This is wandering into IMHO territory, but if I were a car salesman knowing you were trading in an automobile before you’d finished paying for it would pretty much be all the information I would need to know.
Might as well give up, FoieGrasIsEvil. You are in the car business and therefore are a lying cheating thief. I know; I was a service advisor for many years. Just trying to take advantage of the customer. Yeah.
And Omar Little, you have obviously been in the business in some form or other, or at least dealing with the public. Well stated but doomed to be ignored.
That happens all the time. It doesn’t really mean much, other than that the dealership has to come up with the money upfront to pay off the lien and get a clean title (because, in most states, the lienholder holds onto a title until the lien is paid off, and in the few states where that doesn’t happen, very few people are going to want to buy a car with a lien already on it.) It’s not a reflection of moral worth or anything.
Again I’ll state, people interested in how selling a car works need to see a few videos on the four square technique. It is the worksheet FoieGras referred to.
which would be youd know nothing as most car dealers try to get you to trade your car in the last 2 years or so of a contract… even sooner if your car is still desirable
A friend of my cousin abought a pt cruiser right before there was a shortage and shed get outrageous deals sent through the mail and just waited for one to have the same model in the color she wanted
And since it was the same dealer shed bought the first one from there wasn’t much more added to the actual car payment other than 3 more months because the newer one had upgrades on it
But if I recollect what ive been told on trade ins you still owe on they just add it to the second cars payment unless they take some off as an incentive
Yeah, I know they try to do that. You ever wonder why? Probably because it’s such a good deal for the consumer. I’m sure that’s it.
I get a kick out of people telling me how they got one over on the car dealer. Those guys sell more cars in a month than you’ll buy in a lifetime, and you beat them on the deal.
I am in the market for a new car, but I will be paying cash, not financing. what do I need to know before car shopping? I am fairly sure what car I want to buy. Help me, please! I am open to selling my current car privately, it will not affect my ability to buy a new car.
Obviously all of these prices are inflated with generous profit built-in. Maybe technically it’s not “your” dept/division of the company, but it’s the same ownership.
“Service” means “you.” So you (as in your employer/their company) are paying yourself $500 to just look at a car and then retail prices on all the work. So the company makes money on all of that. So this used car you aren’t making any money on, it’s because money was already made every step of the way.
Really, if you make even $1 off the trade-in, then you are coming out with much more profit than if you just sold them a new car with no trade, because every step of the process is adding revenue streams to your business. You charge yourself $500 to just look at your own car? C’mon. Maybe I can pay my wife $50,000 to do $5,000 worth of decorating to our house and then say I lost money when it only sells for 50 grand more than the payoff.
At least in the USA, bonuses and commissions are taxed as ordinary income, identically to salaries. Your employer may withhold more from bonuses, but that just means you’ll have a bigger refund (or smaller balance owing) at tax time.
If you consistently get a big refund, then you can probably instruct your employer to withhold less by adjusting your W-4. If you accidentally under-withhold, then you may owe (generally, modest) interest and penalties.
Would be an excellent point, except no one is saying that. There is a huge difference in “lying, cheating thief” and a consumer doing what is best for them, but thanks for playing the “excluded middle” game.
That is exactly the issue. The buy and the sell, in the consumer’s best interest, should be done as 2 separate transactions. Actually, the consumer is best served by never trading in a vehicle, but that’s a Sisyphean battle so I won’t go there. Wrapping both deals into one is a huge advantage for the dealer as it most often leads to a confused consumer. I’m not saying you or your dealership work this way, but many do. The reputation, while overblown, has basis in fact.
If a consumer insists on trading in a vehicle, the deal should work like this:
- offer and acceptance on new car based on vehicle price (say $20,000)
- offer and acceptance of trade deal on vehicle price (say $5000)
- paperwork on both (our $20k less your $5k PLUS whatever you owe on your car, if anything = final price)
An informed consumer can and should know, before ever coming to you, what they are willing to/can pay for the new car, what they are willing to/can accept for the trade, and have the appropriate financing in hand. That is how a consumer can reliably get the best deal. Some dealers make that easy, many do not.
Yes, I said that. But that only applies after the deal is made. It doesn’t determine the value of the car as a trade-in - the negotiated value the dealer is willing to accept. It only determines the actual value after that value is agreed upon.
Of course this is the ideal way it should work. But how many folks coming into the dealership fall into the category described by Omar Little? Not every customer has a specific vehicle in mind or is knowledgeable about a particular manufacturer’s lineup. Pretty much every auto company has price overlaps between their various car and SUV models. If a customer just wants “a car” how far into the process should the salesperson proceed before they find out that the buyer, who is now in love with a Maxima, can really only afford an Altima once what they owe on the trade is taken into consideration.
