Did you recently take on (or consider) a loan of 84 months or longer on a car purchase?
A reporter would like to speak with you about your experience; please reach out to PR@Edmunds.com by 7/25 for details.
Options

Purchasing Strategies - Questions & Success Stories

1101113151674

Comments

  • mikefm58mikefm58 Member Posts: 2,882
    Another happy student of the Bobst school of car buying. I'm tellin ya Bobst, you gotta patent this thing before the patent trolls beat you to it...LOL

    You did great newtosubie.....
  • bigdveedubgirlbigdveedubgirl Member Posts: 402
    kbb does not buy cars and kbb is only a guide in certain markets.

    GAP coverage is regulated in many states and it is a percentage of the selling price. So there is no reason to shop it. Also GAP must be purchased at the time of Purchase also.
  • golicgolic Member Posts: 714
    ****Also GAP must be purchased at the time of Purchase also.***

    Not sure if that statement is accurate in All States. I was informed from my insurance agent that the policy had to be put in place within 30 days of purchase.
  • mikefm58mikefm58 Member Posts: 2,882
    Very few buyers are not upside down for at least a portion of their loan.

    And GAP insurance should only be used by folks that need the peace of mind it gives or if the financing requires it.
  • rroyce10rroyce10 Member Posts: 9,332
    ... >>> **As you've just admitted, you're several grand below retail, the amount the insurer is bound to pay me thanks to my policy. When it comes to my insurance policy coverage, your low-ball trade-in number is irrelevant.**
    ===========================

    Thats how every retail business works ..... the retailer pays cost and/or a wholesale figure, and hopefully a smart shopper does their homework and looks around and pays a fair retail figure or *asking* price ... business 101 ...

    Over at Real World trade-in Values, we've been talking retail/wholesale prices for over 5 years .. where have ya been, Tibet..? ... there's nothing low-ball about it ... the auctions prices predicate what those wholesale prices are - "not" KBB, not AAA, not the FBI, CIA, UAW, NAACP or the YWCA -- of course those two figures will be different, they're meant to be .l.o.l..

    Just like when you go to the jeweler down the street and pay $2,900 for that TAG Heuer watch, now the dealer probably paid in and around $900 for it ... but if it gets stolen or lost, you'll be lucky to see $500 from your home policy -unless- you have a rider that insures it for replacement cost ~ not much different that Gap insurance ...

    I think where you keep getting lost is ... paying "taxes and fee's" on a $35,000 vehicle is "not" putting money down, it's paying "taxes and fee's" ($2,500ish.?) .... and 80% of the buyers pay that - or less ... the problem starts when the vehicle is driven over the curb and it depreciates $5,000/$10,000+ (not including taxes) ... got it.?



    Terry. ;)
  • bill731bill731 Member Posts: 16
    "Well, now you've exposed me. One of my objectives here is to get consumers to STOP thinking like payment buyers, and get them to focus instead on price and terms."

    socala4, I am not in the Auto business and I seldom post here. However, I do visit this site about every day. But not to read posts from anyone who has: objectives here is to get consumers to do deals MY WAY...

    Bill
  • bobstbobst Member Posts: 1,776
    I'm glad that our advice helped you, Subie. We may disagree on some of the details of our car buying methods, but we all agree that a buyer should have a very good idea how much they are willing to pay before they walk into the dealer.
  • socala4socala4 Member Posts: 2,427
    Royce, that's all well and good, but that has nothing to do with my basic point: A dealer's trade-in price has absolutely no bearing on the amount that I'd get from an insurance company to settle a claim following a theft or total. If you buy a gap policy, your concern should be what an insurer would pay, not what a dealer would pay.

    If you're trying to get consumers to use a lowball trade-in figure as a basis for calculating the "gap", instead of the much higher amount that they'd actually collect from an insurance payoff, then you're obviously making a mistake that, not surprisingly, would grossly overstate the proportion of "upside down" borrowers for the purposes of this calculation. At least you've shown us what faulty argument will be used by the F&I guy to sell some policies to people who don't need them.
  • socala4socala4 Member Posts: 2,427
    I hope that we all helped you, and congrats on your new purchase. I can't comment on your numbers, but I do hope that you considered the invoice in guesstimating your price. (Based upon your margin below MSRP, it sounds as if you probably did well.)

