I have commented here before on these articles by your company. You guys are the reason why when a customer comes into the dealership I work at they are pissed off already and think I am ripping them off before I open my mouth. If you divide the number of hours and holidays I work with my pay I make about minimum wage selling cars. It is none of the customers business what we own a car for and how we make money. We all buy retail everyday of our lives and I don't ask everyone of them how much money they are making and how they do it. When a customer is wanting to buy a car without us making a profit I would just prefer for them to go elswehere, because even if you "give one away" they are not going to be happy. You pay for what you get.
I would agree with the comments that I read stating that the dealer has to make a profit. That's a no-brainer. However, it seems to be the nature of the industry to squeeze as much out of each customer as possible.
I've been buying cars for over 30 years now, various makes, new and used, in several states. In almost every situation, I usually felt pressured to add more than I wanted. Car salesmen seem to be trained not to take 'no' for an answer. Nothing pisses me off more, because when I say 'no', I mean 'no'. I'm a pretty savvy car buyer and I know what I want.
A few years ago I went with my 65-year-old mother-in-law to help her buy a new car. The F&I woman had her agreeing to everything from undercoating, to paint protection, to a tire warranty, to Lojack. It was a Honda Civic. Seriously? Lojack?! Fortunately I was able to be her voice of reason.
It's not Edmunds who is giving car salesmen a bad rep - it's car salesmen themselves. The Edmunds article above simply gives the consumer a heads-up to some items that they may not need at all, but that the dealership will more than likely try to persuade them that they do.
The way I buy cars now it to start with the internet manager. I do ALL my dealings with them via e-mail until I am ready to come in. I ensure that they know that this is not my first rodeo, and that I will not be meeting with the person presenting warranties and protection plans, nor do I intend on waiting around in the dealership for them to keep going back and forth between me and their boss. I NEVER buy an extended warranty for my own cars, and in over 30 years this has never bit me in the butt. Even if I had some catastrophic failure that was not covered by the existing warranty, I have still come out WAY ahead over the years.
By the time I contact a dealership, I generally have done all my research and know exactly what I'm looking for. All I need them for is to see if we can come to agreement on the purchase price of the vehicle alone. Yes, their job is to maximize profit, but mine is to maximize my own value. They can take it out on the next sucker that comes in.
I bought 3 cars - honda civic 2007 & 2008, honda accord 2006. About the only thing the dealer made was the holdback - about 400-500$ on each
1 no trade in they offered me $250 for my 96 grand prix piece of junk, I sold it to a neighbor who cut it up for parts , he gave me 1000$
I sold a maxima in good condition for $3800. the dealer offered me $1000.
Both sales private party.
Sold another grand prix for $2000, dealer had offered 500 or so. All of these cars were without state required inspection needed to re-register the car
Just remember - the dealer is not your friend, he's your enemy. One trick that works well is to make an excuse that you have to go home to get some info. I've been told that once you go out the door, 80% of the time you don't come back.
These cars were all bought for about $300 under mfr invoice price, available from Edmund and i forget the other service.
Good luck - Make capitalism work for YOU the buyer
PS I never workd for a dealer, My background is technology
I can appreciate everyone's need to make a living, and for businesses to make a profit, but I just hate the car buying experience -- where, at every step, one is trying to be upsold and separated from one's money. As a coworker once said, I wish car dealers had to buy bread like we have to buy cars.
Looks like the hackles of the car salesmen have been raised. Good.
Edmunds can't state that auto sales and other dealership people are somewhat lower in ethics than lawyers but they are. To actually get a good deal, one has to convince them they won't make any sale unless they come around to your way of thinking.
I'm not, nor ever have been, fond of sales people. I do not appreciate the fact I have to deal with this level of infestation if I want to purchase a car or truck and will look far and wide for dealerships who don't employ professional hucksters.
I have been a car buyer and also worked for car dealerships. Today in this Internet age I do not understand why car dealerships exist. I find the entire dealership sales system a farce. We go into Walmart and choose a TV, go to check out, pay for it and take it home. We should be able to do the same when buying a car. I have bought homes with less hassle than buying a car. I have bought and sold several cars via the Internet without any help of a salesperson. I think in the future car dealerships as we know them today will not exist. There will be car/truck outlets where one will place an order via the Internet and take delivery at the outlet. Service will be performed by factory authorized shops.
Interesting article. But, in discussing this with an employee of a major American auto manufacturer who sometimes buys cars for his family from local dealers, the "Bill of Laden" was brought up. That's the cost to the dealership of the vehicle being delivered to the dealership. If the dealer were really honest about the cost of the vehicle to the potential customer, he would reveal the price on the Bill of Laden. That's the real cost to the dealer.
There is a large amount obfuscation when it comes to selling cars. No matter what anyone says, they are not worth what is charged. If you pay 2x for it and drive it from the dealer lot is worth only x. What more proof do you need? (Edmunds will deny for the benefit of over-priced vehicle makers but turn around and try trading it in.)
$3900, the price of a 1972 Oldsmobile Tornado, was a realistic amount for an average American car. That car had dual metal body, a steal i-frame, chrome bumpers, and all standard driving necessities (weighed more than prick-up truck curbside)--with regular oil changes it would run forever. If they sold them then for that, three times the cost is a realistic ceiling for today. No business can survive without 50% profit, so the real cost today might be $6000 (3900/2 x 3). The rest of the selling price is hype, hyperbole, fiction and c-level management profit. Look at the annual salaries of bloated management ... AND labor. Don't forget those endless insulting TV ads interrupting your viewing pleasure. You pay for that dribble too when you buy. (Watching them is tax enough!)
Paperwork produced by manufacturers in not verifiable in any real sense; nor would they fess up. Neither is the rhetoric they or their supporters spew. Anyone who has little understanding of accounting knows an accountant can make costs, profits, overhead just about any figure the company wants. Just give the accountant enough time.
They make the car in one minute; shouldn't the price reflect an UAW member's one minute of wages plus materials costs times 2? About $12,012 dollars, by guesstimate. A reasonable price for a Dart, Vette or Towncar.
There's a whole slew of other arguments about the auto industry, government involvement/control, wages, quality, percentage of plastic, unnecessary gizmos, life expectancy, warranties, repairs, etc. that do not bode well for the (less than forthright) car makers.
Who rates their car salesman as the man of the year? Why is anyone up the ladder anymore likable? Crooks are crooked; the car manufacturers are a slew cronies bilking.
Sum it up by agreeing that whenever anyone buys a new car they are being taken to cleaners no matter what they pay.
1988 is the year of automotive epiphany. 10+ vehicles later I saved more than .25 million dollars (not to mention I never got my taxpayer funded car when Government Motors was nationalized--RIPPED OFF). And no finance charges paid either. Ka-ching!!
Return what has been wrought. There many better places to put your money than in a new domestic automobile.
I find this very funny having been a car salesman for the past 25 years. On new cars you talk about holdback and dealer cash which is something the salesperson does not get paid commission on. Sure if it's a used car we try and make as much as we can but with the internet it's hard to trade for a car and give someone less than it's worth or sell something for more than it's worth. Remember we on average only make 25% commission of the profit on the car. for example if you sold a $20,000 car and made $2.000 profit. the salesman makes $500 which is only 2.5% of the selling price. The average consumer pays 10 times that amount in profit on the groceries they buy everyday at the store, but how many times do you see a consumer negotiating a price there. Car salesman get a bum rap, we are just trying to feed our families just like everyone else.
azgm- You say: “but there's too much attention on where the dealer makes money”. Umm Gee, azgm, the title of the article asks the question “Where Does the Car Dealer Make Money” - What did you expect from the author, a treatise on Beeswax ??
Pryorpat - “The author talks about profit as if it is evil” Nowhere in the article does the author say it is bad, wrong, or Evil as you put it, that is Your interpretation. The article is quoting information given by industry professionals.
Erzuahsiam - You say: “Even though you guys have some insight into the car business, the picture you have portrayed in this write-up is a gross representation of the car business” Really?? Please focus and discuss what is grossly misrepresented and why rather than spouting off your over generalizations. You say “Anybody reading this post will automatically cultivate a carricatured image of these hard-working sales persons”. I say not true, what you describe is your caricature which portrays EVERY sales person as hard working. We all know there ARE sharks out there.