Even the OP starts out by stating that he/she is “looking to trade my vehicle.” If that’s how they approach getting a new car then it doesn’t seem quite as presumptuous for the salesperson to ask follow-up questions about the trade, especially if it’s going to avoid wasting time further down the road.
OK, one last time. The. amount. owed. has . nothing. to. do. with. the. value. of. anything.
If the salesman knows that you want to trade in your vehicle, the question they should ask is “How much do you want for it” and go from there. Anything else is smoke and mirrors.
Doc, out.
No, but it can help the salesman find you a car that fits your needs and your budget.
What exactly are you afraid is going to happen if the salesman knows how much you owe on your trade in?
It is the worksheet I referred to. And yes, I use it. That very first video is very informative. The fact of the matter is that none of it is untrue, not any of it. For most people that need financing, banks DO in fact like to see 10-20% down to get a better rate, the MMR and auction values of a car ABSOLUTELY are true and accurate. Do I want to “hold on their trade” and get them to accept a lower number on it which makes me more money? Of course! If I am buying a guitar from you online and I see that they’re going for $1000 on Ebay, you have what I want and are asking $1200 for it, I offer $750, you say no and agree to $1000, then we have a deal and it’s fair for both of us. The price of the car is another issue altogether. I’m going to dispel this rumor, untruth, meme whatever right now: THE DEALER DOES NOT necessarily recoup all rebate/incentive monies. This is especially true for supplier/employee pricing.
Example: A customer is buying a Buick from me, Dad is a retired GM employee. He gets employee price. Sweet, no problem. The supplier and employee prices are SET IN STONE based around the VIN# of the vehicle being sought after. The national rebates, GM points and a few other things are “stackable” with that. Yes, there’s a “dealer allowance” associated with employee pricing. Guess what? It’s nowhere near the full amount and is only in place because if I sell you my new car at employee price WITHOUT recouping the dealer allowance, I have lost money selling you a new car for less than I own it for. It’s absolutely true. That’s something many people do not know.
This actually does happen. Old age used cars priced at or below what the dealer owns them for is an example. We face writeoffs from corporate and will have a used car that’s 90 days old online for less than what we own it for. The logic is that it’s less of a loss to sell it there than to risk it going to auction at 100 days old when you don’t know what you’ll get since other dealers are now bidding on your car…and will reset the price back to what you were originally asking when YOU first got it.
Cub, if you can sell your car privately DO IT. That’s retail value and a dealer will NEVER give you that for it in trade. The flip side of that is a convenience factor (I ran into this with a Mustang GT I was trying to sell privately going into winter, the market for rear wheel drive musclecars is suppressed at that time of year and the auction prices reflect that…I couldn’t get anyone to buy it so I traded it in because I ran out of time). Plus you don’t have to deal with creepy trenchcoat guy in the Wal-Mart parking lot at 9PM wanting to test drive your car, or whatever. If you know what you want then the game is half over. Many folks don’t really know exactly what they want and focus on a class of vehicle rather than a specific brand/model and spend an inordinate amount of time trying to get what they want. Hey, it’s your money. Whatever.
This is bullshit. Service does not mean “me”. I am me. I work in sales. Service adds to our sales cost of ownership for the reasons I already described and every dollar they attach to refurbishing a car to put it onto the lot costs ME money because it eats into what we own it for. If I sold every used car for $1 over what we owned a car for I’d be begging on the streets of Bangladesh for grains of rice while wallowing in my own feces. So while we work under the same roof, we are separate. I hope that makes sense. Service tries to work with the used car manager to do necessary work on a car we intend to resell at cost, but it’s still a COST. Your redecorating example is way off base and not reflective of reality.
I work in the USA and my commission checks are taxed as supplemental income, just like everyone else’s, and it’s about 46%. Yes I get a decent return but that’s irrelevant. I have FIVE exemptions on my W-4 and I still get abused. Look into it, it is literally like I am making a bonus when it’s my primary source of income.
Not sure what you’re trying to say. Most people are informed buyers these days due to the internet. And the process you describe is EXACTLY how I work my car deals.
You keep saying this like someone is disagreeing with you. The amount you owe on a car doesn’t affect what’s its worth. Condition, miles, vehicle type/resale value and age matter. But if you owe on it, I need to know where you are on equity and I will ask you that question as to what you owe. IT MATTERS to the bottom line on your purchase, NOT WHAT YOU WILL GET in trade value. I don’t know why you keep repeating this.
