By on November 15, 2016

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Kori writes:

Hey, Bark! I’m a 37-year-old woman with a couple of financial degrees and a decade of experience in the world of money, yet I still dread going to the dealership. I know that they’re screwing me but I just don’t know how, and that’s the worst part. I don’t object to the dealer making his fair share of money (I’m a capitalist after all), but I just wish that there was a way to know how they were making that money, and where.

In your experience, where do most customers get the shaft in a car deal, and how can it be avoided?

Thanks for your question, Kori. Most customers feel uneasy about the whole purchase experience for this very reason. Let me see if I can help you feel a little better about it by breaking down the various money aspects.

The most tried-and-true methodology of any dealership is the “Foursquare.” We’ve talked a little bit about this before, but in the old days, dealers would use a little worksheet divided into four different boxes, each one representing one of the following categories:

  1. Trade-in value of your car
  2. Selling price of their car (including any dealer add-ons)
  3. Down Payment
  4. Monthly Payment

The whole purpose of this worksheet was (and is, to the stone-agers who still use it) to see which number was most important to the customer. They’ll artificially inflate both the down payment and the monthly payment, so that you can feel good when you object to the ridiculously high number. They’ll go ask the manager for a “better deal,” then come back with a slightly less outrageous payment. Why anybody thinks insulting and enraging the customer is a good idea is beyond me, but this is the way these people have done business for decades, and some of them just can’t get off the crack.

After they’ve calmed down, most customers will focus on the monthly payment, which is music to the ears of any dealer. They can stack allllllll sorts of things into the paperwork of a deal without disclosing it to the customer as long as the payment looks good. The selling price of the car often has no relationship whatsoever to the payment number that the customer agrees to, but people are often so excited to get a payment that they can afford that they don’t realize that 72 x 500 for a $27,000 car is a terrifyingly high sum.

So, yes, payment buyers (i.e. people who respond with a monthly payment when you ask them how much they want to spend, rather than a purchase price) are prone to getting screwed by dealers. They’ll add in additional dealer markup, they’ll bump up the interest rate on a loan, they’ll throw in gap insurance — as long as it’s under the payment that the customer feels comfortable with, it’s all fair game.

How can you avoid this? Don’t ever, ever, not never tell the dealership what payment you’d be comfortable with. When they ask you, simply say, “I’m not concerned with the monthly payment. Let’s get the purchase price of the car right — if we do that, the payment will take care of itself.” Trust me, that won’t be the only time that they ask you, so you’ll have to repeat yourself several times. “I’m not worried about the payment.”

The other way they hose you is on your trade-in. Car dealers will tell you that they make money on acquiring inventory, not selling it. What they mean by this is that if they can buy their used inventory for low prices, they can make more money when they sell it — it’s not rocket science.

This is not entirely true, but it’s pretty close. The trade-in is the lifeblood of any dealer. In fact, many larger market dealers will simply give away new cars so that they can acquire more trade-ins. Trades are always better for a dealer than buying inventory at the auction. Auction inventory is either something that failed to sell at another lot or is coming directly from a rental car company — not always desirable stuff. When I talk to dealers after they’ve returned from the auction, the feeling is almost always one of despair. “Nothing good at the auction today,” they’ll complain.

So they need your trade-in. Desperately. But, in true knuckle-dragging fashion, they’ll still try to screw you on it. The most typical way it’s done nowadays is called the “walkaround.” It used to be that you’d hand your keys to your salesman, who would then take them to the used car manager, who would then drive your car around the block for five minutes and pull a number out of his head. No longer. Most dealers use pricing software now that tells them the recommended value of the car relative to the market, mileage, and condition of the car. In order for the number to be as accurate as possible, the software requires the dealer to fill out a walkaround form for the car.

The dealer will then take his iPad out to the lot and walk around the car with the customer, pointing out every single scratch, scrape, and ding. He’ll mention the tires. He’ll talk about the interior condition. He’ll say that you don’t have a very popular color. All of this is intended to devalue the car in your mind, so when the software spits out a number that’s about 85 percent of market value, you’re more likely to accept it. In fact, over 60 percent of customers who are given a trade-in offer from a very highly respected piece of software from a company widely known by a three-letter acronym with a blue-and-yellow logo just accept the offer. (Don’t ask me how I know this.) This means they’ve instantly given up 15 percent or more of their cars value.

This number that the dealer gives you is intended, once again, to be a starting point for negotiation, not a concrete offer. Don’t be afraid to stick to your guns on your trade-in — it’s the most valuable part of the transaction for the dealer, especially if you’re trading in your car on a new car (meaning new, not just new-to-you used). If they refuse to budge on your trade, walk. You’ll get a call back with ten percent more money in about thirty minutes, guaranteed.

There are other ways that dealers will get you, too, but manipulating the payment and the trade offer are the two biggies. Ignore the payment, stand firm on the trade, and you can likely walk out knowing that you at least held your own.

Bark M. has visited over 2,000 dealers in 44 states. Let him put that knowledge to work for you! Send him your questions at [email protected] or follow him on the of . 

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94 Comments on “Ask Bark: Where Is The Dealer Screwing Me The Most?...”


  • avatar
    CoreyDL

    The spelling of your name bothers me.

  • avatar
    28-Cars-Later

    This is a well written article, kudos.

  • avatar
    PrincipalDan

    I have noticed how much dealers are willing to adjust trade in amounts up down and all around to make a deal work. Give them 2K more and don’t even blink. I’ll never believe the number for what a dealer says he’s got sunk into a used car.