First, allow me to say that I am currently in retail automotive and have been for the better part of the last 30 years. I have been a student of technology for most of that time and have been leveraging social media since way back when MySpace was relevant. Here is my take on buying a vehcle and getting a "good deal". Step 1. In my experience, the best way to buy a car is to first go to Edmunds.com to get their TMV (or True Market Value) price. I have found it to be the most accurate representation of actual market prices anywhere in the automotive arena. This will provide an uninformed consumer the actual price others are actually paying for the same vehicle, unlike the article which states an average new car gross profit of between $700 and $1,000. Edmunds TMV will tell its visitor the actual recent selling price whether it allows the dealer a $100 profit or a $10,000 profit, as in the case of a high-priced, high-demand luxury or exotic vehicle. Regarding the "dealer cash" subject, Edmunds often reflects a TMV price that appears to be below the dealer invoice. The reason for this is that Edmunds already knows about it. The dealer cash is already reflected in the TMV figure. An impasse is created when geniuses in the "consumer advocacy" arm of the press corp set up unsuspecting consumers with the expectation of getting both the low price, and the dealer cash simply because they now know about it. Not true. Also remember when dealing with Edmunds, one must ensure the TMV price is for a vehicle equipped both the way you like, and as it is actually built. Often times the car of one's dreams is not built for dealer inventory and special ordering a vehicle can create its own set of difficulties. Also, ensure you revisit the process for an updated TMV if significant time has elapsed between your initial analysis and your actual dealer visit. Once complete, print the TMV information, put it in your pocket or purse and keep it there, just in case you need it later. Step 2. If you have a trade and have no idea of its value, try this instead of kbb.com, a site loaded with good intentions, yet with no method by which to actually see your present car and absolutely no way to write you a check for whatever number kbb.com spits out. Better to visit a dealer representing the brand associated with your potential trade which is also a dealership at which you do not intend to buy (in major markets, this is typically the "second-closest dealer"). If this is impractical (or impossible), find a dealership with cars like yours on the lot and available for sale. Ask for the used car manager and tell him you are looking to sell your car and have no interest in buying anything he has for sale. Ask him to write his "buy figure" on the back of his business card along with a "good thru" date (typically one week to one month). Do not shortcut this step by trying this technique at the dealership where you ultimately intend to buy, as it will likely create a conflict somewhere in your purchase process. Step 3. Call your banker. Ask them for your rate on a new car loan. If you know you have issues with credit, ask your bank if your rate might be higher because of it. You might hear, "No, your rate won't be higher, yet it is likely the loan will not be approved". If you have good credit and an adequate down payment, make a note of your bank's rate on the TMV sheet you printed earlier. If your credit has been somehow marginalized, work with the dealer's finance department as the entire sale depends upon them being able to get your loan approved. Step 4. Go to the dealer and (stay with me on this) enter through the service department. Ask to speak to the receptionist and ask the name of the salesperson who has been there the longest and the dealership's customers love the most. Once you have the name, ask if that salesperson is in and available. If not, call the salesperson and make an appointment. Then at the appointment, choose a vehicle that most closely meets your requirements. Ask for a price both with and without your trade as "Cousin Mel" might buy it, if he can get "Aunt Abigail" to give him the money. If the salesperson casts aspersions on the scheme, reply saying, "That may be, but Aunt Abigail is LOADED!" Once you have a price and trade allowance, you'll know if the salesperson is being fair with you. This, as the TMV number from Edmunds is fresh in your mind, and you also know an accurate, competitive price for your trade. Ask if there is any special financing or additional cash incentive. If yes, great. If not and the price and trade are in line with your research, buy the car. Step 5. Once you are introduced to the finance department representative, if he or she claims to be unable to be competitive with your bank, ask for a copy of the order and tell them you'll return with a check from the bank for payment. As long as you have an acceptable credit history, your “unattainable” competitive rate will likely (if by some miracle) become available. This, as it’s better for the dealership to have something rather than nothing. Additionally, if you plan to keep the vehicle for an extended period (or pass it down to offspring or other family), consider the extended warranty as well. This way you can have the peace of mind it provides, while paying for it over time. If you wait for the basic warranty to nearly expire, you’ll be faced with a lump sum outlay that could be larger down the road. Worse, if you allow the basic warranty to actually expire, the coverage you desire may no longer be available to you. The dealership process should have taken somewhere between one and a half and three hours, depending on the complexity of the vehicle you purchased and the time it took to select your new pride and joy. Before you leave, ask the salesperson the name of the service advisor who has been there the longest and the dealership’s customers love the most. Ask for a card and an introduction. You’ll be glad you did. Step 6. Drive safely, now.
You guys are such a joke. There is nothing wrong with a dealership making money. Every for-profit business in existance is in business to make money. Your articles are a carbon copy of the one you just printed. The dealership I work for gives tens of thousands every year to the community, whether it's sponsoring little league teams, giving to local shelters, help with funding the local Fourth of July fireworks, setting aside money for fund raisers, ect... The people I work with have families to support, just like the employees at Edmonds. I have been at the dealership I work for for almost 20 years. I don't steer people into more expensive vehicles and I get paid 30% of profit over invoice. If I sell a car for $900 over invoice I make $300. If I sell a car for $300 over invoice (or under invoice) and below I make a flat $100, I'm hardly stealing grandma's savings. With all the technology in cars today just going over the vehicle after purchase can last two hours. There have been times where I have spent 6 hours, from the walk-in to delivery of the new vehicle...all to make $100. My customers count on me to answer questions, give them a service loaner on a moment's notice and to be there after the sale whether they keep the car for 3 years or 10. It's time to stop trying to make a buck by telling the public that other businesses don't deserve to make a buck.
Slow your hatred down there batmanjoker. I have a soul and sleep well at night. I have never stolen a dime in my life and I have never charged a customer more than MSRP. I don't set the MSRP, the manufacturer does. I'd like to know what you do for a living, I'm sure it involves someone making a profit. For those of you who think dealerships will go away you are wrong. Manufacturers need a showroom to showcase their vehicles, a place for people to test drive them and they need well educated salespeople to represent their product in a sea of never-ending competition. If you feel like you're getting the runaround at a dealer then leave. Find one that meets your expectations. Not every dealership is full of rip-off artists. I find that those who come in with a bad attitude and a negative perspective on dealers (very few btw) will never be satisfied, no matter how well you treat them.
Edmunds is spot on. I own a 2005 Acura RL which I bought brand new off the show room floor. Before I purchased it I considered the Infinity M45 and the Lexus is350. I test drove each and then when I decided on the RL I sent an email to the three different Acura dealerships in the area and informed them I wanted to purchase an RL and indicated what I was willing to pay for it. At the time the car listed for $51,000.
I stated I wanted black exterior with tan interior and also wanted the wooden steering wheel and shifter. I ensured all three dealerships knew I was requesting this with each one of them. Of course they all called me with their offer and in the end I paid $43,700.
When I arrived at the dealership to pick the car up they had it waiting in this special bay they put cars in when customers are ready to pick it up. Right next to that bay was the finance person. She asked me do you want fabric protector? I said no because I could buy that and spray it on myself for less that $20.00 a can instead of the $200.00 they wanted to charge. They asked me if I wanted paint sealer and I said no as well. They asked if I wanted an extended warranty? I said no as well because I can always get one later and cheaper from other places.
Once the vehicle was out of warranty I would call the dealership service dept and ask them how much would it cost to fix something and it was always too high. Example, the leather on the arm rest where I as the driver rest my arm on the door while driving began to wear out so I called and asked how much to replace it. Service person said $830.00 which includes labor but the whole pamnel had to be replaced. I called Greg's Japanese auto and they said $200.00 and only the arm rest had to be replaced. I also found out that Greg's hourly labor rates are $30.00 less per hr. Now, I guess you could say what about the quality of work? Greg's does excellent work and have never been disappointed.
I said no to the finance person for this very reason Edmunds states and said no to the service person for the same reason.
To say how come people do not question companies like Exxon, Wallmart etc and only questions car dealerships is different because buying a car is not like buying a loaf of bread and buying cars costs a lot more money than buying an Xbox at Walmart. The fact is dealerships need to make a profit but if you let them, they will take you like Grant took Richmond.
To all you salesmen. What about the second sticker? Why do dealerships put second stickers on highly popular new vehicles? Case in point, New Mustang a few years ago (Current style) same with Camaro and Challenger? I seen some with a 12k second sticker and no, there were no added dealership options either. The 2014 new Stingray Vette will hit show rooms this coming June. Wow, let me be Nostradamus and predict there will be second stickers on almost all of them.
Here is the other thing that pisses me off. You drive up to a dealership and there are about 4-6 salesmen waiting outside and their eyes are following the movement of your vehicle as you slowly drive through. I went to a Cadillac dealer here recently and that is exactly what happened. All I wanted to do was get out, look at a new ATS and XTS but of course I got bum rushed within 10 seconds by a salesman.
When I first go look at a car I want to be left alone. I do not want someone running up to me at light speed with all that can I help you sir crap. Why is that? Because when you tell them that, they start running off at the mouth about what specials they got, then ask more crap and at that point I am fed up.
Here, how about this? How about let me drive up to the lot. You see me and keep yourself posted where you are. When I see something I like I will come get a sales person.
