Its better for the consumer to negotiate the price (new car minus trade-in) then discuss finance. Leaping straight to monthly payments gives the seller a chance to trick the buyer.
Also a buyer should not reveal their budget. Eg rejecting the 12k car because youve got 10k to spend is giving the salesman an in to sell you a 9k car for 10k.
It never hurts to ask. The salesperson is well within his or her rights to ask these questions.
But it might be that it’s in the best interests of the buyer not to answer, and to leave the initial focus of the negotiations on the price of the new car, and the trade-in value of the old one. Working out the “changeover price” (as we called it when i was selling cars in Australia) is the first step; worry about finance costs and monthly payments after that has been determined. It makes the process easier to understand, especially if you’re a customer who is worried about being confused by the four-square sheet or the language of interest rates and such.
Personally, i don’t think i’d set foot inside a dealership without (a) a pretty decent sense of the realistic trade value of my car, (b) a realistic sense of my changeover price or net cost, and (c) financing in place that covers (b). That way, you can streamline the negotiations by focusing on the price of your car, and the price of their car.
Why on earth would I care about that when buying a house? It’s got nothing to do with how much I like the house, how much I’m going to spend to get it fixed and/or customized, or whether I can get my mortgage in order to purchase. The negotiations about the sale price of the house is going to depend on those factors, not on the seller’s finances. The amount that the person owes on the house is only relevant when the lawyer is drawing up the paperwork for where the money goes at closing, whether $100,000 of it is going straight to the bank or not is irrelevant to me, and I think it doesn’t even end up on the paperwork I actually touch.
No. Not at all. I’ve bought 4 houses during my lifetime and never gave a rat’s ass as to what the seller owed on it. All I cared about is whether I could get clear title.
And when buying a car I saw no need to discuss any trade in information with the seller until we had established a purchase price of the car I was buying.
There were exceptions to this. The internet has made car sales prices somewhat transparent. It’s to the dealer’s advantage to help keep the “average market price” of a new car model higher. One way he can discount a new car without showing a lower sales price is to pump up the value of the purchaser’s trade in. So in order to mask the sales price of a new car he can pay the buyer “excellent condition” price on his “average condition” trade in and push the discount into the used car market. To the buyer there is no difference. If he’s willing to play this game (and he should be) he gets his discount from column B instead of column A.
Are you saying a car salesman would give more on a trade in than he really believes the car is worth? That seems hard to believe. I would have to assume that somewhere in the process, any loss taken on the trade in would come back to bite the salesman who made the deal.
When I was looking for a car and had the Opel as a trade in, each place I went offered me less. It was before the internet, so I guess phone calls were involved. Next time I didn’t ask about a trade in until I found a car and price that I liked.
If things were worth what they are worth, then there would be no negotiation. You’d just have someone come in and evaluate the car and give its value, and then have the prices for the vehicle already stated.
Instead, the fact that you negotiate means that the prices are not fixed, and you have leeway. And when you negotiate, the point is to try and make that leeway come up better for you. There is a range of acceptable values on both sides that have to overlap. There is the point that gives the customer the best deal, and a point that gives the seller the best deal. and they are not the same point.
Giving the seller information he doesn’t need doesn’t aid in this. The seller does not have your best interest at heart. He has no reason whatsoever to give you a better deal than the worst deal you would accept and not feel cheated by.
You never want the seller to know the actual worst deal that you would accept, or else they will pick that bad deal. And telling them stuff like your payments or how much you owe on a car gives them that information. Yes, this information influences what you will accept, but it’s never in your best interest for the other side to know how you are thinking in a negotiation.
The whole goal is to get the salesman to offer something much better than the maximum you would accept. Their whole goal is to get you to take something more than the minimum they would accept. These are conflicting interests, and so the relationship is inherently antagonistic.
It’s not that a car salesman is evil, per se–just that they inherently do not have the buyers’ best interests at heart. That inherently makes their advice untrustworthy.
nonsense. If you’re financing through the dealer, the amount you still owe on your trade is going to influence the amount of money you need to borrow from the lender. if it’s too much, they may not even be able to get financing for you.
good lord. It’s relevant to the deal, so I don’t understand why some of you are acting like it’s the equivalent of the salesperson asking for your SSN and all of your bank account numbers.
It’s not relevant to what the trade-in is worth, and it potentially gives the salesman a good idea of how much he can lowball the trade-in value, which people have already explained in this thread. Pretending that giving up that information while negotiating a trade-in value for the card has no downside and is absolutely necessary is not based on reality.