    • 0 avatar
      duffman13

      The amount a dealer has into a used car doesn’t matter. The amount that similar vehicles in the area are going for does. With KBB/edmunds to use as a general starting point, and then cars.com, TrueCar, and CarGurus to compare actual used list prices it’s pretty hard not to see if a dealer is out-of-line with the local market (250 miles is where I set my limit generally).

      The only dealers who tend to care about the amount “in” a car are smaller franchises and mom&pop lots where corporate data-driven inventory management isn’t used, making it is a more gut/emotion-driven process. A dealer that actually uses data knows that a car is costing them too much money after X days, and will do what they need price-wise to move it.

      The only thing “I have $X in this car” is designed to do is illicit a sympathetic response from the buyer so they don’t fight as hard on a too-high price.

  • avatar
    jmo

    It seems that your best option, if you want a new car fairly often, is to lease. If you want to buy, you’re best off using up almost all of the value in your current vehicle. In terms of the risk of getting screwed, the worst option would be buying a new (or used) car every few years.

    • 0 avatar
      dal20402

      There’s no substitute for doing the math; there’s no categorical answer.

      Some manufacturers subsidize their leases and the payment amounts will typically be attractive relative to the depreciation you would incur if you buy. BMW and Ford are often in this category. Other manufacturers don’t particularly love leasing, and buying will often get you the better deal. Honda, VW/Audi, and Toyota are often in this category. But not always! Again, there’s no substitute for doing the math on every potential deal.

      Remember that when you lease you are just paying to cover the depreciation the manufacturer incurs over the lease term. The question is whether the total of the lease payments is more or less than depreciation over the equivalent term + interest over that term + sales tax on a purchase. You can estimate likely depreciation pretty well by looking at similar models a few years old.

      Leasing does have the baked-in advantage, in many states, that you are paying sales tax only on the total of lease payments and not on the value of the car.

      • 0 avatar
        319583076

        You’re absolutely right, but the pernicious truth is that practically everyone would rather store one short rule in their memory than physically compute one, let alone many, scenarios.

        Your choices in life essentially boil down to one, universal choice: invest in preparation or pay for convenience.

      • 0 avatar
        krhodes1

        I’ve done the math on every new car I have bought, and leasing has NEVER been cheaper – even though I leased one of those cars due to other reasons.

        I’ve also never had a dealer be even in the ballpark on a trade-in. I did sell my last one (the Fiat Abarth) to CarMax, but they gave me $2K more than the dealer’s best offer. MAYBE I could have closed that gap, but given the fairly stupid discount I got off the price of my M235i I doubt it.

        Leasing is convenient, and as with most convenient things, you pay dearly for that convenience.

    • 0 avatar
      duffman13

      It really depends how much you drive. If you’re a 10k a year person, leasing can be awesome and keep you in something new and fancy for relatively cheap. If you do 25k a year like I do, not so much (45-50 miles each way to work). In fact, even subsidized lease payments with that kind of mileage on a 3-4 year contract will be roughly equal to a payment on a 5-year loan, and you won’t own the car at the end.

      • 0 avatar
        dal20402

        Very true.

        We have so many megacommuters on TTAC. How do you do it? I just moved from ~11 miles from work to ~3 miles from work because, among other things, the commute (involving a bridge and Seattle’s worst-bottlenecked freeway exit) was too long and unreliable. Now I walk about half the time and take a short bus ride the rest of the time.

        I suppose it would be easier if you can avoid big-city traffic, but even without it that’s a hell of a long way.

        • 0 avatar
          duffman13

          DC Metro area. I work inside the Beltway but not inside the city. Anywhere in the city is too expensive, and anything close to work is basically in the ‘hood, or at least in PG county.

          So to get a decent house in a good area with good schools, I’m left with commuting roughly an hour each way.

          • 0 avatar
            dal20402

            Damn, man, that’s hardcore. Especially during SafeTrack. I don’t envy you.

            Part of why we left DC was because we could see the writing on the wall that we couldn’t afford a house anywhere with good schools and a reasonable commute, or to send kids to in-city private schoos. (Little did we know at the time that Seattle would get just as expensive as DC within a few years, but at least Seattle has more areas with good public schools.)

        • 0 avatar
          Nick 2012

          Dal –

          I’m a mega-commuter. I work for a very large company in a very small town. My options were to live in the small town or on the nice side of a 350k city. The large city is where my wife and I grew up, our parents are there, and my wife’s job is there. There are better schools as well.

          My drive is 32 miles each way, mostly at 70 mph with a few traffic lights. “Bad” traffic consists of having to wait through a cycle or two of green lights.

          After doing this 3 years, it is on the tail end of acceptable only because the drive is relativity stress-free. I’ve used the time to catch up on a lot of books I’ve wanted to read, listen to the Economist, and various interesting podcasts.

          I’m also able to take calls in the car (both personal and professional). Some times I just drive with the radio off and reflect after a rough day at the office or at home.

          My employer is flexible, and it is not a problem to work from home if needed, leave early, etc. I wouldn’t have taken the job if I didn’t have that flexibility.

          Full-stop radar cruse and active lane keeping make a world of difference in my current car, though my commuter pig Insight has none of these things (but will return an easy 70mpg).

          All in all, it isn’t ideal for me but works great for my family.

      • 0 avatar
        krhodes1

        The opposite is true too – you get nothing for not using those leased miles. I put all of 3700 miles on my 328i wagon last year…

        • 0 avatar
          dal20402

          This depends on how accurate the residual is.

          If it’s unrealistically high (as it should be if the lease is a good deal) then you’re right.

          If it’s accurate or even low, and the lessee is well under on miles, he may be able to buy the vehicle on lease end and profit from the sale.

      • 0 avatar
        Zackman

        “If you do 25k a year like I do, not so much (45-50 miles each way to work).”

