After searching the internet for car buying advice and finding only “vanilla” articles that all repeat the same content, I perfected the best buying practices and I created a detailed step-by-step guide. It will allow you to quickly and painlessly negotiate the best price on your next car.
One of the first concepts to understand is that car dealers can make most of their profit from the “back-end” of the car deal. If you buy a car and choose to finance or lease the vehicle, the dealer will make some hidden “back-end” profit. The “back-end” is profit that is made from the “buy-rate” or a lease’s “money-factor”.
What is the “buy-rate”? When a car dealer provides you with financing or leasing options they are actually “buying” the loan or lease from the bank at a cheaper interest-rate. Out of the thousands of car deals that I have made as a car salesman, I have never been asked to negotiate the “buy-rate”. This allowed me to sell cars at a cheaper price (and make the customer feel good) while making thousands hidden in the “back-end”.
The second concept to embrace when buying a car is that most salespeople would like their customers to behave as though they are “tough” negotiators. For example when customers say, “I will leave if you don’t sell it for my price.” Salesman are trained to on a daily basis to keep the customer going “back and forth” and eventually walk them out to their car and then say “OK, please don’t leave…just because we need to sell a car today you got a deal!” In the car business this is called “play-house-90”. As a car salesman, I knew that appealing to the customer’s ego and getting them to feel like they are making a good deal was the most of the battle. To save time, you must be prepared with the true “front-end” and “back-end” costs before you buy a car-but most importantly you must know how car salesman are trained and what is going to happen next.
The Five Steps to Buying a Car and Saving a Ton of Money.
Step One. Car Buying Preparation. – You must find the estimated price of the vehicle you intend to buy. You can do this online though websites like carsdirect.com or edmunds.com. You must also estimate your trade-in’s value (which can be accomplished online though KBB.com) and lock-in financing that can be used as an alternative to the dealers. Most importantly, you must learn the process that car dealers require their salespeople to perform, so you will know exactly what is going to happen when you set foot in the dealership.
Step Two. The First Car Dealer Visit.- Do not buy a car on this visit.. This first dealer visit is to accomplish three things only: 1. Test drive the vehicle – you must drive the car you intend to buy. 2. Obtain the dealer’s ACV (Actual Cash Value) for your trade-in. 3. Learn the dealer’s financing or leasing “buy-rate”. Obviously, the dealer will try to sell you a car on this visit. You will have to know all their techniques before they try to use them and begin to waste your time.
Step Three. Car Deal Calculations. – At home or somewhere other than the car dealership, you must then calculate the net “front-end” and ” back-end” cost on the vehicle and print an accurate payment checker to use during the negotiation. Otherwise the dealer will build a “leg” into the payment and potentially increase their “back-end” profit.
Step Four. Closing the Car Deal. You must negotiate within the dealer’s system and neutralize all of the potential games and gimmicks. If you know what they are going to do before they do it you will be at a huge advantage. Car Dealer’s will use a “write-up” process that will maximize their profit, you must know this system and psychology behind it. Plus, you must be able to negotiate from a position of strength and be able to verify the dealers counter-offers with accurate information and payment checkers.
Step Five. The Finance Office. Also called “F&I” – Just because you made it through the close doesn’t mean the dealership is finished trying to sell you things. You must know the relative values of the extended warranties, mop-and-glow and other add-ons before you complete the deal. Don’t rely on your wits when buying a car. It’s the car dealer’s profession to increase their profit on every vehicle that that sell. You may feel like you are getting a great deal, but you may over-pay if you don’t follow the above steps and prepare yourself with the proper tools and information.