    It's good that you allowed some slack in your pricing to go through a couple of rounds of negotiation, and that you kept your eye on the ball in seperating the trade-in and the new car so that you didn't allow yourself to get confused. It's also good that you went during a non-busy period to give yourself breathing room, and that you did your homework about financing and the incentives available.

    For next time, I would suggest that you consider allowing the dealer to be the first to name the price, rather than being the first one to toss out the number. For one, getting the other party in downward pricing mode is good momentum for your haggle; for another, his offer and subsequent may give you some insight about whether your target price for the new car may actually be too high. (Although it may not -- be careful not to read too much into his offer, but do allow yourself to try to gain some insights from both his numbers and the means by which he tries to get there, as it could help you in subsequent rounds of negotiation.)

    Remember -- part of your mission is to discover the other party's price point, rather than just assume that you know what it is. If you name the first number, then you have chosen the floor for the both of you, perhaps at a level above what he would have ultimately chosen if given the chance. Definitely pick an absolute target price in your mind so that you don't overpay, but endeavor to stay below it, rather than hit it, otherwise your target price will almost invariably be the price you pay, whether appropriate or not. (Unfortunately for us, while the invoice price is readily available, the dealer's lowest acceptable price is not always as obvious.)

    Enjoy your new car, and have fun shopping in the future. Good job, and thanks for sharing your story.
  • samsidsamsid Member Posts: 4
    I'm planning on buying a new vehicle in a cash transaction for a car that the dealer needs to locate from another dealer. I plan to give a deposit via credit card to the salesman later today and pay the remainder once the car arrives and I've confirmed that it matches what I specified, etc.

    In this situation, is it customary to sign the Bill of Sale at the time of deposit or when I take delivery of the car? (Silly that I'm not sure of the answer but previously I've always bought what was already on the lot).

    Also, is there a customary amount for the deposit? I'm thinking $100 - $200 but another dealer had asked for $500.

    Thanks in advance.
  • jmurman42jmurman42 Member Posts: 675
    The Bill of Sale is completed at the time of delivery. You'll sing an agreement called a Buyers Order. A deposit is the norm for a Dealer Exchange, we ask for and receive $500.
  • bobstbobst Member Posts: 1,776
    Samsid, what are you going to do if the car comes in and you don't like it?

    Suppose the dealer says the car is OK and refuses to give you back our $500 deposit. What then?
  • rroyce10rroyce10 Member Posts: 9,332
    ..... Dealer can't keep his money, unless it say's on the contract "non-refundable" .... even so, unless it's a purple people eater with a handshaker, they would only charge him a chase fee if they thought they were being hosed around for a hun or two ..... they sell cars, not deposits.



    Terry. ;)
  • bdr127bdr127 Member Posts: 950
    Suppose the dealer says the car is OK and refuses to give you back our $500 deposit. What then?

    What's the point of taking a deposit if it would just be refunded if the customer wants it back? If you think about it, there's no point to it. The only way it makes sense for a retailer to take a $500 deposit is if he is guaranteed the money if something happens. To give it back at the customer's request completely defeats the purpose of the deposit....

    Am I making sense? Does anyone get what I'm saying here?
  • golicgolic Member Posts: 714
    From what I understand, there is a lot that needs to occur for a dealer to locate your car and perform a trade for your convenience.

    A dealer will perform all if these steps if it has a serious buyer. Hence, the requirement for a deposit.

    I think a serious buyer would say Mr. dealer we will buy said car from for X dollars as long as the car is free of defects and we are satisfied with the vehicle after our inspection. Here is our deposit of $500. This deposit is fully refundable if you can not get the car by a certain date or the car does not meet the expectaions of a typical new car.

    Let's face it, this is being done for your convenience. With the internet you can email or call every dealer in the area and ask if they have X car available. And if they do, well you can skip the deposit and go there.

    I don't fault the dealer for wanting a deposit, and you should go over any "fees" they may have if decide you don't want the car.

    Let's face it, as much as we complain about the dealers I think it would be rather poor if you tell a dealer you will buy X car, agree on a price and while you are waiting the 1-3 days for the car you find another dealer who will give it to you for $100 cheaper. YMMV
  • mikefm58mikefm58 Member Posts: 2,882
    On a dealer trade, who gets the holdback? The selling dealer or the dealer who traded the car out?