        Guilty as charged. I feel your pain, too. That’s why I bought my Impala instead of a smaller car. It’s worlds more comfortable. Faster than a speeding bullet, too, if I put my foot in it! One great ride.

        4 years, 4 months, 104K miles. Retiring in 4 months, too!

  • avatar
    dal20402

    “So, yes, payment buyers (i.e. people who respond with a monthly payment when you ask them how much they want to spend, rather than a purchase price) are prone to getting screwed by dealers. ”

    This is one area where leasing can be easier… if… you’re not trading in a car.

    If you’re not trading in a car, then all you have to do is insist on zero down and your number of miles/year. Once those conditions are satisfied, then the payment truly is the only number, and you should just aim to get it as low as possible.

    (Trading in a car on a lease is generally a bad idea, because the trade-in acts just like a down payment, and down payments on leases are just giving the OEM your money now, rather than later, for no return benefit. Sell it separately.)

  • avatar
    duffman13

    Once again bark, great insight. And once again, it just shows that unless you do zero research/math beforehand it’s kind of hard to get screwed nowadays.

    Here is a checklist for the financial part of car-buying nowadays:
    1. Are you a payment buyer? Figure that number out
    2. Look up used car loan rates from your bank (used) and manufacturer promotional rates (new) assuming you have 700+ credit.
    3. Do the math backwards from payment to total loan amount. $225/month per $10k financed is generally a good number to estimate with on a 5 year loan (5%ish, YMMV – good rates are in the mid-2%s now).
    4. Run your car through KBB’s and Edmunds’s valuation tool. Pick trade-in, and be honest with yourself on the condition. Average the 2. Now you have a baseline for negotiation on your trade-in value to know if the dealer’s offer is crazy/insulting.
    4a. Take your car to carmax for their offer. It gives you a baseline, even if you don’t sell to them. Note – in many states trading in gives you sales tax advantages so it can behoove you to trade-in to the dealer you’re buying from
    5. Add #4 and #5 together, and subtract 10%. This is the most you can afford pre-tax, title, registration, and dealer documentation fee.
    6. Apply at your financial institution of choice.
    7. Go buy the car. If it’s used, give the dealer the opportunity to beat your bank/CU’s pre-approved loan terms. If it’s new, you’re probably leaving rebates/etc. on the table using outside financing, but do some quick math to make sure before you just accept manufacturer financing.

    Yeah that seems like a lot of work, but you can figure out most of it in less than an hour with some excel tools and internet sleuthing. Then you have to do the harder job of figuring out which car you actually want to buy. Dealers prey on customers that don’t do their homework. Don’t be one of them.

    • 0 avatar
      dal20402

      If you have good credit, there is no way you should be paying 5%ish in the current market. 2% to 2.75% depending on details.

      • 0 avatar
        duffman13

        I know what current rates are, I just chose to use something a little bit more inclusive since we don’t know how credit-challenged anyone might be. Plus, it’s never a bad thing as a buyer to err on the higher side when you do your math so you don’t end up overextending yourself.

        It was also the rate I had for my first car loan a over decade ago, so I knew what the payment was off the top of my head.

  • avatar
    JMII

    Beware of the F&I part, this is where all sorts of surprises appear magically because most people think the negotiating is over. If possible arrange your financing BEFORE stepping foot in the dealership. Then see if the dealer can match or even beat the rate the bank is offering.

    I fight #1 by getting a CarMax trade in estimate. While it might be a low ball offer its a written value you can shove in the dealer’s face when they attempt to royally screw you. It also shows them you have done some research and have a relationship with another salesperson/company.

    • 0 avatar
      VW16v

      One thing to look for are those dealer’s that want to pull your credit before the give you a price of the car. Some will basically walk away if they find out you have great credit. This just shows you the dealer makes the cash on the back end of the deal.

      • 0 avatar
        enzl

        This is not the reason you should walk when the request is made to run your credit up front…but it is indicative of a sales environment that emphasizes sales over all else. Not a place I’d want to buy a complicated mechanical device of any kind.

        (Most reputable dealers have maxed out their potential participation to 2 pts on any loan, so whether its 2.9% or 22.9%, the ‘back end’ mark-up is the same for either a perfect FICO or a credit roach.)

    • 0 avatar
      duffman13

      Adding Carmax to my checklist above, thanks.

  • avatar
    Land Ark

    Don’t forget that the salesman will try to distract you from asking for your keys back and they’ll suddenly turn up misplaced after the trade offer happens.

    I have told most of the folks where I work that they have a standing offer of $500 over what a dealer/Carmax offers them for their car.
    My coworkers have taken to referring to me as Brimax.

    What I don’t get are the people who are offended that someone (me) wants to buy their car for what the dealer offered or slightly more only to turn around and sell it for a profit.
    And then there’s the people willing to give up $500 just to make it “easier.” Buying a car is the only time people completely lose understanding of the value of money.

  • avatar
    VW16v

    I’ve been to Orlando Kia West. Has to be one of worst dealerships around. The management running the dealership are complete trash that looks to playing in the snow while at work.

  • avatar
    LeMansteve

    We negotiated a few hundred off the total price of our CPO Hyundai.

    When we went to the F&I office, they offered us a marginally lower rate than our bank, for the same loan duration. There was almost no additional upselling.

    Because there was no hassling at F&I, I assume we got hosed at the front end, and could have negotiated much lower. Correct?

    • 0 avatar

      Not necessarily hosed, per se. Because you came with your own financing, the dealer might have just been happy to get the note. Could you have gotten more on the front? Possibly. But if you were happy with the price and the rate, then don’t worry about it.

    • 0 avatar
      duffman13

      Depends – did you cross-shop the local area?

