Car buying psychology

Discussion in 'Community Discussion' started by senseless, Oct 31, 2015.

  1. senseless macrumors 68000

    senseless

    Joined:
    Apr 23, 2008
    Location:
    Pennsylvania, USA
    #1
    I was curious about this. If a car dealer is selling a new car and taking a trade, what is the better selling technique? Let's assume the profit margin is the same on both of these deals.
    1) Heavily discount the new car and low ball the trade to compensate.
    2) Keep the sale price high, but allow a very high trade in value.

    Which would motivate you to buy?
     
  2. AustinIllini macrumors demi-god

    AustinIllini

    Joined:
    Oct 20, 2011
    Location:
    Austin, USA
    #2
    Experienced buyers don't offer a trade until they agree on a car value. At the end of the day, the dealer has a quota it needs to meet from the manufacturer. The best selling technique is to get the best price on the new car.
     
  3. Fancuku macrumors 6502a

    Fancuku

    Joined:
    Oct 8, 2015
    Location:
    PA, USA
    #3
    True, you never say I have a car to trade-in before you agree on a price for the new car you are buying. Guaranteed you will get the lowest trade-in value if you do.
     
  4. Gregg2 macrumors 603

    Joined:
    May 22, 2008
    Location:
    Milwaukee, WI
    #4
    Last time I bought a new car was in 2011 (a 2012 model). I used an online trade in site. Sight unseen, based on my description, they offered me substantially more than Car Max. (I go there first to get a benchmark.) Went to the dealer, negotiated a good price, then sprung the trade in on them. They said "Yeah, we work with them." and looked the car over, confirmed the accuracy of my description, and I walked away with the best deal I've ever made, which included a promotion for nothing down, no interest on a 3-year loan, AND a 1 grand rebate from the manufacturer on top of the deep discount the dealer was giving me. So I think the dealer's best strategy is not to have many customers like me!
     
  5. McGiord macrumors 601

    McGiord

    Joined:
    Oct 5, 2003
    Location:
    Dark Castle
    #5
    They will always try to sell you whatever they have in stock first.
    They will make money on all transactions they make.

    I will be motivated to buy with the lowest price available and zero percent financing in 60 months or more.

    They always try to offer you a very low price for your used car, and they make almost $1,500 to $3,000 on top of the used cars.
    Used cars in the US have the stigma of being considered disposable by many, like they do with some other products.

    As soon as you sign the contract you new car lost its value.

    It might be better to buy used with few miles and still covered under warranty.

    I used an app called Vinny to check for used car prices that can be helpful to check the real transaction value of your used car.

    http://myvinny.com/
     
  6. ejb190 macrumors 65816

    ejb190

    #6
    Number one - the car company will never NOT make money on the deal. Think you are getting an awesome deal on a car? You might be, until you consider how much money they make on your financing. That's right. They can lower the price because they know they get a cut of your interest payment.

    Last time I bought a car, they asked me 14 times if I was going to finance the car. I think that's a pretty good hint that financing is where they make their money...

    Before the bailout, GM made more from their financing department than they did selling cars. Not sure if that is still true, but I wouldn't doubt it. I will never finance a car through a dealer. Ever. Come to think of it, I won't ever take another loan out for a car. When you add the interest payments into the cost of the car, it is jaw dropping how much money you pay.
     
  7. McGiord macrumors 601

    McGiord

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    Dark Castle
    #7
    Unless you get a zero interest deal.
     
  8. yg17 macrumors G5

    yg17

    Joined:
    Aug 1, 2004
    Location:
    St. Louis, MO
    #8
    Or finance through your bank/credit union.

    When I bought my WRX, I got preapproved for 1.74% from my credit union. Since this was a 2015 model I was buying in early 2014, and had ordered 3 months in advance, Subaru wasn't offering any financing deals since they didn't need to due to demand. The dealership was just like "Yeah, we're not even going to try to beat that."

