Haggling for a Low Price
by Paul Barrett
Before you waste time trying to get the lowest price on a new car, keep in mind that you are negotiating for three important things:
1. The purchase price of the new vehicle
2. The amount they are willing to give you for your trade-in
3. The cost and terms of the financing
You can get the absolute lowest price on a new and get taken on the trade-in and financing. Net result, you lose! When you negotiate or haggle you must do it in all three areas.
One of the keys to getting a good deal in any purchase whether a home or an auto is preparation. In other words, know the market. If you are buying a house, do you know whether it is overvalued? If you are buying stock in a company, do you know if it is overvalued? If you are buying a car, is it overvalued? When it comes to cars (and homes) let me give you a clue. Cars as priced are all overvalued.
If you walk into a dealership and you have no concept of what a truly low price is, chances are you will overpay. Salespeople are like sharks, they can sense weak prey and they will take advantage of your lack of knowledge every time. They can tell if you are bluffing, guessing, or too anxious to make a deal.
Get wise and don't be taken advantage of. Before you even begin to negotiate, know what you want. Be sure of the make and model of the vehicle, the details and features you need, the color etc. Once you are 100% sure of what you want then start making the deal. The salesperson is not that smart, but they are used to the process and they have more practice than you. So stick to a game plan.
Remember we said there are three areas that you must negotiate? Well eliminate the trade-in and the financing. If possible, sell the car yourself. You will get the best price. Then line up financing with your lending institution. If you can't sell the car yourself or obtain financing, don't tell the salesperson. Negotiate the price of the car first. Then negotiate the trade-in and financing. Don't cave in on either area. Get the best deal on each phase of the negotiation. You do it by being disciplined and persistant. If they are unwilling to negotiate, you walk away and give your business to someone else.
Never get angry or leave in a negative state. Be tough but freiendly. You will be back. Go to another dealer and see if they are willing to negotiate. Then bring the deal back to the original dealer. See if they will top that deal. Negotiating is a game and it takes patience, discipline, and persistance. Get what you want!
To get a low price on the car you are buying, it helps to know how much the dealer paid for it. To understand car pricing, click here. Once you know the dealer's cost, plus hold back, you have a starting point for negotiating. Negotiate from the dealers cost down, then add a small profit, and that's your target price. (Never negotiate for monely payments - negotiate the price of the car)Never negotiatte from the sticker price down!
How to handle salespeople
Before we begin, I want to make this point: it's not the salespersons fault. They have no choice but to drive a hard bargain or they lose? They lose their paycheck and their job. The sales manager is on their backs constantly whipping them into being aggressive, annoying, and ever persistent. If they disappoint the sales manger they are out the door. Salespeople are programmed, through training seminars, hours of motivation speeches, and blatant threats regarding performance. It's brainwashing at it's finest.
Car dealer's have been designing a system that takes advantage of your moment of weakness. They have had over 50 years to perfect this system and to propagate it from dealership to dealership. If you are not on your toes they will catch you with your guard down. You will buy a car. If you are emotional, compliant, or lack knowledge, you will also overpay.
Salespeople are trained on a continuous basis in the art of high-pressure tactics. Every move they make is an ingrained training reflex, practiced, until it is perfected to get you to accept high payments, and overpay for the car you buy. From the handshake and smile, to the robotic dialog, its all an act that is learned and practiced on unsuspecting buyers such as yourself.
Every tactic is designed to get you hooked into buying a new car at an inflated price. The salesperson is 100% commission driven. No Sales = No Money. The more they sell the car to you for, the more they make. The commission structure is also designed on an upward sliding scale. The higher the price above invoice, the percentage of commission increases. For example: If the profit on the sale is from $0 to $800 the commission would be 15 percent of the profit. From $800 to $1500 the commission would be 25 percent of the profit. If the profit was above $1500 the commission would be 30 percent of the profit.
The more profit a salesperson can squeeze out of a deal, the higher the commission. The salesperson is highly motivated to get you to pay as much above invoice as possible. Their real job is not to sell you a car. It's to get you to pay an inflated price! Getting you to overpay for a vehicle is the only way a salesperson can make money. That's why they hate internet sales. That's why they hate the IFI.
When you walk into a dealership to buy a car, never forget the fact: the salesperson makes a living by inflating the price of the car. That friendly smiling face looks at you and sees dollar signs. When he acts like your friend with your best interest in mind it's only an act. He's thinking of how much money he can make off of your emotions and lack of knowledge.
Dealerships need to make a profit -- a fair profit. Unfortunately too many of them are making obscene profits at the expense of hard working people. This is not fair. I believe that a new system needs to be in place that would be fair to both the dealership and the customer. That system would eliminate commissioned salespeople. Carmax has a better idea. Until then we have to cope with a system that is difficult to beat. The more knowledge you have the better your chances of getting a great price.