      If you live in a saturated market (I’m in the DC Metro), online prices on volume used vehicles tend to be pretty close to bottom-line prices since there’s a lot of competition.

      I helped my mom buy a CPO Tuscon this spring and learned it firsthand.

      If you live in a more rural area where only one dealer has the local market relatively captured you’re more likely to see too-high asking prices.

      Otherwise, I generally tend to agree with Bark here. There’s always another couple hundred to be had in the deal, the question is did you walk away happy, or pissed off wondering if you could have gotten them to give more?

      • 0 avatar
        krhodes1

        There certainly is a point where it is just not worth the bother. I have a bottom line number that based on my research is what I want to pay for the car. If the dealer can get within a couple hundred of that number on a $40K+ transaction, close enough, let’s all be friends and enjoy this. Haven’t missed yet.

    • 0 avatar
      JMII

      Since the dealership buys loans every day they can sometimes beat your banks offer as they get volume pricing. However it really depends on your credit score and what bonus or specials the dealer gets for selling the note.

      • 0 avatar
        duffman13

        That’s what we did on our last purchase. When we told the the rate (USAA had knocked off an extra half point for a pair of bundling incentives they had going on at the time), they told us they wouldn’t even bother running our credit – it was a great rate and they couldn’t get any lower.

      • 0 avatar
        krhodes1

        I’m about 50:50 across my last few car purchases. Credit Union was way better than the Saab dealer. BMW was better than the CU by a bit on the 328i. Fiat walloped the credit union, wasn’t even close. BMW was initially the same as the credit union on the M235i, so I gave it to them. But six months later I got a call out of the blue from the CU with a refi offer on the car that I simply could not refuse – 1.5%, no fees, and they gave me a $100 gas card for doing it. No idea where that came from, but I took it!

        You just never know until you try, but there is just no reason at all to go into a dealership without your own financing pre-arranged. Like going into a whorehouse without a condom.

  • avatar
    sirwired

    I find it hilarious that to this day, the VW dealer from which I bought my ’04 Passat M/T Wagon (now with 160k on the clock) sends me a postcard every six months letting me know “There is high demand for cars just like yours! Come in to trade yours in for a new VW today!” [Insert latest not-so-special deal here.]

    They know exactly what I purchased (they even include a picture of the car, in the correct color even!), but they persist in the obvious lie that they will do anything but load it right up on a trailer to head to auction. I doubt they’d even wash it first.

    “Hello… Is this Cheat-’em VW? Yes, do you have any 13 year old manual transmission station wagons on the lot?” – Said No Customer Ever

    FWIW, the car’s been pretty reliable for me, needing a tow once in all those years. (Failed coil pack while I was out of town.) And beyond that, it’s only needed one urgent repair (a bad alternator; took a half-hour to replace.) That said, the interior is looking pretty shabby, and it’s starting to rattle over uneven pavement. I could probably keep it going economically for another few years (I do at least some of my own wrenching), but frankly I’m getting kind of tired of it and will probably replace it in the next year or so.

  • avatar
    George B

    1) Always ask for the out-the-door price so you can compare total price including dealer fees.
    2) Visit several dealers and look at several different cars.
    3) Compare the prices dealers ask for to websites like kbb.com and edmunds.com
    4) Don’t be afraid to ask for a price toward the lower end of market price range.

    If you look at a several different cars and compare their prices to prices from at least 2 different online price tools, you can find the market price fairly quickly. The goal is to get into the mindset that you have many options.

  • avatar
    orenwolf

    So, for my mazda6 purchase, I traded in my RX8. In January, which wasn’t going to go over well, to begin with.

    I had already priced out the vehicle cost and monthly payment before I went in, and determined that I was going in for a 36 month term max.

    Dealer pricing is (I think) slightly different here thanks to the OMVIC (https://www.omvic.on.ca/portal/Consumers.aspx) who mandate all-in pricing by law, so I was immediately able to “suss out” what they were giving me on trade-in for my car, at which point I told them what I wanted my monthly payment to be, and they worked internally to either discount the new car or increase the value of my trade-in until they made that price. Key in my mind was that I was ready to walk out over a $5 overage of my monthly rate if necessary. I ended up getting the price I wanted.

    I’m sure if I had not locked down the term length at the beginning of the negotiation I’d have ended up with the payment I wanted on a much longer term, so AFAICT that was the way to go. YMMV.

  • avatar
    whynotaztec

    My last couple experiences have been that after settling on a price and then moving to the F&I office, I am given a nice multicolored sheet in landscape format that shows me 4 or 5 different payments. Of course each includes an inflated interest rate and an extended warranty of some kind.

  • avatar
    zamoti

    I’ve bought three cars in the past two and a half years. First one came from a tiny BHPH that had a lot of depreciated German toys; I bought my BMW there and it was the easiest thing I’d ever done. I negotiated the price on the phone in my jammies on a Saturday morning. Brought my own financing, just went and signed papers. Loved it.
    Second one was a Mercedes from a Mercedes dealer (used of course). The offering price was fair, maybe could have pushed a little harder on the price, but they gave me what I believe was a fair price on my CX9 trade; it was far from perfect. They didn’t care one bit about the condition. They went to autotrader, looked up the price, offered it to me, I took it. It took 20 years to do the paperwork, but I did take their financing.
    I bought a Navigator (used) from a Lincoln dealer using the Mercedes as a trade. OMG they bent me over hard on that one. I knew the Mercedes wasn’t worth a lot, but they first sent me to Carmax to get an appraisal, presumably to lower my expectations (Carmax pays nothing unless they can retail it, in this case it was too old). So now having been lowballed sufficiently, they offered me 10k on the Merc, beating Carmax by nearly $2k. Looked good to me, I pushed on their price (though they wouldn’t move much) and it was a deal. Well, I thought it was a deal; I still don’t know exactly how I pussed out, but reading over the papers (and they slid a LOT of them at me, oops, this one is wrong, not that one, this one) I got sufficiently confused and at that point, pride and being tired (took 3+ hours so far) said “just buy the mfing thing!” I ignored some odd little game they played with the tax “Oh, they’re helping you out here” said the finance manager to the other finance manager. What they did do was knock that 2k off my trade and presumably pocketed it, again, still not sure how.
    So they rolled me for about $2k on my trade by wearing me down and confusing me with paper.
    Lessons learned, if I don’t understand the paper, stop the show and make them clear it up. Screw pride, I’d rather have money. Have more to eat than a coffee and a GD muffin. Don’t bring a trade, just sell it myself, especially when it comes to something odd. Will be selling my BMW on my own.
    The car sales machine is well oiled, the sales guys know what finance is doing, they do it every day. When in doubt, get the fvck out.

