying a car feel like the DMV. It's a lot of waiting and getting shuffled around. Just know that negotiating with your initial point of contact (the salesperson) is futile. Although they might have an idea of the car's price, they don't have any final say in the matter.
14 True: Salespeople Wind Up Owing The Dealership
Everyone knows that car salespeople work for commission. It's this dangling of the carrot that makes the car sales industry so savage amongst salesmen and women. Commissions can make or break a salesperson's career. It's the difference between thousands of dollars being added to their paycheck or owing the dealership money.
You read that correctly; sometimes the car salesmen owe the dealership money.
A lot of car dealerships pay their staff with a "draw." This is like an advance on your expected commissions. Each week, the salesmen are paid whichever is higher, the commission or the draw. If a salesman's draw is $2,000, and he only earned $1,500 in commission, then he will get paid the draw on his next paycheck. Contrarily, if his commissions are $2,500, that's the amount he receives instead.
If the salesman has a dry spell for a while, he may have to borrow against his commission, owing the dealership money. Not making sales for an extended period of time is risky business. If the salesman is in the hole for too long, he can owe upwards of thousands of dollars to the dealership. This is called being "in the bucket." The only way for that salesman to remedy this is to quit or be fired.
13 True: You Should Clean Up Your Trade-In
Often times buying a car doesn't mean adding one to your fleet, but replacing a car that you already own. Some people decide to take their old car to the dealership as a "trade in," to help cut the price of the new car they're looking to buy. Trading your car in can be a good option, but there is one easy way to get the most out of your old car and apply it the new.
It's such a simple tactic that gets overlooked, but bringing a clean car with you to the dealership is an effective way to get as much value as possible. Think about it, if a car worth $10,000 comes in covered in dirt and filled with fast food wrappers, it's not going to appear in good condition. This gives the dealership power in negotiations because they can offer you way less then your car is worth, simply because of its appearance. They might say it's worth as little as $7500, just because of the filth.
Take the time to get rid of trash, wash and wax the outside, air up the tires, and Armor All the dash. It's amazing what a difference a clean vehicle can be valued at, in comparison to one that has doggy nose smudges on the windows and a heap of trash in the trunk.
12 True: You Should Make Friends With The Service Department
Talking to a salesperson can be overwhelming and confusing. Every car they show you will be, in their opinion, "the best." They will fill your head with numbers on reliability and safety. They will ensure you that all the vehicles are mechanically sound and built to last. So how can you determine if the vehicle you're looking at is actually going to stand the test of time? How do you know if a car will need thousands of dollars in repairs in the future?
Your best option is to go talk to the service department. The service team sees what cars are brought in consistently for repairs and which ones aren't. They can tell you common problems they find with specific vehicles, and what to look out for when you go on a test drive. They can also give you information on any cars that have recently had recalls.
Their insight can be taken seriously because they are not paid on commission. They don't care whether you buy or not, so chances are they will give you an honest answer. This information can be invaluable in determining whether the car you picked is worth the price and will last for years to come.
11 True: The Competition Is More Fierce Than Politics
According to New York Daily News, car salespeople are considered some of the least ethical and most untrustworthy of all occupations (even worse than politicians). The lack of integrity boils down to competition. Car sales is a cutthroat industry, and salesmen and women are willing to resort to any tactics to close that sale.
The competition stems from a highly saturated market. There are tons of options for car buyers. Don't like what you see at one dealership? You can literally walk next door to a different one. At a dealership, It's every person for themselves. Their co-worker is not their friend when it comes to getting that commission. Some will even try to steal the customer from another salesman.
Beyond that, car dealerships offer weekly games, prizes, and incentives beyond the commission to encourage their workers to sell hard (these are called “spiffs”). This creates an even more aggressive competition. The result is that not everyone is willing to play fair. In the end, the customer doesn't trust the car sales process, and the car salesmen resort to lowering their moral compass just to make a buck. Be wary of the over-eager salesperson, and trust your gut when it comes to what they say and do to get your business.
10 False: You Should Buy The First Car You See
When you arrive at a dealership, the salesmen who shark their way over to you will usually start by asking what you're looking for in a car. You might tell them you have no kids, you want something with good fuel economy, and you would like something a little sporty. The salesman then tells you he has the perfect vehicle and it's at a great price, only to walk you over to a giant SUV.
Sometimes it can feel like they're not listening. It will be especially apparent in the first car they show you. Now, it's not that they aren't listening...they actually heard every word you said. They just don't care. The first car they show you is usually a car that they have been struggling to sell.