Nope, that won't work either because you guys are all clamoring to get the next customer so you all have to run after every customer that drives up on the lot.
I have worked at dealerships for over 12 years. There are also incentives paid on volume which are not mentioned in either the comments or the original articles. When I purchase a Mach 1 in 1973 the mark up was approximately 33% off of list. Now you see that there is a 10% gross profit off of MSRP? No person have to pay the floor plans (interest on cars in inventory) could make a profit with those figures. The best thing I can tell everyone is that "Figures lie and liars figure"! The dealership is there to make a decent profit. If the salesman does not achieve a decent mark up, he/she will be gone! At one dealership I worked at, you got a better deal at a competitors dealership. Nuff said.
If a car buyer goes into the negotiation by acknowledging to the salesman that you understand that he has to feed his family and pay his mortgage, then the deal seems to go much faster with a mutual conclusion. It seems everyone sees only a conspiracy to rob customers, and these days, that's the last thing dealers want. Many customers define a “win” as when the dealer loses. The dealer can’t (and won’t) give cars away at a loss. You CAN buy your new car and leave smiles on everybody’s faces.
Doing your homework is good but you also have to have the right attitude when dealing with sales people. Tell them what they want to hear, up to a point, and be friendly. Two other things are also helpful when buying either new or used. Before you go to the dealer of the car you really want go to 1 or 2 other dealers with different brands and get a general quote on a similar priced model. Then when dealing with Joe at Toyota and not quite getting what you want let them know you can get a better deal on the Nissan and/or Honda down the street. Say thank you, goodbye and the salesperson who works on commission will usually say"Wait a second sir let me see what I can do to sell you this car" or something like that. It has worked for me often over the years. I have bought 5 various cars over the last 16 years and always got excellent deals. Another good line is to tell the salesperson they give you a good price and they can easily make up whatever they don't make from you when they get another customer who obviously has no idea on how to negotiate and sell them all kinds of extras they don't need. One of the most important things to remember is know specifically waht you want and not get talked into the extras you don't want/need and if you do want something extra, like a better sound system, that they charge $1200 to $2000 for you can get after market for a lot less.
It's interesting to review the commentary relative to this article from those folks within the industry.
While I certainly recognize that any business needs to garner a profit to survive, it's also not a secret that the car sales industry continues to wear a "black eye" due to the misdeeds of the past. Even to this day and age, it's still a significant slight to refer to someone as a "used car salesman." Right, wrong or indifferent, there's a very real perception that customers continue to be unfairly treated or "swindled" out of a hard earned dollar at the local dealership (and certainly pre-internet where information was not as readily available).
Regardless, an educated consumer, who also truly understands that a business must make a profit, is a good thing. For me personally, I buy a new car about every three years and don't have any specific brand loyalty (e.g. I've been to a lot of local and regional dealerships across all brands in my 20+ years of driving). While I'd like to say that all of my experiences with a dealership's integrity have been positive, that would be incorrect.
The overwhelming majority of the dealerships that I've visited across the years have indeed possessed integrity and honesty, but there are still "bad seeds" out there that the information in this article can help a consumer spot pretty quickly (along with additional research relative to Customer Service experiences, deeper research on a potential trade-in valuation, friend and family recommendations, etc.).
If you've made the effort to significantly educate yourself BEFORE your visit to a dealership, you can spot a charlatan from a mile away.
The recommendation concerning dealing with only the Internet Sales Manager have worked in spades for me personally. In fact, the last car I bought was completely through email negotiations with 7 different Internet Sales Managers for one respective brand of car (within a 120 mile radius of my home). The price disparity was somewhat amazing ($3K in one instance for the exact same model and trim level).
Well, first you have to understand that it is no different than going to buy a TV, Furniture, clothing, or groceries. I would love to here a story where someone went in to Wal-Mart and after they were checked out and got their total, negotiate the total price of their purchase. Give me a break! The whole economy is based on profit. Why all of the sudden does it become a dirty word. let's face it, realestate sales people have nothing invested in your property, however they command a 6 to 7 percent profit. Go in and offer a car dealer a 6% profit on their product that they bought and have in inventory. I promise you they will be happy to accept your offer. If this guy got paid for this article, then its because he's nothing but a burnt out salesman that couldn't cut it anymore.
How many million$ of dolalr4 sitting on the lot everyday costing money, interest etc. Of course the dealer has to make a profit, just like any other store with inventory. Edmund, KBB, Consumer reports all offer good info to help in the deal, but all these services do try to make a car dealer as the only business that is out to hose people. A good dealer wants return customers, for service and more cars, and recommendations for more business. I think iI have been luck in finding the VW dealer I have dealt with since 1986, many cars, and lots of great service, if they didn't make money they still wouldn't be there to keep giving good cars and service. And a good dealer can get you any new car ya want if it ain't on the lot, all dealers trade vehicles all the time, how else do they stay in business. CPO USED cars is also a great plan, cars are primo, come with another usually 24K 2 year warranty, after teh original warranty passed, and it's a factory warranty, so it's good at any dealer, it's like buying a new car all over. Lots of dealers have folded, the ones that are in business for over 30 years, must know and do it right, otherwise customers don't return. An educated shopper does get a better deal.
The best advice I ever had was from a banker. Do your research with Blue Book and Edmunds. Research the crap out of the models. Take great care with the "no price" dealers. Put the spending limit in effect before walking on the lot and stick to it. I've been flat turned down only to have them almost run as I nearly reach the exit. Hey mr. soinso, the manager said yes. I paid $3500 for a car I drove 12 years and 180,000 miles. But I stuck to my guns and would not go any more. They wanted me to take out a loan but I didn't. I handed them cash. They offered a warrant equal to the price of the car. They pulled every trick in the book and I got what I wanted at my price. Or did I? Seems like I won but I bet they still laughed as I drove out the lot.
Car dealerships have made their own bed. They have made the process of purchasing a car so grueling and disagreeable with all the gamesmanship that most people had rather not deal with it. "What will it take to get you in that car today?" "What do I have to do to make a deal right now?" - all the while trying to figure out how to squeeze the most cash out of you. I hate buying a car, and the hassle of purchasing one makes me wait as long as possible before doing so. I have never left a lot after a purchase without believing that I have been taken, and on at least two occasions I was right. There are also sales people who believe that aggressiveness makes them better. As I have gotten older and wiser, I have far less tolerance for this approach. These salesmen's fake smiles and transparent pleasantries leave me ready to walk off the lot. It is not my intention to broadbrush all salesmen with the same stereotype, but there are enough of them like this around to make me want to stay home rather than go car shopping.
This explains the success of businesses like CarMax, who charge a fixed price for their vehicles and their sales people get a fixed commission regardless of what car they sell you. There is no financial incentive for them to sell you more car than you need. You might get a better price by going to a more conventional dealership and fighting for two or three hours, but that gets very tiresome.
This is how I see it, I realise these people need to make money, but it is a very corrupt system. I don't walk into a store and negotiate a price for anything, only if the same item is offered somewhere else cheaper. That being said all new cars should have a firm price, so no matter where I go or who I am I won't be screwed over. For used cars its a whole other ball game, they truly do rip you off and that is where all the profit is made. Not sure how to fix this issue.
I love the blanket approach to this article. Car dealerships are evil, soul sucking entities only out to profit at any cost, hiding the truth at every turn. Salesmen are slimy, lying, manipulative and selfish. Service Writers are shucksters, snake oil salesmen pitching gloom and doom at every turn.
Salesmen spend hours every day studying information on everything from the features and benefits of their product line and those of the competition to business ethics. The make calls following up with clients who both have and have not purchased from them. The educate customers and direct them to vehicles that meet the stated needs of the customer.
Sales managers ensure that the training presented and received by their staff is informationally up to date and ethically sound. They structure sales in such a way that the customer is able to get what they want, how they want at a price they claim they can afford. The handle difficult situations, take calls, purchase and sell vehicles and make sure that the inventory reflects the needs of the community. AND - they hire people. They put people to work.
Service writers listen to customer complaints. They diagnose what may be wrong based on noises customers here, situations customers report and "gut feelings" they are presented with. They recommend service based on manufacturer recommendations. They, like salesmen, contact customers that may have, or may have not, done business with them to make sure that the vehicle service needs are being met to ensure that the vehicle owned by the customer lasts for as long as possible and is operated in as safe as a manner as possible. Oh, they also attend training and maintain certifications from manufacturers, dealers, vendors and state agencies.
All of this is on top of the fact that this is the only business that the average buyer can set the terms under which they will purchase a product.
