Going to a car dealership is a lot like walking through a mine field. You’ve got to know where all the bombs are buried so you can walk out alive. The car buying process is laid out to extract the maximum amount of money from a consumer. To help you avoid the mines, here are some of the top secrets that car dealers don’t want you to know.
1- You could save up to $10,000 driving a few hours south
Importing a car into Canada takes a little energy but can result in big savings. By importing a car from the U.S. you can save 20-30% off the price of a new vehicle. Incidentally, that’s about the same percent a new car depreciates when you drive off the lot. So another way to think about it is you are completely wiping out that depreciation.
What’s your time worth? Let’s say you spend 4 hours working out a deal before you leave home and another 10 hours picking up your car, filling out paperwork and going through Customs. If you saved $10,000 on a car, that’s $714 per hour. Even if you only saved $5,000 on a car, that’s still $358 per hour!
2- Buying based on the monthly payment is the wrong mindset
One of the first questions a car salesman will ask when you enter a dealership is how much do you want to pay per month. This is a devious little trick! Once you commit to a monthly payment amount, they can sell you a more expensive car by changing the financing terms. By adjusting the interest rate, length of loan, or down payment amount, they can fit a wide range of car prices into the same monthly payment.
Plan your budget around the total price of a car and calculate affordable monthly payments at home using an online loan payment calculator. When talking to a salesman, only negotiate based on total price, not the monthly payment.
3- Everything is negotiable
Everyone knows that the price of a car is negotiable (and to see just how negotiable, Car Cost Canada is a good resource). But, did you also know just about every other aspect of a car sale has some wiggle room. The amount of your trade-in, the interest rate offered, and the amount you pay for an extended warranty can all be negotiated. You can even negotiate maintenance appointments and car washes.
4- Sometimes the salesman needs a deal more than you
Both salesman and dealerships have monthly sales quotas that are tied to compensation. Salesmen are much more likely to give you a bigger discount at the end of the month when they are trying to meet their numbers. Often times the amount of bonus tied to selling several cars will greatly exceed the loss made on a single sale. If you time it right, a couple hundred dollar discount for you might be profitable for a salesman if they are poised to make a thousand or more in bonus money. For the best deal, start the car buying process in the last couple days of the month.
5- Your trade-in is the second biggest money maker for a dealership
Car dealers know you have a limited number of options to get rid of your old car. So they will buy it from you for as little as possible and turn it around for a hefty profit. Before you go to a dealership, do some research on CanadianBlackBook.com to find out how much your car is really worth. Consider selling it to a private party if you’ve got the time or bring an appraisal with you to the dealership to ask for more money.
6- The Finance Office is the biggest money maker
Most people put all their effort into negotiating the price of a car and then let down their guard. Car salesman encourage this. After you settle on a car price, they will congratulate you and make you feel like you’ve won the lottery. But there’s more work to be done. The Finance Office wants you to use their financing and buy warranties, insurance, and add-ons like rustproofing and fabric protection. All of these items have very high profit margins for dealerships, but most are unnecessary. Shop around for financing and insurance outside the dealership and you’ll likely find much better deals.
Do you have any tips that car dealers would prefer to be kept a secret?
Author Bio: These tips are from the Car Negotiation Coach who teaches people how to buy a car and negotiate the best possible price.
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Great stuff CNC. Importing is definitely the way to go if you truly want to save.
It’s not just specific to Canadian market. It’s everywhere. Neither the manufacturer nor the dealer would want you to know “nothing.”
The dealer knows how much he paid for the car. He would always make profit on the new ones and the used ones. He would lose money when customers stop buying and he continues to pay interest on his inventory.
Once he is able to sell one car, he makes money including interest he paid on the car.
Yes, the financing office is a big money maker. Be aware that the dealer may be less willing to negotiate on price if they know you will not be financing through them. If you have the funds available and don’t need to finance, you might want to finance anyway: negotiate with the dealer and agree to finance and see if you get a better deal. You may save a couple of thousand dollars and pay a nominal amount of interest (pay the loan off immediately!).
Thanks SPF, and I appreciate the proof-reading as well!
Great tips, better than the usual “Do your research” cliche. In regards to American savings I have found the price of cars start to get fairly comparable over the last few years. There is still a definite difference in higher priced/luxury cars, but on your average 4 year-old sedan there isn’t much difference (on the Manitoba-North Dakota border at least).
Definitely insightful. I’ll have to Re-read this before making my purchase.
Virata
This article underlines the fact that it is definately worth it to do your homework before buying not only the price but for reliability over the time you plan to own your car to minimize upkeep costs.
First figure out the car models you want to purchsse then go to the library and check Consumers Reports auto review for new cars…also available for used cars. Many models have a continuing negative history of problems.Why buy a car like that? As long as we continue to buy cars with a poor performance history, the manufacturers will continue to build them.
Second,after narrowing down your choices to say 1 or 2 models then get out to the lot on a Sunday to check them out without the sales rep hanging over your shoulder.Are you still interested? go online to the dealer or get some brochures.
Also scan the newspaper auto sections to see what deals are on. Does anything appeal to you? Does it work for your budget?
I went online to Car Cost Canada and for a very small fee got some excellent coaching as to how to do the deal…(deal first on the price you will pay then go to the trade allowance) and a better breakdown of the prices and where to start negotiations.They also had referrals to the participating dealers. There are other sites that offer this service.
Plan your purchase a few weeks prior and end of month is good especially during summer and winter months.
I took some time 4 years ago and again last year to do this and ended up with a better deal and a better vehicle that had minimal upkeep. It’s worth the effort and you will be better equipped to do the deal. I am 65 years old and you can do this too. Good luck.
Hello Sir/Madam, We are consultant company base in Ghana,and we are looking for cars to buy in a very large quantity, Since we have seen that you can supply to the standard we want. We would like to have a long term business with your company. We are buying more than 50 cars a month and our payment is LC by bank to bank for the fair deal to be done,You can give us your verbiage for the LC you want us to issue to secure the good deal.If our procedure is fit to your policy do not hesitate to contact us back as soon as possible.
Yours Faithfully
Mr Richardson
CEO
Tel 00233-266251555
I’ve read countless other books about saving, investing and spending. This is one of the best, if not the best book so far, this still helps.