Today’s car shoppers are savvier than ever. Many of them know to turn down unnecessary add-ons such as rust-proofing and fabric protection. They even may know they can get price quotes from multiple dealerships online and detailed information on dealer costs, rebates and financing.
But that doesn’t mean shoppers—even those who think they have learned many of the common sales tactics—can withstand all the ploys that a car salesperson can throw at them. That’s especially true when they face some new twists on the classic sales techniques.
This is not to say that all dealerships resort to high-pressure or misleading sales tactics. In fact, the increased sophistication of consumers has persuaded some dealerships to behave more openly and honestly than ever before. But shoppers still need to be wary throughout the car-buying process.
Five things a car salesperson might say that could signal he/she intends to try to get you to pay more than you should….
“I’m selling it to you for just $300 over cost. Look up the invoice price yourself—you’ll see I can’t go any lower.” Salespeople know that shoppers have become used to looking up the so-called “invoice price” of a new vehicle online. So rather than try to hide this information, they sometimes encourage buyers to look up invoice prices…and encourage them to believe that these prices are what dealers actually pay for cars. Sometimes they aren’t. Invoice prices often are referred to as “dealer cost,” but in fact, automakers typically use “dealer holdbacks” and “dealer incentives” that reduce what dealerships pay to an amount that can be hundreds of dollars below invoice price—sometimes thousands.
What to do: Do not let a salesperson convince you that you are getting an incredible deal just because the price you are paying is fairly close to the invoice price. A better sign that you’re getting a good deal is if you are paying less than the typical buyer in your area paid for the same vehicle. Several major car-shopping websites provide this information, including my company’s site, KBB.com.
“What do I need to do to sell you a car today?” Car buyers can easily get quotes online from multiple dealerships, even dealerships hundreds of miles away. That gives salespeople more incentive to convince shoppers to buy the first time they set foot on a dealership lot—if they walk away, there’s a strong chance they’ll buy somewhere else. To encourage a quick purchase, a salesperson might claim a price is available only today…that supplies of a model are very limited…or that the dealership has only one vehicle with the desired colors and options and that another buyer is interested in it, too.
What to do: Ignore these classic high-pressure tactics. Buyers who move slowly and shop around almost always get better deals than those who rush. Any “today only” price you are offered is likely to be offered in the future, too.
Exception: It is possible that a “today only” price is available only today if it’s the end of a specific sales or dealer/manufacturer incentive period and the dealership needs to make some final, quick sales to meet its quota and earn a bonus from the manufacturer. Even so, do not rush to buy unless you have researched the prices other buyers have paid for this vehicle and you are confident you are being offered a competitive price.
“We’re a different kind of dealership—we offer no-haggle pricing.” No-haggle pricing, also called “guaranteed pricing,” has been tried on and off for decades and is becoming increasingly common as dealerships try to attract buyers who dread the difficult, protracted negotiation process. It sounds sensible—almost everything we buy has a fixed price, so why not cars?
Trouble is, the no-haggle guaranteed price might not be a very good deal. In fact, it often is not much different from the opening price the salesperson would have offered to a buyer who did negotiate. Choosing the no-haggle option just might mean you don’t get to make a counteroffer.
What to do: Use a car-shopping website to check how the no-haggle price that you are offered compares with the price the typical buyer in your area is paying for the car. (You even can do this right at the dealership using your smartphone, tablet or laptop.) While some no-haggle prices are fair, in many cases you can save perhaps up to $500—potentially much more on a high-end vehicle—by haggling just a little at a no-haggle dealership.
Exception: If you buy a car from Tesla, the luxury electric-car maker, there is a fixed price and no haggling.
“Bad news—you didn’t qualify for that interest rate.” Salespeople sometimes offer an attractive deal…then change the terms when the deal is nearly finalized. It may be that the buyer didn’t qualify for the originally quoted interest rate…or that the dealership is trying to raise the interest rate unjustifiably. The buyer has invested so much time and mental energy in the purchase by this point that it would be psychologically difficult to walk away.
What to do: Have a financing offer in place from a credit union, bank or some other third-party lender before you shop for a car. If the dealership tries to charge a steeper interest rate, use this financing instead.
Variation: The salesman offers a very appealing price for a buyer’s trade-in in addition to a competitive price on a new car. When the deal is nearly done, the salesperson apologetically says he cannot offer nearly as much for the trade-in as promised because the dealership’s service department discovered the vehicle has a hidden mechanical problem. Your response should be to either walk away from the deal or pull the trade-in out of the deal and sell this used car through the classifieds, on Craigslist.com or at a place that buys used cars outright such as the national chain CarMax.
“But everyone pays the vehicle-prep fee.” If a savvy car buyer won’t pay the dealer’s original asking price, the salesperson might agree to a lower price…but also add on hundreds of dollars in extra “fees” at the last minute when you are about to sign the papers. If the buyer protests, the salesperson will typically say that these fees are standard and unavoidable.
What to do: Well before you are about to sign final papers, ask the dealership to quote you an “out-the-door” price that includes absolutely all charges. Some fees, including destination charges and tax, title and licensing fees, are truly unavoidable. Many dealerships also refuse to budge on a “documentation” fee, which dealers say covers processing the paperwork for the title and registration, although it is worth at least trying to negotiate this fee if it is significantly above $50. Many other fees, however, are negotiable, especially if you threaten to walk away. This includes dealer prep fees…delivery fees in excess of factory destination charges…and charges for add-ons you did not request and that are not necessary, such as vehicle identification number (VIN) etching on the windshield. Any fees that are charged should have been included in the out-the-door price you were quoted.
In a situation that applies only to used cars, the car salesperson says…
“This used car is in great shape—I’ll even show you the Carfax.” Salespeople know that sophisticated used-car buyers are likely to check a vehicle’s AutoCheck or Carfax history report before buying. This report lists the vehicle’s accident records and certain other aspects of its history. Salespeople will often readily provide these reports for free. But automotive problems that do not result in insurance claims often do not find their way onto AutoCheck or Carfax reports.
What to do: Pay an independent mechanic $200 to $400 to give a used car a prepurchase inspection before buying even if it has a clean history report.