Now, please don't get me wrong. I'm all for customer education. I love sites like Edmunds, Kelly, Autotrader and NADA. I love that customers are checking inventories from as far out as 200 miles away and comparing prices. I'm a salesman and I do that. In the end, though, I make (and have made) all my vehicle purchase decisions based on the treatment I receive as a customer. I already knew what I could afford (both cash price and installment payment price), what options and colors I wanted and where and when I was going to purchase.
The author could have saved everyone time and just said: Buyer beware. Do your homework. Check with other people on price. Set your limits and stick with it. There is more than one dealer selling what you want, if you can't get it at point "A" inside what you want, go to point "B" and try there.
I love the blanket approach to this article. Car dealerships are evil, soul sucking entities only out to profit at any cost, hiding the truth at every turn. Salesmen are slimy, lying, manipulative and selfish. Service Writers are shucksters, snake oil salesmen pitching gloom and doom at every turn.
Salesmen spend hours every day studying information on everything from the features and benefits of their product line and those of the competition to business ethics. The make calls following up with clients who both have and have not purchased from them. The educate customers and direct them to vehicles that meet the stated needs of the customer.
Sales managers ensure that the training presented and received by their staff is informationally up to date and ethically sound. They structure sales in such a way that the customer is able to get what they want, how they want at a price they claim they can afford. The handle difficult situations, take calls, purchase and sell vehicles and make sure that the inventory reflects the needs of the community. AND - they hire people. They put people to work.
Service writers listen to customer complaints. They diagnose what may be wrong based on noises customers here, situations customers report and "gut feelings" they are presented with. They recommend service based on manufacturer recommendations. They, like salesmen, contact customers that may have, or may have not, done business with them to make sure that the vehicle service needs are being met to ensure that the vehicle owned by the customer lasts for as long as possible and is operated in as safe as a manner as possible. Oh, they also attend training and maintain certifications from manufacturers, dealers, vendors and state agencies.
All of this is on top of the fact that this is the only business that the average buyer can set the terms under which they will purchase a product.
Now, please don't get me wrong. I'm all for customer education. I love sites like Edmunds, Kelly, Autotrader and NADA. I love that customers are checking inventories from as far out as 200 miles away and comparing prices. I'm a salesman and I do that. In the end, though, I make (and have made) all my vehicle purchase decisions based on the treatment I receive as a customer. I already knew what I could afford (both cash price and installment payment price), what options and colors I wanted and where and when I was going to purchase.
The author could have saved everyone time and just said: Buyer beware. Do your homework. Check with other people on price. Set your limits and stick with it. There is more than one dealer selling what you want, if you can't get it at point "A" inside what you want, go to point "B" and try there.
All these other posts slamming this article as stupid crack me up. These have to comming from sales people. I think Philip Reed did a good job showing where the profit in selling cars comes from. I don't think he painted car dealers in a bad light, But rather provided me a little knowledge that i can use when buying my next car. We all know that selling cars is a business that is trying to make a profit. But unlike other businesses the price of the goods they sell are never posted in black and white and haggling is just part of the deal. Knowing what to haggle over is a nice piece of information to have. Thanks Philip!
This is for garagemonkey complaining about dealers loosing money doing the $29.95 oil change special. Of course they loose money on that but what you fail to mention is how many people get the oil change done only to told by the service writer that "while we were under the car we found you have a worn (insert any part you want) and you really need to have it fixed now before you are stuck on the side of the road.(scare tactics) And 2 days later that same person pays the $1200 bill for that "oil change." Come on "garagemonkey" you know as well as i do this is why they have that "oil change" special in the first place and that's how you make your pay check. LOF's have always been zero profit line items for dealers and always will be, It's the up selling of repairs and make the dealers money. Even if only 1 in 5 go ahead and have repair done that is still a nice profit and more than covers any loss from the other 4 LOF's. ( LOF is what mechanics call lube and oil filter jobs).
This is for garagemonkey complaining about dealers loosing money doing the $29.95 oil change special. Of course they loose money on that but what you fail to mention is how many people get the oil change done only to told by the service writer that "while we were under the car we found you have a worn (insert any part you want) and you really need to have it fixed now before you are stuck on the side of the road.(scare tactics) And 2 days later that same person pays the $1200 bill for that "oil change." Come on "garagemonkey" you know as well as i do this is why they have that "oil change" special in the first place and that's how you make your pay check. LOF's have always been zero profit line items for dealers and always will be, It's the up selling of repairs and make the dealers money. Even if only 1 in 5 go ahead and have repair done that is still a nice profit and more than covers any loss from the other 4 LOF's. ( LOF is what mechanics call lube and oil filter jobs).
I'm ok with profit but I draw the line at being used as a golden goose. If an owner finds himself in the service area for more than regular maintenance, it's time to find a new place. The local Honda dealer here uses his customers unmercifully. He uses the service shop to forecast doom and get people to trade in their low mileage Honda's for new ones. If he can't get you to trade, he'll find all kinds of things for you to fix. As for car purchases, buyers have to make up their mind before they go in. Shop around for the best price and say 'no' to all the extras offered. Know the value of your trade when you go in and stick to it. The dealers know they have that cushion to work with and they really want to turn over cars. Thanks Edmunds, you provide a great service to potential car buyers.
This is the way to save money. Also, change your oil at the intervals recommended in your owners manual--not according the sticker the oil-change guys put on your windshield.
The image of the car dealer as "money grubbing demon" is a well deserved reputation. I have purchased a number of new cars over the years, and EVERY time I initiated a transaction, I was pressured to purchase goods or services I did not want or need.
Every car dealer I have worked with was only interested in extracting additional cash from my wallet. It is what it is. Don't go to a car dealer for a friend. Go there knowing that you are swimming with trained sharks. Do your homework, and leave if you you don't get the deal you want.
There are two sides to this story. Both have valid points but like the transaction of buying a car neither is completely forthright. The Seller: Sellers often are bringing a flawed vehicle in to trade expecting that if they fully disclose the condition of the vehicle they will lose money. When an amateur tries to con a professional, they lose! However they do not realize that most dealers have the database of issues, when they occur and the probability of occurrence. Combining knowledge with employment practices that take Darwinism to its highest level enable a dealership to win. A buyer will always loose unless your do your homework. My experience is less than 1% do real research. Have you heard about catching ducks in a barrel? At least try not to quack.
Dealers do all of what is stated in the article. That is there business. It is a model steeped in secrecy and old school salesmanship. "Don't trust me . . . Trust yourself (beware) . . . I just want you to have what you really want, need and deserve (emphasize Deserve)." It works just as well today with insanely technical and complicated vehicles (yes they are) as it did with home remedies sold out of a wagon pulled by a donkey.
Professional buyers are trained not born. Most people do not actually understand what it takes to be a "buyer". It is not like a freeform back room auction. Buyers spend 70% plus of their time researching. They start with a goal then create options to achieve their goal. Emotions cause bad decisions.
DO as this article suggest but add the following: 1. be forthright" . . . here is what I have it is not perfect you know what to expect. Please give me a written explanation of your offer for my car for and explain why?" Quickly review and ask if they are positive this is the best the dealer can do. You will be looking to other options to sell your car. Best wins. Put the dealer's sheet into a folder. Does it match your expectations? Rate it 1 to 5. Do not allow the dealer to place your trade in into the formula for the price of a new car.
2. On Paper list exactly what your minimum requirements are from a car include price - not payments. This is for you only keep a sheet comparing each car to what you have to have. If an option is not part of your minimum requirements do not pay for it. It is just waste. 3. Have at least 3 different manufactures to consider with one vehicle per manufacturer. Too many choices are worse than too few. 4. Do your research on TSB's and recalls on the 3 vehicles are interested in for the last 4 years. Review independent research on each car like Edmunds and others. 5. Google, Yahoo, and others are your best friends. What are the slowest selling makes/models with the fewest quality issues and lowest cost per year to maintain? For every hour in a dealership you should spend 3 hours researching. It is hard work but it pays off. 6. Never let yourself get to a point of desperation. Sell it before you have to. Before you buy the car, look at the same or similar models at one year, two years, 3, 4, 5, 6 years back look at the trade in values and plan when you will sell, + or - one year. Budget around this. Desperate ducks quack louder and get plucked sooner. 7. The dealer has a right to make a profit; you have a right to a reasonable price. Do not be afraid to ask what is your "all in" profit for this transaction. In your purchase contract you can ask to have wording added like if your all in profit is greater than xx% all proceeds above that amount will be split 50% to Dealer, 50% to customer. Line it out. Dealers are retailers. Specialty shops typically sell with higher margins because they sell fewer items to support their overhead. If a dealer has hundreds or thousands of cars, their costs should be lower and their prices should significantly reflect those lower costs. If they do not and you remain on their yard, you are quacking loud and plucking yourself.
In the end, Buyer beware, do substantial homework, be objective and always remember the American Heart Association recommends exercise to improve your health and life span . . . walking away from a bad negotiation is good for your health.