    When my son bought his '04 Tacoma, it wasn't configured exactly the way we wanted, so I asked the dealer if he could locate one. His answer was yes, but not at the price I gave you as we would lose the holdback?

    This forum is slowing morph'ing to "Any Questions for a Car Dealer?"
  • golicgolic Member Posts: 714
    That was a great forum, btw. *rattle*

    I asked this question before and it was explained to me that the holdback does not follow the car and stays with the original dealer.

    However, I am not completely sure the 'get-me-the-car' dealer is losing any money, SINCE if 'get-me-the-car' dealer is going to trade one of his cars to the other dealer he will retain his hold back on that car.

    So don't get caught up in the dealers ploy of trying to confuse you with the "losing" the holdback. I would tell the dealer if you can't get me the same price I'll just go over to the other dealer and save you the hassle of the trade *wink*
  • bigdveedubgirlbigdveedubgirl Member Posts: 402
    If you do leave a deposit for a dealer to locate a car for you, let the dealer look for the car. Because, bless our customers hearts, after they leave a deposit, they will call around town, looking for the car, find it and call us and say "I found the car at dealer X". Then when we call that dealer to make the trade, the dealer says they have a deal working on it and they do not want to trade it. Sit back and relax you are paying for a service, and we as dealers want to sell a car so we will do whatever neccessary to get the car for you! :blush:
  • socala4socala4 Member Posts: 2,427
    What's the point of taking a deposit if it would just be refunded if the customer wants it back?

    The dealer wants the customer to (a) show commitment to the deal, and (b) feel compelled to complete and close the deal.

    I don't blame the dealer for wanting a deposit for a trade, but there's no reason for the customer to make that deposit non-refundable for the reasons to which Bobst alludes. In any case, it is unwise for you as a customer to ever pay a non-refundable deposit for anything, that's just exposing yourself to more opportunities for pack, last minute "price adjustments" and other drama that you don't need. You should be able to walk away from the closing table at any moment until that time that you have inspected the car, negotiated every point that needs to be negotiated, and fully reviewed all the numbers and documents to your satisfaction.
  • bdr127bdr127 Member Posts: 950
    The dealer wants the customer to (a) show commitment to the deal, and (b) feel compelled to complete and close the deal.

    You'd think that putting a deposit down on a car would show committment.... Say I went and looked at a car and liked it (but wasn't totally "sold" on it) and they asked for a deposit. If I knew it was refundable if I asked for it back, then I'd say, "Suuuuure, you can put a $10,000 deposit on my credit card!" (It could be any number, for that matter.) Then, of course, what kind of real committment is that since my mind was never reeeally made up to begin with. I just didn't want them to sell it to anyone else before I made up my mind. After a day or two I go back and tell them I don't want it and to refund my deposit. The dealer is stuck with the car, they lost a day that they could have sold it to someone else, and they don't get the money, either. Since I knew I'd be getting it back if I changed my mind, the deposit was no "committment" in my mind.

    I do, however, agree with what golic said regarding deposits:

    "we will buy said car from for X dollars as long as the car is free of defects and we are satisfied with the vehicle after our inspection. Here is our deposit of $500. This deposit is fully refundable if you can not get the car by a certain date or the car does not meet the expectaions of a typical new car."

    Now that makes sense. If something is wrong with the car or they can't get it soon, then a refund makes sense. You can't just get your deposit back if you "change your mind." IMO, it would be pointless to take a deposit if the customer knows they can get out of it if they decide to buy elsewhere.... there's just no "feeling of committment."
  • socala4socala4 Member Posts: 2,427
    You can do what you like, but it's unnecessary and there's no reason to advise other consumers to follow that lead. A car is just inventory, and the dealer will simply sell it to someone else if you end up not purchasing it. It's the dealer's job to manage his inventory, not the customer's.
  • joel0622joel0622 Member Posts: 3,299
    Mike, the dealer who originally had the car gets the hold back. So if a dealer does transfer a car in for you he loses that, + the price of going and picking it up.

    As far as deposits go, I agree that a deposit is useless if the consumer knows that you will refund it. If that is the case screw a $500 check, give me a $100 bill, you can't stop payment on it and I know you will come back. The consumer thinks its fine to tell a dealer they will be back at 4:00 to pick a car up and us spend the time/money prepping it only for them never to come back, but let a dealer forget to order the valve stem cover for the left rear tire that was missing on 1995 zorch you bought and watch them go ballistic

    I have been reading these forums for a few days and it amazes me how people want to brow beat a dealer to death and wine and complain about everything they do.