    • 0 avatar
      AJ

      I hear you and you are so right on that they’re well oiled and professionals at what they do.

      Years ago, my first car new car purchase, I was bent over, especially with doing a trade. I had a slick sales manager showing what I was told was a new salesman how to sell a car! He scribbled numbers all over a piece of paper and did a good job confusing me. Thinking back to it, it was just embarrassing.

      The four cars after that have been better, but with each buy, there was always something that just angers me to this day. As a result, I’ve got three old cars in the garage and I recently told my wife that her 12-year-old SUV is good for another five years. And my daily driver, I plan to drive it until the wheels fall off after having to deal with the lying bastard finance manager with that purchase. (Rant over… lol.)

  • avatar
    Fred

    As a cash buyer all I need to know is the price of the car and what I can sell my old car for. Makes the whole process a lot simpler.

  • avatar
    Arthur Dailey

    You want to read an absolute worse case true story about underhanded dealings by a car dealer? Ripping off an intellectually challenged, umemployed woman for over $25k on a car purchase. From the Toronto Star, May 6, 2010.

    The Mazda dealership in Orangeville Ontario may have given new meaning to the automaker’s slogan of “zoom, zoom, zoom” for motorist Madeline Leonard.

    Leonard walked into the dealership wanting to replace the tires on her 2004 car. By the time she left she was on the hook for a spiffy, black 2010 Mazda6 sedan used as a demonstrator by the dealer, at the eye-popping price of almost $66,000, after taxes and the value of her trade-in vehicle.

    That’s $25,000 more than she should have paid, according to Ontario’s auto regulator Carey Smith, the regulator’s director of investigations. “The deal was way over the top regarding pricing.”

    Smith said the salesmen also billed Leonard, who is intellectually disabled, about $4,500 for a “protection package” that included fabric guarding, rust and sound proofing and window etching. Other dealers charge about a third of that for the same items, he said.

    Furthermore, Smith said Leonard, who is unemployed, should not have qualified for a loan from the dealer because her monthly income including a disability pension is less than $2,000.

    But Smith added that didn’t stop the two employees from offering an eight-year loan that will result in about $16,000 in financing costs for her, including a final balloon payment of $7,000.

    Smith has charged Mazda of Orangeville and two senior employees with breaching Ontario legislation that protects consumers. The dealership could face a fine of up to $250,000 if found guilty.

    The results of this disgraceful incident were posted on June 17, 2012.

    Mazda Canada quickly terminated the dealership’s sales and service agreement for breaching the automaker’s business practices in the deal and other incidents. The move effectively shut down the store’s operations. Mazda also unwound the deal with the woman and compensated her.

    An Ontario court has slapped a former Mazda auto dealership in Orangeville with $10,000 in penalties after the store pleaded guilty to committing “an unconscionable representation”.

    The province’s Licence Appeal Tribunal revoked the dealership’s registration. In addition, the tribunal suspended the registration of the two senior store employees.

    https://www.thestar.com/business/2010/05/06/salesmen_charged_for_selling_41000_car_for_66000.html

    https://www.thestar.com/news/gta/2012/06/17/former_mazda_dealership_fined_for_selling_car_for_25k_more_than_it_was_worth.html

  • avatar

    K-B-B is a joke. Since dealers pay for their software it is in their best interest to keep a large gap between trade-in value and retail value.

    Ever notice how you can’t easily switch between trade-in and retail on their website?

    • 0 avatar
      28-Cars-Later

      KBB is fiction, I’ve noticed only once where its valuation was somewhat accurate.

    • 0 avatar
      CoreyDL

      You also don’t know how to use the KBB site.

      Right on the page, options: Buy From Dealer, Buy From Private Party, click at the right for Trade-In Values.

      http://www.kbb.com/infiniti/fx/2012/fx35-sport-utility-4d/?vehicleid=366071&intent=buy-used&mileage=67088&condition=good&pricetype=retail

    • 0 avatar

      That’s wildly inaccurate. First of all, Kelley doesn’t sell software. Secondly, dealers complain that KBB trade-in values are too high Every. Damn. Day. If you’ve ever worked a day in a dealership, you’ve heard a used car manager say, “Well, Kelley Blue Book won’t write you a check for that amount. I’m willing to write you a check for mine.”

      • 0 avatar
        r129

        I’ve heard that line before, right before I was told that nobody would ever buy my car if I tried to sell it myself because it was a manual, and I might be robbed or murdered if I tried. I ended up selling it on Craigslist in one day for $2500 more than the trade-in offer, but I never did go back to that dealer.

        • 0 avatar
          krhodes1

          If you are trading in a manual “oh, nobody wants those, I can’t give you anything got that!”. If you are buying a manual “oh, RARE, you must pay more!”

