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Part 5: A TALE of TWO DEALS - continuation
If they were excited about the car, they wouldn't be rational when it came to making a deal.
Naturally, the couple began asking about the price of different models. Michael pointed to me and said, "He'll take you back out to the lot. Find one or two minivans you like. Get the stock numbers and we'll get specific about payments. How's that sound?"
We went back outside, and located a minivan that was buried deep in a row of trucks. The couple made their choice based on color and sticker price. We went back inside, and Michael quoted them a monthly payment of about $550. The man balked at these figures saying he had been given lower numbers by another dealership. Michael countered by saying it was difficult to compare two vehicles with different options.
"I just had an idea," he said. "There may be a rebate on this vehicle we could use to bring the payment down. I'll go see if it's still in effect." He disappeared into the sales tower.
Whenever someone failed to accept the "first pencil" (the high numbers they begin with) Michael would always have "an idea" or "remember" a rebate or special interest rate program. This avoided the head-to-head confrontation. It also promoted the sense that we were working in the customer's best interest.
When Michael left to go to talk to "the desk" (the sales managers) I sat down with the couple and made small talk. I noticed that the man had his cellular phone out and was punching the keys. I asked if he was playing computer games. He smiled and said, "I'm playing a game called 'calculator.'" I realized he was running the numbers Michael suggested. It struck me that this might be a good way to check numbers at a dealership. If a customer whips out a calculator it could really tick off the salesman. But we're getting used to seeing cellular phones in everybody's hands.
Michael went back and forth with the guy several times, but they seemed to be settling on monthly payments of $475. Finally, Michael held out his hand and said, "Do we have a deal?" They shook hands.
If the minivan was selling for a sticker price of about $24,000 with options and tax, a 60-month loan at 9 percent interest would be $475 a month. However, I later checked Edmunds.com True Market Value prices and saw that this van should have been discounted about $1,700 from the sticker price. Then, monthly payments at 9 percent would have been $430 a month. Over the life of the loan this was a $2,520 difference.
The long paperwork process began. They ran a credit report and the couple had a good score. Still, they needed to sign the contracts in the finance and insurance room, or "F&I."
The dealership was closed now, and most of the salesmen and customers had left. But I had been warned that we would stay as long as it took to get the deal done. After about a half an hour, one of the sales managers told me to move the couple into the "fish room." This meant I was to put them into a waiting room built around a large aquarium. Apparently, it was thought that gazing at fish relaxes people.
Later, Michael told me that on weekends he doesn't like people to go into the fish room. "I've had a couple of deals blow out of the fish room. They start talking to each other, comparing deals and payments, next thing you know one of them is pissed off and they leave. I like to stay with the customer the whole time."
Luckily, my customers were the only ones in the fish room. I took the minivan to the service department and told a porter to wash and detail it. Then I took it down the street and bought a full tank of gas. It's funny because, here is a customer who has just spent about $24,000 on a new minivan. But when you tell them you're buying them a free tank of gas they get all excited.
Back inside the dealership, I checked on the couple in F&I. Apparently, they were having difficulty approving the $3,500 down payment on their American Express card. It was after midnight and the approval office was closed. By now this poor couple was slumped in their chairs utterly drained. Michael pulled me aside and said, "If their credit card doesn't go through you're going to have to follow them to their house and get a check." Eventually, the charge was approved and the people were allowed to buy their new minivan. We gave them a short demonstration of all the features and they drove off into the night.
By now it was 1 a.m., but I still wasn't done. The desk manager told me I had to put up "the blocker" — a vehicle parked across the entrance to prevent the new cars from being stolen. This was part of the nightly ritual called "lock and block." You check to make sure all the vehicles are locked, and then you move a car to block the entrance.
I put the blocker in place, and told Michael I was leaving. He shook my hand. "Congratulations on your first sale," he said.
I asked him how we did on the deal.
"The problem was, he made me bargain against the other dealership. But we sold the car for sticker. That's the good part. There'll be $300 or $400 in it for you."
Actually, when I got my voucher, I made a $501 commission on a payable gross of $1,689 — almost the $1,700 discount that the Automotive Business advised. Our commissions were paid twice a month. But we received vouchers within a day or two showing how much we had to look forward to. The vouchers were yellow carbon copy slips from the dealership's books. The salesmen kept the vouchers in their wallets and took them out to show each other like scalps.
A friend came up to me on the lot one day and said in a confidential voice, "Want to see a bomber?" He unfolded the voucher and showed me the yellow slip: $1,274. "Is that unreal or what? What a bomber." If his commission was $1,274 (30 percent of the dealership's profit) the dealership made $4,242. That's a lot of profit to make on a $25,000 car — about 16 percent.
From my commission check it was clear that the minivan couple could have made a better deal and saved several thousand dollars. So where did they go wrong? Well, first of all, they negotiated as monthly payment buyers, rather than bargaining on the purchase price of the vehicle. When you agree to be a "monthly payment buyer" several variables are introduced that are harder to keep track of: the term of the loan can be extended up to 72 months (six years!) without your awareness and the interest rate can be raised. When you bargain on purchase price, it is a cleaner, simpler way of negotiating.
After my minivan customers left that night, I went back into the new car tower to check out. I looked up at the enormous white board on the wall that listed the salesmen on the lot. The sales manager was coloring in a blue box next to my name. My first sale. I was finally on the scoreboard.
Part 6: LEARNING FROM THE PROS
I first started working as an undercover car salesman I was e-mailing my editors every day with accounts of car lot life. But as I settled into the job, my e-mails tailed off. There just wasn't much room in my schedule for writing. For example, one night I had a deal that didn't wrap up until 1 a.m. I had to be at work the next day at 9 a.m.
I must have let several days go by without writing my editors because I received an e-mail from my boss asking: "Have you gone native on us?" Maybe they thought I was making so much money, or enjoying life on the lot so much that I was going to change my profession. Not a chance. Sales isn't in my blood. I didn't like "tap dancing on rain drops," as one salesman described the sales pitch.
However, I had agreed to work at one more dealership — a no-haggle car lot — before I ended this undercover project. Before I could do that, though, I needed to leave my present job where I had worked for about a month and sold five cars. And I needed to find a way to make a graceful exit. Little did I know the unexpected form it would take.
One Friday morning I was trying to sell a pickup truck to a college student. During a break in the dealing I phoned home to get my messages. I heard my brother's voice on the message machine calling from the East Coast. He said he had sad news. My brother-in-law had died the previous night. It was completely unexpected and it left me in a state of shock.
I stumbled outside and told my sales manager what had happened. He said to take as much time as I needed and he would hold my job open for me. Later that week, I phoned him from the East to say I would not be returning.
When I got back from the funeral I began looking for a new job at a no-haggle dealership that sold American cars. This would make an interesting contrast to a high-pressure dealership that sold Japanese-made cars. I called several places until I found one where they were actively looking for salespeople. They asked me to come in for an interview.
It was a small dealership on a busy street filled with storefront businesses and strip malls. The used cars were parked along the front row facing the street with signs in their windshields listing the year, model and price. The new cars were parked farther back in two short rows and there were another 40 new cars on the back lot. Inside the showroom, two new cars were on display, surrounded by desks for the "sales consultants" — as the salespeople were called here. I noticed that, unlike at the previous dealership, about half of the salespeople were women. The uniform here was a polo shirt with the car manufacturer's logo on it.
My interview was with the sales manager, a laid-back guy in his mid-30s named Kevin. When I arrived he was in his office off the showroom floor. Evidently, there was no sales tower here. Kevin reviewed my application and recognized the name of the dealership at which I had previously sold cars. He whistled.
"How long did you work there?"
"A month."
"You lasted that long, huh?" he laughed. Then he added, "Why did you leave?"
"I got tired of lying."
"Right. When you work here you won't have to lie —." But then he stopped, reconsidering what he had said. "Actually, it depends on your definition of lying. But the point is we won't ask you to do anything that conflicts with your core beliefs."
He explained that the way they handled the trade-in is a judgment call for the sales consultant. Say the used car manager appraises the car at $4,500. The sales consultant could then tell the customer that we would give them $4,000 for their trade — thus adding $500 profit to the deal.
But in general, Kevin told me, things were as straightforward as they appeared.
"We don't hit people with stupid high numbers," he said. "We don't pack payments. We tell people we're no haggle, no hassle and we stick to that. It's a good place to work."
He offered me the job starting immediately. But first, he wanted me to attend a four-day sales seminar. I resisted because there had been so much training at my previous job. What I wanted was more of a chance to sell cars. Eventually, though, I agreed to go because I thought it might add a new dimension to the experience.
I attended the seminar with two other salesmen starting at my new dealership. They were both in their early 20s. One was a surfer dude named Al who had long brown hair combed straight back and a big tattoo on his upper arm. He blinked constantly — an affectation either left over from his surfing days, or caused by all the chemicals he'd poured into his bloodstream. The other salesman was Jeff, a sincere guy who was a gearhead.