    The reason dealers have Doc fees/Prep Fees/Advertising fees is because consumers think they are doing us a favor by paying a $100 over invoice.
  • jipsterjipster Member Posts: 6,296
    In any case, it is unwise for you as a customer to ever pay a non-refundable deposit for anything.

    That would not apply to private car sales would it? If I'm selling a vehilce, and someone comes out, test drives vehicle, and says he wants to buy it...I would want a non-refundable deposit. If 3 or 4 days later he changes his mind or can't arrange financing, then I'm out those days to where I could have made the sale to someone else.
    2021 Honda Passport EX-L, 2020 Honda Accord EX-L, 2011 Hyundai Veracruz, 2010 Mercury Milan Premiere.
  • joel0622joel0622 Member Posts: 3,299
    LOL why should it be diffrent. The same thing holds true for a dealer. If I am holding a particular car for you for 3-4 day I am missing the same opportunities
  • socala4socala4 Member Posts: 2,427
    Mike, the dealer who originally had the car gets the hold back. So if a dealer does transfer a car in for you he loses that, + the price of going and picking it up.

    And as Golic pointed out, the holdback situation is the same for the car that was given in trade, so the money will ultimately wash.

    Example:
    -Dealer A has Car X in inventory; Dealer B has Car Y
    -Dealers do a trade, so A ends up with Y, and B with X
    -When B sells X, A gets the holdback
    -When A sells Y, B gets the holdback

    Both dealers end up with the very same amount of holdback that they would have ended up with in the first place. The only added expense is the transport cost.
  • socala4socala4 Member Posts: 2,427
    Everything is negotiable. If that's what you want to do, then do that.

    If you want to pay a non-negotiable deposit to a dealer, you are absolutely free to make that choice. But that's a bad choice, and one that is unnecessary for the customer.

    (Remember, this thread is supposed to be about advice to help the customer, not the salespeople. I thought that the salespeople had their own "war stories" thread where they were free to vent about guys like me...)
  • joel0622joel0622 Member Posts: 3,299
    Remember, this thread is supposed to be about advice to help the customer, not the salespeople. I thought that the salespeople had their own "war stories" thread where they were free to vent about guys like me...)

    And where would that be please?
  • socala4socala4 Member Posts: 2,427
    It's called "Stories from the Sales Frontlines." Should be toward the bottom of the Smart Shopper front page.
  • bdr127bdr127 Member Posts: 950
    You can do what you like, but it's unnecessary and there's no reason to advise other consumers to follow that lead.

    I'm not necessarily advising anyone one way or another.... I'm just pointing out that I don't understand the point of a deposit that you can get back if you change your mind. It doesn't hold water!

    Please stop trying to advise everyone to pull one over on the dealer and just answer my question. Does it make sense to have a deposity that doesn't hold water? What the heck is it for, then?

    A car is just inventory, and the dealer will simply sell it to someone else if you end up not purchasing it. It's the dealer's job to manage his inventory, not the customer's.

    As someone else pointed out, what if you were selling your own car as a private party? If someone gave you a deposit and took the car off the market.... then came back and said "no deal" and wanted their money back, would you be pissed that you could have sold the car to someone else during that time? (Not sure why I'm even asking you, since I can predict what you'll reply, anyway....)
  • socala4socala4 Member Posts: 2,427
    I'm just pointing out that I don't understand the point of a deposit that you can get back if you change your mind. It doesn't hold water!

    But it does make sense: it's to secure buyer commitment and to give leverage to the dealer. Those buyers who feel guilty about getting it back, mistakenly believe it to be non-refundable, dread the anticipated battle to get it returned, etc. all increase the likelihood of those buyers completing the purchase. Good for the dealer, not necessarily helpful to the customer, and this thread is about advice to help the customer.

    As someone else pointed out, what if you were selling your own car as a private party?

    The dealer isn't a private party, so let's talk about how to conduct business with a dealer, and leave private parties for a different conversation.

    A dealer is in the business of selling cars and moving inventory, and has a staff of people and a marketing and promotional effort to get customers in the door and out with a car. I presume that the dealer is clever enough to manage things for his team, and I will manage things for mine.

