I went car shopping in November for my mom when she’d totalled her car. I was looking for a used small suv…around three years old, decent milage…ect. There seemed to be many of this type at the various big dealer lots…but all of them were priced at the tippy tippy top of the price charts (edmonds, kelly, even black book) and none of these dealers would budge on their price. I was offering cash…on the spot…and wasn’t really gutter balling my offers…but every big dealer stayed firm on their high as could possibly be quoted price, and only one or two even bothered a counter offer. I’d never encountered this before.
Luckily around this time a friend of mine was thinking of selling his 4 year old toyota highlander and I got it for mom at a terrific price.
Surely this suggests that the prices they were asking were, in fact, close to a reasonable market value for the cars. If a dealer won’t even negotiate with you, and lets you walk off the lot, it suggests that he really does believe (rightly or wrongly) that he can get what he’s asking for the car.
You probably also suffered due to circumstances beyond your control. One thing that the abysmal Cash 4 Clunkers program did—in addition to forking over billions of taxpayer dollars so that people who were probably already going to buy a new car could save some money—was push up the value of used cars by artificially removing over 600,000 vehicles from the used car pool. Sure, some of those were oil-burning, smoke-belching shitheaps that probably needed to be scrapped anyway, but by no means was this the case for all C4C trade-ins.
He said “taxes, insurance, transport fees, preparation fees, legal fees, paperwork fees, license fees, etc.)”
Taxes,yes
insurance= you are WAY better off buying this on your own.
transport fees= varies
preparation fees= bogus or negotiable
legal fees= such as?
paperwork fees= bogus
license fees= yes.
So, he’s mostly right.
Transport fees are standard.
I’ve never seen “legal fees” added on, ever. It’s a red herring.
Prep fees are negotiable.
Paperwork fees are almost always about $40 and are negotiable.
So out of seven items, four are ironclad, one is fiction, and two are negotiable. He’s mostly wrong and so are you.
Besides which: the claim was that these charges are added on afterwards and that they are somehow a scam being perpetrated on the buyer. They’re not, unless exhorbitant.
Ha! Beat you to it! 
Any where it’s a large, financed purchase.
Offroad ATVs, Houses, boats, motorhomes, etc.
Anything that requires extensive paperwork and regulation gets extra fees to deal with them.
You’re comparing two entirely different sales processes. You pay fees to a mortgage broker, above the cost of your home. It’s the same concept.
I’ve only done it once, but one time I went in prepared. I knew what my car was worth, the dealer price on the car, etc. The salescritter made his offer, and I went to work with my calculator. I figured the price on the car, the value of my trade, and allowed the dealership a $300 profit. The total was about $1800 under his offer. He did the “talk to the manager” bit, came back and offered exactly my deal with a $500 dealer profit. I took it, although they agreed easily enough that I am sure it could have gone quite a bit lower if we worked at it.
Are there any advantages of buying a new car though someplace like Costco, other than avoiding the dreaded dealership negotiation tactics?
I’d say that RV’s are different from cars, in that even the car manufacturere’s web sites let you build-and-price (to MSRP) every option on the vehicle. When I tried to research RV’s, all I ever got to regarding pricing is same old, “see your authorized dealer” message. Compared to cars, it’s damned hard to research RV’s. In the general sense, though, I think only an idiot goes shopping for a Class A diesel pusher motorhome and expects it to cost on the lower-end of your stated inventory range, though!
Ah, I think his original point was in nickel-and-diming people, though. “Oh, you don’t want to upgrade to the THX audio? Yeah, maybe you can’t afford that.”
Wow, I thought that most intelligent, educated people no longer shopped based on monthly payment, but I often over-estimate the number of intelligent people in the world. Did you find that most RV shoppers were also payment shoppers? Especially for higher-end RV’s, they typically seem (to me) to be more affluent and able to manage their money, and not who I would expect to be payment shoppers. I’m genuinely curious.
Transport fees should be on the federal sticker. They’re the same for every model of the same car, regardless of whether you buy it in Dearborn, Michigan or Nome, Alaska. If you see a different transport fee, that’s the dealer trying to pad their bottom line.
Prep fees are also padding. The manufacturer pays the dealer directly for prep!
Paperwork fees… in Michigan, we call them doc[umentation] fees. They’re not negotiable. In fact, by recent state law, it’s now iron-clad that they’re not negotiable. The dealer must charge the same doc fee to everyone. It used to be that when purchasing directly from my company, participating dealers were required (by contract) to waive the doc fee, but state law now prevents that from happening! What was going on was, unscrupulous dealers were trying to use it as another type of additional dealer markup. In my experience in Michigan, doc fees are always dirt cheap (under $100, usually closer to $30), and seem to reflect a fair price for the dealer running to the SecState and doing all the paperwork for me.
The supermarket doesn’t have office work that needs to be paid for? Who pays the managers, the stock people, the truck drivers?
No, I don’t expect you to lose money. I expect the salesman to figure those things in when we make the deal.