There were a total of about 15 salespeople in the seminar. The others were from a variety of dealerships selling many makes and models of U.S.- and foreign-built cars. The class was taught by a tall, handsome man named Roy, who had sold cars for 17 years and wore an exquisite suit and silk tie. He told us that when he first started selling cars he was terrible at it. But then he decided to imitate the successful salesmen on his lot. Eventually he made a bundle using the skills he would teach us here. I had to wonder just how big a bundle he made if he was teaching seminars like these.
We then went around the class and introduced ourselves. I was struck by how the other salesmen described themselves in ways that revealed extremely low self-images. Most of them were divorced or refugees from other unsuccessful careers. Others were downright bitter and hostile. One salesman, 50-ish with a pink, bald head and white fringe of hair said, "I'm the kind of three-time loser that hasn't kept a job, a wife or kids for more than three years."
I prepared to listen attentively during this seminar since, after my first job, I had questions about how to sell cars more effectively. One thing that baffled me, for example, was how to get people into the sales office after the test drive. In some cases, the customer loved the car, they felt comfortable with me, but they wouldn't take that big step through the dealership door.
In one case, I had a husband and wife interested in a crew cab pickup. It was obvious the husband wanted to "buy today." The wife didn't. After the test drive I held the door open so they could walk into the dealership. He stepped in. She stayed outside. They had a little spat right there. The wife won and I lost the sale.
It didn't bother me that I didn't sell the truck. I wasn't there to sell cars as much as to understand the process. I felt bad about pressuring this couple when it was obvious it was causing conflict between them. But it came at a time when I hadn't sold a car for a few days and my boss was beginning to give me heat.
The names of slackers such as myself were put on a white board in the sales tower labeled, "Three-Day No Sale." This meant you had to meet with your manager to figure out why you were in a slump. Usually they told you the problem was that you weren't taking enough customers on test drives (called "demos"). The general manager of our dealership was fond of saying that if we demo-ed three cars without selling one, he would give us a "come-to-Jesus talk." This was like being read the riot act. You had to come to Jesus — to give everything to the dealership — or you'd be fired. Then, he added, if you demo-ed another car and the customer left without buying, you'd follow them home (because you'd be "blown out"). He reinforced his point with another of his favorite expressions: "You'll do it my way, or hit the highway."
Roy, the instructor at the seminar, was like the GM at my first dealership. He was filled with trite phrases and platitudes about sales. The difference was, Roy taught a total system for sales, called "Needs Satisfaction Selling." You found out what the customer's needs were and then you presented the car in such a way as to meet their needs. This meant you needed to know the car's features so well you could present it in a number of different ways. If the customer wanted safety you had to talk about ABS, airbags and crumple zones. If the buyer wanted performance you talked about the V6 engine, the silky-smooth tranny and the platinum-tipped spark plugs.
The selling system was built around a progression of questions we were told to memorize. That night I took these questions home and my 9-year-old, who loves role-playing, helped me practice using them.
I'd shake my son's hand and say, "Welcome to the dealership! And your name is?"
"Freddie."
"Good to meet you Freddie. Are you familiar with our product line here?"
"Uh uh," he'd say, trying to be serious like an adult.
"Fine. Do you mind if I ask you a few questions? That way I can better understand which cars on our lot to show you."
"OK!"
"Freddie, let me ask you, what are you driving now?"
"A BMX bike."
"OK. And what do you like about that bike?"
"Goes real fast."
"So Freddie, what you're saying is performance is important to you. Is that right?"
"I guess."
"Well, we have a model over here with a V6 engine that puts out 210 horsepower. Follow me."
He always followed me when I turned and walked toward the imaginary cars. I wished all the customers were like Freddie.
The next day in the seminar I was called up in front of the class to role play with the teacher. With 14 other salesmen watching, and snickering, and hooting, it was difficult to remember all the lines I had memorized. But I began to appreciate the way the questions helped identify and address the customer's needs. I thought back to all the haphazard sales pitches I had given at my first dealership. And I was glad I'd have another shot at selling cars in my new job.
During a break in the seminar I stood outside with my two buddies from my new dealership. Al, the surfer dude, told me his dream was to work at a Mercedes dealership. His father had once owned a Mercedes and he knew everything about every model ever made.
"Test me, dude," he said to me, blinking rapidly. "Dude, I'm serious. Test me. I know everything."
The other guy, Jeff started testing him and, sure enough, he did know everything. He could talk forever about how the taillights had changed from one year to the next, how they had added chrome or flashing to such and such a model. Jeff, on the other hand, knew everything about the motors they put in the cars.
Back in the seminar we learned about how to present "feature-benefits." It wasn't enough just to say this car had, for instance, an antilock braking system. You had to point out the feature — ABS — and then link a benefit to their needs — in this case, safety.
The teacher then took out a $20 bill and taped it to the easel he had been making notes on. He told us all to stand up. He then went around the class and named a benefit, and we had to name a corresponding feature. The last man standing (actually, our group included one saleswoman) got the twenty.
As we stood up, I whispered to Jeff, "You're going to win this thing, man."
"I wish."
"You will," I said. "You're like an encyclopedia."
"Economy," the teacher said, pointing at a standing salesman.
"Fuel-injected four-cylinder engine," the salesman said.
"Safety," the teacher said, pointing at another salesman.
"Dual front airbags," the salesman responded.
In the beginning, it was easy. But one of the rules was that you couldn't repeat any features that had already been mentioned. So we began to run out of benefits for our features.
Finally, there were only three of us standing: me, Jeff and the salesman who described himself as a loser.
"Performance," the teacher said, pointing at me.
"Twin-cam engine," I said.
"Aaaaant!" the teacher said, imitating a buzzer. "Sit down. Someone already said that."
I didn't hear anyone say that. I was disqualified on a technicality!
Jeff and the guy battled it out and Jeff finally won. I had identified Jeff as a winner and the other salesman had accurately described himself as a loser.
Jeff went to the head of the class and got his twenty. As he sat down, he said to me, "Good thing I won. I didn't even have gas money to get home."
An assignment for our class was to go to a dealership and critique a salesman or woman who waited on us. We weren't supposed to tell them this was for a class or that we were car salesmen. We were merely supposed to evaluate their performance in relationship to what we had learned. I chose a German car dealership along a street near my home. As I walked inside, it occurred to me that this was getting complicated. I was an undercover car salesman for the Automotive Business, sent to a dealership, which sent me to a seminar, which sent me to another dealership as an undercover shopping evaluator. I guess that made me a triple agent. Very good lines.
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LEARNING FROM THE PROS - continuation
Part 7: NO-HAGGLE SELLING
When I was hired at the no-haggle dealership, I was told I would be doing some phone work to build up leads. "Phone work" is a euphemism for calling people at dinnertime and harassing them. I realized I had become one of those people that I despise — a telemarketer. Still, to complete this experience, I attacked it with enthusiasm.
The leads we were given were names and numbers of people who had bought cars several years ago (and presumably would be ready for a new one) or people who had recently brought their cars in for service. We were given about 20 names a day, and those people who seemed like hot prospects were then called more frequently. Other people who had responded coolly were called again in six months. All our calls were logged into a computer database.
We were given a script to follow when making our calls. To me the dialogue sounded stilted and ridiculous. But I made a point of following it word for word. For example, after we had identified ourselves, we had to ask, "Am I interrupting anything important?" This seemed like a poor strategy to me. I felt they would tell us if we were interrupting anything. Or we could tell from their tone of voice if they were busy.
Assuming we hadn't interrupted something important, we then explained why we were calling: "We have a shortage of quality used cars on our lot right now and my manager would like to offer to buy your car at above market value. We would like to invite you to come down here for a free appraisal. Is the afternoon or the evening better for you?"
The beauty of this system, the BDC manager told me, was that "they're expecting you to sell them something. But you're not! You're offering to buy their car!"
Of course, all you're really doing is offering to take their car as a trade-in. Because, when you are appraising their car, it will begin to occur to them that — if they sell their car — they will need another one. So they begin looking around our car lot and before you know it, you have a sale and a trade-in deal. Nice idea. But it never worked for me.
Another ploy was to call someone who had once bought a car from our dealership and leave a brief mysterious message such as, "Mr. Jones, I have some information about your 1996 (fill in make and model of car) and I need to contact you as soon as possible. Please call me at — ." This method nearly always brought a return call from a customer with visions of recall information or maybe even police trouble. When they found out that we merely wanted to "buy" their car, they were often quite annoyed.
Still, I was surprised at how receptive most people were to talking with me on a cold call. They were more open than I am to people who call me at dinnertime or while I'm not "doing anything important." I was even more surprised at the loyalty customers showed toward this car manufacturer. Apparently this "no haggle, no hassle" style of selling created a feeling of good will that lasted throughout the entire ownership of the car. And it was an American car at that! I was filled with patriotic pride thinking how these cars might someday be as popular as the hot-selling Japanese models.