    Just as one chess player wouldn't tell his opponent, "Hey, let me show you this sequence that you can use to checkmate me in three moves," I'm not going to negotiate points that favor the dealer without giving me anything of value in return. I'm playing for my side, he plays for his, and somewhere in between, we end up with a deal that is sufficient for both of us. If I'm on the dealership's payroll, then I'll switch hats and play accordingly.

    There's no need to make deposits non-refundable, when you can get a refundable one, instead. But it's all negotiable, so you are free to make it non-refundable if you like. I just wonder why you would when you're getting nothing of value in return.
  • rroyce10rroyce10 Member Posts: 9,332
    ... >>> **A car is just inventory, and the dealer will simply sell it to someone else if you end up not purchasing it. It's the dealer's job to manage his inventory, not the customers...**

    Your right, "just inventory" -- very expensive inventory that the dealer pays a quarter point over prime on ~ every month ...

    Like someone mentioned before, the dealer who had the car gets the holdback .. and the buying dealer loses it on the transfer ..... and speaking of transfer, we don't even know if they can or will trade a "like for like", usually the other dealer will cherry pick, and most times, they'll just say pick up the vehicle ... which means, titles (MSO's) and checks get written and traded .. either way, it takes up the time of both title people at both stores, plus the drivers .... it's not like trading chicken wings at the Sunday go to meetin' picnic ...


    >>> **Both dealers end up with the very same amount of holdback that they would have ended up with in the first place. The only added expense is the transport cost ...**

    Where do you get this stuff.....? .. most dealers will only trade a $25,000 vehicle for a $15,000 vehicle, or a $35,000 vehicle for a $21,000 vehicle .... and the dealer loses the holdback and pays for the drivers, the title clerks, paper transfers and everything in between .... and you wonder why they might want a "non-refundable" deposit on a vehicle...?

    If the vehicle comes in damaged, the seats are ripped, maybe the wheels are scared, just a plain old mess (which is rare) and the dealer can't make the customer happy no matter what (which is also rare) then they will give any security back .... but if it comes in nice, clean and it meets all the contract specs and the buyers are drifting around for 2 or 3 days, then they're going to keep some $$ ....

    We understand that you can't grasp the "negative equity" discussion from yesterday .... but this one, you're in the tree's with ..... again.

    By the way ... what business are you in...?



    Terry ;)
  • socala4socala4 Member Posts: 2,427
    That's a lot of misleading spin, a sales pitch that's meant to confuse the consumers whom this thread is intended to help.

    #641 is accurate. If Dealer A trades a car, he'll collect his holdback when Dealer B sells it. It just doesn't vanish into thin air, as you'd like us to believe.

    I do like how you ignore the other half of the transaction in order to "prove" your point. It's just another example of why consumers need to do their own homework, rather than believe the salespeople.
  • rroyce10rroyce10 Member Posts: 9,332
    ..... **#641 is accurate..**

    .....l..o..l.......

    I think you've been watching a little too much Rod Serling and sittin' a little too close the Jim Beam lately ...

    You still didn't answer .. what type of work do you do..?



    Terry.
  • bflomanbfloman Member Posts: 1
    I got back from a dealership where he took a $200 check, saying it was a good faith deposit for the bank financing, saying that we were 'serious' and refundable but non-refundable in some case, I was confused!. We haven't signed anything, or reserved a car- nothing. It was at a dealership for new cars.

    What happened?
    Is this bad?
    Is it refundable in Connecticut?

    Since I didn't sign a thing, I could still place a stop on the check if it is shady. HELP!!! :(
  • mikefm58mikefm58 Member Posts: 2,882
    You gave a deposit and didn't sign anything? Who did you make the check out to, Mr. Cash? A good faith deposit on bank financing? What about the car? Golic spelled it out pretty good in post #631.

    If I were you, I'd run not walk, back to the dealer and insist on a buyer's order be written up that spells out what the dealer is doing for you. If they won't write it up, demand your check back. And take your gf with you.

    It's examples like this that just prove everything socal4 has been preaching about low life dealers and the tricks they pull.
  • rroyce10rroyce10 Member Posts: 9,332
    .... Mike, pay attention ........

    User: bfloman
    Email: private
    Member since: March 11, 2006
    Last login on: March 11, 2006

    I fell for the last one ... I guess it's your turn now ...