    Always, always, always get preapproved from a bank or CU, just to have leverage while negotiating. My parents bought a new car this year and got the same 1.74% rate approved from the CU. The dealer first offered them something like 2.4%, then my parents mentioned the rate they got from the CU, and the dealer was suddenly able to match that through Chase or Cap One or one of those big banks. My parents ended up going that route because the dealership was able to do all the paperwork in house. It was late in the day, and financing through the CU would mean taking some paperwork back to the CU (which was a good 30 minutes away without traffic) and bringing back a cashiers check to the dealer. A huge hassle, but they would've done it if the dealer didn't match the rate. In the end, everybody won, my parents got the same rate the CU offered them, the dealer still got their cut (even if smaller than what they hoped) and the financing paperwork was complete in a matter of minutes. So it's always good to have that in your back pocket.
     
  9. ejb190 macrumors 65816

    ejb190

    #9
    Incorrect. The car company is still going to get a kickback from the finance company that they hooked you up with - they generated the business, they get a finders fee. Many 0 interest deals still have some finance charges involved. Even if it looks like you are not paying extra, don't think the dealer isn't getting something out of the deal.

    Remember the saying about the internet. If you appear to be getting something for free, then you are the product being sold. Cars are the same way. How many credit card offers do you think you will get after financing with GMAC? There's always a hook or a deal going on in the background, especially on new cars. Not to mention the service and parts charges some of these places have.
     
  10. dogslobber macrumors 68020

    dogslobber

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    Oct 19, 2014
    Location:
    Apple Campus, Cupertino CA
    #10
    Sell the trade in privately is best. You'll never outsmart a car dealership no matter what you think.
     
  11. dogslobber macrumors 68020

    dogslobber

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    Oct 19, 2014
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    Apple Campus, Cupertino CA
    #11
    You left money on the table by not undercutting your CU if you went with the dealer financing match. Lesson learned for next time.
     
  12. hallux macrumors 68020

    hallux

    Joined:
    Apr 25, 2012
    #12
    That entirely depends on how much more you think you can sell your old vehicle for compared to the trade value and where you are located. In some (many?) areas the trade amount is deducted from the taxable part of the sale so depending on how much of a difference you have on the trade value it could make sense to just trade the old car in. In my case, I saved $500 in sales tax, for the MAYBE $500 or so more I could have made by selling the car myself (I talked them up $1700 from the initial offer) it wasn't worth the hassle.
     
  13. whodatrr macrumors 6502a

    whodatrr

    Joined:
    Jan 12, 2004
    #13
    I keep the two as separate discussions, looking at the entire deal either way.

    Bought a new care this year and most of the dealers weren't budging much on sales price, at least not in the ballpark I wanted them to. Some offered ridiculously high trade-ins,, while keeping the sales price close to the sticker. Some budged on the sticker, while making trade-in price too low. Either way, I think today's consumers are smart enough to know that game, and playing it costs the salesman credibility.

    At the end of the day, I waited a few weeks while watching some of the online sites. Saw the vehicle I wanted pop up as a demo, with 3,000 miles. It sold as new, and looked the part. Sticker was $37,500, and I got it for $26,000. I didn't ask them to budge on that advertised price, because I knew it was very low. But I did ask them to give me a trade-in that was on the very high-end of what had been quoted me before, and they did. I was in and out of the dealership in 45mins.

    Point is, at the end of the day, today's consumers are smart enough to look at the whole deal. So the sort of gamesmanship where you play with numbers on one side or the other can come back and bite you in the butt. Treat the buyer with respect, assuming they are not idiots, and you'll do OK. Back to my purchase, I wound up buying from a saleswoman who wasn't even supposed to be selling that car. I chose her, asking for her by name, because she was one of the few salespeople who had treated me like I had a brain a few weeks prior. So when I came back to lay down cash, I wanted to ensure that the commission went to her.
     