But still, I hadn't sold a car at this dealership. I had attended class, talked on the phone and even taken a few ups on the lot. But no one was buying. When I looked restless, the assistant sales manager, a heavy blond woman, said: "Please don't quit! I know it's slow, but wait till the weekend. You'll sell a car this weekend."
"Wait till the weekend," was a popular refrain in the car business. Everything revolved around those two days when ups were supposed to stream onto the lot. One of my other sales managers told me, "On the weekends, we have so many ups, we call it the tuna run."
"Tuna run?" I asked.
"You know — so many fish it's hard to pull them all into the boat. You'll see."
The tuna run never materialized at my old job. I was anxious to see if it would come true at my new job. I made sure I arrived early Saturday morning because, I was told, salespeople took ups in the order in which they arrived for work.
At noon I was still waiting for my first up. I decided I better eat something before the tuna started running. I began walking toward my car when Al called me back, "Dude, where're you goin'?"
"McDonald's. You want something?"
"Dude, dude. You can't leave. You miss an up, that would be like a $300 burger."
Al was very persuasive. We ordered a pizza to be delivered. When it came it had the wrong topping and Al didn't have enough money for the extra charge. He was going to send it back. I made up the difference and we sat down to eat in the break room. I never saw food disappear so fast. He hunched over the pizza, I heard muffled grunting noises and it was gone. He belched a few times and headed back outside to look for ups.
One thing I discovered was that car salesmen are easy marks for anyone selling things. That's because they are always hanging around — they're a captive audience. And some of them are flush from a recent sale.
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NO-HAGGLE SELLING - continuation
At the first dealership, I was in a sales cubicle one day when a guy stuck his head around the corner. "Silk ties, 10 bucks," he said, and disappeared.
Outside I found a cluster of salesmen gathering around the open trunk of a shiny black BMW. In the trunk were boxes packed with ties in protective plastic sleeves. I picked out two ties and gave him a twenty. The tie guy (as he was called) fingered the tie I was wearing and then compared it with the two I had selected. He nodded approvingly. "You've, like, got this pattern thing going. Cool."
After the tie guy visited the dealership, the salesmen would congregate in the bathroom trying on their new purchases, complimenting each other. Gold ties were the most popular. They went nicely with the watches, rings and chains the salesmen wore.
Besides the tie guy we also had the sandwich lady and an older guy who sold golf balls he had found in water hazards. The balls were neatly arranged in egg cartons in the trunk of his car. "Three bucks a dozen. Mix and match," he told me. "Lotta Titleists there." Then he dropped his voice confidentially, as if he was giving me a special deal. "Got a Callaway three iron in the backseat. Ten bucks." I imagined an irate golfer giving it a heave into a water hazard. Little did he imagine that it would be resurrected in this way.
Then there was the chicken man. You never saw the chicken man so much as smelled him. He seemed to appear on weekend nights when it got busy. You would smell fried chicken and see a figure out of the corner of your eye carrying a cardboard box on his shoulder. Then the word would spread: "The chicken man's here!"
I went into the F&I office one night and found a sales manager hunched over a chicken dinner with his tie thrown back over his shoulder to protect it from grease splatter. He was eating with great purpose, making harf, harf, harf noises.
"Is it as good as it smells?" I asked.
"No. But I was starved," he said, throwing the bones in a trash can. He wiped his mouth, picked up his contracts and moved back into the hallway to a waiting customer.
It was almost 2 o'clock that Saturday afternoon when I got my first up. I saw a man wandering among the new cars. This was the first real up I had gotten since I took my sales seminar. As I walked toward him I began rehearsing all the things I had learned.
His name was Ron and he told me his car was in the service department. He wasn't going to buy a car today but since he had a few minutes to kill he wanted to see the new family sedans we offered. The top of the line model came with a V6 engine that had been highly praised.
I took Ron to the lowest level family sedan on the lot. We had been told in the seminar that it was "easier to sell up, than down." This meant that you always started the customer at the least expensive model and let them bump themselves to the more expensive models. The reasoning was that, once they had sat on leather and felt the power of a V6, how could you get them excited about driving around in cloth and plastic, powered by a whiney little four-banger?
The strategy worked. Ron told me he liked the roominess of the car and the way it handled, but he wanted power. No problem, I told him. Then, as if the thought just occurred to me, I said, "Tell you what, while we're on the test drive, I'll have your car appraised. Then, if you decide you want to buy, I can give you an idea of what your payments will be."
He agreed, although he told me he would pay cash rather than finance or lease the car. I got all the information on his trade-in and gave it to the assistant sales manager. She began feeding the information into her computer, then pounded on the keyboard in frustration.
"Damn thing's locked up," she said. "I'll have to do it the old-fashioned way. She pulled out a small reference book and added the cost of options and the mileage allowance. She gave me a trade-in value of $4,200.
"Great news," I told Ron, who had been waiting in the showroom. Salesmen always return to their customers with what they call "great news." I told him: "We can give you $4,200 for your trade-in. Believe me, that's high. You'd never get that anywhere else."
Actually, $4,200 really did seem like a lot. But I wondered if that was just in relation to the ridiculously low figures we gave for trade-ins at the first dealership I had worked at. Ron seemed encouraged by this figure so I decided to give him a little sales pitch about leasing I had cobbled together from bits and pieces of presentations I had heard, or overheard, from other salesmen.
Leasing is very popular these days. One of the benefits, from the salesman's point of view, is that it is so complicated that the customer sits transfixed during negotiations, unable to defend themselves. Usually, the salesman hits the customer with incredibly high monthly payments on a purchase plan. Then, as if the idea just popped into their mind, the salesman will say, "You know, there might be another way to get the payments down... Have you folks ever considered leasing?"
Personally, I think leasing can be a good way to go. For one thing, leasing allows people to drive more expensive cars. But you have to be careful. Some dealers base leases on 110 percent of the vehicle's sticker price. This is called a "full pop lease" and it's what most dealerships aim for. Also, it's easy to disguise the interest rate in a lease because it is expressed as a decimal multiplier instead of a more recognizable percentage rate. For example, a 9 percent interest rate becomes .00375.
At the first dealership I worked at, a veteran sales manager rounded up all of us green peas and taught us how to present it to Mr. Customer. He said to tell customers: "In three years, you can turn your old car back in and get one that has the latest technological inventions. And what do you think cars will be able do in three years? Who knows? Fly in the air! Go across the water! Go under the water? Who knows?"
I didn't give Ron that speech. But I did tell him that if he paid only the drive off fees (about $650) and gave us his trade-in as a down payment, he would have a $257 monthly payment for 39 months. I pointed out that we offered interest rates of 4.9 percent.
"Why take your money out of a mutual fund at 16 percent when you can use our money at 4.9 percent?" I asked him. "Then, at the end of the lease, if you love the car, you can buy it at about half its current value."
I looked up and saw the assistant sales manager frantically waving me into her office. I left Ron to ponder the advantages of leasing and stepped back into the sales manager's office.
"You didn't give him the price on his trade-in did you?" she asked.
"Of course I did. Why?"
"Damn. The computer just came back up. We're offering him about a grand more than what it's worth." She thought it over. "Look. We have to stand by our offer. But tell him it's good for today only. And if I were him, I'd jump on it, big time."
I walked back out into the showroom and rejoined Ron. "You're going to like this," I said (using a variation of the "great news!" opener). I explained what had happened, then added, "You can tell all your friends how you outfoxed the car salesman."
He chuckled. If you could get people laughing it got them on your side.
Still, there was a problem. Of course, there was always a problem in every deal. Ron's problem was simple and very common: he had to talk to his wife first. He kept calling her on his cell phone. But she was out with the kids. He confided in me: they had agreed his wife would be the next one to buy a new car. He was worried that she might be upset with his purchase.
By now I had been with Ron for about two hours. It had gone from being a hot, sunny afternoon to a cool, windy evening. Ron was hungry and so was I. But after all this, I didn't want to turn him into a "be-back."
Ron had given up trying to reach his wife. He was about to go home and talk it over with her when his cell phone rang. It was his wife. I moved outside to give him some space. It might sound corny but I began visualizing that I had made the sale. This is a popular technique with salespeople. It just means that you picture the outcome you want before it happens. I pictured shaking hands with Ron and saw him signing the contracts. But life isn't that simple. When Ron was done talking to his wife his answer wasn't yes or no. He merely said, "She's coming down."
A few minutes later a van pulled up and Ron's wife stepped out. Before she could speak I said, "I'm the pushy salesman who's been holding your husband hostage all afternoon."
She laughed. And I knew I had a sale. They leased the car for three years. I even sold them a service contract.