          Jack covered this quite well a few years ago and I agree with him. It might take longer to sell a manual (or a lime green special order Audi), but you will get more money for it most of the time.

          Depends on the car of course. The extreme being something like my RWD 6spd stick BMW wagon, which sells for a truly silly premium used to all the enthusiasts who were too cheap to buy them new. They will line up to pay it too. No idea what the dealer take on them is – probably see above if you don’t know what you have, but everyone who owns one of these unicorns knows exactly what they have (since 95% of them were special ordered). I suspect my 6spd no sunroof M235i will sell for a very nice premium over the typical AWD Automatic with sunroof M235Xi in a few years too.

      • 0 avatar

        Maybe “software” wasn’t the right word, but they do sell “solutions”…

        https://b2b.kbb.com/

  • avatar
    stevelovescars

    A leasing question. The advertised rates are often for a stripper model you’ll never find, so adding trim levels, AWD on the SUV, etc. will raise the price. However, these advertised leases also mention the MSRP of the vehicle advertised… but not the selling price.

    My question, can the purchase price (“capitalized cost”) be negotiated as easily as it can on a purchase? Should one negotiate price, get the car for something south of invoice for example, then ask for a comparison in payments between financing and leasing AT THE SAME COST? Do dealers often get to book these sales/leases at full MSRP with a lease because customers don’t ask? Lease buyers are probably also payment buyers and do they often pay more than they have to?

    Also, are residuals based on the difference between MSRP and the estimated value at the end of the lease or are they based on another estimated selling price? If the former, then it should be direct relationship between money off the sale and payment. In other words, if the residual is 50% of MSRP then the residual price is set rather than recalculated on what one pays.

    I only leased one car and the selling price was based on the lower negotiated price but I wonder if this is common.

    • 0 avatar

      The short answer is Yes. Typically, all lease specials are offered as rebates to the dealer, so the dealer has the option to negotiate further than that if they’d like to. The process you’re describing is exactly what I did with my Fiesta ST—I negotiated the price and then asked to see lease and purchase payments. The dealer then offered me the same price for 12,000 miles annually as 10,500 miles, without my even asking. Must have been a slow sales month.

  • avatar
    7402

    One of the things that happens when you take your trade-in to a dealer to buy a car from the same manufacturer is that the “walk-around” process is basically a documentation exercise to destroy the value of your vehicle. We were shopping for a Honda CR/V and trading in our old Odyssey which we had bought and maintained there. The sales guy had the service manager “look it over” which involved a short test drive and putting it on a rack for inspection. I’m pretty sure they effectively did a pre-purchase inspection (PPI) which they sell to the public for about $100. The service tech and service adviser documented, in exhausting detail, everything “wrong” with the car, including a long list of “recommendations”.

    After that, it’s much harder for me to sell my Odyssey privately since many savvy buyers will take it to a Honda dealer for PPI or simply call the service adviser and ask if Odysswy VIN xxxx has been maintained and needs anything. Now it is worth much less in the market.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      So, a vehicle in poor mechanical condition is worth less than a well-maintained example? Amazing.

      If it was deferred maintenance or needed repairs, it damn sure should subtract from the vehicle’s value. Its not worth full retail when it has a cracked out timing belt, 30% tire/brake life remaining, and worn steering/suspension components that can fail at any moment.

      If it is nothing too pressing, show the “recommended” list to the buyer, tell them nothing major is wrong and this shows just that: only some minor fluid flushes (or whatever) needed “sometime” in the future.

      Wouldn’t you want someone to be honest when selling you a used minivan for your family? Or do you like paying full value for a vehicle that snaps it a timing belt, $hits its transaxle and/or crashes from a failed tie-rod in the first month when the previous owner was aware that it was all very likely?

      I don’t see how you can feel sorry for yourself that the inspection ruined your chances of getting away with not maintaining the vehicle, yet receiving full retail value for it. You’re sad/mad that you can’t screw someone over as easily as before?
      Either fix what needs fixing, or sell it to someone, at a fair price (not “high retail”), made fully aware that they will need to spend some money on it soon. Its the decent thing to do.

  • avatar
    quaquaqua

    Thomas Kia in Highland, IN did allllmost everything right for my parents (who were paying cash for their Sorento). Good offer ($4k off was their first offer), they paid above blue book/carmax for my parents’ near-dead trade-in, and very little in license/doc fees.

    Where they really royally screw everyone at that particular dealer is a forced ~accessory package~ which they add to every frickin car – even a base Rio – for a whopping $1000. And all you get are mudflaps, wheel locks, pin stripes, and plastic along the door edges. Huge, huge screw. Any additional add-ons, like floor mats and cargo covers, were also jacked up to twice the MSRP. Overall my parents still got a great deal, but forcing everyone to take the add-ons – EVEN if you give them a big discount – is just slimy.

    • 0 avatar
      genuineleather

      The $895 “Protection Package” for mudflaps, door guards, and wheel locks is big with our local Honda/Acura dealers. They’ll take them off if you ask, though.

      • 0 avatar
        krhodes1

        My local BMW dealer does put BMW wheel locks on every car in the lot. But, they charge 1/2 BMW list price for them (probably their cost), and did not put up a fight when I told them I did not want them on my car – though they did make me sign something saying I acknowledged that they were not responsible if my wheels were stolen while the car is in for service. Fair enough, that is why I have insurance.

  • avatar
    stevelovescars

    My GF traded in her Audi A4 to the same dealer on a new Subaru. A few days earlier, they had hit her with an estimated $6,500 bill. Some was for scheduled maintenance (timing belt and new tires at 80k miles which weren’t unexpected) but most was to replace a leaking turbo and intercoolers damaged by the oil leak.

