New Cars

 

Take a look at one of my husband’s Ford truck buying expeditions:
My husband decided he wanted a truck right now! That meant he had to get one that was already on a dealer’s lot, and he already knew just what he wanted. We looked for awhile and finally found a lot with his exact truck.
We told the salesman we wanted to take a test drive and were given the keys. Fifteen minutes later we were back in the salesman’s office. The salesman opened his mouth to talk. I held up my hand and said, “I used to be a car salesman.”
His salesman smile disappeared, and I said, “Here’s the deal:” I gave him my offer (which was less than I was willing to pay), he disappeared to the manager’s office, came back with a counter offer I was happy with, and I said, “Sold.” It took less than 5 minutes. We were completely satisfied with the deal we had made, because we knew we had negotiated a great price.
This is how my daughter’s Mazda minivan purchase transpired:
Salesman getting ready to speak … daughter talks first: “My mother is a car salesman. Here’s the deal:” In less than 10 minutes she saved thousands of dollars. She proceeded to tell them she didn’t want the finish coating they put on the car and wasn’t paying for it … and didn’t. She also said she didn’t want the $80 floor mats even though they came with the minivan – but did decide to take them for $40. Then she took a $500 manufacturer cash incentive and a 0% interest loan. Her neighbor bought the identical minivan and literally paid $5000 more.
My neighbor’s car buying trip, speaking first: “I’m ready to make an offer:”
Well, you get the idea. It’s as simple as that. Well, almost that simple.
Here’s one that didn’t work: I coached “Mindy” on how to buy the new car she wanted. The smart salesman realized he wasn’t going to get a big commission and sweet talked her into a used car. She came away with a used car that cost almost as much as a brand new car. I hadn’t thought to prepare her for that – she lost about $2000 on the used car deal. Used cars are an entirely different buying ground that most buyers don’t understand. But after reading this book—you will—and you’ll never get taken on a used car deal like my friend Mindy.
Before I ever set foot on the showroom floor, I had 3 weeks of intensive sales training by one of the best training companies in the country. Yet despite the fact I was very successful, I never actually sold a car. Most buyers think they are buying their car from the salesperson. That’s who they’re set to do battle with. In about 99.9% of cases, the salesman has no power to sell a car. Only the Sales Manager can clinch the deal.
The salesman’s job is to get the most money out of you that he possibly can – not only for the dealership, but for himself as well, for he works on commission. Now the salesman may tell you he has the power to sell you the car, or he may tell you he “might” be able to save you money. Or if you mention some price he may tell you that he “might” be able to get it for close to the price you want to pay (whether or not he can is not important at this point). Meanwhile he may be asking you questions about how much you can afford to pay per month, how much down payment you have, and whether you need anyone else (like a husband?) to make decisions for you.
What is really going on?
The salesman is “qualifying” you on how much money you have to spend and whether you are the real buyer. It is his job to put you in a car that you can afford and one on which he can also make a good commission.
Then his job is to get you into his office and start talking price. First he will tell you what the price is – which is, of course, the top retail sticker price. At this point you are in shock and start stammering about how you thought he could get you a better price – or maybe you flat out tell him you don’t want to pay retail – can’t he do better than that? After all, nobody pays full retail price for a car! (Of course that’s not true either.)
He keeps you spinning until you finally manage to offer some suggestion or figure about the price. He tries to convince you that your price is much too low and works you to get a better price, which he then writes on his “offer” paper—which you must sign—and he takes to his sales manager. (That tells you who’s in charge.) In a couple minutes he is back apologetically telling you he can’t do it that low, but he can do it for X amount … which is much closer to the retail price. You balk, and offer a compromise in between. He goes back to his manager and comes back apologetically with a counter offer. And so it continues ….
I recall one of those customer sessions. The customer’s first offer that I wrote down was actually quite decent. I was set to make a very nice commission. I took the deal to my sales manager who said, “Let’s try to get a little more out of him.” (It’s part of the sales manager’s job to size up your customer.) So I went back, head hung (the whole act), and said, “I’m sorry. I tried. My manager says he can’t do it for that. But he could do it for X.”
My customer balked and came up a few more dollars. This went on back and forth at some length until finally I was standing mid way between the manager’s office and my office calling out figures between the two. My manager was totally enjoying the game. In the end my customer was happy and felt his 20 minutes of bargaining had saved him $250. At the other end was my manager laughing saying, “See how a few minutes of your time brought in $250 more and made you a bigger commission?”
If you don’t like or feel comfortable with the salesman or maybe he is not knowledgeable, you can ask for another.  On occasion I would have an older gentleman who couldn’t accept the idea of buying a car from a woman. When I realized that was the problem, I would turn him over to a salesman.
For the un-savvy customer, length of negotiating is equated with getting a better deal. I recall one prospective customer who came into the dealership – I had called him because I knew that the car that just rolled off the delivery truck minutes before was what he had been looking for. It was a car that would be snapped up quickly and I wanted the sale.