After Ron and his wife signed the contracts, I led them outside. They transferred all the crap from their old heap to their gleaming new car — cupholders, maps, cassette tapes, Kleenex, flashlights, etc. After they drove away, I pulled their trade-in to the back of the lot. The thing was a real beast. The interior had a moist, funky smell. At this very moment, I thought, Ron was driving home, inhaling new car smell. I enjoyed imagining how happy he must be.
Back inside the dealership everyone was hurrying to lock up and go home. The F&I manager came over and said, "You did a phenomenal job with that guy. I'm going to break my rule and speak to you before you've been here for six months."
So, did Ron get a good deal? Well, he drove in behind the wheel of an old heap. He paid only $650 out of pocket (drive-off fees on his lease) and he drove out in a more powerful, more reliable, safer, top-of-the line car.
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NO-HAGGLE SELLING - continuation
Was the no-haggle method of selling better? From the salesman's point of view, it allowed me to focus on what the customer really needed. Also, the good will I built up on the test drive was preserved during the deal-making process. The only problem I could see with no-haggle selling was with my commission — I made about $350 on the deal. Not bad for four hours of work. But, as it turned out, it was the only car I sold that week.
Part 8: PARTING SHOTS
It was the last day of my career as a car salesman. I was working the evening shift at the no-haggle dealership, on a day in the middle of the week. A typical day. A slow day. I made my sales calls in the "business development center," trying to set up sales appointments I knew I would never keep. My heart wasn't in it and, not surprisingly, I couldn't convince anyone to sell me her "quality used car" for "above market value."
I sat at my desk in the showroom hoping for some diversion to pass the time. I had done that a lot as a car salesman. And on this day, sure enough, something happened to kill a few minutes. It involved a salesman I'd gotten to be friends with, a guy named Craig. He had recently moved from Montana and true to his roots he looked like the Marlboro man — rugged features and a thick graying mustache. Unfortunately, Craig also had bad teeth and was a foot shorter than what I imagined the Marlboro man to be.
Early on, I had been told a good salesman "walks the lot" every day to check on inventory. Craig did this religiously and memorized the location of every car on the lot. If you were in the middle of a sale, and the customer decided he wanted a white coupe instead of a black four-door, you had only to call over to Craig and he would instantly give you the location of the car that would seal the deal. I later realized Craig had another reason for walking the lot. He had a bottle hidden out there somewhere. He'd always return from the lot a touch more animated, a glow in his face.
On one return trip from walking the lot, he went to sit at his desk and missed the center of his chair seat. The chair was on wheels and began sliding backward as he continued downward. Despite his heroic efforts — clawing for handholds on a nearby potted plant — down he went. And all this happened right in front of the boss's office window.
There was silence in the showroom for a few seconds, then high-pitched squeaks of laughter from a saleswoman, named Allie. Her laughter continued until it infected the rest of us. We stumbled outside to recover ourselves and, as Allie lit up a cigarette, she began regaling us with stories of other mishaps involving the parade of salesmen and women who had worked there during her tenure. I felt odd as she talked about past co-workers since I knew I would soon be joining their ranks, disappearing into the anonymous job market.
Allie told us how she had helped a friend named Mark get a job as a salesman there because, "He was an even bigger klutz than me." One day he took a customer's driver's license into the showroom to photocopy before going on a test drive. Turning back to the customer, he walked right through a plate glass door, saying, "Here you go," and handing back the license as if nothing had happened. As he turned away, Allie saw blood spurting from his knee where an artery had been severed. They wrestled him into the break room and a mechanic in the service bay, who had been a medic in Vietnam, staunched the bleeding. They rushed back outside to tend to the customer and discovered he had a long shard of glass protruding from his foot.
Another time, Mark went outside to "lock and block" and never returned. Lock and block is a nightly ritual where the sales staff makes sure all the car doors are locked and the entrance is blocked by parked cars. In this case, the salesman had pulled on a chain link gate to see if it was locked but succeeded in pulling it down on top of himself, pinning him to the ground. When they lifted the gate off him, he had a waffle pattern on his face from the chain link fence.
As we talked, the afternoon turned to night and a chilly wind came up. Allie went inside to make more sales calls and Craig drifted away to do a thorough check of our inventory. I leaned against a car and watched the traffic passing in the street. From where I stood I could see the guys across the street at the Dodge dealership drinking coffee and smoking. It was slow over there too. I began thinking back on my experiences, summarizing what I had learned from my three months as a car salesman.
Of course, I absorbed a lot I couldn't easily describe, bits and pieces of information I knew would come back while I was at the Automotive Business. But how had my view of the big picture changed?
I know for sure I'll never look at car salesmen and women in the same way. I used to hate and fear them, to lump them all in the same category with sweeping generalizations. Now, I had some insight into the waters they swam in. I sympathized with them, I pitied them, and — in some cases — I admired them.
I saw that many car salesmen and women, like myself, were just moving through the dealership experience, on their way from one point in their lives to another. Most of them didn't have college degrees and were trapped in lives that they thought offered few chances for advancement. The car business offered them a way to use a lot of hustle and little book learning to make money. I admired anyone who was trying to improve his (or her) life, particularly through hard work. But making big bucks in the car business wasn't the slam-dunk it was made out to be.
Previously, I had known car salesmen from the outside, as I encountered them while buying a car. Now I had worked alongside them. I had been rejected by customers and bullied by sales managers. I had been excited by a big sale and disappointed when a sure thing fell apart. I saw the same dream they saw: big commissions from easy sales. All you had to do, as my assistant sales manager Michael told me, was get "right in the head."
In the Friday morning sales meetings at my first dealership the managers tried to psyche us up by saying that we could make more money as a car salesman than a doctor. True, some of the successful salesmen made a lot of dough. But the vast majority of car salesmen were eking out a living, thinking that some day, somehow, their luck would change and the money would begin rolling in.
So, you think I'm romanticizing car salesmen? Trying to clean them up and excuse their evil ways? And, you might ask, if the salesmen aren't the bad guys, who is?
Having been a salesman myself, I began to view the managers and dealership owners as the real culprits. While salesmen play people games with the customer, the guys in the tower work the numbers with computers, their eyes fixed on the bottom line. They can see at a glance what kind of profit they are taking from the customer and they do it any way. Furthermore, they bully the sales staff, encouraging them to manipulate, control and intimidate customers while they take the lion's share of the profit.
Sometimes, the profit a salesman generates is not even pocketed by them. One salesman told me the F&I people can work their magic to rob a salesman of his commission. They move front-end profit to the back end where it evaporates from the salesman's voucher and returns, over the years, to the dealer in the form of high interest and steady payouts. I experienced a little taste of this myself. I leased an SUV to a single mother and at sticker price expected a nice commission. But on payday I cashed a $65 check. No explanation. No hint of where my commission had gone.
The management pushes the salesman out the door, lets him meet and greet the customer, then takes the profit. Not only that, but the management also blames the salesman when something goes wrong. I saw this quite clearly when the TV news team did its hidden camera investigation of the dealership (more on this in Part 6). A salesman was made out to be the bad guy. When the camera was turned on the dealership owner he disavowed knowledge of what was happening in his business and promised a complete review of their practices. This, despite the fact that at Friday sales meetings, the owner was cheering the boys on to get more deals at a higher profit.
Profit.
By itself profit is a positive word. But in the car business, the dealership's profit is the consumer's loss. I'm not suggesting that the dealership be run without a profit, but in one case I heard about, the dealership made a 16 percent profit on a $25,000 car. That meant the consumer, the average Joe buying the car, paid about $4,000 too much.
While working as a car salesman I became impressed with the damage a bad car deal can do to the budget of an ordinary person. In one case, I participated in leasing a car to a couple at well over its value. I was haunted by the thought that this nice ordinary couple had trusted me, and I had let them sign a contract that would bind them for five years to a high-interest lease. I consoled myself thinking perhaps another dealer would have inflicted greater damage.
How did the car business get so screwed up? There's nothing else in our society that is sold with the consumer so conspicuously unprepared.
During the sales seminar I took, the instructor attempted to tackle the "Why is it this way?" question. He said that just after World War II there were a lot of people who wanted to buy cars, and there were a lot of people who had money, but there weren't enough cars to go around. So the car salesman didn't really have to "sell." Their job was merely to qualify customers, to find out who was really going to "buy today," so they could move on to the next customer. This set the tone for the business and it is still that way today.
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Part 9: LESSONS from the LOT
In this final installment, I'd like to sum up what I've learned, and offer a few things that can help you the next time you shop for a car. I've decided to divide this chapter into two sections: Car-Buying Concepts and Specific Recommendations. The Concepts are general thoughts underlying the car-buying process. In some cases these are simple, fundamental realizations that you might already know. But it doesn't hurt to revisit them before we move on to the Specific Recommendations.
CAR-BUYING CONCEPTS
Concept 1: The Stakes Are High
This realization hit me very strongly while I was selling cars — people can lose a lot of money by making the wrong choice when buying a car. This is a serious decision for the average household budget. If you are unprepared for the encounter with the salespeople and make a poor decision you can lose money. A lot of money. How?
