Many of us have been at car dealership and have been drained by a salesperson during price negotiations for purchase of a new car. Most people give in too easily or do not negotiate at all to avoid dreadful act. This only means more money in car dealers’ pocket, while you are out of several thousand dollars! Yes, they make that much in profit per car.
This article unveils dealer’s selling tactics and how you can get around them. But before we dive into new car buying tips, we need to understand what makes up dealer’s profits.
In addition to MSRP (manufacturer suggested retail price), which is dealer’s cost for car plus an additional 20-25% profit, a dealer also gets financial incentives from manufacturer when a new car is sold. This is called Holdback.
Depending on car, dealers can make hundreds on each car through holdbacks. Dealers also get additional incentives and bonuses on selling a car before end of month and/or quarter.
A shrewd dealer can make several thousand on a new car even by selling it at invoice price. This is how new car buying can become tricky for consumer.
Ready to learn how not to put a dent in your wallet on your next car purchase? Here are four tips to get you started. Each one is a dealer tactic to watch out for.
1. The Guilt Trip
As you may have noticed, every desk in a dealership has photos of salesperson’s family, instead of photos of cars. Midway in negotiation, sales person will bring them up and make it look like his little commission check can hardly pay for his daughters college and little Bradley’s braces.
A seasoned salesperson will soon have you feeling guilty for driving price down and hurting his commission. Watch out not to fall for this tactic, since you already know about holdbacks and incentive programs from manufacturers.
2. Wearing You Down
Come prepared to spend half a day at dealership or pay whatever dealer asks for. Car Dealers are trained to delay and tire you out to point where you give in and accept their price just to get out of there.
After you make your offer, sales people typically claim they would have to run it by their manager. You may then have to re-start negotiating with manager, who is also a seasoned salesperson. This dance goes on for a while until you give in.
Remember, there are multiple dealerships in a city, so they need you more than you need them. Demand to speak to manager after a certain time period or threaten to leave. Because you are devoting a lot of time to bargain with dealer, they know you are a serious buyer, so they will not let you leave. The earlier you can speak with manager, faster you can leave.