  14. dogslobber macrumors 68020

    dogslobber

    Joined:
    Oct 19, 2014
    Location:
    Apple Campus, Cupertino CA
    #14
    The only way you will come near to getting one up on a car salesman is if you do your time. That is, you are there on a Saturday for a minimum of 3-4 hours engaging a salesman. The salesman needs to make a sale so will take a lower profit the longer you're there to get some comeback on the time you caused him to waste. Without the time payment, you never got a good deal no matter what you think.
     
  15. AutoUnion39 macrumors 601

    AutoUnion39

    Joined:
    Jun 21, 2010
    #15
    This isn't very good advice. More often than not, you're missing out on the tax deductions
     
  16. dogslobber macrumors 68020

    dogslobber

    Joined:
    Oct 19, 2014
    Location:
    Apple Campus, Cupertino CA
    #16
    What is that tax deduction? It's your state's sales tax rate which gives you a savings of the trade in value of your car multiplied by the sales tax rate. It only becomes beneficial to you if the difference between the trade in and selling privately is LESS than the sales tax rate of your state. E.g. GA is 6%. Tell me where I will get a trade in off my hands for 6% less than selling privately. Otherwise, you leave money on the table trading in.

    Plus, if you do get a "great" rate for your car for trade in then you're paying over the odds for your new car, due to rule #1, you'll never outsmart a car dealership no matter what you think.

    Note that this doesn't even consider the maximum trade in tax deduction you're allowed in your state. It's a pittance.
     
  17. AutoUnion39 macrumors 601

    AutoUnion39

    Joined:
    Jun 21, 2010
    #17
    I've talked to so many of my friends who do this for a living or guys who have sold me cars. It's apparently their #1 pet peeve.
     
  18. AustinIllini macrumors demi-god

    AustinIllini

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    Oct 20, 2011
    Location:
    Austin, USA
    #18
    If they want my business, they'll deal with it.
     
  19. C DM macrumors Westmere

    Joined:
    Oct 17, 2011
    #19
    I wonder what people say if at some point early on or even in the middle of bargaining the question of whether or not they have a trade-in comes up?
     
  20. yg17 macrumors G5

    yg17

    Joined:
    Aug 1, 2004
    Location:
    St. Louis, MO
    #20
    Depends on the state. Missouri allows you to get the sales tax allowance if you sell to a private party and buy a new car within so many days.
     
  21. Chip NoVaMac macrumors G3

    Chip NoVaMac

    Joined:
    Dec 25, 2003
    Location:
    Northern Virginia
    #21
    If there is a Carmax in your area, go and get a trade value from them first. Would have saved me many hours for a failed deal at Koons Toyota in Tysons VA. They offered $5k, I was willing to take $7k. Ended up getting $10k and my then new 2012 Prius.
     
  22. bunnspecial macrumors 603

    bunnspecial

    Joined:
    May 3, 2014
    Location:
    Kentucky
    #22
    Here's my strategy:

    I pretty well know exactly what I want before I go shopping, so I just keep an eye on the area dealers when one shows up for sale.

    If I find something that's close, I'll go test drive and talk but do my homework beforehand on what the car is worth and what my trade-in is worth(if I'm trading in).

    When it comes time to go inside, I'm up-front about the trade in or any other stipulations(i.e. if I'm paying cash), but will usually start off with why the car isn't exactly what I'm looking for(which it almost never is). I do this to let them know that I'm serious about it but am also not "in love" with the car. I then just shoot what I think is a fair, out the door price for the car(including my trade in). I don't worry about splitting hairs over what I'm paying for the car and what they're paying for my car-I just name a price where I'm going to be happy with the deal. I'm never afraid to walk.

    I've found that quite often, I'll end up walking out with the keys in my hand at my price. In the worst case, I've had them counter a few hundred more-whether or not I take it depends on how far off from my "ideal" car the vehicle is, but quite often I'll take the counter if I still judge it to be within reason.

    At the end of the day, I don't fart around and waste a salesman's time or my time-if we can't come to a deal within 15 minutes of me walking in the door, it's probably not going to happen and I'll walk.

    BTW, I've walked before and had dealerships call me the next day saying they'll take my offer. That's rare, but it has happened.
     