Well, say Joe Consumer decides it would be nice to have a new car. Without doing any research he heads on down to the car lot and hooks up with a sharp salesperson. Joe Consumer might be talked into buying a car in too high a price bracket. He could also be switched to leasing without his knowledge or consent. And he might also put down too much money. In the F&I Room he might be talked into buying protection packages, road safety kits and extended warranties.
What would these mistakes add up to? Over the course of five years (the length of some lease contracts) this could mean he pays thousands of dollars too much for that car. This might convert into hundreds of dollars too much per month. Many people are on tight budgets. Paying a hundred dollars too much could sink the ship; certainly it would produce stress and prevent a family from saving or investing their money for the other necessities of life.
The monetary loss is only part of the problem here. People become angry, humiliated and resentful once they find out they have been deceived and overcharged. And yet, once they sign the contract, it is difficult — if not impossible — to unwind the deal.
I should add that there are many good dealers who wouldn't cheat or overcharge even a naive customer. But, sadly, there are enough unscrupulous dealers out there to make caution and suspicion necessary. I know that many of the salespeople I worked with would take an extra thousand dollars profit without a thought, then laughingly brag about it to the other salespeople. The management of the dealership rewarded this kind of profit taking and called it superior salesmanship.
Concept 2: Self Defense is Simple
OK, that's the bad news. The good news is that it's not that hard to protect yourself from severe economic loss. By doing even an hour's worth of research, by keeping in mind several simple concepts, the average person can be reasonably sure they won't be swindled. By doing an additional hour's research, they can get a pretty good deal. It's not that hard. In fact, some people find that they like the process once they learn how to handle it.
Knowledge is power. That's almost a cliche. But it holds this simple truth: if you know the numbers of the deal it will be hard for the salespeople to overcharge you. It's like going to a store and seeing a nice lamp for $30. Then you go to a second store and see the exact same lamp for $50. Now a salesperson approaches you and tries to talk you into buying their lamp at the higher price. Will you do it? Probably not, because you know the exact same lamp is sitting on the other shelf for $20 less. What can the salesman say to you to convince you that their higher price is justified?
Now let's extend this concept to car buying. If you wander onto a car lot without knowing how much the cars should cost, you have no frame of reference. As your reasoning power is reduced by a combination of breathing new car smell and test driving the car, you will begin to believe the car salesperson when he tells you the car is going to cost a lot but it will be worth it. Remember, the salesperson wants you to be excited about the car because then the rational side of your brain will become disabled. Just ask yourself this: if you buy today, how will you feel when you wake up the next morning? Is this a decision you can live with?
What car buying numbers do you need to know? Find out how much the dealer paid for the car you want to buy. Find out what cars like that are actually selling for. Find out what your trade-in is worth (if you want to trade it in to a dealer). And finally, if you decide to finance the car, find out what your monthly payment should be by shopping for a car loan before going to the dealership.
Concept 3: Profit Equals Commission
I never really thought of this until I sold cars but... Car salespeople earn their living by inflating the price of the car you are buying. The more they inflate the price, the bigger their commission. This might seem very obvious, but we tend to lose sight of it when the smiling salesperson greets us on the car lot. They make us think they have our best interests in mind. The good salespeople do have our interests in mind. The unscrupulous salespeople are thinking how your purchase increases their commission.
One of the dealerships I worked at had a sliding scale for commissions. The higher the profit, the higher the commission. Naturally, the salespeople tried to hit that point where the commission was bumped to the higher percentage. That might mean moving you into a higher level vehicle. It might mean increasing the profit by financing sleight of hand. In both cases, this smiling salesperson, with the personable air, didn't have your best interests in mind.
I believe in paying a dealer a profit for his car. I also believe in rewarding the salesperson for their expert help. But I don't think this justifies making an unfair profit at my expense.
Car-Buying Recommendations
Now we come to the nuts and bolts of getting a good car at a fair price. This isn't a tutorial, since we have this information already posted on the Automotive Business web site. Instead, these are guiding principles to help you navigate the choppy waters of car buying. These are rules I saw being broken all the time by the shoppers that turned up on the car lots where I worked
1. Use the Internet.
The Internet is an amazing tool for car shopping. It levels the playing field by giving accurate information to the consumer. It takes the anxiety out of negotiating. It forces dealers to slice profit because they must beg for your business. It allows consumers to comparison shop loans and leases, as well as extended warranties and insurance. It gives the consumer power. Use Edmunds.com to conduct research and our PowerShopper tool to solicit bids. Once you enter the information about the car you are looking for into the PowerShopper interface, the dealers will come to you.
It's likely that you will have to visit a car lot at some point in the car buying process (for the test drive, for example). The following recommendations are general tips that will help you if you insist on face-to-face negotiations with car salespeople when buying a new vehicle.
2. Don't be in a hurry.
This is a tough one because many people live busy lives with tight schedules. Their car breaks down and they have to do something about it this weekend, or on their day off, or at night. They might be overwhelmed by the problem and just throw themselves at the mercy of the car salesperson. Big mistake.
First, if your current car is on its last legs, consider sinking a little money into repairs so you don't have to make a panicked move at the car dealership. Yes, it's tempting to think of getting a new car and leaving the old heap behind. But caving in to this kind of impulse will cost you money.
If you can't fix up your old car, rent a car for a week. And make sure you rent the kind of car you are thinking of buying. There is no better way to test drive a car than to live with it for several days, using it for your daily commute or your typical errands. I guarantee you will learn something significant about the car that will help you make your final decision.
3. Walk away from any deal/salesperson you don't like.
If you aren't committed to this rule you will lose money. Car salespeople know that if you leave the car lot to "think it over" you might decide not to buy their car. So they pressure you to "buy today." This isn't good for you. It means you might buy the wrong car. It means you might agree to financing that doesn't fit your budget. It means you will probably pay too much.
If you have serious misgivings about the deal you are making, walk away. Similarly, walk away from any salesperson who seems too aggressive, overbearing, bullying, evasive or unreliable. There are plenty of good salespeople out there. Find one. And deal with that person until you have the car you want, at the best price with the right financing for you.
4. Know the numbers.
Yes, we already covered this under the heading of general concepts. Now let's look at it in a little more detail.
When you visit a dealership, and go into the sales room, the salesman will reach for a 4-square worksheet. They do this to keep track of the numbers in the deal that will affect their profit. Don't you think that if the pros do this, you should do the same thing to protect your money? If you don't, how else will you know what to pay for the car? What to take for the trade-in? What your monthly payment should be?
Using the Automotive Business to find out what the invoice, sticker and the Automotive Business True Market Value® (TMV) prices are for the car you want to buy. TMV® is a new concept developed by the Automotive Business.
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4. Know the numbers - continuation
It's a guide that provides you updated weekly pricing on what you should pay for a vehicle — without having to spend hours negotiating with a dealer.
Write these prices down. Then find the approximate price of your trade-in. Then figure out how much money you will have to borrow and how much your monthly payment should be. Consider the difference between paying cash, leasing and financing. Make sure you also find out about holdbacks, rebates and incentives.
Is your head swimming with numbers now? That's pretty normal (unless you're some kind of math whiz). That's why you should write all this down. Then, with the numbers in front of you, get out your calculator and crunch them. When they have been put through the wringer, you will get one gleaming, shiny number which represents what you should pay for the vehicle you want to buy. With that number in mind, set a range. Start low and increase your offer in small increments until they say the magic words, "We've got a deal."
5. Shop around.
Say for a second you didn't know any of the numbers. Say you were in a jam and had one morning to get a new car. You could probably get a good deal by shopping around. You can do this in person or on the phone — or even with e-mail.
What you do is this. Contact dealer number one. Tell the salesperson, "I'm ready to buy today but I want your best price on the car." When the salesperson gives you his best price, write it down. Or, if you are doing this in person, have him write it on the back of their business card.
Now contact dealer number two and do the same thing. Only, tell them you have already been to dealer number one and you got such and such price. Then, repeat the mantra: "I'm ready to buy today. But I want your best price." Naturally, they will try to undercut the first guy's offer.
Now contact dealer number three and do the same thing. By now you should have three offers. If you want, you can even go back to the first guy and see if he will whittle a few more bucks off his offer. If not, can the dealer throw in something else to make their offer more attractive?
The beauty of this is that the market will define itself in a short period of time. And when you're done, you will be confident that you got the best price possible. Incidentally, dealers hate it when you shop their offer. They hate it because it can get you a very good price.
6. The deal's not done until you drive off in your new car.
You don't have to be a jerk about it, but you should be on guard throughout the entire car buying process. The biggest place that people err is when they have struck a deal with the salesperson. They breathe a sigh of relief and think the dealing is done. But the buyer needs to stay alert for the F&I process. Extra charges can appear in the contract. There may be a problem with the condition of the car. All these things can be addressed if you have the right attitude. If anything crops up during the F&I process that doesn't jibe with your numbers you can still walk away from the deal.
