Last week I received a message from an old friend who I have not heard from in months. Since most of our communication existed via email, I assumed with an actual phone call, there must be a sense of urgency so I immediately called him right back. "Hey Bill" he says, "I need your help. I think I am getting screwed by a car dealer."

This is not the first time I have received calls like this. Earlier this year a good friend was at the mercy of an out of state Toyota dealer who felt if they scared him bad enough with dealer terminology, he would immediately send them ANOTHER $5000 rather than have to return the car. Fortunately I armed him with knowledge, and the dealer ended the pursuit.

I would like to set something straight, I believe dealers have the right to make a profit. If you planted a $30k investment, you too would expect a healthy return. There is a fine line. The best way to balance the scales is to assure that both parties share equal knowledge. Every buyer should have a background of the vehicle, of the dealership and the car sales industry. I can help you with the latter.

"Let's talk price"
Every purchase will essentially come down to price. The M.S.R.P. (Manufacturers Suggested Retail Price) is a nice little guide to what you should pay for any vehicle on the lot (30 years ago). Since then, dealers have shot themselves in the foot by making every effort to undersell the competition, so that now children have been trained at birth to dicker. So how do dealers get around that? Dealer add-ons. These are over and above the factory options listed on the sticker. These are additional costs that can vary from undercoating, paint sealant, fabric protector, supplement retail, market value adjustment and more. These inflated costs are designed to show a higher price for the car, therefore making the dealer look like saints for lowering the price. Always examine the "Supplement sticker" buried somewhere on the vehicle you are considering.

Invoice price is a guide most dealers will shout at you. "We sell for $500 over invoice!" This of course can be deceiving considering seldom does it reflect true dealer cost. Again, there are many factors to consider. Dealers can alter an invoice. Often they contain a "dealer pack" of .6% and can also have various "other" costs listed below such as "shipping", "lot", or "dealer" fees. If a dealer offers you a purchase price above invoice, be sure to have a copy of that exact vehicle's invoice easily obtainable from the internet. These can occasionally be incorrect, by often no more than $50. Finally, what the dealer did not want you to know. Every factory offers a "hold back". The hold back is the money sent back to the dealer for selling that car at year's end. Most dealers do not use this figure when they are calculating a deal, but if a dealer ever tells you he is losing money on a deal, think again.

The re-bait
The dealer can do only so much to persuade you to sign sixty months of your life away. They rely on the dealer incentives often to help close the deal. Dealer incentives are often cut and dry. They consist of an "either/or" program that will appeal to cash or financing consumers. Dealers usually use factory rebates to help show lower sale pricing. If you come in for a "Specially advertised price", they will not mention any special financing rates. Often, these rates will lower your payment significantly, although opting for "specials rates" cancels out foretold rebates, therefore deconstructing their sale price. A smart shopper will have accessed information for rebates and rates on the automakers site prior to shopping on the lot.

What about my trade?
Trades can kink any deal. In a perfect world, cars would just explode after 36k miles and you could walk into a dealership fresh. But, out with the old payment, and in with the new.

Many factors can determine the unloading your prior burden. How much you owe? Condition of vehicle? Market value? How bad you were screwed the last time you bought a car?

Everyone hopes to have equity in a trade. If you are trading in your car with in the first 3 years, do not count on it. Most loans require well over half of the contracted payments made just to break even. It seems for every payment you make, your car loses double the value. Hard to justify buying another vehicle, be we do. Consumers are often armed with printouts and Kelly Blue Books showing what their car is worth. On this one, I have to side with the dealers. Dealers are not going to take your car in for more than it is worth; it does not make sense for them to do so. They might show it on paper with some clever numbers. But they will NEVER overpay for your present vehicle. Dealers use present auction value as a guide. If your 97 Chevy Blazer shows a Blue Book value of $12,873, but an identical Blazer went through the last regional auction for $9,120. You can assume you will get the lesser amount for your trade. It is basic math. Sure you drove your car to soccer games and back and only used premium gas and synthetic oil, but your Caravan is worth what it is worth. No reason to argue.

Now, with that in mind, do not let them steal your trade. Knowing the market value of your vehicle is not common knowledge. Most dealers must either call an auction or check with pay services that keep up to date on the ever changing figures. So asking a few deals of your vehicle's worth is always your best shot.

Payment SHOULD be
There is a common practice called "Packing the payment". This is where the manager calculating payment will add to either the payments shown or the interest they feel they can get you. This covers a few bases for them. By adding to the payment they present you, it leaves them room to add an extended warranty. This is designed to cover you past your present factory warranty. There are a few things to consider when purchasing this option. First of all, how long have you had your present vehicle? If you are in the habit of turning in past vehicles every 2 to 3 years, this warranty is a bad idea. You will be adding another $15 dollars a month to your car payment for no reason whatsoever. Two misnomers about extended warrantees are that you can purchase one anytime prior to your factory warranty running out. Second is that if you purchased one, and are trading in your vehicle before it runs out, you many receive money back for the unused portion from the supplying company (usually the dealer who sold it to you).

Packing the payment combines the forces of the lending corporations. Banks will allow dealerships to raise interest rates and pocket the difference. If I was approved with First Bank of Goober Idaho at 6.9%, Goober Chevrolet could then offer me 9.9% and put a nice little 3% in their pocket. It is never a bad idea to obtain financing through a credit union or personal bank if factory rates are not offered. 1 to 3% can add up fast.

The number game
Everyone likes to cushion the blow. Dealers have built a successful business by learning how to sell you a car. After a dealer sits with you, listens to your concerns, and understands your financial limits, he will then go in back to write down their numbers. Be prepared.

A wise man once told me math is math.

If you expressed to your salesman that your main concern was getting the most for your trade, that is what you will get. If you mentioned you could get the same car at your brother-in-laws dealership for a certain price, that is what you will get. There is simple math here that anyone can follow.

If a dealer tells you that your car is ONLY worth $10k, and will sell you his car for a discount at $25K, you may be getting a great deal on a new car for a difference of $15k. But wait, another dealer told you he would give more for your trade. He shows you a sheet with $15k for your trade, but offers you the new car for $30k. Again, $15k difference. They will show you numbers any way you would like. Each time with the same exact difference. Keep an eye out on how a deal is presented. Take the time to do your own math and see how it makes sense.

Simple little items to watch for:

A new car should always come to you clean and full of gas.

If you have accessories on your trade that will transfer to your new vehicle, ask to keep them. If they say no, then ask how much they gave you for them (Dealers seldom add trade value for accessories). If you bother them enough, you should be able to keep your old stereo and KC lamps.

Ask the dealer "why should I buy from you?" Ask them for rentals at service, free car washes, and free oil changes. They have no problems giving their service department extra work down the road for a simple car sale now.

Never asked a friend for advice. There is a common rule; your friends will always tell you they paid 15k more for their house and $5 less than they really did for a car. No one will ever be honest about how a dealer took them for a ride; therefore you will never get a straight answer on what they paid. Never use hearsay for ammo.

Make them work for your business. There are 20 other dealerships near you that paid the same price for that car. They need to stand out, so make them. Also, never buy a car on the same day you get an offer from a dealer. Always research their offer. If a deal sounds too good to be true…well, you get the point.

Research research research. Always have your facts. Know your stuff. Ignorant with a $600 car payment is is not the way to go through life. Happy buying.

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