    Seriously, not two days later the car was on their lot and I saw it driving around with a temporary tag on Monday… less than a week had gone by. It doesn’t matter that the asking price on the lot was $14,900 (2008 A4 quattro) and they had paid her $6,500… she was glad just to get out of it without coughing up the repair money and this was only a couple of grand shy of what we thought we could sell it for locally.

    I’m more concerned that they flipped it without doing the maintenance or replacing the turbo. The thing was using oil badly. I have to assume they put tires on it, but they may have sold a car 3k miles away from a timing belt change as well. I pity the new owner if they did that.

    At a higher level, THIS is why I like to buy my used cars from private parties rather than dealers.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      As shown above, some private owners like to defer maintaining or repairing the car, hoping to find a sucker willing to pay good money for it.

      Best to have a pre-purchase inspection on anything over, say, $2k.

      If you pay $800 for an old beat up Geo Prizm, you’re not really setting yourself up for multi-thousand dollar repairs because if the beater craps out after two months, you can just dump it and move on to another one. Odds are, you haven’t lost much money on it, and it was probably cheaper than renting a car for that long. Donate it for tax write off. Give it to a teenager in the neighborhood who can’t afford his own car, and tell him if he can fix it, he can drive it. You’ll be his hero lol. Might piss his parents off, might not, haha!

      Not so easy to make that choice when you just paid $10k+ for a newer Audi. Its well worth the $50-$250 to make sure it isn’t about to self-destruct on you.

  • avatar
    genuineleather

    Getting a Carmax offer is an easy way to get leverage on a trade. I make everyone who asks me for help buying a new car take their current vehicle to Carmax to establish a trade-in baseline. If the dealer matches it, you’re already ahead with the trade-in tax incentive. If not, Carmax will cut you a reasonably fair check within the hour; they paid $6k for my mother’s nice-but-older Lexus GS when the dealer only offered $2k.

    As others have mentioned, leasing removes a lot of the question marks since the residual, money factor, and fees are set by the captive finance arm. Assuming those are within reason, the only thing left to do is negotiate the dealer’s discount, something easily determined over email.

    It’s car buying 101, but letting a dealer cool his heels his is no bad thing. I recently had a sales manager giving me the hard sell on why the discount was as much as he could do, and that they were going to “lose money” on the deal. I told him our conversation wasn’t productive and ended the call. Two days later, I get a phone call from the GM asking how he could resolve he problem; within a few minutes, I get another $1,500 off and his store gets a sale.

    Finally, while I agree that you should never start negotiation with a payment figure,it’s sometimes worth mentioning at the very, very end. After settling everything else, you can usually get them to take off a little more by saying, “$436, huh? Can you do $430?” The salesman and dealer are already invested in the sale, and usually won’t let you walk over a few hundred dollars.

  • avatar
    C. Alan

    The easiest car purchase I ever made was my last purchase for a new 2016 Chevy Volt. A month before, I had lost my 2011 Volt in a flash flood in the deserts of Southern California. I didn’t have a trade in to deal with, as the insurance company had paid out for my old Volt, and before I even started shopping, I got myself pre-approved for a loan though my credit union.

    It was near the end of the model year when the 2016s were just starting to come out, and I found perhaps the last base model 2015 Volt in all of California in a dealership near Fresno. I spent a few days talking to the salesman over the phone and via email, and we made a deal. I walking into the dealership at 10am on a Friday morning. The finance guy looked at my pre-approval, and treated me like a cash buyer. I was on the road back home by 10:45. It was by far the easiest dealership experience I have ever had.

  • avatar
    dwford

    The four square is alive and well in more places than you think. It works.

    • 0 avatar
      5280thinair

      Some dealers will literally refuse to negotiate any other way, and will let you walk out of the dealership rather than talk total price.

    • 0 avatar

      Oh, trust me, I know it works—for the dealer. It makes me sad.

      • 0 avatar

        “2. Selling price of their car (including any dealer add-ons)”

        Is this correct ? In my experience the dealer will do absolutely everything possible to avoid telling you what the car’s total selling price is. I thought the 4th square was the number of monthly payments.

    • 0 avatar
      FreedMike

      Thankfully, no one is using the “Ben Franklin” close anymore…

    • 0 avatar
      SCE to AUX

      A local Nissan dealer tried the four square on me and my son in 2013 while we were shopping for his first car.

      I repeatedly told them all we were interested in was the selling price, but they kept returning with the four square. They also lied about the availability of the car he had in mind, and we knew it, with them trying to sell us a car we didn’t want for $4k more.

      I let them play with me for 2 hours, then we left and bought a CPO car elsewhere without all the BS. It was a great lesson for my son, and I figured I saved another customer from their trap.

      • 0 avatar
        AJ

        I was shopping for a used Cherokee one time and stopped at a slimy used car dealer. The first thing the guy behind the desk said to me (who had a picture of Jesus on this desk) was how much do you want the monthly payment to be for a Cherokee he had for sale, which I told him I’d pay cash. I then took it for a test drive, which when I got back he went on about how they had serviced everything and I said, “That’s amazing as the brakes don’t work!” (Which they didn’t.) He then told me that someone was on the way to buy it, which I laughed and said, “For that price, they can have it.”

        Fortunately the place later went out of business.

  • avatar
    5280thinair

    An odd dealer behavior I’d never run into before (but did recently) was the sales guy wanting to run a credit check before we’d even looked at the car (much less talked price). This after we’d already told him that, if we did a deal on the car we were there to test drive, we would likely be paying cash. He seemed honestly surprised we balked.