7. Always remember that it's your money.
Car salespeople are good at making us feel obligated to buy from them. They serve us sodas in the sales room. They run to get the keys for the test drive. They brave their bosses wrath with our lowball offer. So, when it comes time to make a decision we're tempted to think we owe it to the salesperson to buy from them. Yes, we certainly do owe them our business — if the deal is fair. Don't do it just for the salesperson. Do it when the numbers make sense. After all, you may be signing a contract you will have to honor each month with your hard-earned money. How will you feel about it as the years roll by and the car begins to show its age. Thinking about that can be like a bucket of ice-cold water in the face.
Final Thoughts
The world of car buying is changing rapidly. Buyers are more informed. Dealers are more sensitive to their customers' satisfaction. But, like in many industries, the old ways die hard. So it is still important to be informed and to make a good decision when shopping for a car for yourself and your family.
Of all the advice I've offered, I'd just like to stress that it's important to remember that buying a car should benefit both you and the dealer. While I have focused on deflecting the sales techniques in the dealership, I don't recommend becoming overly defensive. If you deal fairly with the car salesperson, and you get the same in return, the transaction can be enjoyable — even exciting. It really should be. So, I wish all of you a great shopping experience and many years of driving pleasure in your new car.
The End
Glossary to "Confessions"
Car salespeople have their own vocabulary. It describes their customers, the deals they make and the day-to-day life on the lot. Here is a sampling of how they talk when the customer's not around.
Be-backs - A customer who leaves the car lot promising to return later, saying, "I'll be back," or some variation of that statement. "The guy was a be-back. But I think he meant it. I'll see him again."
Bumping - Raising the customer's offer for a car. "If Mr. Customer says he only wants to pay $250 a month, just say, 'Up to -- ?' He'll probably bump himself up to $300 without you doing anything."
Closer - An experienced salesman who is brought in to "close" the customer by making them agree to a deal. "If I worked with a better closer I'd have more units on the board."
Desk - This is the sales manager, not the place he sits. "Ask the desk if these rebates are still in effect."
F&I - This stands for the Finance and Insurance office where the documents are signed. The F&I salesperson usually will push products such as extended warranties, fabric protection and alarms. "The wait for F&I is two hours. Better stick with your customer so they don't leave."
Full pop lease - This is when a vehicle is leased at 110 percent of the sticker price - the highest amount allowed by most banks. "I got them into a full pop lease. I'll get a nice voucher for that."
GM - The General Manager. The GM is the head honcho at the dealership. He runs the business from day to day. "The guys were standing out on the curb drinking coffee so the GM called them into the tower and read them the riot act."
Green pea - A new salesperson. "The funny thing is, green peas can outsell the veterans. That's because they don't know how hard this job is."
Grinder - A customer who negotiates for hours over a small amount of money. "We were only $500 apart but the guy wouldn't sign. Man, what a grinder
Lay down - A customer who takes whatever deal the salesperson offers. "I quoted him monthly payments of $575 and he took it! I wish all the customers were lay downs like that
Mooch - A customer who wants to buy a car at invoice. "People are spending too much time on the Internet. It's turning them into a bunch of mooches."
Packing payments - Adding extra profit to the cost of a car. "This place I used to work got busted for packing payments. Next job I get is going to be in a no-haggle store."
The Point - The place on the car lot where the "up" man stands looking for customers. "The GM saw me standing on the point with my hands in my pockets. He went ballistic and sent me home for the day."
Pounder - A deal with $1,000 profit in it. "Doctor comes in and buys the top of the line model, fully loaded - and he pays sticker! That'll be a two pounder for me."
Rip their heads off - This describes taking a customer to the cleaners. "I stole their trade in, I sold them the car at a grand over sticker - I mean, I just ripped their heads off."
Spiff - A tip, kickback or payment of any kind, usually cash which is handed between salespeople. "I spiffed the F&I guy $20 bucks and he took my customers first."
Strong - This has a special meaning on the car lot. It means holding firm on your price and being a tough negotiator. "When they ask for your price you have to be strong. Hit 'em with high payments, then scrape them off the ceiling and start negotiating." (See also "weak.")
Tower - The office where the sales managers work. This is usually a raised platform allowing the managers to see over the roofs of the cars so they can watch customers and their salespeople. "Attention: All new car salesmen report to the new car tower!"
Turn over - Also known as "turning," this is the practice of passing a customer from one salesman to another. It is thought that this will prevent customers from leaving the car lot. The theory is that the customer might just have bad chemistry with the first salesman and he might like the next salesman. "I turned this guy to my partner and he wound up buying. I'll get half of the commission on the deal."
Up - A customer that walks on the car lot. The term probably comes from the order in which customers are taken, as in: "I'm up next." Many dealerships also have an up system. "We've got ups all over the lot, and you're in the back drinking coffee?!"
Weak - This describes being a weak negotiator or coming down too quickly on price. "The guy was weak so he only lasted a few months. How are you going to make money in this business if you give away cars?"
The End of "Confessions of a Salesman"
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********** Learn These New Car Buying Tips **********
10 Steps To Buying A New Car
Introduction - The following steps will tell you how to locate, price and negotiate to buy the car you want. If you still don't know what car to buy, read 10 Steps to Finding the Right Car for You and then come back after you have decided.
Step 1: Starting out - These steps will help you to locate the specific car you want, and at a price that is fair to both you and the dealer. By now, you should have done plenty of research to determine which is the best car to suit your needs. And, you should have a good idea of what to pay for the car you want. Now you need to narrow the research even more. You will soon be finding the exact car you want to buy — with the options you have chosen — and then you will be determining a target price to pay. If you have done your homework, this will be a fairly easy process with no unexpected surprises.
Buying a car is a big investment, but it can be exciting and rewarding, especially if you feel like you got the right car at a fair price.
Step 2: Using incentives and rebates - Today's new car market is crowded and competitive. Many new cars are offered for sale with attractive incentives to make you choose a particular model. In some cases, the cars with the best incentives are those that aren't selling very well on their own.
An incentive is anything that gives you an added reason to buy a particular car. Often, however, it comes in the form of a cash rebate or low-interest financing. A car might be selling for $22,000 but the manufacturer is offering $3,000 in customer cash for a final price of $19,000. In another example, a $22,000 car financed for five years at six percent would have a monthly payment of about $550. But with zero-percent financing, the payment is roughly $480. That's a huge savings to you.
Check the Edmunds.com Web site for the latest incentives and rebates available for the car you want to buy. You can also watch for TV and newspaper promotions but, remember, the incentives don't apply to all models and are not offered in all regions of the country. Furthermore, your credit must be very good to get the low-interest financing. And finally, keep in mind that there are some hidden incentives paid directly to dealers to push certain cars. Edmunds.com tracks this so-called "dealer cash" as well, and posts the information in the incentives and rebates section of our Web site.
Research what incentives, if any, are offered for the car you want to buy. Print out this information and keep it in your car-buying folder as you move to the next step.
Step 3: Pricing the car - Car salesmen will usually point to a car's "sticker price" as the amount you have to pay. However, the price the dealership is willing to sell a car for is often well below the sticker price. How do you know what to pay? Edmunds.com has created a valuable tool for car buyers called True Market Value (TMV®) pricing. Based on actual sales figures, TMV is the average price buyers are paying (also known as the "transaction price") for a certain type of car in your area. The TMV figures, found on Edmunds.com, are adjusted for many factors including options, geographic region and color.
To calculate TMV, begin by looking up the car you want to buy on Edmunds.com. Follow the prompts to arrive at a final TMV price with options for the exact car you are buying. Keep in mind that this price includes the destination charge, which is levied by all manufacturers. (However, the invoice price might vary in certain regions where advertising costs and other fees are included. Edmunds recommends paying the fees listed on the invoice, but questioning any advertising fees that appear on the purchase contract.)
Now it's time to factor in the incentives and rebates you researched and printed in the previous step. Take the final TMV price and deduct the amount of the cash rebate. In other words, you create your best deal based on TMV, and then lower it by whatever the rebate is. If you are going to use low-interest financing, calculate your final buying price, then use our payment calculator to find your monthly payment.
Print these figures — the TMV, the incentives and the monthly payment — and carry them with you for reference as you continue the car-buying process.
Step 4: Finding the exact car you want to buy - You should now have a very specific idea of the car you want to buy. This means you know the make, model, trim level, options and color. The more flexible you can be about these specifics, the wider the range of the cars you'll find available for sale. Ultimately, the ability to consider several versions of the same model can give you additional bargaining power. For example, a shopper might be very firm about the make, model and trim level, but could accept a variety of options and colors. If you're a shopper who definitely wants hard-to-find options and a specific color, it will be more difficult to make a great deal. Why? You have no leverage as a negotiator. You have to pay the dealer's price or try to locate another identical vehicle. Obviously, if you do find the exact car you're looking for, there's no need to volunteer this information to the dealership.
