I Needed to Buy a New Car
Buying a new or used car can be intimidating. It can also be time-consuming and drain your wallet, but knowing car-salesman tricks can help you get through the purchase process faster and save a significant amount of money.
At the time I was driving a 1996 Pontiac Bonneville, which I loved and hoped to drive for many years. However, the car developed mechanical problems, and $2,000 worth of repairs did not fix the problems. I could have used that $2,000 as a down payment on another car, and it was a hard lesson to learn.
The Bonneville had developed a vacuum leak issue (or so I was told) and it became dangerous to drive. For no apparent reason, the car would surge forward and I was afraid I might unintentionally run into someone or something. The car became a liability and had to be replaced.
This was the first time I had to purchase a vehicle on my own, and I dreaded the experience. However, I have a natural curiosity and I studied different methods to navigate the sales process, and I saved thousands of dollars in the process.
Be Prepared for Delay Tactics Used at Dealerships
I went to Half-Price Books and picked up a couple of paperback books on dealing with salesmen. I spent about $20, and the information I learned saved me thousands of dollars and many hours.
Do These Two Things Before You Visit the Dealership
Before you ever visit a dealership, make a copy of your driver’s license. Right next to your copied license write the following, “Permission is not authorized to run a credit check”. Take this note to every dealer that has a car you want to test drive.
The note puts the dealership on notice that they do not have permission to run your FICO credit score. If they run your credit report without your permission, they might charge a higher interest rate based on the credit score.
Hold On to Your Driver's License
One of the reasons they will ask for your license is to ensure you are current with the state and actually know how to drive. If you don’t take a copy of your license then they will have to make one for themselves.
When the salesperson walks away with your driver's license, you cannot leave. You can’t get up and drive off even if you want to because they have your license. This is a delay tactic to keep you at the dealership.
Do Not Get Comfortable in the Sales Office
The car salesman wants you to be comfortable, and to enjoy their coffee and soda. However, the longer you stay in the sales office, the more the salesperson will learn about your finances, and the vehicle you can afford. This information can increase the amount of your overall loan.
The Sales Manager Wants to Close the Deal
The salesperson's job is to make the sale. The salesperson can increase the loan amount through premium upgrades, a low-ball offer on your trade-in, or through a high-interest rate auto loan.
Tips on Financing a Car
The dealership interest rate could be double or even triple the annual percentage rate of your credit union. Shop for interest rates before you set foot on the dealership lot.
Know Your Credit Score and Save Money on the Car Loan
My credit score was 750, and I knew that financing would not be a problem. The salesman told me the best they could do was 10%. I knew my credit union would have a much lower rate, but I didn’t tell him that.
I financed the loan through my credit union for 4%. Knowing the value of the loan and the interest rate saved me thousands of dollars.
Maintain a Poker Face With the Salesperson
I spent several weeks visiting dealerships (never once giving them my driver’s license, always a copy) but I could not find the vehicle I wanted. I really wanted an SUV, but truthfully I didn't know much about them. I had gone to lunch with a co-worker and loved the stadium-like view from her Cadillac SUV. My view from the Bonneville was a view of someone’s tailgate.
Do Not Get Excited About the Test Drive Experience
I test drove a Chevy Tahoe at the first dealership I visited and fell in love with the SUV.
Here’s another tip. Do not show any affection for the car you test drive. If the salesman knows you love the car, it puts him in the driver's seat. The advantage of knowing that you love the car gives him the opportunity to sell you upgrades, also known as premium add-ons. Those premiums can be very expensive.
There Are Advantages of Buying a Used Car
I prefer to buy a one-year-old car for a couple of reasons.
- The car is probably still under warranty, depending on mileage.
- The car has already depreciated in value for a year.
- A one-year-old car is more affordable than a brand new model of the same car class.
Do Not Discuss Your Trade-In Vehicle
Do not tell the salesperson if you have a vehicle to trade in. If he asks you about your car, be very noncommittal about trading it in. This is a source of bargaining power for you later in the process. Do not give up this power.
Do not give him keys to your car. Do not allow your eyes to twinkle if he makes an offer on your car which will lower the cost of the one you want to buy. Do not engage in any further conversation about the value of your car. This is a final part of negotiating the price of the ‘new’ car you want to buy.
I knew the value of my Bonneville and I didn't owe any money on the car. I did some research and the value was $5,000. Keep in mind that I was having problems with this car. However, I also knew that if the dealership wanted it, they could make the repairs and still make money reselling the car.