The amount owed is relevant to the FINANCING deal, but it’s being asked as part of the TRADE-IN valuation. That is (or should be) an entirely separate deal, in which the amount owed is not relevant.
Whether you owe nothing at all or twice its book value should not affect what the salesman is willing to offer for the old car, yet the salesman wants to know the loan outstanding before he makes his offer. Why? What justification can you offer for the salesman needing to know for that transaction?
If you’ve already got a firm offer on the old car and have negotiated the final price on the new car, then the amount owed is relevant when sitting down to do the paperwork and the loan application, but that’s not what’s under discussion here.
This.
If you know how much your car is worth, insist on that amount as a trade in. The salesman gains no leverage whatsoever by knowing how much you owe.
Really? How does what you owe on your car affect how much you will take as a trade in?
Three days ago in this thread there was an explanation. It’s really useful to read the thread before asking something like this.
The value of the old car is affected by many items. Model, age, condition, mileage, etc., are obvious points, and you can plug those into a blue-book website and come up with a decent idea of wholesale value. However, that’s going to be a range, with hundreds or even thousands of dollars between the top and bottom ends.
For example, right now, per Kelley Blue Book, a silver 2010 Toyota Camry LE in zip code 66601 (Topeka, KS) with standard equipment, no extra options, and 100,000 miles on the odometer in very good condition has a trade-in value of $6500 to $7750. That’s a spread of over a grand. You have researched your car, so you’d like to get closer to $7600+, but you understand you might not be able to get that much.
Meanwhile, the value of the car for this particular deal will also be affected by points such as: how many similar models does this dealership already have on their lot? how many prospects do they have looking for a good used late-model whatever-you-have? how many deals have they already made this month, and how many do they want/need to make? how long has the car they want to sell you been sitting on the lot? are you likely to bring your new vehicle to their service department? what add-ons and extras can they sell you on your new purchase, and what’s the margin on them? etc.
You won’t know the answers to most of these questions. The sales rep, though, has a pretty good idea of the answers to most or all of them, and he (or she) wants to buy the car at a price that makes the largest profit for them. If he can convince you that $6600 is a really good offer, he makes more money than if he has to pay $6900, much less $7500. Knowing that you owe only $4K may help him to persuade you (“hey, that’s enough to pay off the old one and have a good down payment for the new one, and here’s this long sad story of how we have too many Toyotas right now, but we’ll be super-generous and give you a good price for yours anyway”); meanwhile, if he knows you owe $6700, he’s got to re-jigger the deal, which might mean offering you $6750.
If you have perfect information about his wants/needs/incentives, then it’s not such a big deal him knowing the minimum amount you must have. You won’t have that perfect information, though.
Oh yeah, the explanation that only works when it features a dumb customer that has no idea what his trade is worth.
(unnecessary snark deleted)
No, there really wasn’t.
Newsflash! He is a car salesman! He was always going to offer you less than your car is worth. If you are dumb enough to allow the amount you owe on the car to affect how much you accept as a trade in, that is your own fault.
I’m not sure what fault has to do with this, or why assuming that the customer trading in might be a human affected by psychology instead of a stoic robot is a bad thing. OP I’ll just point out that none of the people claiming there’s no problem with revealing the information seem to care about improving ‘your’ result, just the dealership’s. RedSwinglineOne’s position seems to be that if you reveal this information and then fall for a common sales tactic afterwards, that it is “your own fault” - which clearly means that revealing the info is not to your advantage, but he’ll blame you if it is used against you.
Looking back on my draw pay stubs vis a vis my commission checks, I think you are right. The “usury” comment was mostly a joke. The taxation thing I don’t completely understand. I know that if I keep my draw high (mine’s $600/week) that I pay a lot less taxes as a percentage on that than I do my commission checks. Seriously. I’ve had a couple really good months where I made 10k, less my $2400 draw (before taxes) and that my check is for $7600 and what goes into my account after taxes is something like four grand. I claim five exemptions so I’m not sure how this all works but I can see (and was told) that the commission checks are taxed at a higher rate because it’s considered “supplemental income” when it’s anything but that. It’s primary income.
Oh, I’m aware it’s irrelevant to any deal and I do not under any circumstances discuss this with my customers, it’s completely unprofessional. I suppose it was a bit of a tangent describing how we’re paid in order to shed some light on why people may experience certain reactions from salespeople on car lots with regards to “You’re wasting my time” comments and the like.
Great post, also 100% true. Not everybody is trying to screw you over guys.
