Statistically, most people would rather get stabbed in the eye with a steak knife than talk to a car salesman. We’re just barely joking about that — a poll found that 83 percent of Americans dread having to buy a car, and 20 percent said they would give up sex for a month if it meant they wouldn’t have to deal with the soul-crushing haggling experience.
Well, I’m a god-forsaken car salesman, and despite my gold tooth and plaid sports coat, I don’t actually want to screw you over. I’ve been hocking cars for over a decade now, so I know all the ins and outs of car sales. Here’s what you should know:
If One Dealer Seems to Have a Better Price, Read the Fine Print
First off, if you see a dealership with a «too good to be true» price, look closer. There are lots of ways they can screw you without you ever knowing it.
One thing to keep in mind is that where Walmart can undercut competition because they can always find merchandise from a lower-paying sweatshop, every car dealer pays the exact same price for their cars, regardless of where they’re located. We even have a database that we log our sales into, so dealerships see one another’s prices. Likewise, every dealer has to play by the same rules when it comes to manufacturer incentives like cash-back rebates and financing offers.
Why does that matter to you? Well, it means that if one dealership is offering the same car for $1,000 less than another dealer, either they’re willing to take $1,000 less in profit out of the goodness of their hearts or they’re not telling you something. Guess which is more likely!
So, there are a bunch of ways dealers can seem like they’re coming down on the price or adding free stuff without actually doing it. For instance, their advertised prices frequently have a miniscule disclaimer at the bottom that says «all incentives applied.» What this means is that all of the little bonuses and extra discounts that a dealer can offer have been subtracted from the advertised price, but that doesn’t mean you’re necessarily eligible for them. So, that price may include incentives for things like being a recent college graduate or a bonus for brand loyalty. Unless you just graduated and already own a Ford, those incentives don’t apply to you, and the sweet price you thought you were getting just shot up $1,250. Also, dealers commonly offer either a cash-back bonus or low-interest financing, but not both — even if the sign out front has both offers prominently displayed.
Other shady dealers will sweeten the deal by offering additional items like paint protection, extended warranties, or gap insurance while telling you not to worry your sphincter over it, because it’s all «included in your payment» — implying, of course, that you’re getting it for free (since it’s under the umbrella of what you’re already paying for). But wait, did you actually ask for that stuff? And if you say you don’t want it, shouldn’t your payment be lower? Yeah, what the dealer is pretending to throw in like the toy with your $30,000 Happy Meal is called payment packing, or «charging you for shit you didn’t agree to buy.» If you’re thinking to yourself that payment packing should be illegal, it actually is in some states, and as we all know, once a law is made, nobody ever, ever breaks it.
The point is, unless you’re getting the price minus those incentives and with the interest you will actually be charged over the life of the loan, you’re not getting the price — you’re getting an irrelevant string of digits.
Negotiate on the Total Price of the Car, Not the Monthly Payment
If you’ve ever bought a car from a dealership, you’ve almost certainly had the dealer sit you down and watch as he pulled out a piece of paper onto which he drew four squares. This is the beginning of the price negotiation phase, and you are about to see all of the salesperson’s mystical mind tricks on display.
That thing he drew on the paper is the now-infamous four-square worksheet. The four boxes are for the price of the car, the monthly payment, the down payment, and the trade-in value of your old car. The salesman will bounce from square to square, scratching out and rewriting numbers to keep you from getting too focused on one block, if that block is starting to upset you. The numbers are all interconnected through moderately simple math, but if you don’t have a calculator in front of you (like the salesman does), it’s all just nonsense. So, your eye will be drawn to the one square with the most easily understood number: the monthly payment.
This is by design — the dealer knows that $25,000 is a much bigger and scarier number than $350 (a month, for five years). It also allows the salesman to put things into more abstract terms. If you’re haggling over $30 on the monthly payment, the salesman might pitch it to you by saying something like «$30 a month is only one bottle of Coke per day.» Why, that’s not much at all! I’m so sorry for having been such a miserly bastard. Please, accept my money as a token of my contrition.
Wait a minute — if $30 a month is such a trifling amount of money, why isn’t he cutting it from the price? That’s because over five years, that «bottle of Coke per day» adds up to $1,800 (not including interest), and no dealer is going to let two grand fly out his door. So, for the second time, the advice is to focus on the actual, total price of the car.
After all, that’s what’s actually going to come out of your pocket; everything else is just trying to make it fit into your monthly budget without resorting to catching your food. You’re not renting the car, you’re buying it. It makes no sense to be OK with a higher price just because they stretched the payments out for longer, unless you think that before the term of the loan is up that society will collapse and all currency will become worthless in the post-apocalypse.
The Internet Is Your Trump Card
If you’re pricing a new car, Edmunds.com is a godsend. On top of having reviews on essentially all the cars, they have another thing called the True Market Value tool. Remember that database I mentioned with all the final prices of every car a dealer sells? Edmunds has access to that, so if you enter your ZIP code and what car you’re looking for, it will spit out a bell curve of what you can expect to pay for it. And in addition to that, you can also find out every incentive, rebate, and financing offer that is being offered for each model so you can work out ahead of time which combination of incentives works best for you.
