To the OP
- He needs to know how much you owe on the car because it needs to be paid off (by you or them) before you can trade it in.
- Watch some videos on the four square method of car negotiation.
Why not? People do it all the time.
People make all sorts of foolish and financially unwise decisions all the time. But it doesn’t hurt to inquire why someone is doing so. As to “why not”, it is generally fiscally unwise to buy a car you can’t pay off in three years (or four at the outside), and generally fiscally unwise to buy a new car more often than every five to 10 years (personal frugality dictates where in that range one falls). I was just curious why someone is selling a car they do not yet own outright. I realize personal and family circumstances change, but if this is a repeating pattern, it is a sign of financial immaturity and lack of discipline.
The OP is free to answer or ignore my question. But I generally advise people to pay off a car, but keep making “payments” to themselves into a savings account. After three years or so of saving the monthly payments, a much smaller car loan is necessary next time. Do this a time or two, and you won’t need a car loan at all.
Last time I shopped for a car, I took a test drive with a very young salesman. By the end of the drive I knew how many cars he had sold that month and the past month, how many he was expected to sell and how many the dealership had sold that month vs their average. Meanwhile, my friend - who I had left at the dealership - was online researching the car itself. My friend was this guy I’ve known for a long time and we make a good negotiating team, I think everyone assumed we were a couple and I didn’t enlighten them otherwise.
Then we compared notes and did our negotiating act - cash price - no talk of payment - and then once it was settled we rejected all add-ons.
We ended up with a really good deal
Of course he does. What you owe on your car should not have an effect on the price of the new car or what he offers you for your trade in, but it absolutely affects what your payments are going to be and at some point or another, it always comes down to the car payment.
How does it affect what my payments will be? How does that make it his business anyway?
I’ll handle my debts, not him. If and when it comes time to calculate a trade-in and pay off the old loan as part of the transaction, and I choose to involve the salesman in that, then he/she can know what I owe.
Why? Where’d you get those numbers?
Again, where’d you get those numbers?
It’s not how much you owe, it’s how much equity the car has - how much it’s worth after you pay off what you owe. If it’s worth more as a trade-in or sale than what you owe, you’re ahead.
That only works if your car isn’t getting so old that it requires frequent, expensive maintenance, making it not only impossible to save this cash, but costing you more than it would to just go out and get a new one.
When anyone asks me a question that I’m not willing to answer straight away, my response is always the same, “Why do you ask?”
You should have asked him why he wants to know. His response, whatever it is, gives you more information to judge the situation, even if all you get is that he’s evasive in his answer to you.
If your trade in is worth 5k and you owe 1k on it, your trade in is worth $4k. If your trade in is worth 5k and you owe 5k, your trade in is worth $0. That is how it affects your payment. It’s his business because he is you know, buying your car.
But he doesn’t need to know that to make you an offer on the trade in. Sure, if you accept the offer and buy a new car from him, that information becomes necessary to come up with the final amount you owe. But it’s not needed up front.
And if you start talking with the salesman on how big your payment will be, forget it, you’ve already lost.
I absolutely do. On a new car purchase I ask all the pertinent questions to ascertain what additional savings they may qualify for on top of the national rebates. Are you a farm bureau member? Any non-GM vehicles titled to the household? Costco member? USAA insurance? Etcetera. And if it’s near the end of the month that favors the customer, not me. They’ll get even more money off on the car if they buy it right now. After a certain point it’s just a unit count to me and I’ve made $100 selling you a $50,000 car.
There’s nothing complicated about it, and I only posted what I did to showcase that I am not making some vast fortune selling cars, and that at least where I work, we are transparent.
Knowing the payoff doesn’t give me any distinct advantage. The car is worth what it’s worth and what they owe is what they owe. If you owed nothing, would you accept nothing for the car as a trade? Of course not. Trade equity is a form of “money down”, and I need to know how much of that you have, if any, or if you’re underwater because we cannot structure an accurate deal without that information. It’s literally that simple.
I don’t typically ask what people can afford or what their payment target is. I want to know what kind of vehicle you’re looking for, new or used, what your most important features, etc are and I will put you onto a car using my knowledge of vehicles that best suits what you’ve told me. Like the car first (or not), talk about price and payments later. If you don’t like the car first you wouldn’t buy it so no sense engaging in that topic of conversation until we know the car would work for you, now and in the future.
Exactly. No matter a customer’s protestations, if they’re financing, it almost ALWAYS comes back around to monthly payment.
All the used car sales people bashing assumes that every customer is a financially responsible person that knows how to handle money and knows to distinguish between purchasing a car and selling a car. Unfortunately, much of the general public does not fit into that category and has a car with a payment, and they want to get a new car, and their payment needs to be between X and Y. Can you help me?
If you are in the former group, politely tell the salesman, that you’ll discuss the amount of your current car note at the appropriate time, and it is not now. If you are part of the masses, just give them the info. so they can get you into that new Ford Focus!
Which is the absolute worst way to buy a car. For the consumer I mean - not the dealer.
It absolutely does. It gives you an “anchor” price to start the negotiations, just as it would the buyer if you were to disclose what the dealer actually had in the new car. As you say, the car is worth what it’s worth. Payoff has no bearing on that. You, as a salesperson, don’t need that information until:
- an offer on the new car has been made and accepted
- an offer of the trade in has been made and accepted
- you are compiling the paperwork to determine any remaining amount and payment schedule.
Dr. J, we generally come up with all those figures simultaneously on some kind of worksheet. If a customer doesn’t want to tell me what they owe on a car, fine, I can work around it, but we must first agree ahead of time how the amount of equity or negative equity is going to affect any payment schedule we put together in the absence of that information.
Believe me when I tell you, you’d be shocked how many people tell me over and over again how they’re not shopping on a payment, then at the end of the negotiation, it comes down to payment. Or, something like “I would never buy a black truck” and leave in a black truck, etc.
I prefer once again to have all the cards on the table upfront, and not because I’m up to something, but because it gives us accurate numbers at the outset and saves time, a commodity that people say is the number one complaint about buying a car, how long it takes, when in fact it’s often the customer adding to the time spent in the process by not being upfront.
No. To him, the car is worth $5k, period, regardless of how much I owe on it.
To me, it’s worth $4k if I still owe $1k, but that’s not his concern.
If the deal involves him paying off my debt, though, then that’s obviously different. He’d have to know the debt to pay it.
Bolding mine.
It absolutely involves him paying off your debt. The dealer has to pay off the balance of your loan before he can get the title and sell the car.
How do you think trading in a car works?
Of course, you tell them the incentives available to them, because it doesn’t affect your bottom line and makes it more likely they’ll buy the car. But do you tell them how much the dealership paid for the car? Do you tell them the incentives the manufacturer is offering to the dealer (not the buyer) to sell a certain number of cars? That’s the kind of information that I’d consider a fair trade for them laying “all their cards on the table”.
See, to a cynic like me the fact that it you need the info for “some kind of worksheet” and that in the end it “comes down to payment” means you’re selling them a full package of car, trade-in, extended warranty & financing with plenty of places to hide extra profit.
Of course a person shouldn’t be shopping only by monthly payment. Ideally one would treat the trade in, purchase price, and loan details separately. But when the rubber meets the road so to speak, the payment is always a limiting factor. You can negotiate the best deal in town but it does you no good if you cant afford the payments.
I have never in my lifetime bought a car based on the monthly payments. Since the dealer can lower the monthly payments by steering you from 36 to 48 to 60 month loan its somewhat ludicrous to focus on payments as a limiting factor.