Former car salesman checking in here (don’t ask - worst year of my life).*
Yes, it’s a common scam. While car salespeople might look and act like idiots, they are actually cunning, conniving bastards. And that’s the good ones.
Firstly, you really should avoid getting your financing from the dealer, if you can possibly avoid it. Sometimes when i was selling cars, if we got some guy who was set on a particular trade-in value or sticker price, the manager would let the car go for that price as long as we got to do the financing. This was because the manager knew that we could make more on a four year financing deal than we would have made on the car. Also, if the guy is going to bring his car back into your dealership for servicing, you also make money in that way.
Second, if you are really set on trading in your old car, forget any illusions you had about how much its worth, or how much your new car should cost. The ONLY figure you should be concerned with is the changeover figure; that is, the amount of money you have to give the car dealer in order to hand over your old car and drive out in your new one.
Getting hung up on the trade-in value of your old car can just get you screwed. For example, say you think your heap of junk is worth $5000, and you won’t accept a penny less. You go to two dealers, and the first offers you $4000 while the second offers you $5000. You think, “Great, i’ll go with dealer number 2.” But what you don’t realize is that dealer number 2 is charging you $22,000 for your new car, whereas dealer number 1 might have charged you $20,500 for the same car, saving you $500 overall. IT’S THE CHANGEOVER VALUE THAT IS THE KEY, BECAUSE THAT IS THE AMOUNT COMING OUT OF YOUR POCKET.
It’s also good to be very clear, before you sign the deal, about what extras you do and don’t want in the car. If you agree to a deal without the extras, you can then be screwed when you add them on. For example, our dealership used to get a rustproofing package done by a local company. The company charged us $175 to do the job, and we charged the customer $850. How’s that for a markup? If we thought the customer was getting nervous about doing the deal, we could always knock a few hundred off the rustproofing; but if the customer had already agreed to the deal, and was adding the rustproofing later, then he always paid full price and got shafted.
Once you’ve decided which car you want to buy, what colour you want, what extras you want, etc., then go to three separate dealerships (at least) with your old car. Tell each of them that you want them to quote you a changeover price, based on trading in your old car for THE EXACT MODEL, COLOUR, EXTRAS, etc. that you want. Be sure to emphasize that the quote should include all the extras.
Tell each dealer that you are going to two other dealers, and that the dealer that gives you the best quote will get the sale. Tell them that there will be no second chances, and that you’re not interested in running back and forth conducting an auction. This should ensure that they go “balls and all,” as we used to say, on the quote and give you their best possible price straight away.
- Note: this information is based on one year’s experience in selling new cars in Australia in 1990. Things may have changed, and may also be different in other countries.