    Having too many credit inquiries on your report has a negative impact on your credit score*, so you shouldn’t consent to having one run unless absolutely necessary (i.e. you’re actively negotiating to buy the car and need to find out what kind of rate the dealer can get you on financing.) Even then, it’s good to get pre-approved by your bank/credit union up front and let the dealer know you’ve already got financing arranged at a particular rate. If they know they can’t meet/beat it, then there’s not reason for them to run the credit report at all.

    *The credit bureaus are smart enough to treat several auto- or mortgage-related inquires in a short period of time as a single event, as it probably just means you’re shopping for rates. However, if you’re being liesurely about your car shopping, the inquiries could be treated as separate events and interpreted as you looking to take out multiple loans. That will ding your credit score.

    • 0 avatar
      krhodes1

      It doesn’t ding you much if you have great credit to start with. That is a perennial thing called out by my various FICA score reports, but I am always within 20 points or so of the highest possible score anyway. I have absolutely top-notch credit, by Dog I am going to use it to my advantage whenever possible. I LOVE using other people’s money for free or almost free. The difference between an 830 and an 850 is no difference at all.

  • avatar
    r129

    Sometimes just going to more than one dealer before getting deep into negotiations is the most valuable thing you can do. Especially if the first dealer starts using a foursquare.

    • 0 avatar
      dal20402

      This. I weed out the dealers that won’t offer me a reasonable price by email. It makes car shopping many times easier. By the time I actually visit the dealer, we’ve gotten to a reasonable price on a specific car and we are negotiating the trade (if any) and whether I’ll take dealer financing.

      I got a foursquare trick played on me once. It was a learning experience. never again.

    • 0 avatar
      hgrunt

      I used an unusually low internet price from one dealership to leverage two other dealerships into lowering their prices until I had something I agreed to…ended up saving an additional $900 on top of $2500 of factory incentives.

  • avatar
    FreedMike

    @Bark:

    Some manufacturers let you pre-qualify for a lease on their websites.

    I’m thinking it’s one way to limit the number of hits on your score (which, in my case, got the Steve Austin “we can rebuild him” treatment, so I’m a little paranoid about getting it dinged on purpose). You decide on the car you want, and since the lease specials are almost always through the manufacturer’s captive financing arm, make your best cash deal and then tell the F/I guy you have a pre-approval through their manufacturer’s lender, or see what they can come up with.

    Good idea? Bad idea?

    Also, is there a good app for doing lease calculations on your phone?

  • avatar
    SCE to AUX

    1. If I’m trading, I always bundle the trade and the new car into a single bottom line number – never separately. That way, the dealer can choose which transaction he wants to make money on.

    2. Trading is more fun when your trade is only worth $100 in scrap.

    3. Three times I’ve bought a car out of town (2-5 hours’ drive). This allows me to turn the dealers’ ad slogans on their head by saying, “I’m only here today, so this is your opportunity to sell me a car.” It’s great leverage.

  • avatar
    iama

    Let’s see. Bark has NEVER WORKED FOR A DEALER, so I’m not sure what makes him the expert.

    Unless you’re pretty gullible, the dealer makes no money on a new car. The job of the sales guy is to sell you a car, not make the dealership money. You’re then walked into the F&I office, where they make their money. They manage to complicate the finance to a point, that you’re lost and they make money. Get your own financing. They then upsell you on all kinds of useless key insurance and paint protection. Never buy anything other than the car.

    Dealers do make money on used car sales. They need to. It costs money to prepare, inventory, and sell a car. Typically, they need about $2K. They might drop that down if they know they’re going to get some money financing you the car.

    The trade-in part is correct.

    • 0 avatar
      AJ

      I know a guy that goes over trades at a dealer and then reports to the sales manager on what the car needs serviced. If the manager decides to sell the vehicle on their lot, he’ll then take care of the repairs/maintenance. If they don’t want to sell the car, they’ll either send it to auction, or a guy from “downtown” drops by with cash… who then takes the cars and sells them as is.

      Edit… But yes, cars always need something repaired. He said the exception to this is cars that are traded in by old guys. :)

    • 0 avatar
      hgrunt

      I recently waltzed into a Ford dealership (after haggling online) as an internet customer and ‘cash buyer.’ The F&I guy asked me only once, then whizzed me through the paperwork and I was out of there before my my lunch break was over. I was genuinely surprised here was no hard upsell

  • avatar
    Robbie

    Yes, dealerships are stealerships. You will be taken advantage of in horrific ways. Therefore, let the theft happen as few times in your life as possible. Buy something you truly like; keep the vehicle at least a decade; and leave the trade-in-every-three-years practice to the suckers.

    • 0 avatar
      Old Man Pants

      I agree that the most an average person can do against that very entrenched and constantly conniving class of shysters is to limit the number of times you expose yourself to them, but I wouldn’t use “horrific” as a description of the worst they can do.

      Don’t tempt fate to educate you about the things for which that word is usually reserved.

      • 0 avatar
        brenschluss

        Today’s “average person” shouldn’t be so paralyzed in a situation where they’re spending tens of thousands of dollars that they’re readily able to be taken advantage of.

        In addition, knowing the fair cost of a product one is buying (particularly if it’s a very significant expenditure,) and being willing to walk away from a bad deal (assuming there’s an alternative,) are necessary to not be ripped-off, and should not be exclusive if you know that the internet exists and now has this information.

        If any of this is inapplicable, it’s unfortunate, but it makes it harder to assign blame.

  • avatar
    Flipper35

    The last car we bought a new, new car the salesman was pushing hard for want we wanted as payments. I finally blurted out $300/month for 36 months. He said they couldn’t do that so was asked again for the purchase price in our budget. Bummer, I was happy with those payments, though he could have probably talked me up to $350 for 36 months.


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