My customer came on his lunch break. I had 45 minutes to sell him a car from features demo to test drive to signing papers. I didn’t want to lose him. My manager cooperated with me to give him a deal he would never have gotten had he had unlimited time. He bought. But for months afterward he showed up at the dealership lamenting in my office that he knew he could have made a better deal if he’d only had more time to negotiate. Little did he know that more time = more advantage for the dealership. He would have paid several hundred dollars more had he had the time!
One looker who came to our dealership had been to 24 other dealerships trying to buy the same car. Every dealership lowered the price less than the last one. The last 7 dealerships he had been to each lowered their price $25 less than the one before. The fellow was sure he was going to get a better offer here, then a better offer at his next stop. Charlie – a 25-year car selling veteran, top notch and a decent fellow – and among the .1% who really did have the power to close a deal – decided no other dealership should have to waste their time on this man. He pulled the invoice from the files, showed it to the man, and sold the car to him at $75 over dealer invoice, which incidentally, was $25 less than the last dealership the man had visited. When the man saw the invoice, he was finally convinced he had made a good deal and could stop looking.
There is no magic to it. It is very simple:
Never deal from the top (retail) price down. Instead, DEAL FROM THE BOTTOM UP. That is: Negotiate upward from the dealer’s Invoice Price.
There is no way to know whether you made a good deal unless you know exactly what deal you made – and you can do this only by paying a set amount over invoice (or in some cases under invoice) – the amount you determine you are willing to leave on the dealership’s table. This is how you save hundreds or even thousands of dollars when you purchase a car. 
As a salesperson, I understand a dealer has to make money, and when I purchase a vehicle I have no problem with making a deal that is fair to both of us.
Each dealership has its own guidelines, but most dealerships will take a deal that is $500 over invoice, and many will take less profitable deals, even below invoice deals. A car sold is better than no car sold. They know that if a customer walks out the door, he is likely gone for good.
Occasionally a knowledgeable buyer would call our dealership and ask, “Can we buy a car from you at $500 over invoice?” The answer was never YES. It was always: Are you going to buy TODAY? Of course, when they came in I tried to sell them for more than $500 over, but – even if I didn’t – that was okay too. I made a sale for myself and the dealership.
My goal is to never pay more than $500 over invoice (and usually much less)
I would have to be desperate or infatuated with a vehicle to pay more! There are some cars that are in great demand because of limited supply, and dealers have been able to get retail price – and ever additional $$ over that – but most people can find more than one car they like.
The last time my husband wanted a new truck, we tried a dealership in a small town. The dealership was in the process of selling out to a larger dealership in a nearby city, and would soon be closing. There were only half a dozen vehicles still on the lot, none of interest to us. I told the owner/salesman we wanted to order a truck to our specifications at $150 over invoice. He immediately shot back with a $500 over offer (which was the company’s desired bare minimum). We struck a bargain at $350 over (after he called his buyout company for permission – he could go only $500). He pulled out the specifications sheet, and in 15 minutes we had the truck specked out and purchased.
In bottom up deals, the dealer is not going to sell unless he is happy, and you are not going to buy unless you are happy, so these are always WIN! WIN! DEALS.
I’m not suggesting that every dealership will accept a $500 over invoice offer, but I have never gone to more than one dealership to get it. Next time might be a different story. If you have to go to a second dealership, or a third, then do it.
One day early in my car sales position, I had a sale that seemed like a win for the customer, but a loss for the dealership. The customer owned a well-known vineyard in the area, and the dealer wanted to have the customer driving around in a car with the dealership’s name on it … and let the customer know that was important to him. (You gotta love the free advertising dealer’s bolt onto your trunk lid unless you tell them not to—which you have every right to do.) That certainly seemed to put the customer in the driver’s seat, I thought.
The customer’s offers remained below invoice during the negotiation. Finally the manager pulled out the invoice on the car and showed it to the customer and said the customer could purchase the car at invoice price – that was how grateful he would be to the vineyard customer for owning one of his cars – at which point the customer whipped out his checkbook and paid cash.
I was quite surprised by how easily my sales manager made the at-invoice deal. “How does this work?” I asked him.
He explained: “This month the auto manufacturer has a special incentive to the dealership for that car. For every make/model of that car, we get a $1000 incentive from the manufacturer.” The customer went away happy as sweet grapes about his buy, and the dealership got a $1000 kickback from the manufacturer. Manufacturer dealer incentives make it possible for you to buy a car at invoice price (or even less sometimes) and the dealer still profits. Incentives to the dealer from the carmaker belong to the dealer; nevertheless, some dealers may be willing to sell a vehicle for under invoice rather than sell no car at all when there are dealer incentives. Later we’ll talk about how you can find out those dealer incentives.