Often times, this vehicle has been on the lot for a while. The price has been lowered multiple times, and they still can't get rid of it. At this point, the dealership will lose money on the sale of this car, but the salesman will still make his commission. So sometimes the lowered price is a good enough selling point to get a customer to buy, even if it's not the car they want.
Take your time when purchasing a car. There's no reason to buy the first one you see. It's more important to take a little longer and get a vehicle that meets all of your wants and needs.
9 False: Certified Pre-Owned Is Best
The second best option to buying a brand new car is buying a Certified Pre-Owned car...or at least, that's what we're told at the dealership. CPOs can be a great value and have a lot of good benefits, but it isn't necessarily your best option.
When considering new and used, consumers often prefer new because of the manufacturer warranty. However, buying a slightly used car can save you a bundle thanks to depreciation. As stated by CarFax, a brand new car drops 10% in value from the time it takes you to sign the paperwork, to the time you park it in your garage.
CPO cars are nearly-new vehicles that are hand-picked based on their make, mileage and the quality of their condition. The dealership selects the car by putting it through multiple inspections and they repair anything that might need fixing. They then offer the car with an extended warranty.
The idea is that this gives the buyer peace of mind. But these cars cost significantly more than another used car in the exact same condition. If it's a car that has a history of reliability, forking out the extra money for a warranty may not be worth it. Additionally, they may say the car has a clean history, and that isn't always factual. Even if a car has nothing reported on CarFax, there could have been repairs done privately at home or a local shop. The dealers often miss things like this when doing inspections.
8 False: Salespeople Make Bank
Cars are an incredibly expensive commodity. According to Kelley Blue Book, the average new car is around $36,000. And since we all know salespeople work on commission, they must make a pretty fat paycheck. This isn't actually true at all.
Although it is possible to make good, or even great, money as a car salesperson, it's not common. Even a salesman at a Ferrari dealership will be limited on what he can make. This is because, although a new Ferrari costs well into the $300,000 range or more, they don't have a big demand. So he might get a bigger commission per sale, but he may only sell a few per year.
At a smaller dealership, a salesman might sell 10 cars a month, but he has a smaller commission on a cheaper car. So his take home is less. And before a salesman can take home commission at all, he must exceed his "draw." If he needed to sell 4 cars to surpass his draw, and he only sold 3, he won't get that bonus.
A quick Google search says that the average car salesperson makes around $40,000 per year. And it is a feast or famine industry. So some months the dealership might be hopping, while other times the car salesmen are "in the bucket."
7 False: There's Always A Fresh Supply
When you're driving down the freeway you might notice several car dealerships side by side. Rows and rows of glistening new cars and big balloons floating above them may catch your eye. You might also notice a brand new row of cars out front every time you drive past.
If you're like most people, seeing different cars in the front of a dealership makes you think they're a successful business, sell a lot of cars, and constantly have new inventory. Yes, they could sell a heck of a lot of cars and need to replenish their parking lot often, but most of the time that isn't the case.
Car dealerships often spend several hours a day rearranging the location of the cars. They move the cars around the lot to attract new potential buyers. Swapping out cars gives customers something new to see from the road as they pass by. Maybe the customer is in the market for a sedan, but the dealership only has trucks visible. Until they see some 4 door economy cars out there, the customer will keep driving past the lot.
It's not uncommon for dealerships to shuffle their inventory when business gets slow. Just because the front row changes, there's not necessarily anything new to see.
6 False: You'll Make A Fortune On Trade-Ins
When getting a new car, you have the option to trade in your old one or sell it privately. Trading it in can seem like a really great, hassle-free idea. You want to get a car that costs $30,000, and the dealership is willing to take the old car off your hands and lower the price of the new vehicle to $23,000. Wow, they're really hooking you up! Well, not really.
Trading in a vehicle is a really painless process. It takes only a few minutes and all the tedious paperwork is left up to the dealership. They will take any car, no matter the condition. You could even tow your car to the dealer's lot and use it for trade in. The question is, do you get what it's worth?
No. Never. You will always make more money by selling privately. It can be more time consuming. You'll have to set aside time to meet with strangers, and it could take a few tries. Then, if they do want to buy it, you'll have to haggle over the price and they'll nitpick every detail on your vehicle. Shake on a price and then comes the paperwork. For some, this is all too much effort.
The choice is yours, but if you decide to trade in, be prepared to lose a lot of the worth of your car.