Really, the first step before payments and price when financing for me is 100% ensuring the customer loves the car and that it does what they need it to do and how they need it to do it. I WANT customers to pick up the phone a year after I sold them a car when I’m checking up on them and tell me that they still are enjoying it. The last thing I want to do is sell you a car that you hate while you’re still making payments on it. It’s a headache for both parties, it’s bad for business and frankly I just don’t want to sell someone a car that they tell me they don’t like. We move onto something else that might work for them if we have it. Otherwise it’s a smile, a handshake, a mild apology and a good day to you, sir.
The internet.
Explain this please. A dealer might over allow on a trade to facilitate a car deal, particularly on a brand new car (unit bonuses! end of month! $100 for me!) but there’s no “masking” of the price of the new car by over allowing on a trade in. The price is the price, and over allowing isn’t a discount, so there’s no discount to be “pushed into the used car market”. Over allowing means less profit for the dealer/salesperson when the used car is re-sold because we own it for more than other dealers own similar cars for, or what a similar car is going for that we could have bought at auction for behind book value.
Read the post above, it does happen. It just means the overall deal is worth less money so everyone makes less money.
And buyer’s don’t have my best interests at heart and lie to me without batting an eye. What’s your point? Sure stuff is negotiable, but at the end of the day things really are “worth what they are worth”. You had a good comment about the overlap between what you’re trying to sell me versus what I am trying to sell you. That middle ground is where car deals, and all compromises in life, are born.
Again, the internet. Customers already know the range of what their trade is worth unless they are totally feckless and ignorant of looking up what their car is worth from some resource. It come down to again, meeting in the middle on both vehicles. I tell unrealistic or unreasonable people routinely that “You can have some of the money, you cannot have all of the money.” This means that if I give you what you say you want on your trade (regardless of what you owe on it, it’s worth what it’s worth, rmember?) and by doing so I am over allowing, I’m less inclined to budge on our price after your rebates and programs are figured it.
In fact, GM now will suspend a person’s ability to dish out authorization codes as a current or retired employee if they discover that the employee price less rebates (and maybe GM card points) is even being negotiated. It’s a set price, it’s the best price, take it or leave it and don’t ask for more, essentially.
Here’s the deal: we do all of this at the same time. The trade evaluation, your credit application if financing, price less discounts on our car, what you owe on yours, etc is all collected at one time, and all the numbers are presented together. This saves time and I am very clear and transparent on all of it. Understand, “trade shoppers” are often ridiculous. YOU KNOW roughly what your trade is worth. I will abjectly refuse to simply give you a trade offer (unless you’re selling me the car outright with no replacement) because I am not in the business of helping Up The Street Motors sell you their car because they’re willing to go $400 more than my initial offer (which of course would not be my last offer necessarily) to sell you their car. “They offered you $5000 and all we have to do is give you more and you’ll do business? Come right in!”
Yep. And it’s the internet. Especially NADA.
As stated a million times, as you are incredulously stating, it doesn’t. Zero. Zilch. Zip. Nada.
Good post.
Not true.
While your last sentence is true, where I work we don’t aggressively lowball. We offer average trade value at the outset. Many, many, many MANY people are so out of their minds with what they think their car is worth though. “I’ve got all my service records!”
So what, adds no value to the car plus Carfax tells me that.
“I’ve put aftermarket wheels and exhaust on it and kept the receipts!”
Irrelevant, adds no value, often makes cars harder to sell.
“Sir, it looks like there’s a disabling accident on the Carfax (makes it harder to sell, worth less), the tires are bald and the check engine light is on”
“But the car is in otherwise in good condition and has been garage kept!”
:smack:
Incorrect. I care and have repeatedly said so, and I’m the salesman! What you owe on a car is not what it’s worth, but asking is a means of establishing your equity situation, WHICH ABSOLUTELY MATTERS when you’r financing. Heck, it matters when you’re paying cash. If you owed zero on it you wouldn’t TAKE zero for it!
Negative equity is the customer’s problem when they owe more than what a car is worth, and THEY have to pay for it. A dealer shouldn’t and won’t pay for your high interest rate on your heap. It’s not my fault you didn’t pay your bills, your credit took a beating and you bought a car at a 20% interest rate because you had no other option.
That is not my position, and I am not trying to lay blame. My position is simply that there should be no disadvantage to letting the salesman know how much you owe on your car.
If you were trading in a car worth $5K and you owed no money on it, would you accept $0 as a trade in? Of course not. Why then would you trade in a car worth $5K for $2K just because $2K happened to be the amount you owed on it? One thing has nothing to do with the other. You are under no obligation to accept the dealer’s offer just because it happens to match the amount you owe, and the dealer gains no negotiating leverage knowing what that amount is.