In any case, locate the exact car you want by sending e-mails to the Internet managers of dealers in your area. On Edmunds.com, you can simultaneously solicit quotes from multiple dealers. In many cases, you will have to follow up with a phone call. Say something like: "I'm looking for a 2003 Matsura Accell. I'm not too fussy about the color but I don't want black or white. I want ABS and side airbags. What do you have on your lot?" Often the salesperson will have to check his inventory and call you back. After a few phone calls you will have a good idea of how widely available the car is. If there are several dealerships offering the same car, you will be in a better position to make a good deal.
As you make phone calls and exchange e-mails, take careful notes. You should record information about each car you locate, including the color, options, and the dealership name. This will save time as you continue through the shopping process
Step 5: Test driving the car salesman - As you call dealerships to locate the exact car you want to buy, you can also test drive the car salesman. In other words, you can determine if this is a person you want to do business with. It's a good idea to consider this issue ahead of time, before you get to the deal-making phase of the process.
The first way to evaluate a good salesperson is to ask yourself if you feel comfortable dealing with them. Are they impatient and pushy? Or are they relaxed and open? If you asked them about a specific car's availability, did they respond to your needs? Or did they try to steer you toward another car simply because they have too many of that model in stock? Do they return your phone calls? Do they answer your questions in a straightforward manner? Or are they evasive and confusing?
By considering these issues you should have a sense of whether or not you want to buy from this salesperson. If you feel comfortable with the individual when researching by phone, and if the dealership does indeed have the car you're interested in, set up a time to test drive the car, preferably when the dealership will not be very busy, such as a weekday morning. Before heading to the car lot, review all your notes and make sure you bring your car-buying folder. This might include your checkbook, registration and proof of insurance. Keep in mind that you're bringing these items so you'll be ready to buy a car if you get a fair deal. Don't feel obligated to purchase a car simply because you have all the necessary paperwork with you or because you test drove the car.
Step 6: If you are trading in your old car... - If you are trading in your old car to a dealer, you will probably not get as much money toward the price of a new car as you would have if you'd sold it yourself to a private party. However, trading in offers some advantages. You can solve all of your car-buying problems in one visit to the dealer. You can unload a hard-to-sell car with no newspaper ads, DMV lines or tire-kicking buyers involved. In some states, you will even pay less sales tax on a deal that involves a trade-in.
Begin the process by looking up your car's trade-in value on Edmunds.com. The Edmunds.com True Market Value® (TMV®) Used Vehicle Appraiser will also give you trade-in values. After you plug in all of the vehicle's information (mileage, options, condition and colors) you will get a specific trade-in price. This will often be slightly different from the offers you get once you are on the car lot. At a dealership the value assigned to your trade-in varies based on the time of the month, the dealer's specific inventory and the used car manager's mood, but at least TMV will give you a rough idea of what your trade-in is worth.
If it's important to you to get the maximum value for your trade-in, you should visit several dealerships and solicit bids. Tell the salesperson that the sale of a new car will be contingent on the amount he or she will give you for your trade-in. Also, tell them you are visiting several dealerships. With a little legwork, you may be able to boost the price you get for your old car by several hundred dollars or more. Remember, the extra effort you spend in getting competitive bids is far less than what it would take to advertise, show and sell the car yourself.
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Step 7: Negotiating for your lowest price - Many buyers like to handle the question of price before they even go to the dealer. Internet salespeople are willing to discuss price over the phone — even by e-mail. This wasn't the case a few years ago when the salesperson wanted you in his office before he would get down to brass tacks and talk price.
It's quite possible that, in your calls to various Internet departments, the selling price of the car has already come up. Often Internet salespeople will volunteer the selling price of their car since they know this is the make-or-break factor in most buyers' decision making process. If the price they've quoted is at or below Edmunds.com's TMV, then you are already in the right range to buy the car. If you want to try to improve the deal, you have a few options.
Everyone has their own idea of what makes a good deal, but most people just want to know they got a fair price. Here, TMV will be your best guide. If you want to try for a rock-bottom price, start by getting bids from three local dealers. Follow this up by taking the lowest price, calling the two other dealerships and saying, "I've been offered this car at this price. If you beat it I'll buy it from you." They almost certainly will. However, keep in mind that you can't play this game forever. Eventually, they will give you a take-it-or-leave-it price. For more on getting the best price, read Negotiating 101.
Also, be warned that if you ask the dealer to cut his profit, he might try to take it back somewhere else. Remember, a good deal isn't just the lowest selling price. It's the lowest total out-the-door cost on a car that meets your needs. This means that to ensure you get a fair deal you have to be vigilant throughout the entire purchase process, even after you and the salesman agree on a price.
Step 8: Closing the deal - If you feel good about the price you have been quoted, it's time to take a look at the big picture. Many buyers focus on the cost of the car and ignore the related expenses. Besides the cost, you will have to pay sales tax and various fees which vary from state to state. These expenses can be estimated and totaled with the Edmunds.com calculators.
The simplest way to estimate total cost is to ask the salesperson to fax you a worksheet and invoice before you go to the dealership. This way, you'll be able to review the figures in a relaxed environment. Compare the numbers from the dealership to those you have calculated and the TMV prices on Edmunds.com.
In some areas of the country, dealers have costs that don't show up on Edmunds.com invoice prices. This means the Edmunds.com invoice price of the car you are researching might not exactly match the dealer's invoice. Don't panic — and don't begin making accusations. Edmunds.com can't track all regional fees, such as advertising costs. So, as a rule of thumb, consider the charges on the dealer's invoice to be nonnegotiable. However, if extra fees are written into the contract (such as "D&H" or "Administrative Costs") which seem bogus or redundant, ask to have them removed, or say you will take your business to another dealership. For more information about this crucial point in the process read Invoice Scams and Sudden Extras.
Step 9: Reviewing and signing the paperwork - At the dealership, you will be presented with the contract for your new car and a dizzying array of forms to sign. This might be done by the Internet salesperson you have been dealing with, or it could be done in a separate office by the finance and insurance (F&I) manager. If this happens, the F&I manager might try to sell you additional items such as extended service contracts, fabric protection, alarms or a LoJack vehicle locator. In most cases, we recommend turning down these extras — with the possible exception of the extended warranty. While we don't feel that extended warranties are a good value, it does provide peace of mind to some buyers. Additionally, it is worth noting that some states allow up to 60 days after purchase to cancel an extended warranty, but you should check local laws to confirm your options in your area.
To prepare yourself for the kinds of products that might be pushed on you, or inserted into the price without your knowledge, read High-Priced Dealer Add-ons.
If you have already seen a worksheet for the deal you've made, the contract should be a formality. Make sure the numbers match the worksheet and no additional charges or fees have been inserted. You will also be asked to sign various forms that register your new car and transfer ownership of your trade-in. Understand what you are signing and what it means. Ask questions if you don't understand, and don't ever feel like you have to hurry. Buying a car is a serious commitment and it's the F&I manager's job to ensure you are comfortable with every document involved. Remember, once you have signed there is no going back.
Step 10: Inspecting and taking possession of your new car - Most dealerships detail the car and provide a full tank of gas. You will have one more chance to inspect the car before you take possession of it. Make sure you walk around the car and look for scratches in the paint and wheels or dents and dings on the body. If you are paying for floor mats make sure they are included. If anything is missing, or if any work needs to be done, ask for a "Due Bill" that puts it in writing. You will then be able to come back and get the work done later.
As you drive away inhaling that new-car smell, there is only one more thing to be done: enjoy your new car.
Checklist -
Decide how much you have to spend on your new car purchase.
Check to see what incentives and rebates are available on the car you want to buy.
Print out the Edmunds.com TMV price on the car you want to buy (adjusted for options, color and region).
Look up Edmunds.com Cost to Own for the car you want to buy.
If you are financing the car, uses the payment calculators to determine the monthly payment for the car you want to buy (and remember to apply the incentives to the purchase price).
If you haven't already done so, test-drive all the cars you are considering buying.
Contact the Internet department and simultaneously solicit quotes from multiple dealers.
If you are trading in your old car, check its Edmunds.com True Market Value and print out this information.
Call the Internet manager to negotiate the best price of the car you want to buy.
Once you've reached a good price, ask the salesperson to fax you a worksheet showing all the prices, taxes and fees.
Bring your worksheet with you to the dealership so you can compare these numbers to the figures on the contract.
Inspect the car for dents, dings and scratches before taking final delivery.
********** The End **********
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********** Learn These New Car Leasing Tips **********
10 Steps to Leasing a New Car
Introduction - The following steps will tell you how to locate and negotiate a fair lease rate on the car you want. If you still don't know what car to lease, read 10 Steps to Finding the Right Car For You and then come back after you have decided.