(Note: I would like to point out that there are a few honest and ethical salespeople. We are currently developing a plan to train salespeople and deprogram them so they are able to work with our members. About 20 years ago, a salesman by the name of Joe Girrard was consistently the top selling salesman in the world. in his book he wrote one of his secrets was to develop repeat customers. He dealt honestly and fairly with his customers and it paid off. He did not play games. Our course is open to all salespeople. Another point to keep in mind is that it is not always the fault of the salesperson. Many times they are following orders. The system is rigged and the salesperson is only a cog in the wheel.)
Hopefully you now realize that the salesman wants you to spend as much as possible for the car. When negotiating, never believe the salesperson is trying to get you a low price. They have more incentive to sell the car at a higher price than the dealer. The salesperson also makes money on the financing and any extras you buy. To most salespeople you are a pay ticket. Many consider you a sucker. They joke about you and your vain attempts to beat the house.
After the test drive, the salesperson will draw you into the sales cubicle or desk, where start pounding you with numbers. Here is where the average person gets overwhelmed. Once your in the cubicle or at his desk, the first thing the salesperson does is to take out a pad of paper refereed to as the "4-square work sheet. This worksheet is designed to get the maximum profit for the dealer.
The worksheet is divided into four sections, where the salesperson records the details on the car you want, the sticker price, your trade in value, and financing terms or monthly payments. Each of these areas is a negotiation poing. To win in the negotiation process you need to understand the 4-square worksheet. How the 4-square works
The Closer and Double Teaming
Once the salesperson starts filling in the 4-square worksheet, the meat of the negotiation is about to take place. This is the war zone. This is where the real games begin. This is where the salesperson feels you out and makes an offer. If you refuse the price he goes back and forth to the manager to get a better price. Most of the trips to the manager are not real. The reason they play this game is so that they remain the good guy going to battle with the sales manager. Isn't that nice? the salesperson is going to bat for you. Don't believe it. He is only trying to get you to accept a high purchase price, a low trade-in value, high finance charges and monthly payment.
If you don't accept the terms at this point, the salesperson will double team you. He will call in the dreaded "closer." The "closer" is a highly skilled person trained and seasoned in the art of closing a sale. The closer is an expert. He is skilled, he is sharp and knows every mental and emotional trick in the book. The salesperson needs to make the sale at all costs, together with the closer they will continue to whittle away at your resistance.
When the salesperson hits you with the four square, the closer tries to close you, and the sales manager keeps giving you so called great prices, you are being put through the ringer. This is where they get you to accept a deal where you win and they lose. To learn more about handling the salesperson and the negotiation process, attend one of our car buying seminars.
The Test Drive
The test drive can be a chump drive if you are not careful. Only test drive when you are fairly certain of the types of cars you are interested. The test drive is pre-planned. It's one of the salesperson's strongest selling tools. The new car smell, feel, and drive is a selling experience that can easily hook you into making an emotional purchasing decision. Use the test drive to your advantage. Here's how: test drive
If you know what you are doing you can beat the salesperson every time. If you don't you will lose. You will also lose if you get emotional, anxious, or run out of steam. Salespeople are trained in negotiation strategies. You aren't. So listen up. The salesperson will open a bag of tricks, full of time-tested ways to get you to buy a car at a price that is outrageous. Since you have to deal with a salesperson, you need to learn a few of their tricks and how to outmaneuver them. Once you recognize which game the salesperson is playing, it's easy to counter their tactics.
When handling the salesperson keep this in mind: he needs you more than you need him. You can make his day happy by purchasing a new car or you can make his day hell by taking up his time and walking away and buying from another dealer. Remembering this point is paramount to winning. One of the tactics a salesperson uses is to try and keep you in the showroom as long as he can. Why? Because he knows you are emotional and anxious. The longer you stay the more likely you are to buy a car and the less likely you are to shop another dealer. You can use this to your advantage. The more time he invests in you the more he wants to sell the car. The more anxious he becomes, the more accommodating he becomes. So be sincere and friendly, but make him squirm. Remember, you can make his life happy or miserable. For tips on psychological warfare, click here.
Negotiation is a game of wits. Keep yours! Let the salesperson break before you do. The salesperson will try to act like your friend, and pretend that he is out for your good. He is trying to gain your trust so he can slam you. Never feel sorry for the salesperson. Never totally trust or believe a salesperson - they lie. A salesperson will always tell you that's their best price, in 9 out of 10 cases it's not. They will always come back with a lower price. Only after several attempts will you get the best price. Remember, the salesperson is at work, he is only interested in seperating you from your money and making a sale. Do you really think he cares about you and enjoys your company? Belive me, he would rather not be at work, and he would certainly be doing something more enjoyable. So don't get soft and get suckered by all his sappy stories and attempts and gaining your confidence and trust. This is business. Be freindly, but stick to your mission!
By now you should understand the environment, the mentality of the salesperson, their motivation, and you are now ready for some negotiation rules and tips. To learn the art of negotiation see: Rules of Negotiation
In the Financial Wisdom Seminar we teach you how to save money on all your purchases. Let us help you get wise.
Remember, my job is to help you become financially stable, secure and independent. I will do my best , you do your best.
Your author and friend,
Paul Barrett