The fear is that they will get screwed, when in fact, a car is worth what its worth. Not all vehicles depreciate the same, your interest rate may have been high and you owe more than it’s worth, maybe your tires are bald and it needs brakes (which means you’re paying for that one way or another, most people when they know they’re trading in a car won’t fix shit, but they WILL pay for it because WE have to fix it before we can sell it).
It’s not rocket science. The info is out there if you use the right source.
Withholding for supplemental wages is different. Taxation is not. Allowances are for withholding. Exemptions are for taxes, not withholding. You are paying the same tax rate as someone who makes exactly your income as salary (vs. salary plus bonuses/commissions). If you think I’m wrong, contact a CPA.
I assume that by “decent return”, you mean your tax refund. I’m not sure why you think that’s irrelevant. If your employer withheld $1 less, then you’d get $1 more now, and $1 less at tax time.
Did you complete Form W-4 using the “Personal Allowances Worksheet” on page 1? That’s the easiest way, but it’s not always the most accurate. I’d strongly suggest that you specify the number of allowances that gives you a minimal refund/balance due at tax time. That’s potentially complicated, especially since your employer may use multiple methods (at its discretion) to withhold from supplemental income, but your options are to (a) figure it out, (b) go conservative, and give the government an interest-free loan, or (c) guess, and owe penalties if you guessed wrong.
I sold cars for a year, quite a long time ago. Hated it, so i got out.
A lot of what you’ve said about the car-buying experience is true, and it’s also true that buyers are as good at lying as salespeople in many cases.
But everything i’ve quoted above is completely irrelevant to the deal. How your salary is structured—the “draw” and stuff like that—and how your employer organizes your tax withholding, are not the customer’s problems and have no bearing whatsoever on the way a deal is negotiated, at least from the customer’s point of view.
You make it sound like you are taxed unfairly, and at higher rates than other Americans, especially when you talk about taxing your commission as supplemental wages or bonuses. But this is, as TommySeven had pointed out, a disingenuous set of claims. Your tax liability for the year does not change just because some of your income is considered supplemental income; the only thing that might change is how much gets withheld from your paycheck each month. If too much is withheld, you get it back as a refund. Yes, that might be inconvenient, but it doesn’t change your actual income or the actual tax that you pay.
If you and i are, for example, both single and both have the same number of exemptions, and we both earn $75,000 (before tax) in a year, then we both end up paying the same amount of federal income tax. And this is true even if i earn $75,000 in straight salary and you earn $35,000 in salary plus $40,000 in commissions. The federal government treats the commissions as regular, taxable income.
Also, if your employer is withholding your commission at a rate of 46%, you should talk with your employer. The top marginal income tax rate in the United States is 39.6%. You are NOT paying more than that, no matter how much you earn. Even the IRS’s own guide on Supplemental Income says quite clearly that withholding at the top rate of 39.6% is only required for people who earn more than $1 million in supplemental wages in a year.
There’s FICA, though, and possibly state or local taxes too. So the 46% probably isn’t an outright mistake. FoieGrasIsEvil can’t complain about selectively unfair taxation, but might justifiably complain about the convoluted process to set up fair withholding in that particular situation.
Sorry for the digression, but (a) fight ignorance, right?, and (b) maybe there’s some psychological analogy between “funny tax math” and “funny trade-in value math”?
Fair enough. But his implication was that he was suffering from some special, “usurious” rate of taxation that was somehow unique to his particular situation, and that’s not the case.
I pay FICA on my income. I pay state income tax on my income too. I got a special, separate pay check a few months ago for some consulting work i did for my employer, separate from my regular job, and tax was withheld from that check at a rate higher than my regular paycheck. But none of that means that i’m being treated unfairly or being singled out.
As a former plaid coat, have to take umbrage with a few of the responses here.
It’s a 100% legitimate and fair question to ask if you intend to trade in your car, since his company will have to assume the debt. If I was selling you a $200,000 house, but still owed $100,000 on it, isn’t that something YOU’D want to know? No matter howe the deal goes down, the bank still wants its money.
Its also a rather fair qualifying question to ask: if you have a car that is worth $3000 trade in legit and you owe $8000 on it, thats a red flag for a car salesman; unless you just came into a lot of money, you may be wasting their time they could be using to find legitimate prospects because its unlikely a transaction can be conducted.
They MIGHT actually be doing you a favor, not trying to screw you, if they suspect you are upside down.