5 Car Buying Myths from So-Called Car Buying Experts
I’ve spent most of today doing research for some videos. Despite my detailed search criteria, I’ve gotten caught up in reading some of these car buying tips/hacks/advice articles from “experts” who “know everything” about the car business. I can’t tell you how many people I’ve encountered in my career who think that, because they’ve purchased twenty cars in their lifetime, they’re experts on the process. News Flash: No dealer employee will come out after you play the tough guy role and tell you that you left money on the table. Just because they say “Wow, you really drive a hard bargain!” doesn’t mean you actually took them for a ride.
Note: I’m not telling you that I’m the only one who can offer good advice on car buying. Quite the contrary. There are some good pieces and tips out there to be had. Unfortunately, a lot of those good tips are mixed with some hardcore car buying myths Some of which I’d like to share here.
Dealerships Can Always Negotiate
Any all-inclusive statement is bound to fail and this shenanigan is no exception. There are two things to consider here. The first is from an article written by someone who clearly did all of three minutes research on this topic before starting. He tells the reader that (paraphrased) the new fad of locking in high prices by telling people that no negotiation will take place is a lie and that all dealerships are prepared to negotiate. This is a false statement. Some dealers have taken a policy of marking their used inventory to virtually no profit and not allowing the store to negotiate. This is part of a system being implemented at several dealerships in the U.S. and is by no means a guarantee that you’re being ripped off. The second consideration is that, as inventory ages, dealers do lower their prices on vehicles to move them from the lot. It is possible that the vehicle is old enough to have been marked down to their very best price. That’s not to say that this line isn’t used daily to maximize profit, but anyone who guarantees that you’re being ripped off is operating without knowledge of what really goes on.
You’ll Get a Better Interest Rate by Going to Your Own Bank
Snopes would call this partly true. You may get a better interest rate through your own lender. Yes, dealers can mark up your interest rate for profit, but by simply knowing what rates are available to you before you go to the dealership, you can negotiate the interest just like you can negotiate the price of the car. The dealership almost always wants you to finance through them, regardless of how low the rate. If they can’t get the marked-up percentage, they’ll settle for the “flat”. The flat is the small percentage that the lender gives them for the loan when the rate is not marked up. Additionally, they don’t want you to get your back-end products like GAP and warranty from your credit union, so they’ll go to great lengths to beat their rate and keep that business (and profit) in-house.
Say No to Everything the Finance Manager Offers You
Another all-inclusive statement made by people pretending to know more than they do. Two products you should definitely consider in the Finance Office are Gap and Extended Service Agreement. (Often called Extended Warranty.) Gap Insurance pays the difference between what you owe on your loan and what your insurance company gives you if your car is totaled. Anyone who has ever had to file a Gap claim will tell you that they’ll never buy a car without it for as long as they live. Service contracts can be a rip-off, but they can also save you a ton of money. You need to do your research before deciding. Be aware of what is actually covered, how much you’re paying for the policy, what amount of time it covers, and how many miles it’s good for. Some other products may occasionally be beneficial to you depending on your specific habits and needs.
New Cars Lose Half Their Value When You Drive Them Off the Lot
We’ve all heard this one, but no. That $70,000 Hellcat is not dropping to $35,000 in the next ten minutes. A new car becomes used once it’s titled. At that point, you can’t expect a dealer to take it back and sell it to another customer for the same price as a new one. If you were the customer, wouldn’t you just take the new one for the same price? Of course you would! With that said, here’s the funny thing that no one ever seems to mention: How many times in your life are you going to take the car back the next day and trade it in? You can avoid this ever being an issue by not making an impulse purchase and doing your research ahead. The only people who really need to worry about how much a new car depreciates when they drive it off the lot are the ones who trade every one or two years.
Don’t Tell Them You Have a Trade-In Until You’ve Negotiated the Deal on Your New Car
Ummmm… What? I’m going to label this as the worst advise I’ve read today. There are a lot of factors that play into this. Too many to explain here, but the reality is that the sales manager doesn’t have a ton of liberty to increase or decrease the value that he puts on your vehicle. If he appraises too high, and the car goes to auction, the dealer is going to show a loss. If he appraises it too low, they’ll show a profit at the auction and he’ll have to hear his General Manager scream about how he’s leaving deals on the table because he doesn’t know how to appraise a trade properly.
Trade values are basically determined by A. At what price similar vehicles have sold in the area recently and B. What similar vehicles have sold for at local auctions recently. The hard truth is that your trade is worth what it’s worth. You can arm yourself with as much research as possible and having a reasonable expectation when you negotiate, but holding the trade until after you’ve negotiated the entire deal is only going to send you back to square one. In most cases, you’re going to end up walking out of the dealership completely frustrated because they can’t get anywhere near what you want for your trade after discounting the new car to their best price. This topic definitely warrants a whole article, but for now, suffice it to say that this is a bad technique that won’t do you any favors.
To sum it up: There’s a lot of good advice out there for car buying and negotiating strategies, but be careful of where your information comes from. Car buying myths are just as prevalent on the internet. Consider the source of your information and understand that there are two sides to every story. We spend all of our time keeping customers from being overcharged by dealerships, but we do it amicably. Not every salesman is a bad guy who is trying to take you for a ride. Sometimes… sometmes… they’re telling the truth when they say they’ve done all they can do. After all, there has to be a litmit as to how far they can go.
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Disclaimer: The example in this article is fiction. Names, characters, businesses, places, events, and incidents are either the products of the author’s imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.