If you’re undecided about what car you want, you can still avoid visiting all the prospective dealers, since even if you do manage to walk away (remember, the entire point of these sales tactics is to ensure you don’t make it to the second dealer), test driving a car virtually guarantees a deluge of emails, phone calls, and everything else short of flaming bricks through your window, all trying to pull you back onto the lot. But since the test drive is one of the most important parts of buying a car, CarMax is a good alternative. Because they deal with used cars in large volume, you can test drive all the cars you’re considering in one trip, and since CarMax sales people aren’t paid on commission, you don’t have to worry about being pestered with Christmas cards and boiled rabbits later on.
Once you are ready to dance with the car-devil in the pale moonlight, that’s still no reason for you to actually talk to a human being. Instead, start emailing dealerships and getting quotes on the car you want. Not only will you be less tempted to make an impulsive decision (that car does look pretty damn sexy up close …), but it reverses the entire dynamic, because the dealer knows that you’re probably emailing multiple dealerships, so now the pressure is on them instead of you.
Our dealership offers special Internet pricing, because someone who is emailing us is less likely to need a car right away than someone who walks into the showroom. If you play your cards right, you should only have to step on the lot to sign the paperwork and pick up your car.
Car Buying Isn’t Nearly as Bad as It Used to Be
I mentioned earlier that payment packing had been made illegal in parts of the USA, and in general there is a trend of going away from the shady shit I described. The biggest reason for that is the Internet — the information available to consumers has leveled the playing field, like this amazing expose written for Edmunds by a reporter working undercover as a car salesman. Customers are too well-informed these days to be screwed over like they used to, so salespeople who are unable to adapt don’t survive. Also, in the wake of the economic collapse of 2007 (and the near-collapse of several automakers), cash-strapped customers were less willing than ever to put up with a salesperson’s shit.
So these days, a lot of dealers have moved away from the traditional profit-based commission structure and replaced it with a flat commission. Salespeople are paid a fixed amount for every car sold, regardless of how much profit the dealership makes, so they have no incentive to screw you on the price.
And, over time, the fast-talking, shady salesman types are being pushed off the sales floor. When I started working in 2002, the dealership was full of those people. Not long after, a new manager took over and fired every salesperson except me, because they saw which way the wind was blowing.
Now that I run a dealership, I control what kind of salespeople work there. I always make interviewees read that Edmunds expose and tell me what they thought of it. If I get any hint of them condoning the sales methods, I show them the door. Many dealership managers (myself included) are very hesitant to hire salespeople who have worked at other dealers simply because we don’t want them infecting the staff with shady tactics and bad habits (you’ll notice how young most of the salespeople are now — this is why).
So, what happened to all of those sleazy salespeople? If you’ve bought a house or a bed recently, you already know — a lot of the old school salespeople moved on to real estate, and after the housing bubble, most now (curiously) work in flooring and mattress sales. Hey, have you heard that you need to replace your mattress every eight years because it fills with dead skin? Yes, there’s always a market for bullshit.
«So,» you’re probably asking, «if that’s true, why can’t I just buy a car for a set price off the Internet, the way I buy every fucking other thing in my life?».
A Shocking Amount of Customers Prefer the Haggling
A survey found that 90 percent of consumers would be more excited about buying a car if it was a haggle-free experience. This dovetails nicely with the desperately emerging trend of «no-haggle» car sales, which is exactly what it sounds like: the price of the car is set, there’s no negotiation, take it or leave it. So if customers hate haggling, and dealers know they hate it, why does it continue?
Well, it’s kind of a self-perpetuating thing — remember, the customers have been taught over the course of decades to assume that they’re getting screwed if they take the advertised price. So if the dealer says, «Let’s not haggle!» a large percentage of customers nod and say, «Ah, yes, it’s the infamous ‘no haggle’ haggling technique! Well played, sir!»
This isn’t a hypothetical for me — I ran a no-haggle dealership for a while, and while the survey claims that 90 percent of customers want haggle-free buying, approximately 100 percent of customers insisted on freaking haggling. It wasn’t like the prices were so inflated that they felt forced into it — I marked all the cars below the Edmunds TMV and below what people were frequently paying at other dealerships. It didn’t matter — the dealership ultimately closed simply because customers could not accept at face value that I was offering them a good deal.
And some people just seem to like playing the game. Not long ago, I had a gentleman on the lot, and after several hours with him, we had negotiated a good price on a car. Just as were getting ready to close, he informed me that a competing dealership had quoted him the same car for less money. When I looked at the quote, I pointed out the aforementioned fine print that said «all incentives applied,» but he insisted that the other dealer had promised he could use both the cash-back bonus and the 0 percent interest. Even after I showed him that all dealerships were strictly forbidden from doing that, he decided to check out, but promised that if it turned out to be a scam, he would come back.
I checked a few days later and saw that this guy wound up buying the car from the other dealer for $200 more than we had been offering, just so he wouldn’t have to come back and admit he was wrong. Why? Did he think I was going to mock him for it, or that I wouldn’t honor our original agreement as punishment? Fuck no, I don’t care about that, I wanted to sell the damn car! On top of that, he just reinforced a shitty sales technique while disincentivizing someone for being up front and honest.
That’s kind of the way these things go — it’s hard to get people to stop playing games, as long as there’s still someone out there who’s sure they can «win.»