So where on this site can a place an ad for my company for free? Ever wonder how much it costs Edmunds to plade an electronic ad on their site? Practically nothing and I bet they charge near thousands to place them. Nobody knows what the dealer paid for the cars? What the heck did the grocery store pay for the box of cereal or even the $125 worth I just bought!! Not the same thing? Well at $125 a week times 52...thats a lot of money. You have to be a smart buyer no matter where you buy things. I even negotiate buying shoes and clothing. Don't make profit en evil thing. It's how each and every one of us earns a paycheck. An ex car guy now trying to shout good guy is laughable. I'm sure he's not working for free now either. An attorney's hourly fee...a visit to the doctor...the dentist...a gallon of paint...how much does everything you buy cost and how often do you buy them. Take that all into consideration before you villify an industry.
BREAKING NEWS....There are less and less places everyday to buy a new car because dealers are no longer allowed to make a profit.
How about an article that talks about the expenses involved in keeping a franchised dealer's doors open? Things like, but not limited to: Mortgage, Property Taxes, Building Maintenance, Utilities (just electric is several thousand/month), Insurance, Interest, Shop Equipment, Staff Compensation, Staff Training, Staff Health Insurance, Staff Pension Plans, Franchise Fees, and the list goes on and on.
How about an article that breaks down how much a furniture store truly pays for the living room set you want or how much Best Buy truly pays for that flat screen television you want?
I have been in this business for 15 years and have watched profits fall every year and watched a lot of people, myself included, work very hard but lose their job anyway because the doors of the dealer they work at have closed. These are people that may be your neighbor or attend your church that are now joining the growing ranks of the unemployed in our country. They are not lazy. They just no longer have a place to work.
Just wanted to give a different perspective from an insider who is trying to provide for his family.
One last question.... Why is earning a profit such a bad thing? Isn't that why any of us are in the business we are in?
The complaints about this article are clearly from sales staff working for a car dealer. They are laughable and should be ignored. Edmunds serves the consumer. Neither consumers nor Edmunds expect a car dealer to sell a car without making a profit. Dealers won't accept a deal that doesn't make profit, so stop crying. The consumers' sole objective is to purchase a car at a price that gives the dealer as low a profit as they are willing to accept. Period. Consumers' obligation is to their pocketbook and their own families' finances. They have no obligation to the salespeople other than honesty and not wasting their time. If the sales people don't like it, they're in the wrong business. If you don't want somebody trying to lowball your commission, say "no, that won't work. Here's the lowest sales price I will agree to that gives me the commission I deserve." Then kick the buyer out when they don't agree to that price. Wait, that won't work - your employer will accept a lower price than that and you know it. If you can't get the commission you think you deserve then your problem is your employer and your sales model, not this article or the buyers that benefit from it.
I’ll be brief with my comments. Do you ask your grocer, pharmacist, appliance dealer, furniture dealer for their invoice? How about negotiating with your doctor about his fees or better still your healthcare facility? I’ve worked for the same family owned auto franchise for over 40 years and we give good, honest prices and back them with excellent service. Simply put, if we didn’t make a profit we couldn’t survive nor can any business. We make much less gross profit than any of those I mention. Why pick on us?
The internet has changed everything. Some car dealers have adapted and others have not. That said, having purchased a vehicle recently I can tell you the game is very much alive for many of these dealers. Thankfully, as consumers, we have sites like Edmunds to assist us with the process.
To me, the F&I guys are the worst. The salesman will tell you why you should buy from them (look how reliable our vehicles are) and then the F&I guys play the whole "you need to get the paint and interior protection or the extended warranty or plan on losing thousands, if not tens of thousands of dollars. And look it only adds a little bit to your 60-72 month finance rate!"
Give me a break. And we all know the dealer makes thousands on your trade-in. I researched my trade-in. Vehicles of my make, model, and mileage were selling for about $5-6K more than their initial trade-in offer within a 200 mile radius. I realize the dealer will spend money fixing some issues, prepping the car, and the overhead to sell the vehicle. They have to make a profit. I totally get it. But fleecing unsuspecting people is bad business. I am quite sure the dealer will make about $1500-2K in profit from my trade-in. They were not going to get the $4-6K from me.
As a buyer you should be fair and professional to the dealer and salesman/woman. But you need to be informed. Buying the new car is one transaction. Selling your old vehicle is a separate transaction. Financing your new vehicle is yet another transaction, and all should be negotiated independent of each other and you need to research each transaction.
As I was creating an account so I could post a comment, I noticed there was a check box to allow edmunds.com to sendmarketing materials. Marketing and advertising is how Edmunds makes their money. I do not create websites to disclose how much Edmunds charges for their advertising or provide detailed information of that information.
However, it seems as though, there is some consistent "sleight of hand" reference in all of these articles.
As a Finance Manager, I protect my customers with the products I sell. Is there a profit, absolutely, but it is insurance. Just like life insurance, auto insurance, disability insurance and any other insurance. If I am looking for an auto insurance quote I look at several different companies, I look for the best value, not the lowest price, but the best value.
Any customer who walks in my office has the opportunity to protect his or her purchase. If their insurance company offers GAP insurance for less money, great, buy it through them. I don't write an article about the fact that their insurance company is insuring their own coverage for a fee.
I also don't understand the reason why dealers are constantly addressed as the bad guy. General Motors makes between $6,000 and $8,000 profit on every new truck that is sold. The dealer, on a new vehicle, makes $700 to $1,000 as the article states. Maybe GMC and Chryler are the bad guys, since they are making 6 to 8 times as much without ever getting a complaint about the pricing.
Some things I noticed, the tax paid on a new car is on the price paid including factory rebates and factory discounts. This is the only item in the USA you pay tax OVER what your final cost is, its a state thing and not right. Only dealer discount is not taxed.
The dealer does NOT want you to pay cash, they make money on financing and will not treat you very nice if you have cash. Toyota is the worst and Chevy is the best at discounting with cash, Ford is between.
That new car smell is sprayed in on cars sitting on the lot, if you order a new car it will smell nice but not that disgusting smell.
Best to buy from a dealer with a great service department all other things being equal.
No car company likes Web pricing, they tolerate it but hate it, best to price that way and visit dealers for off the lot discounting if you want off the lot.
I despise car salesmen almost as much as lawyers, especially when see them making comments like "our job is to separate a sucker from his money". Nobody deserves to make $500 for filing out paperwork when I go to a dealership with the purpose of buying a vehicle. Do they give a dam about your finances or talking food out of your family's mouth? Hell no they don't, they're greedy dishonest weasels. I apologoze to the 1 out of a hundred salesman who are honest. People should educate themselves and see the ridiculous profits these jerks make for selling you something you already wanted. Many times they'll pocket thousands of your hard earned money off one sale, by being dishonest weasels.
You people who keep whining about having the right to make a profit get no sympathy. Yes every business wants to make a profit, problem is, car salesman don't want to give you the real price. If I go to the grocery store, lumber yard, restaurant, or even walmart, the PRICES ARE MARKED AND KNOWN. Car dealerships jack up the price to steal as much as they can from you, and 2 different people will pay a different price the same day.
Listen, the obvious car salesman that posted comments here trying to defend the business really need to STOP trying to defend it and face reality - buying a car is one of the worst experiences a consumer can have in this country - period !! end of story and if you don't realize that - you are just not seeing things as they are -
I have always been very blessed with my automobiles I have purchased. I have paid too much most of the time. I have been very happy with most vehicles I have purchased. I have never seen a salesman driving a fancy car for the most part. Meaning a ford salesman is not usually drive a high dollar BMW. I have walked away from many deals. One word of advice I would give if your payment is going to be 500 a month wait a couple months taking out 500 each month and see how it feels. My insurance has never gone up much. Place I live what does go way up is the tag. Oh maintenance is also getting more expensive. A used car can end up costing you more than a new one for sure. I like driving a newer car for the car is almost maintenance free the first couple years. Oil changes general maintenance you will have to pay for. I have always had to keep money going into a saving to buy tires and maintenance that you know will be coming up. Buy a new car in about 4 years you will need a good bit of maintenance done. I have found out about 200 a month set aside for maintenance is a good thing to do. A car will be new and everything good but one day it will need work.
so; Do they just lose money at year end. i typically watch the adds and look for as much off invoice as possible. My Merc mountaineer was a year end sale and I got about 20% off sticker. On the other had I paid full invoice for a Pruis ( too good a seller) but got 0% interest for 5 years from toyota. What is really irritating is when they try to sneak something in. at the finance office I was reviewing the contract and noticed an add on of $400. that I did not ok. When I challenged it I was told it was for insurance if the car was stolen. He then removed it. The same person tried to get me to sign up for a multi year extended mechanical coverage for $2800 What a bunch of crap - he said most everybody gets it so I should. When I said no he immediately said they could today give me employee pricing of $1200 for the same coverage. I of course declined that. I was with my son when he purchased a used mini van that had a big windshield sign saying free 90 days mechanical warranty. When he went in to buy it the salesman said this is as is and no warranty. i then said what was all that crap on the windshield he said absolutely nothing, just got up and came back with a revised sales contract including the warranty. Are all dealerships such low lifes? I feel they would cheat their own mother if they could. Disgusted in Phx.