More Games That Car Salesmen Play
I test drove the Tahoe and met with the sales manager. He wrote a dollar figure on a piece of paper and handed it to me. I then successfully negotiated the sales price down another $1,800.
The $1,800 price reduction could have easily become part of a low-ball offer on my trade-in value IF they knew I had a trade-in.
Most Credit Unions Offer Lower Interest Rates
I left the dealership and went to my credit union the next day to get financing on the Tahoe. However, when I called the sales manager to confirm the price, I was told that he was offsite and the dealership could not honor the price we had negotiated.
I followed up with a call to the salesman and told him, “If you want to play the Missing Man Game, that's fine. However, I will give you 30 minutes to confirm the price we had agreed on or I will buy a Tahoe from another dealership”. It was ironic how the manager was able to call me 10 minutes later and confirm the price.
Purchase Order Authorization to Buy a New Car
I received financing through the credit union in the form of a purchase order which essentially is an electronic way of moving money without handling any cash. I met with the Finance Manager at the dealership the following day to complete the purchase of the 2000 Tahoe.
Don't Fall For the Premium Upgrades
The Finance Manager asked if I was willing to trade in my Bonneville. I definitely wanted to trade in my car. The truth was that I actually couldn’t wait to get rid of it because I was afraid to drive it anywhere. I told him that if he wanted to make a deal, I would accept $5,000 as trade-in value and not one penny less.
The real benefit of having an approved purchase order from my credit union took away their bargaining power on my trade-in.
They offered me less, but I stood my ground on the trade-in value. They accepted, and it saved me $5,000 on the loan value.
The finance manager attempted to talk me into financing through the dealership by offering an upgrade on the Tahoe. However, I didn’t need any fancy upgrades and I held my ground on financing through my credit union.
Run a CARFAX Report Before You Buy a Car
Before you sign any loan paperwork, run a CARFAX Report. You need to know if your car has been in an accident, flood, or other type of chaos. You also need to know that the title is clear. Unreported accidents will not appear on the report, but this report will reveal how many different people have owned the car and in which states it has been registered.
The most important thing you can do when buying a new or used car is to do your homework. Know before you go. Know your credit score, know where you can get cheaper financing, know the games that salespeople play, know what you can afford and never, ever negotiate monthly car payments. That is a sucker's game, but I’ll write about that in another article.
What You Should Know About Dealer Add-Ons
Don't believe everything you read on the internet. If you see a car posted on a dealer website and it has everything you need, beware of the dealer add-on, it may not be included on the website but will be posted on the car. A dealer add-on is also known as a supplemental sticker. This sticker inflates the cost of the car.
A dealer add-on is also a profit center for the dealer. It may have features that you want on the car, but the likelihood is that the features are overpriced. For example: splash guards, window tinting, a tailgate on a pickup, and even alarm systems and an interior protection package. This "protection package" is basically Scotch Guard, and you can do that yourself to protect the upholstery. You can get the windows professionally tinted somewhere else for 50% of what a dealer will charge you.
Extended Warranty Protection Doesn't Last Forever
Within a few months of purchasing my Tahoe, I found a bumper-to-bumper extended warranty posted online. It wasn't very expensive, and my truck was only a year old.
In the first two years, the throttle body got clogged. The truck would flat-out die as I approached a stop. I took the Tahoe to the dealership on three separate occasions to fix the clogged throttle body.
I received a cancellation notice from the warranty company in the third year of ownership. The company was terminating contracts with 'older models', and mine was not even grandfathered into the program. I was ticked off, but there was nothing I could do about the situation. I couldn't even get my money refunded.
The extended warranty originally gave me some peace of mind about my purchase. However, once it was terminated—the loss was mine. I had considered it part of protecting the value of my vehicle, but it turned out to be worthless.
I still have the Chevy Tahoe, and it still runs great and is very reliable. I have never owned a vehicle for this length of time, but I don't want car payments and I'm serious about regular vehicle maintenance. I have been lucky in finding the right auto mechanic whenever I need to have parts replaced.
Enjoy Your New Car
Knowing some of the salesmen's tactics before you visit a dealership can save you time and money. Make sure that you got exactly what you bargained for before you leave the dealership, and don't pay a penny more. Once you drive the car off the lot, you own it.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
Questions & Answers
Question: How transparent were you regarding your car that was unsafe to drive (as you said) when you traded it in?
Answer: The car had obvious problems when starting. It was loud (very loud), and the entire car rattled. They took it for a test drive and had no issues with driveability, safety, brakes or anything else. They made me a full trade-in offer, which I accepted.
© 2012 Michelle Orelup