  23. maflynn Moderator

    maflynn

    Staff Member

    Joined:
    May 3, 2009
    Location:
    Boston
    #23
    All I know is, salesmen do this everyday and most of us only do this once every 4 (or more) years. Its really hard to beat them at their own game. I usually try to achieve a fair price, i.e., a few percentages over invoice and a decent trade in value.
     
  24. puma1552 macrumors 601

    Joined:
    Nov 20, 2008
    #24
    i negotiate as two transactions, i dont set foot in a dealer until ive got an acceptable sales price over email, which is never more than invoice minus rebates. even if they sell below invoice before rebates, they still make money on the car due to holdback and floorplan incentives, not to mention sales quota bonuses etc., and all the service and potential financing charges they will get over the next x years.they make plenty at invoice or even below.

    i then work trade, and point blank, i dont take anything less than high nada/kbb trade, plain and simple. they are gonna stick my immaculate car on the front row for high retail every single time, so i wont take it up the butt on the trade. the trade is worth what its worth based on book value, if you dont pay me that, someone else will. why on earth would i take less than what its worth? i always print kbb/nada trade values before i go to the dealer because every single time they will under option your trade and come back saying its worth $3k less than the printout in your pocket. they do this EVERY time, so know your own trade value and call them on it and pull your little printout out. then they will go oh well comps in the area arent selling for the high retail price listed right next to the trade value on your little pocket printout. then they start to pull printouts off the computer of lesser optioned cars, at which point you pull the same printouts out of your pocket of these same cars with scribbled notes about the options they dont have compared to yours, then pull out true comps optioned like yours selling for the high retail on your little pocket printout. you should know what comps in the area are selling for and have printouts in your pocket. they can make $1000-$1500 on my trade, but not $4k-$6k, sorry. dont get greedy, then you make zero dollars on two lost sales. the dealer is allowed to make money, but not too much.

    trade and new car are two completely separate transactions. this state does have the tax credit when trading in, so ill factor that in when i consider what i could get for the car privately or would need to get to effectively get the same price as if i were to trade. ive sold enough cars and dealt with enough lowballing scum that i really dont care to sell privately. its can also be tough to sell a car privately if you have a lien on it.

    remember - they need to sell you a car, you dont need to buy one. so why roll over? they will make money on both sales every time, and they constantly lie about everything, so stick to your guns. zero reason to get whacked on either end of the deal when you dont need to buy a car in the first place and even if you do absolutely need to buy there are a million dealers willing to sell you one. for this reason i also dont give a crap if its end of the month or not, shouldnt be waiting til the 31st to hit your quota.

    ill finance with the dealer for covenience if they match/beat my credit union. my credit union wont do 0%, but a lot of dealers will so then its a no brainer. ill finance wherever the rate is best, plain and simple. currently have 0% through vw on my wifes beetle, its great.

    for what its worth on my last car, i bought a '14 mustang gt premium. i special ordered it and got it for invoice minus rebates, which came out to $7k off sticker for a special order. did this over email/phone before going to a dealer or mentioning trade. once i got a price i liked from a good sales guy, i went in to meet in person and ask a few follow up questions on the order process. i then said i had a trade and we went to look at it. my trade was a '13 Jetta SEL w/nav, which stickered around $27k and I paid somewhere a little under $24k new (less markup on a VW but still paid below invoice). bought it new, drove it for 16 months and 20k miles, and traded it in for high nada trade value of $17,300 (and dealer locked it in in writing at time of mustang order) saving tax on $17,300 on the mustang, making the effective trade price around $18,500. for comparison, vw dealers were listing certified jettas (which ford couldnt cpo it) like mine for asking prices of $19k at the time, so i did excellent on both ends of the deal. i actually suspect ford was lucky to make $500-$1000 on it. cant really complain when you buy a new car for under $24k, trade it after 20k miles and only lose a quarter of the value when dealing with new car depreciation and trade lowballing.
     

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