Phillip Reed is a Dolt. I worked in the car business for many years and it is a grueling, stressful and thankless job most of the time. Consumers are the reason and they are the ones who made the car-buying process a hassle. They accuse you of lying, cheating and manipulating while excpecting you to work for nothing. They also lie about their job & credit. When they go to any other business to make a purchase, do they look for bargains? Sure, but they don't brow-beat and abuse the salesperson, and slander their character just because they want to make a living. I wonder how many teachers, mechanics, plumbers, lawyers, truck drivers, etc., etc., would feel if they were told day after day that they are liars & cheats and should work for the lowest possible wage? I made a good living providing EXCELLENT service to consumers when I worked in that industry. Excuse me for thriving in a very tough industry where consumers are rude, impatient and insulting most of the time. Maybe they should just walk, or get a bicycle.
BTW, if you disagree with "profit" made in the F&I department (interest from the BANK), complaign to the BANK. Or pay cash for your next car. Oh, you don't have the cash? (big surprise) Then pay the BANK what it asks for and enjoy your new car.
The man who called car salespersons "weasels" is obviously rude and uneducated. I wonder what HE does for a living? Obviously not in an industry where he can afford to purhcase a new car.
Comments
I've been buying cars for over 30 years now, various makes, new and used, in several states. In almost every situation, I usually felt pressured to add more than I wanted. Car salesmen seem to be trained not to take 'no' for an answer. Nothing pisses me off more, because when I say 'no', I mean 'no'. I'm a pretty savvy car buyer and I know what I want.
A few years ago I went with my 65-year-old mother-in-law to help her buy a new car. The F&I woman had her agreeing to everything from undercoating, to paint protection, to a tire warranty, to Lojack. It was a Honda Civic. Seriously? Lojack?! Fortunately I was able to be her voice of reason.
It's not Edmunds who is giving car salesmen a bad rep - it's car salesmen themselves. The Edmunds article above simply gives the consumer a heads-up to some items that they may not need at all, but that the dealership will more than likely try to persuade them that they do.
The way I buy cars now it to start with the internet manager. I do ALL my dealings with them via e-mail until I am ready to come in. I ensure that they know that this is not my first rodeo, and that I will not be meeting with the person presenting warranties and protection plans, nor do I intend on waiting around in the dealership for them to keep going back and forth between me and their boss. I NEVER buy an extended warranty for my own cars, and in over 30 years this has never bit me in the butt. Even if I had some catastrophic failure that was not covered by the existing warranty, I have still come out WAY ahead over the years.
By the time I contact a dealership, I generally have done all my research and know exactly what I'm looking for. All I need them for is to see if we can come to agreement on the purchase price of the vehicle alone. Yes, their job is to maximize profit, but mine is to maximize my own value. They can take it out on the next sucker that comes in.
1 no trade in they offered me $250 for my 96 grand prix piece of junk, I sold it to a neighbor who cut it up for parts , he gave me 1000$
I sold a maxima in good condition for $3800. the dealer offered me $1000.
Both sales private party.
Sold another grand prix for $2000, dealer had offered 500 or so. All of these cars were without state required inspection needed to re-register the car
Just remember - the dealer is not your friend, he's your enemy. One trick that works well is to make an excuse that you have to go home to get some info. I've been told that once you go out the door, 80% of the time you don't come back.
These cars were all bought for about $300 under mfr invoice price, available from Edmund and i forget the other service.
Good luck - Make capitalism work for YOU the buyer
PS I never workd for a dealer, My background is technology
Edmunds can't state that auto sales and other dealership people are somewhat lower in ethics than lawyers but they are. To actually get a good deal, one has to convince them they won't make any sale unless they come around to your way of thinking.
I'm not, nor ever have been, fond of sales people. I do not appreciate the fact I have to deal with this level of infestation if I want to purchase a car or truck and will look far and wide for dealerships who don't employ professional hucksters.
$3900, the price of a 1972 Oldsmobile Tornado, was a realistic amount for an average American car. That car had dual metal body, a steal i-frame, chrome bumpers, and all standard driving necessities (weighed more than prick-up truck curbside)--with regular oil changes it would run forever. If they sold them then for that, three times the cost is a realistic ceiling for today. No business can survive without 50% profit, so the real cost today might be $6000 (3900/2 x 3). The rest of the selling price is hype, hyperbole, fiction and c-level management profit. Look at the annual salaries of bloated management ... AND labor. Don't forget those endless insulting TV ads interrupting your viewing pleasure. You pay for that dribble too when you buy. (Watching them is tax enough!)
Paperwork produced by manufacturers in not verifiable in any real sense; nor would they fess up. Neither is the rhetoric they or their supporters spew. Anyone who has little understanding of accounting knows an accountant can make costs, profits, overhead just about any figure the company wants. Just give the accountant enough time.
They make the car in one minute; shouldn't the price reflect an UAW member's one minute of wages plus materials costs times 2? About $12,012 dollars, by guesstimate. A reasonable price for a Dart, Vette or Towncar.
There's a whole slew of other arguments about the auto industry, government involvement/control, wages, quality, percentage of plastic, unnecessary gizmos, life expectancy, warranties, repairs, etc. that do not bode well for the (less than forthright) car makers.
Who rates their car salesman as the man of the year? Why is anyone up the ladder anymore likable? Crooks are crooked; the car manufacturers are a slew cronies bilking.
Sum it up by agreeing that whenever anyone buys a new car they are being taken to cleaners no matter what they pay.
1988 is the year of automotive epiphany. 10+ vehicles later I saved more than .25 million dollars (not to mention I never got my taxpayer funded car when Government Motors was nationalized--RIPPED OFF). And no finance charges paid either. Ka-ching!!
Return what has been wrought. There many better places to put your money than in a new domestic automobile.
Pryorpat - “The author talks about profit as if it is evil” Nowhere in the article does the author say it is bad, wrong, or Evil as you put it, that is Your interpretation. The article is quoting information given by industry professionals.
Erzuahsiam - You say: “Even though you guys have some insight into the car business, the picture you have portrayed in this write-up is a gross representation of the car business” Really?? Please focus and discuss what is grossly misrepresented and why rather than spouting off your over generalizations. You say “Anybody reading this post will automatically cultivate a carricatured image of these hard-working sales persons”. I say not true, what you describe is your caricature which portrays EVERY sales person as hard working. We all know there ARE sharks out there.
Step 1.
In my experience, the best way to buy a car is to first go to Edmunds.com to get their TMV (or True Market Value) price. I have found it to be the most accurate representation of actual market prices anywhere in the automotive arena. This will provide an uninformed consumer the actual price others are actually paying for the same vehicle, unlike the article which states an average new car gross profit of between $700 and $1,000. Edmunds TMV will tell its visitor the actual recent selling price whether it allows the dealer a $100 profit or a $10,000 profit, as in the case of a high-priced, high-demand luxury or exotic vehicle. Regarding the "dealer cash" subject, Edmunds often reflects a TMV price that appears to be below the dealer invoice. The reason for this is that Edmunds already knows about it. The dealer cash is already reflected in the TMV figure. An impasse is created when geniuses in the "consumer advocacy" arm of the press corp set up unsuspecting consumers with the expectation of getting both the low price, and the dealer cash simply because they now know about it. Not true.
Also remember when dealing with Edmunds, one must ensure the TMV price is for a vehicle equipped both the way you like, and as it is actually built. Often times the car of one's dreams is not built for dealer inventory and special ordering a vehicle can create its own set of difficulties. Also, ensure you revisit the process for an updated TMV if significant time has elapsed between your initial analysis and your actual dealer visit. Once complete, print the TMV information, put it in your pocket or purse and keep it there, just in case you need it later.
Step 2.
If you have a trade and have no idea of its value, try this instead of kbb.com, a site loaded with good intentions, yet with no method by which to actually see your present car and absolutely no way to write you a check for whatever number kbb.com spits out. Better to visit a dealer representing the brand associated with your potential trade which is also a dealership at which you do not intend to buy (in major markets, this is typically the "second-closest dealer"). If this is impractical (or impossible), find a dealership with cars like yours on the lot and available for sale. Ask for the used car manager and tell him you are looking to sell your car and have no interest in buying anything he has for sale. Ask him to write his "buy figure" on the back of his business card along with a "good thru" date (typically one week to one month). Do not shortcut this step by trying this technique at the dealership where you ultimately intend to buy, as it will likely create a conflict somewhere in your purchase process.