Perhaps I didn’t state things clearly. Nobody ever walked on the lot saying "I can afford $xxx per month. By asking what a person would see himself paying per month for his vehicle of choice, it’s a simple math exercise to see what price range they are looking at or can probably afford. It beats asking a stranger straight out “how much can you afford?” The answer to that will almost always be (rightly) “None of your fuckin’ business.”
Any experienced salesman can almost instantly tell the expected price range from the monthly payment information and can then steer the customer to vehicles in that price range. If you take him to a Taurus and he says WTF, show me the Lincoln Towncars, then he’s either sadly underestimated what monthly payments will be, or may not be a serious buyer. At that point the salesman can regurgitate what the customer has already told him and ask if that’s a correct estimate. I never pressed anybody for financial information after the first couple of questions. If it was clear they were not happy to be asked for that info, then why antagonize them.
But are you saying that monthly payment amount is of no concern to someone buying a vehicle? If so, that doesn’t make sense to me. Anybody with a brain should be very concerned about how much they’re forking over to the bank each month.
RVs: People routinely buy high-end RVs with a 30-year loan. Many of them have the astounding notion that the second-home tax deduction makes it all worthwhile. There are certainly cash buyers out there, and the number of people who considered this a wise “investment” never ceased to amaze me. Hello? McFly? Anybody home?
Someone paying cash has no monthly payment. Just sayin.
No, I understand you now. But anyone with a brain will already know what their payment is, because they already know what their credit looks like, and ideally they already have their financing taken care of. It simplifies negotiations because you can fixate on a price rather than give the dealer the opportunity to jack up the price to meet your expected payment. There’s a big difference between walking into a car dealership (I dunno 'bout RV dealerships!) and saying, “Show me what you have in the $25,000 range” (and knowing your payments will be about $575), and walking in and saying, “show me what you can sell me for $575 per month.” The latter is just as good as saying, “I’m a sucker!”
Wow… I’m astounded. I had no idea that anyone could finance a motor vehicle (or any such depreciable asset) for 30 years. I’m just, wow. On the other hand, that kind of answers my wondering how some people that make a whole lot less than me “afford” those things.
Let me chime in.
I think the larger point is that the buyer shouldn’t negotiate based on a monthly payment, because doing so increases the complexity of the transaction and reduces the power of the buyer. Which is why, obviously, all buyers should do their dang research ahead of time to know what they could afford, in terms of total cost of the car, interest rates, and monthly payments.
Your previous point about how it’s normal, in fact, expected for a salesperson to inquire about a monthly payment is a fair one, but it’s a question that salespeople ask in the hope that the buyer answers, i.e. they DIDN’T do their research (the research both of us agree is necessary). Because, again, the monthly payment as baseline allows the dealer to manipulate a whole host of other variables-- all behind the scenes-- potentially increasing the total lifetime cost of the car to the buyer.
Although its really long, this is a great and thorough article where a reporter for Edmonds went undercover for several months as a car salesman.
Long story short, they’re all pretty much total scam artists. If you’ve ever seen Glengary Glen Ross you get the picture…
Thanks for that link! The article is fascinating.
I especially enjoyed the part where the guy in the service waiting room decided to buy the new SUV they were selling for more than sticker price. He did a little internet price research on his Palm, called the fleet manager, and ended up buying the vehicle for under invoice price. VICTORY!
The last time I bought a brand new car, I used the paper version of Edmunds guide for that model year. I had a lot of information about invoice, dealer hold backs, rebates, etc. The salesman seemed very annoyed when I’d bring those things up and kept telling me the book was inaccurate but, in the end did the deal.
I don’t know about that. For the last two cars I bought (a Toyota and a Subaru), I went to dealerships that were several towns away (about 30 miles away) because my local dealerships were not interested in negotiating with me. I ended up buying both vehicles in that town. I’ve had them serviced at the local dealership, though.
Great article on how cars are financed
This is also from Edmunds
http://www.edmunds.com/advice/buying/articles/125308/article.html
Uh, third person to link to the same thing?
Here’s a bit of contrarian advice.
This came to me via an anecdote in the book The Millionaire Next Door (a book that had the premise that most millionaires are such because they had moderately high or high incomes and led modest lifestyles; they were contrasted with high income people with lavish lifestyles who had little savings or net worth).
In this anecdote one person negotiated by phone and fax with several dealerships to get the absolute lowest price on a Porsche and got one just a few hundred above invoice. Another person went to only one dealership and negotiated a price on a Mercedes not much lower than the sticker price. [I’m doing this from memory having read this many years ago – I may have the details wrong.]
The person who was shown to be the sensible one was the one who haphazardly negotiated for the Mercedes. Though he hadn’t driven as hard a bargain, he bought used instead of new and got a model with a diesel engine for higher fuel efficiency.
Maybe the moral of this is that negotiating the most dealership profit out of the transaction doesn’t necessarily mean you’ve gotten a good deal.