Dealers love to throw confusing jargon or nonsensical terms at you to throw you off and line their pockets a little more. Follow these best practices to avoid paying an unwanted rookie tax:
  1. Get your own credit score and bring it with you to the dealership
  2. Don’t  pay a cash deposit for your financing loan because if the deal goes bad, you can’t get your deposit back
  3. Don’t apply for a car loan until you have been employed for at least 6 months if you are a recent college graduate
  4. Apply for your loan online so you can avoid getting ripped off
  5. Learn to fix your credit before you apply for a loan. Get your credit score to at least 680 first.
  6. Pay off your credit card debts before you look for a new car
  7. If you have recently moved wait 6 months before applying for a loan. You addresses are always verified. If you move a lot, they will not trust that they can keep track of your whereabouts should you make late payments etc.
  8. Having been approved for a loan in the past helps
  9. Don’t get a co-signer for your loan because often times you will find that the deal is solely in the other person’s name

How to arm yourself and prepare for battle

Whenever you are considering getting a new car, you should be sure to bring all of the information that will help you to get the best deal you can. This will all be included in your “folder”. Here is a list of all of the information that you will want to include in your folder:

  1. A copy of your credit report from Truecredit.com
  2. New car purchase prices for the cars that you are considering from autousa.com
  3. Accurate pricing data, rebates, tips and incentive from FightingChance.com
  4. Credit pre-approval in writing from e-loan.com
  5. Insurance quote that cover the coverage that you want on your loan
  6. Used car blue book that has used car information and market values
  7. Extended warranty quotes from warrantydirect.com
  8. Current loan rates that are in your local paper. Bringing all this information with you will literally cut the legs out from under the dealer. It shows that you are one step above the various scams that you will encounter.

What offer do I open with?

When you go into a dealership, you want to know all of the pricing and costs of the car that you are looking into buying, as mentioned earlier. You should know the manufacturer’s cost and the dealer’s cost. Calculate the cost that the dealer paid for the car and then make a reasonable offer to him if you want to get somewhere.

You should also know that the dealer’s price is not the invoice price from the factory. You should know that the dealer’s cost is much lower than the factory’s cost.

In order to make a fair offer to a dealership, you need to learn to read a factory’s invoice. Here is what you can expect to find on the factory invoice.

  1. Base model of the car on it
  2. All of the options packages
  3. Destination charge
  4. Hold back and dealer flooring help

Pro Tip: DO NOT confuse the invoice with the MRSP window sticker because they are not the same.

Contrary to popular belief, dealers don’t have to tell you the invoice on any car. This often gives the dealer leverage over you. They can offer you one dollar over the invoice. You should know that there are hidden factory incentives in the invoice price that lowers the cost of the car for the dealership. It’s no bargain for you.

If a dealership is very quick to show you the invoice, you should be aware that they are fully aware that they will be making money on that car off of you and they can settle at a lower price for the car.

Knowing this before you walk into a dealership can be your best negotiating strategy. See, they will tell you that you can afford to buy the car at MSRP hoping that you will not then wonder what the actual worth of that car is.

Knowing this information can let you make them the same offer.

If you offer a few dollars over the factory invoice (which is the actual worth of the car) then you can open your bid and let them know how much profit they can make off of your offer. Check out these websites if you want to know the factory invoice of a car:

  1. InvoiceDealers.com
  2. CarsDirect.com
  3. Car.com
  4. Autoweb.com

Dealers are always going to try and tell you that they paid less for the cars than they actually did so that they can make a higher profit off of the sale.

Salesmen often try and make you feel guilty by telling you “I’m losing my shirt off of this deal”.

In truth, you are the one that is losing your shirt off of the deal, so don’t buy into it.

To calculate what your offer should be to the dealership, you should get the factory invoice price (don’t forget to include the options in this price), and add 5% to that amount. That is how you should calculate your offer the dealership.

When I mention the options, I mean the ones that you can’t avoid. Some cars come equipped with a CD, sun roof etc. and these are fees that you can’t avoid paying so sure to account for these at the beginning.

You should also be sure to account for any buyer rebates as well in calculating your offer. So in the end your offer should be calculated like this:

DEALER’S COST + 5% – ANY BUYER REBATES = YOUR OFFER

Calculating your offer to a dealership is as simple as that. When you are considering how much you can afford for a car, be sure that you don’t get sucked into paying more than that.

If you are unwilling to pay more than your opening offer, let the salesman know that your offer stands firm and how they will profit from the offer.

In the end you will get what you want on your own terms. To be certain that you get the drift I will set an example for you.

You are hoping to buy a Toyota Camry. You do your research at DealersInvoice.com, and find that the invoice price is $19,922; MSRP is $22,385. The dealer may offer you the car for $22,000, and shows you the invoice.

You learned by researching that there is a $500 factory to dealer incentive; and a $447 holdback on the MSRP (2%).

Based on the above calculations, the dealer’s real cost is $19,922 (invoice) – $500 (incentive) – $447 (holdback) = $18,957. This is far below the factory invoice number.

Now, if you add the 5% for your offer to that price, which will up the car price to $20,379 due to the addition of $455 for the destination charge that is always present, you will see that based on the offer that the dealership offered, you just saved yourself $3410.

This may seem complicated but if your use a pre-designed spreadsheet from CarsDirect.com or AutoUSA.com, the program does all the calculation for you.

Negotiating Better

Being a good negotiator doesn’t have to be difficult. Sooner or later everyone has to negotiate with someone if they want to get a good deal on a purchase.

When you are trying to negotiate with a car dealer, you should know that they are very practiced in the art already. You will need to know how to get through their “car speak” in order to be successful.

Since you now know how to calculate your offer and already know what the dealer paid for it, you should get a copy of the paperwork from a friend that recently bought a car, so that you can become familiar with what you will see on your paperwork. They are all generally the same.

If you’ve followed the above mentioned tips, you will also be pre- approved for a loan. The key is for you to get in and out of the dealership as quickly as possible because the salesman will definitely find more loopholes to up your charges if you stay.

Here are a few tips to successful negotiating:

  1. Remain positive and confident
  2. Don’t talk down to the salesman
  3. Show up prepared
  4. Bring ads from other dealerships
  5. Get approved for a loan before you arrive as a backup
  6. Bring a friend for extra support

Something that you should look out for from salesmen is the extra little tricks that you will likely encounter that will try to force or rush into a buying decision.

You have to remember that they are trying to negotiate you into paying more money just as you are trying to negotiate paying less. Here are some of the things that you can expect to hear from them.

  1. “These cars are flying off of the lot. It may not be available for the same deal tomorrow”. (Threaten to leave and they will ease up and try to change their strategy).
  2. “This deal is only good for today. If you come back tomorrow I can’t guarantee that the deal will be the same”.
  3.  “I’m an honest man. Look at how many cars I’ve sold this weekend” (This is where he will show you his list of sold cars. If he does this, then tell him that he doesn’t need your money).
  4. “I hate to tell you this but I have another offer on the table from a man that is willing to pay more money than this. I am just waiting for his paperwork to be returned”. (Tell him that if he promised the car to someone else, you don’t want to step on someone else’s toes and that you should leave then).
  5. “To cover the overhead costs, we have paid $13,000 for this car (Just check your paperwork in your folder and prove them wrong).

Have a good one and stay dirty.

A Continuation Common Closing Tactics Part IX