Step 3.
Call your banker. Ask them for your rate on a new car loan. If you know you have issues with credit, ask your bank if your rate might be higher because of it. You might hear, "No, your rate won't be higher, yet it is likely the loan will not be approved". If you have good credit and an adequate down payment, make a note of your bank's rate on the TMV sheet you printed earlier. If your credit has been somehow marginalized, work with the dealer's finance department as the entire sale depends upon them being able to get your loan approved.
Step 4.
Go to the dealer and (stay with me on this) enter through the service department. Ask to speak to the receptionist and ask the name of the salesperson who has been there the longest and the dealership's customers love the most. Once you have the name, ask if that salesperson is in and available. If not, call the salesperson and make an appointment. Then at the appointment, choose a vehicle that most closely meets your requirements. Ask for a price both with and without your trade as "Cousin Mel" might buy it, if he can get "Aunt Abigail" to give him the money. If the salesperson casts aspersions on the scheme, reply saying, "That may be, but Aunt Abigail is LOADED!" Once you have a price and trade allowance, you'll know if the salesperson is being fair with you. This, as the TMV number from Edmunds is fresh in your mind, and you also know an accurate, competitive price for your trade. Ask if there is any special financing or additional cash incentive. If yes, great. If not and the price and trade are in line with your research, buy the car.
Step 5.
Once you are introduced to the finance department representative, if he or she claims to be unable to be competitive with your bank, ask for a copy of the order and tell them you'll return with a check from the bank for payment. As long as you have an acceptable credit history, your “unattainable” competitive rate will likely (if by some miracle) become available. This, as it’s better for the dealership to have something rather than nothing. Additionally, if you plan to keep the vehicle for an extended period (or pass it down to offspring or other family), consider the extended warranty as well. This way you can have the peace of mind it provides, while paying for it over time. If you wait for the basic warranty to nearly expire, you’ll be faced with a lump sum outlay that could be larger down the road. Worse, if you allow the basic warranty to actually expire, the coverage you desire may no longer be available to you.
The dealership process should have taken somewhere between one and a half and three hours, depending on the complexity of the vehicle you purchased and the time it took to select your new pride and joy.
Before you leave, ask the salesperson the name of the service advisor who has been there the longest and the dealership’s customers love the most. Ask for a card and an introduction. You’ll be glad you did.
Step 6.
Drive safely, now.
I stated I wanted black exterior with tan interior and also wanted the wooden steering wheel and shifter. I ensured all three dealerships knew I was requesting this with each one of them. Of course they all called me with their offer and in the end I paid $43,700.
When I arrived at the dealership to pick the car up they had it waiting in this special bay they put cars in when customers are ready to pick it up. Right next to that bay was the finance person. She asked me do you want fabric protector? I said no because I could buy that and spray it on myself for less that $20.00 a can instead of the $200.00 they wanted to charge. They asked me if I wanted paint sealer and I said no as well. They asked if I wanted an extended warranty? I said no as well because I can always get one later and cheaper from other places.
Once the vehicle was out of warranty I would call the dealership service dept and ask them how much would it cost to fix something and it was always too high. Example, the leather on the arm rest where I as the driver rest my arm on the door while driving began to wear out so I called and asked how much to replace it. Service person said $830.00 which includes labor but the whole pamnel had to be replaced. I called Greg's Japanese auto and they said $200.00 and only the arm rest had to be replaced. I also found out that Greg's hourly labor rates are $30.00 less per hr. Now, I guess you could say what about the quality of work? Greg's does excellent work and have never been disappointed.
I said no to the finance person for this very reason Edmunds states and said no to the service person for the same reason.
To say how come people do not question companies like Exxon, Wallmart etc and only questions car dealerships is different because buying a car is not like buying a loaf of bread and buying cars costs a lot more money than buying an Xbox at Walmart. The fact is dealerships need to make a profit but if you let them, they will take you like Grant took Richmond.
When I first go look at a car I want to be left alone. I do not want someone running up to me at light speed with all that can I help you sir crap. Why is that? Because when you tell them that, they start running off at the mouth about what specials they got, then ask more crap and at that point I am fed up.
Here, how about this? How about let me drive up to the lot. You see me and keep yourself posted where you are. When I see something I like I will come get a sales person.
Nope, that won't work either because you guys are all clamoring to get the next customer so you all have to run after every customer that drives up on the lot.
Tell them what they want to hear, up to a point, and be friendly.
Two other things are also helpful when buying either new or used.
Before you go to the dealer of the car you really want go to 1 or 2 other dealers with different brands and get a general quote on a similar priced model. Then when dealing with Joe at Toyota and not quite getting what you want let them know you can get a better deal on the Nissan and/or Honda down the street.
Say thank you, goodbye and the salesperson who works on commission will usually say"Wait a second sir let me see what I can do to sell you this car" or something like that.
It has worked for me often over the years. I have bought 5 various cars over the last 16 years and always got excellent deals.
Another good line is to tell the salesperson they give you a good price and they can easily make up whatever they don't make from you when they get another customer who obviously has no idea on how to negotiate and sell them all kinds of extras they don't need.
One of the most important things to remember is know specifically waht you want and not get talked into the extras you don't want/need and if you do want something extra, like a better sound system, that they charge $1200 to $2000 for you can get after market for a lot less.
While I certainly recognize that any business needs to garner a profit to survive, it's also not a secret that the car sales industry continues to wear a "black eye" due to the misdeeds of the past. Even to this day and age, it's still a significant slight to refer to someone as a "used car salesman." Right, wrong or indifferent, there's a very real perception that customers continue to be unfairly treated or "swindled" out of a hard earned dollar at the local dealership (and certainly pre-internet where information was not as readily available).
Regardless, an educated consumer, who also truly understands that a business must make a profit, is a good thing. For me personally, I buy a new car about every three years and don't have any specific brand loyalty (e.g. I've been to a lot of local and regional dealerships across all brands in my 20+ years of driving). While I'd like to say that all of my experiences with a dealership's integrity have been positive, that would be incorrect.
The overwhelming majority of the dealerships that I've visited across the years have indeed possessed integrity and honesty, but there are still "bad seeds" out there that the information in this article can help a consumer spot pretty quickly (along with additional research relative to Customer Service experiences, deeper research on a potential trade-in valuation, friend and family recommendations, etc.).
If you've made the effort to significantly educate yourself BEFORE your visit to a dealership, you can spot a charlatan from a mile away.
The recommendation concerning dealing with only the Internet Sales Manager have worked in spades for me personally. In fact, the last car I bought was completely through email negotiations with 7 different Internet Sales Managers for one respective brand of car (within a 120 mile radius of my home). The price disparity was somewhat amazing ($3K in one instance for the exact same model and trim level).
This explains the success of businesses like CarMax, who charge a fixed price for their vehicles and their sales people get a fixed commission regardless of what car they sell you. There is no financial incentive for them to sell you more car than you need. You might get a better price by going to a more conventional dealership and fighting for two or three hours, but that gets very tiresome.
Salesmen spend hours every day studying information on everything from the features and benefits of their product line and those of the competition to business ethics. The make calls following up with clients who both have and have not purchased from them. The educate customers and direct them to vehicles that meet the stated needs of the customer.
Sales managers ensure that the training presented and received by their staff is informationally up to date and ethically sound. They structure sales in such a way that the customer is able to get what they want, how they want at a price they claim they can afford. The handle difficult situations, take calls, purchase and sell vehicles and make sure that the inventory reflects the needs of the community. AND - they hire people. They put people to work.
Service writers listen to customer complaints. They diagnose what may be wrong based on noises customers here, situations customers report and "gut feelings" they are presented with. They recommend service based on manufacturer recommendations. They, like salesmen, contact customers that may have, or may have not, done business with them to make sure that the vehicle service needs are being met to ensure that the vehicle owned by the customer lasts for as long as possible and is operated in as safe as a manner as possible. Oh, they also attend training and maintain certifications from manufacturers, dealers, vendors and state agencies.
All of this is on top of the fact that this is the only business that the average buyer can set the terms under which they will purchase a product.
Now, please don't get me wrong. I'm all for customer education. I love sites like Edmunds, Kelly, Autotrader and NADA. I love that customers are checking inventories from as far out as 200 miles away and comparing prices. I'm a salesman and I do that. In the end, though, I make (and have made) all my vehicle purchase decisions based on the treatment I receive as a customer. I already knew what I could afford (both cash price and installment payment price), what options and colors I wanted and where and when I was going to purchase.