    Terry.
  • bigdveedubgirlbigdveedubgirl Member Posts: 402
    Why does this have to be so difficult.

    We take deposits, not to do voo doo on the customer, but For example AUDI people are wierdos, and they always want what does not exists. So we build the car for them. It takes about 12 weeks to build. A deposit is never 100% non-refundable. But if I build an dakar beige car with no roof with nav and rear airbags, and my customer changes his mind after the car arrives, We are keeping the $1000.00. Because that car will be almost near impossible to to sell.
    If my customer orders a car and it is not what was agreed upon at delivery they get a refund. I have never ever had a problem with this in 7 years with anyone it makes sense.

    Asking for a deposit is not a negotiation ploy, its called CYA!
  • bobstbobst Member Posts: 1,776
    Stop payment on the check.
  • british_roverbritish_rover Member Posts: 8,502
    If it is a car I have on the lot and we have done business before then I will take just a handshake to do the deal. Right up a buyers order right there and set up a delivery date and time.

    If I have not done business with you before then I want some form of deposit or if we are ordering a car. For a used car normaly 500 dollars but I might make it a 1000 depending on the vehicle. New cars being ordered are 2000 dollars and a minium 12 week wait. Low production models might be as long as 6-9 months.

    For a car we are going to go swap out I will ask for 1000 dollars unless it is a Range Rover then I want 2000. If I could take more then 2000 I would but since our CC machine has a 2000 dollar limit that is normaly what I take. If the person feels a little fishy I will ask for a check so that I can get more then 2000 dollars. I have asked for 5000 dollars a couple of times.

    There are a handful of customers, I think I can count them on the fingers of one hand so really a handful, who could call up myself or our centre manager and just ask for any car ordered, to any specification at, anytime with no deposit.

    Typical conversation with one of these guys.

    Customer: Hey I want to replace the Range Rover you sold me last year with a Black/Blue/Silver Supercharged Range Rover with _________ Interior.

    ME: Ok will probably be at least six months but I will move it along as much as I can.

    Customer: Ok no problem just keep me in the loop.

    End of conversation.
  • samsidsamsid Member Posts: 4
    Wow, I didn't know that my question would trigger such a spirited discussion.

    In any event, I signed a Buyers Order after reading it front & back and gave a refundable deposit of $500. I've thoroughly researched the car model for quite awhile and test drove it a few times. I plan to buy it upon delivery unless there is a major defect that cannot be easily remedied.

    I've also researched the area dealerships and sent out internet requests for quotes, etc. I settled on the salesman who was straightforward and didn't try any of the stereotypical tricks. Incidently his quote was not the lowest, but was close enough. I'd rather pay a bit more to one of the good guys than have to deal with any nonsense.

    Thanks for all the input.
  • socala4socala4 Member Posts: 2,427
    I wouldn't compare a deposit taken on a special order for a car yet to be built with a dealer trade. The dealer trade is already existing inventory, is likely coming from close by, and isn't being customized to appease some autophile's odd quirks.

    In any case, I wouldn't pay a non-refundable deposit, either. If I did a special order and wanted something very unusual or over the top, I would perhaps expect something conditional. But for a run-of-the-mill car, there's really no reason for it, you'll simply sell it to someone else if I decline.
  • socala4socala4 Member Posts: 2,427
    I don't really follow what you've done or not done here, but you should avoid deposits in most cases. Surely there's no reason to pay a deposit if you haven't yet identified a specific car.

    Get your check back. If they can't/won't give you the check, stop payment.
  • mikefm58mikefm58 Member Posts: 2,882
    Doh, yeah it's my turn this time...:blush:...didn't think to check his profile. If it sounds too ridiculous, it probably is a troll.
  • british_roverbritish_rover Member Posts: 8,502
    Don't worry happens to all of us. Just remember trolls aren't just people who register the same day as they make their trolling post. Trolls are also people who will post over and over just to stir up trouble and get attention. Trolls can have long established identies and even post things that seem reasonable for a time. They just post the reasonable things so that they can catch people by surprise the next time they post something inflamatory.
  • rroyce10rroyce10 Member Posts: 9,332
    ... All on the same day ......................?