5 False: Weekends Are The Time To Buy
Postcards are constantly mailed out to residential neighborhoods promoting big, upcoming sales at local car dealerships. The glossy postcards usually have images of shiny, new cars with big bold writing exclaiming things like "Inventory Blowout," "Red Tag Clearance," and "Free Fuel Gift Card For Test Driving." These events almost always happen on weekends. That's one reason why you shouldn't go.
The worst time to go to a car dealership is on the weekend. It seems like this would be the optimal time because that's when sales are promoted. In all actuality, these are the busiest days to visit a dealership, preventing you from getting questions answered and having undivided attention from the staff. When you buy a new car, you're going to have a lot of questions. The sales team might be spread too thin, and won't have time to help you effectively.
There will also be a lot of waiting around; waiting to ask questions, waiting to test drive, waiting to get your counter offer from the "tower," and waiting to sign all the paperwork. The car buying process isn't fun, but you can ease the burden by going on a weekday and avoiding the crowds. According to Edmunds, Tuesdays are the best day to shop for a new car.
4 False: Dealerships Make A Ton
So we've already determined that car salesmen don't make as much as we thought. Surely all the money you spend must go to the dealership. The dealership must be the one rolling in the dough when the new or used car gets sold, right? Wrong.
Despite the fact that in 2016, franchised car dealerships sold nearly one trillion dollars in cars, they don't bring in as hefty a profit as you might think (according to the National Automobile Dealers Association).
The net profit on a brand new car is -$200. That's right, not only does a dealership not make money on the sale of a new car, they actually lose money. The sale of new cars is really more to maintain cash flow.
Average net profit on a used car sale isn't much better. It's usually in the range of $60 or $70. The low profit margin is caused by how much a dealership lost to acquire the used car, the cost of any repairs prior to sale, and the payout on commissions. The longer a car sits on a dealers lot, the less money they can make on it. Most used cars need to be sold in under 45 days in order to make any sort of profit.
3 False: They Offer The Best Price First
If you walk into a dealership expecting them to sell you a car at a fair price, you’re out of your mind. A car dealership is a business with one goal; making money. They’re going to get as much out of the car as they possibly can.
When the customer starts showing real interest in a car, salespeople get hungry. They will offer you a price for the car that’s well above whatever they expect to get. The whole point is to negotiate. They expect it.
If you do decide to haggle, be sure to remember that the sales manager is still human. Believe it or not, how you treat them will have at least a small impact on what you end up paying. They will be much more accommodating to a nice person who negotiates politely, then someone who low balls and makes demands.
If the idea of haggling makes you nauseous, you might see if the type of car you want is available at a dealership with upfront pricing. Negotiating and commissions may be going the way of the dodo bird. Car dealerships are now testing the method of no-haggle prices. This is of benefit to both the dealer and the buyer. One can only hope this trend continues.
2 False: Anyone Can Test Drive
Everyone has heard the age-old saying "you wouldn't buy a car without test driving it first." A test drive is an incredibly important idea to ensure the car works well and is exactly what you need. DME Automotive, a research company, determined that 16% of buyers don't even bother test driving the vehicle they purchase. That’s a big risk to take with your hard earned dollars.
Now keep in mind, you can’t just roll into a parking lot and demand the keys to a brand new vehicle. First of all, they’re going to want to see some genuine interest, not just some 19-year-old guy who wants to burn rubber in a new Corvette. They need to see that you’re not just wasting their time.
You will also need to show a few important documents. You obviously need to have a drivers license. They want to ensure that you are legal to drive and will be responsible for their vehicle. And you will need to provide proof of insurance.
Lastly, don’t plan on taking the car for a spin all alone. The salesman will be riding along, to make sure you’re not just going for a joy ride.
1 False: They Love Cash
From the buyers perspective, paying for a car in cash up front is the best way to handle the transaction. Arriving with a briefcase full of rubber-banded hundos not only feels cool, but has added benefits. It will save you the time of running your credit, the paperwork of taking out a loan, and the massive amounts of interest that will be tacked on to your monthly payments.
The piece of mind of owning a car outright the minute you drive off the lot is an important factor in deciding whether to pay cash or take out a loan. If you take out a loan for $20,000 with a 5% interest rate over 5 years, you're looking at adding over $2500 to your overall price. If you don't want to budget paying that extra money, and would rather apply that to the car itself, then pay in cash.
However, don't plan on getting a better deal because you bring wads of cash to the table. Dealerships don't want your cash, they want you to finance. This is because they make money on the interest you pay. Because their profits on car sales are so low, the interest is how they make up some extra income. They won't always be eager to hear you say you're paying in cash, but it's generally a good option for the buyer.
Sources: edmunds.com, mentalfloss.com, cargurus.com, jalopnik.com