New Car Buying Myths are Not Taught in School!
As a former new car salesman, I’ve noticed prospects mistake “lowest price” for “best deal.” Why? They put too much emphasis on price or they haven’t done their homework. Here are facts to explode old assumptions and myths allowing you to honestly get the best deal on a car you want with great service.
- Don’t rush or allow yourself to be rushed. Mistakes will not be in your favor.
- Do all your homework before you talk money with any salesman.
- Be respectful of the sales person. He is just trying to make a living while helping you.
Let’s deal with some auto buying assumptions and myths:
Top 5 Car Buying Myths
Myth 1 – The best day of the week to buy a new car is Saturday. WRONG!
Saturday is the busiest day. Sales people will rush you to buy. But with no rush hour traffic, it’s a great day to test drive. Select your car on Saturday, but make your purchasing appointment on the slowest days Tuesday thru’ Thursday. If you have to buy on Saturday, be at the dealer by 10:00 a.m.
Myth 2 – Best prices are at month end. WRONG!
Manufacturers give incentives that start on the 1st of the month but may improve on the15th. But, wait for the last day and your desired car/color/features might not be in inventory. (It can take up to a week for your dealer to find one and put it into inventory.) Remember, never allow yourself to be rushed! You’ll be forced to accept less than perfection or lose the price advantage.
Myth 3 – You get the best deal at year end. WRONG!
The best deals are nearing model year end. The manufacturers help their dealers by giving their best incentives to make room for next year’s model, plus there’s an ample supply of models and colors.
Myth 4 – You get a lower price from the dealer where you are getting serviced. WRONG!
Dealerships are actually made up of 3-5 separate businesses. Each entity needs to meet the owner’s profit goal. “New Car Sales” doesn’t care where a car is serviced, while “Service” doesn’t care where you bought the car. Key: New cars can be serviced at any authorized dealer.
Myth 5 – Every car salesman wants to steal your money. WRONG!
Honest salesmen outnumber the dishonest at least 5 to 1. Surprise! Customers buying cars are far more dishonest. New salesmen are taught on day one: “All Buyers are Liars.” This, too, is wrong. However, a large percentage would sell their Mother to get a lower price.
3 Car Buying Myths that are True
6 – You can get stuck with a bad salesman at a dealer! TRUE.
The first person who gets your name and phone number enters it into the dealer’s Customer Relationship Manager (CRM). He gets ½ commission of anything you buy. Don’t like or trust him? He still gets it. Now, other salespeople won’t expend much effort to help you, since they can only earn ½ commission, unless they plan to make big money on you.
Advice: Don’t give your name to just any salesperson. Find a good one and stick with them. If they get 100% commission, you’ll get their very best service.
7 – Used Car Salesmen make more than New Car salesmen! Generally, TRUE.
Besides selling you on all the features and benefits of the new car you’re going to purchase, new car salesmen easily spend 3 hours with corporate-imposed minutia. These include special forms, instruction manuals, customer training, then making certain the car is prepared to jewel-like perfection. The reward for this effort is often as little as $100. Used-car salesmen close the deal, hand over the keys, the customer drives off and they often make $400 to $2000 – Quick and Simple. They report to no higher entity and make more per car.
Tip: If you’re purchasing a “Pre-owned” (Used) Car, don’t just make certain it is in great condition. Make certain it doesn’t have a bad odor inside. If you smoke or don’t have a good sense of smell, before you buy, have someone with a great sense of smell check out the vehicle. Dealers try to cover-up bad odors (including body odor) with an “Ozone” treatments. But the smell comes back and you are stuck!
8 – I should own my new car. MAYBE!
Obviously, buying a $20,000 car that will in 10 years be worth only $1,000 or 1/20th its original value is a poor investment. If you have $20,000, it’d be smarter to put it into property or gold. But, you do need a transportation. Therefore, many people choose a lease.
Fact: Did you know that only 19% of car owners will ever own their car? Did you know – typical
owners of expensive cars lease? These include: Jaguar – 98%; Mercedes – 80%; 70% Mercedes, Lexus and BMW owners)? Did you know at the end of 3 years you can usually buy your car for the same amount you owed if you had purchase it? If you just lease, after 3 years you can just walk away from it, IF it isn’t worth what you’d need to buy it.
Years ago, unscrupulous auto dealers concocted “open-ended” leases requiring customers to pay huge fees at the lease end. The US Congress “Truth in Leasing” Act curtailed that practice.
Who should consider leasing?
Since more cars have 3 year/36,000 mile warranties, anyone who doesn’t want to worry about expensive repairs or typically changes cars every 3 years is a great candidate. So are young families or those planning to start a family because your automotive needs will change. Finally, those who are not expecting to drive excessive miles (over 15,000 a year) can benefit with a lease. Honda and Toyota leasing programs are good as are GM’s. At this time Ford doesn’t have one.
Who shouldn’t lease?
If you will definitely will keep the vehicle over 5 years, don’t lease. Here’s other poor candidates: Delivery vehicles and those to have significant modification of looks or designs; vehicles that will drive over 30,000 miles yearly and cars to be transported out of the U.S.
include getting a bank lease. Because they don’t sell cars, a large disposition fee at lease end can cost you $700-$2000. (This additional surprise fee will be collected when you turn the car in.) Another is a bad residual value, which can cost you dearly. Finally, the dealer can play around with the money factor, which is based the interest rate, but looks very low. One problem is this money factor is hidden, so can cost you a higher interest rate.
- MSRP – Manufacturer’s Suggested Retail Price
- Doc Fee – This refers to a Document or Administrative Fee that dealers like to include. These range from $99 to $249 and are added onto the bottom of the contract or by the Finance/Business Manager. Are these justified? Probably not! You can choose to not pay them.
- Invoice – This is the price that the new car department is charged for the model.
- Hold Back – This indicates money below invoice that is used to pay administrative salaries, carrying charges for keeping a car in inventory, heat, electricity, filling your tank with gasoline, advertising, telephones, building rental, etc. This money is rarely given to a new car buyer.
- Mini – This is the lowest amount that a salesman can make by selling 1 car. It is usually around $100 and not much for having to spend 4-5 hours putting you into ypur new car.
- UP – A salesman’s turn to approach a customer. If customer is just wasting time, the salesman feels cheated, loosing his turn in line. For fairness sake please don’t just go into a dealership and waste a salesman’s time. He has to feed a family just like you.
- CRM (Customer Relationship Manager) – Whoever puts your name into the system, gets ½ of the sale no matter who makes the actual sale.
- Over the Curb – (Burnin’ Gas) The customer has picked up the car and has driven it into the street. It’s now theirs, so everyone can collect their commission.
- Booger – A customer who is considered a waste of time for a salesman. Customer doesn’t have any money, although pretends to be interested in purchasing. Wise salesman quickly realizes this and hands the customer over to another unsuspecting salesman.
It’s hoped this article has demystified the purchase of new cars and put to rest some old buyer’s myths. For a step-by-step new car purchasing procedures, here’s a link to “How To Buy A New Car And Not Get Ripped Off: Tips From An Insider” posted on ChristianPF.com.