    Terry.
  • socala4socala4 Member Posts: 2,427
    I don't know whether or not the post was legit (and I am not sure why someone is expected to be a "regular" to post here), but it is not at all unusual for dealers to try to collect deposits. Are the salespeople implying that the effort to get deposits is an exception, and not the rule?
  • jrourkejrourke Member Posts: 72
    It's been ages since I bought a new car so I'm doing some "refresher" research. When discussing trade-ins all tips I've read suggest to keep the new car purchase and the trade-in as 2 separate dictinct deals. Once one is finsihed it's not allowed to enter into play in the subsequent discussion which makes total sense to me.

    Most of the time, recommendations are to do the new car purchase first, before the trade-in. Can someone explain the rationale behind this instaead of doing the trade-in first which actually seems to make more sense to me.

    Thanks.
  • raybearraybear Member Posts: 1,795
    Both dealers end up with the very same amount of holdback that they would have ended up with in the first place. The only added expense is the transport cost.

    Wrong answer, more often than not dealers trade at invoice on unequal cars. The cheaper the car, the lower the holdback, so if I swap a $33,000 Outback to another dealer I may ask for an Impreza back, effectively doubling my profit on the Impreza when it sells.
  • mikefm58mikefm58 Member Posts: 2,882
    The only difference that makes a difference is the difference. It doesn't matter which one you negotiate first, but the dealer's profit is based on both.

    It's been awhile since I bought and traded, but I never negotiated as two seperate transactions, just offerred my trade in plus $X, plus TTL, for an OTD price of $Y, that is after doing my homework first.
  • socala4socala4 Member Posts: 2,427
    A successful negotiation process is dependent in part on appropriate timing. Doing things in the appropriate sequence can maximize the benefit to you.

    To understand the process, look at it from the dealer's standpoint -- he has not just one, but three basic ways to make money from a deal:

    -Selling the new car for as much as possible
    -Paying as little for the trade-in as possible
    -Adding markup and add-ons through the F&I process

    His hope is to mix the first two together, to get you focused on payments, and to confuse them all to the point that you fail to see that you are paying too much, settling for too little on the trade, and getting worse terms on the loan than you otherwise could, while buying add-ons that you don't need.

    In that context, I'd negotiate the new car first. There are several reasons, but here are a few:

    -From the standpoint of dealer psychology, you want the dealer to hope/think in the back of his mind that what he gives up on the new car sale, he'll have a chance to make up for on the trade. If you have a good quality trade-in, the dealer actually stands to make more on your used car than he does on the new car sale, and he may feel inspired to give you a low price for the new car just for a shot at getting his hands on your trade. (If you have a good car, he'll try to buy your trade for well under wholesale Kelley Blue Book, then mark it up to close to retail, a spread of several thousand dollars.)

    Putting the trade second serves as the proverbial carrot on the stick, which you want him to chase for as long as you can get mileage out of it. But if you focus on the trade-in first, you'll have locked in this spread early in the game, taking away any hope/expectation that he may have had to make back his low margins on the new car sale with a favorable purchase of your trade.

    -For another, it makes things easier for you, both intellectually and emotionally, because by negotiating the new car first, you're getting the most difficult part of the negotiation out of the way first, before moving forward with the rest of the transaction.

    Whereas your new car purchase involves balancing a few moving parts (invoices, rebates/marketing incentives, sales taxes, doc fees, holdbacks, etc.) that you might not quite completely follow but need to comprehend in order to get the best deal "out the door", the trade-in value of your car is pretty quick-and-dirty for the layman to understand and digest.

    -Failing to get a good price for your trade at this stage of the negotiation would also make it easier for you psychologically to pull the whole deal off the table and walk away if you don't get a good price for your trade. Of course, that is the last thing that the dealer would want to see after he has spent all that time and energy cutting the first part of the deal, which will help you to maximize what he pays for your trade. More leverage for you.

    -I'd also put the trade-in after the new car because of the purpose it serves for you, the buyer, in the transaction. Remember -- your trade will ultimately serve to reduce whatever cash you put down, or to reduce the amount that you borrow, amounts that are ultimately based upon the purchase price of the car. Do the trade-in second, and you will be able to immediately quantify the benefit of fighting for its value, because you can calculate its financial benefits as it relates to the new car purchase. But do it first, and it becomes more of an abstraction that loses its context to the overall purchase process. Maximizing that trade-in value allows you to put up less cash or borrow less money, a number that will be much easier for you to define and go to battle for if you already know the price of the new car.
This discussion has been closed.