The author could have saved everyone time and just said: Buyer beware. Do your homework. Check with other people on price. Set your limits and stick with it. There is more than one dealer selling what you want, if you can't get it at point "A" inside what you want, go to point "B" and try there.
Salesmen spend hours every day studying information on everything from the features and benefits of their product line and those of the competition to business ethics. The make calls following up with clients who both have and have not purchased from them. The educate customers and direct them to vehicles that meet the stated needs of the customer.
Sales managers ensure that the training presented and received by their staff is informationally up to date and ethically sound. They structure sales in such a way that the customer is able to get what they want, how they want at a price they claim they can afford. The handle difficult situations, take calls, purchase and sell vehicles and make sure that the inventory reflects the needs of the community. AND - they hire people. They put people to work.
Service writers listen to customer complaints. They diagnose what may be wrong based on noises customers here, situations customers report and "gut feelings" they are presented with. They recommend service based on manufacturer recommendations. They, like salesmen, contact customers that may have, or may have not, done business with them to make sure that the vehicle service needs are being met to ensure that the vehicle owned by the customer lasts for as long as possible and is operated in as safe as a manner as possible. Oh, they also attend training and maintain certifications from manufacturers, dealers, vendors and state agencies.
All of this is on top of the fact that this is the only business that the average buyer can set the terms under which they will purchase a product.
Now, please don't get me wrong. I'm all for customer education. I love sites like Edmunds, Kelly, Autotrader and NADA. I love that customers are checking inventories from as far out as 200 miles away and comparing prices. I'm a salesman and I do that. In the end, though, I make (and have made) all my vehicle purchase decisions based on the treatment I receive as a customer. I already knew what I could afford (both cash price and installment payment price), what options and colors I wanted and where and when I was going to purchase.
The author could have saved everyone time and just said: Buyer beware. Do your homework. Check with other people on price. Set your limits and stick with it. There is more than one dealer selling what you want, if you can't get it at point "A" inside what you want, go to point "B" and try there.
This is the way to save money. Also, change your oil at the intervals recommended in your owners manual--not according the sticker the oil-change guys put on your windshield.
Every car dealer I have worked with was only interested in extracting additional cash from my wallet. It is what it is. Don't go to a car dealer for a friend. Go there knowing that you are swimming with trained sharks. Do your homework, and leave if you you don't get the deal you want.
The Seller:
Sellers often are bringing a flawed vehicle in to trade expecting that if they fully disclose the condition of the vehicle they will lose money. When an amateur tries to con a professional, they lose! However they do not realize that most dealers have the database of issues, when they occur and the probability of occurrence. Combining knowledge with employment practices that take Darwinism to its highest level enable a dealership to win. A buyer will always loose unless your do your homework. My experience is less than 1% do real research. Have you heard about catching ducks in a barrel? At least try not to quack.
Dealers do all of what is stated in the article. That is there business. It is a model steeped in secrecy and old school salesmanship. "Don't trust me . . . Trust yourself (beware) . . . I just want you to have what you really want, need and deserve (emphasize Deserve)." It works just as well today with insanely technical and complicated vehicles (yes they are) as it did with home remedies sold out of a wagon pulled by a donkey.
Professional buyers are trained not born. Most people do not actually understand what it takes to be a "buyer". It is not like a freeform back room auction. Buyers spend 70% plus of their time researching. They start with a goal then create options to achieve their goal. Emotions cause bad decisions.
DO as this article suggest but add the following:
1. be forthright" . . . here is what I have it is not perfect you know what to expect. Please give me a written explanation of your offer for my car for and explain why?" Quickly review and ask if they are positive this is the best the dealer can do. You will be looking to other options to sell your car. Best wins. Put the dealer's sheet into a folder. Does it match your expectations? Rate it 1 to 5. Do not allow the dealer to place your trade in into the formula for the price of a new car.
2. On Paper list exactly what your minimum requirements are from a car include price - not payments. This is for you only keep a sheet comparing each car to what you have to have. If an option is not part of your minimum requirements do not pay for it. It is just waste.
3. Have at least 3 different manufactures to consider with one vehicle per manufacturer. Too many choices are worse than too few.
4. Do your research on TSB's and recalls on the 3 vehicles are interested in for the last 4 years. Review independent research on each car like Edmunds and others.
5. Google, Yahoo, and others are your best friends. What are the slowest selling makes/models with the fewest quality issues and lowest cost per year to maintain? For every hour in a dealership you should spend 3 hours researching. It is hard work but it pays off.
6. Never let yourself get to a point of desperation. Sell it before you have to. Before you buy the car, look at the same or similar models at one year, two years, 3, 4, 5, 6 years back look at the trade in values and plan when you will sell, + or - one year. Budget around this. Desperate ducks quack louder and get plucked sooner.
7. The dealer has a right to make a profit; you have a right to a reasonable price. Do not be afraid to ask what is your "all in" profit for this transaction. In your purchase contract you can ask to have wording added like if your all in profit is greater than xx% all proceeds above that amount will be split 50% to Dealer, 50% to customer. Line it out. Dealers are retailers. Specialty shops typically sell with higher margins because they sell fewer items to support their overhead. If a dealer has hundreds or thousands of cars, their costs should be lower and their prices should significantly reflect those lower costs. If they do not and you remain on their yard, you are quacking loud and plucking yourself.
In the end, Buyer beware, do substantial homework, be objective and always remember the American Heart Association recommends exercise to improve your health and life span . . . walking away from a bad negotiation is good for your health.
How about an article that talks about the expenses involved in keeping a franchised dealer's doors open? Things like, but not limited to: Mortgage, Property Taxes, Building Maintenance, Utilities (just electric is several thousand/month), Insurance, Interest, Shop Equipment, Staff Compensation, Staff Training, Staff Health Insurance, Staff Pension Plans, Franchise Fees, and the list goes on and on.
How about an article that breaks down how much a furniture store truly pays for the living room set you want or how much Best Buy truly pays for that flat screen television you want?
I have been in this business for 15 years and have watched profits fall every year and watched a lot of people, myself included, work very hard but lose their job anyway because the doors of the dealer they work at have closed. These are people that may be your neighbor or attend your church that are now joining the growing ranks of the unemployed in our country. They are not lazy. They just no longer have a place to work.
Just wanted to give a different perspective from an insider who is trying to provide for his family.
One last question.... Why is earning a profit such a bad thing? Isn't that why any of us are in the business we are in?
Thanks Edmunds!
To me, the F&I guys are the worst. The salesman will tell you why you should buy from them (look how reliable our vehicles are) and then the F&I guys play the whole "you need to get the paint and interior protection or the extended warranty or plan on losing thousands, if not tens of thousands of dollars. And look it only adds a little bit to your 60-72 month finance rate!"
Give me a break. And we all know the dealer makes thousands on your trade-in. I researched my trade-in. Vehicles of my make, model, and mileage were selling for about $5-6K more than their initial trade-in offer within a 200 mile radius. I realize the dealer will spend money fixing some issues, prepping the car, and the overhead to sell the vehicle. They have to make a profit. I totally get it. But fleecing unsuspecting people is bad business. I am quite sure the dealer will make about $1500-2K in profit from my trade-in. They were not going to get the $4-6K from me.
As a buyer you should be fair and professional to the dealer and salesman/woman. But you need to be informed. Buying the new car is one transaction. Selling your old vehicle is a separate transaction. Financing your new vehicle is yet another transaction, and all should be negotiated independent of each other and you need to research each transaction.
However, it seems as though, there is some consistent "sleight of hand" reference in all of these articles.
As a Finance Manager, I protect my customers with the products I sell. Is there a profit, absolutely, but it is insurance. Just like life insurance, auto insurance, disability insurance and any other insurance. If I am looking for an auto insurance quote I look at several different companies, I look for the best value, not the lowest price, but the best value.
Any customer who walks in my office has the opportunity to protect his or her purchase. If their insurance company offers GAP insurance for less money, great, buy it through them. I don't write an article about the fact that their insurance company is insuring their own coverage for a fee.
I also don't understand the reason why dealers are constantly addressed as the bad guy. General Motors makes between $6,000 and $8,000 profit on every new truck that is sold. The dealer, on a new vehicle, makes $700 to $1,000 as the article states. Maybe GMC and Chryler are the bad guys, since they are making 6 to 8 times as much without ever getting a complaint about the pricing.
The dealer does NOT want you to pay cash, they make money on financing and will not treat you very nice if you have cash. Toyota is the worst and Chevy is the best at discounting with cash, Ford is between.
That new car smell is sprayed in on cars sitting on the lot, if you order a new car it will smell nice but not that disgusting smell.
Best to buy from a dealer with a great service department all other things being equal.
No car company likes Web pricing, they tolerate it but hate it, best to price that way and visit dealers for off the lot discounting if you want off the lot.
Disgusted in Phx.