Step 1: How leasing works - Leasing a car is like renting a car — but for a longer time period. Unlike buying, you never actually own the car and you have to give it back at the end of the lease. Leasing became popular in the 1990s because cars became too expensive to buy for many people. Leasing allows a person to drive a brand-new car and make lower monthly payments, thus making the "new-car experience" more accessible to more people. Finally, leasing can offer tax breaks for certain occupations.
In 10 Steps to Finding the Right Car For You we talked about the pros and cons of leasing. It might be a good idea to review those points now. Remember that, while leasing might not save you money in the long run, it could fit more easily into your budget on a monthly basis. Also keep in mind that some people find leasing to be confusing since many of the terms are different. We'll do our best to quickly and clearly explain how to make leasing work for you in the following steps.
Step 2: Checking incentives and special lease deals - Car manufacturers commonly offer lease specials. This is a good way to shop for a leased car because it can save you even more money. However, the specials might have hidden costs that are not clearly identified in the lease ad. You should always check to see if the promised monthly payment includes sales tax and fees. Also, does the advertised lease require a large down payment (sometimes called a "cap reduction payment" or "cap cost reduction"), bank fees and a security deposit? What about the annual mileage limit? These are questions you want answered long before you're closing a lease deal.
Edmunds.com compiles and regularly updates a list of lease specials. Check the "Incentives and Rebates" section of the site to see what is being offered in any given month. Be sure to confirm the specific make, model and geographic region that the incentive applies to.
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Step 3: How long should your lease be - It is possible to lease cars for two, three, four or five years. However, the three-year lease is the best choice for most people. The majority of carmakers offer three-year bumper-to-bumper warranties. If your lease is for three years you will always be under warranty without paying extra for an extended service contract. Furthermore, a car really begins to show its age at about three years — right at the time the lease is expiring. Remember, one of the reasons for leasing is to drive a new, or nearly new, vehicle on a constant basis. Why would you lease for five years and be forced to deal with extended warranty fees and higher maintenance costs? If paying for these items doesn't bother you, maybe you should consider buying the car.
Of course, everyone wants a low lease payment, and extending the length of the lease will drop the monthly cost. But extending the lease means you're investing more and more money into a vehicle that will never be yours. It's better to shop aggressively for a competitive lease deal and keep the length of the contract to three years.
Step 4: Estimating your lease payments - A lease payment is calculated from many different numbers and can be difficult to understand. However, you should attempt to estimate your own lease payment before you go shopping to avoid paying too much. In the old days (like, five years ago), this meant an hour or two with a calculator. Now, the process has been streamlined by the Internet.
On the Edmunds.com homepage look for the link to "Calculators" in the directory. This suite of calculators allows you to generate your own lease payments based on purchase price, lease length, interest rate and more. You can even use the same figures to create a side-by-side comparison to see what it would cost to buy the car. When you are done, print out the results and keep them with you in your car-buying folder as you continue shopping.
Step 5: Finding the exact car to lease - If you followed the "10 Steps to Finding the Right Car for You," it should be obvious which car you want to lease. This means you know the make, model, trim level, options and color. The more flexible you can be, the better the lease deal you will be able to make. For example, a shopper might be very firm about the make, model and trim level, but could accept a variety of options and colors. If another shopper definitely wants hard-to-find options and a specific color, it will be more difficult to make a great deal. Why? You have no leverage as a negotiator. You have to pay the dealer's lease rate or try to locate another identical vehicle.
In any case, locate the exact car you want by sending e-mails to the Internet managers at dealerships in your area. On Edmunds.com, you can simultaneously solicit lease quotes from multiple dealers. In some cases, you may have to follow up with a phone call. Say something like: "I want to lease a 2005 Matsura Accell for three years. I'm not too fussy about the color but I don't want black or white. I want ABS and side airbags. What do you have on your lot? And can you give me a lease payment?" Often the salesperson will have to check his inventory and call you back. After a few phone calls, you will have a good idea of how widely available the car is. If there are several dealerships offering the same car, you will be in a better position to get a rock-bottom lease payment.
As you make phone calls and exchange e-mails with the dealership's Internet manager, take careful notes about the lease quotes you receive. You should have already calculated your lease payments yourself using the Edmunds.com lease calculator . Now, compare the quotes you get to your own calculated lease payments. Record the information you receive about each car you locate, including the color, options and the dealership name. This will save time as you continue to shop for a good leased car.
Step 6: Test driving the car salesman - As you call dealerships to locate the exact car you want to buy, you can also test drive the car salesman. In other words, you can determine if this is a person you want to do business with. It's a good idea to consider this issue ahead of time, before you get to the deal-making phase of the lease process.
To evaluate the salesperson, ask yourself if you feel comfortable dealing with him. Is he impatient and pushy? Or relaxed and open? When you asked him about a specific car's availability, did he respond to your needs? Or did he try to steer you toward another car simply because his dealership has too many of that model in stock? Does he return your phone calls? Does he answer your questions about leasing in a straightforward manner? Or is he evasive and confusing?
By considering these issues, you should have a sense of whether you want to lease a car with this salesperson's assistance. If you feel comfortable with the individual when researching by phone, and if the dealership has the car you're interested in, set up a time to test drive the car. Preferably, when the dealership will not be very busy, such as on a weekday morning. Before heading to the car lot, review all your notes and make sure you bring your car-buying folder. This might include your checkbook, registration and proof of insurance. Keep in mind that you're bringing these items so you'll be ready to lease a car if you get a fair deal. Don't feel obligated to lease a car simply because you have all the necessary paperwork with you.
Step 7: The final test drive - When you arrive on the lot you will want to take a careful look at the car you are planning to lease. You should also drive the car one more time. You might have driven several other cars during the "10 Steps to Finding the Right Car for You" phase, and need to refresh your memory. If you specified several options — such as side airbags or ABS — check the window sticker to make sure they are on the car you are getting ready to lease.
If everything checks out, it's time to make a deal for your lowest lease payment.
Step 8: How to negotiate a lease payment - Negotiations can be handled several ways. If the car is widely available, contact your local dealerships and solicit bids (as described in Step 5). Take the lowest bidder, call the other dealers, and see if they can beat that price. If not, you are at rock bottom.
If the car is harder to find, and you are on the lot, you can still refer to the lease payments you calculated at home. If the lease quote from your salesperson matches your estimate, you're probably getting a fair deal, but make sure the numbers and terms match your calculations. Be especially sure to check the down payment (we recommend a zero down payment), the term of the loan (we recommend three years), the monthly payment and the annual mileage allowance.
In the past, Edmunds.com recommended that the best way to get a good lease payment was to negotiate the lowest selling price for the car (using True Market Value pricing as a guide). Once that was set, you would get the salesperson to draw up a lease payment based on that figure. The thinking was that if the salesperson knew you were leasing, he would focus on the monthly payment while ignoring the negotiated price. He might even try to confuse you with leasing jargon. But the reality is, if you're happy with the down payment, monthly payment and mileage allowance, the purchase price of the vehicle is probably right. Keep in mind, however, that if you think you will want to buy the vehicle at the end of the lease, you should also check the "residual value" to make sure it is a realistic figure.
Whichever method you choose to negotiate, it is a good idea to ask the salesperson to fax you a worksheet, detailing all the costs before you go to the dealership. This will allow you to review the figures in a relaxed environment. Compare the numbers to those you have calculated and the True Market Value prices of cars listed on Edmunds.com.
Step 9: Reviewing and signing the paperwork - At the dealership, you will be presented with the lease contract for your new car and a dizzying array of forms to sign. This might be done by the Internet salesperson you have been dealing with, or it could be done in a separate office by the finance and insurance (F&I) manager. If this happens, the F&I manager might try to sell you additional items such as extended service contracts, fabric protection, alarms or a LoJack vehicle locator. In most cases, we recommend turning down these extras. To prepare yourself for the kinds of products that might be pushed on you, or inserted into the price without your knowledge, read High-Priced Dealer Add-ons.
If you have already seen a worksheet for the lease deal you've made, the contract should be a formality. Make sure the numbers match the worksheet and that no additional charges or fees have been inserted. You will also be asked to sign various forms that register the new car for you. Understand what you are signing and what it means. Ask questions if you don't understand, and don't ever feel like you have to hurry. Leasing a car is a serious commitment and it's the F&I manager's job to ensure you understand the documents involved. Remember, once you have signed there is no going back.
Most lease cars are based on the owner driving 12,000 miles a year. If you drive farther than this, you are charged from 10 to 15 cents for each mile over the limit. If you think you are going to drive farther than the allowed mileage, you may be able to buy extra miles up front. Usually, you can buy extra miles at five cents per mile and have this rolled into your lease payment. This pay-as-you-go approach prevents any unpleasant surprises at the end of the lease. (Check Home part 3 for continuation)
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