Confessions of a Former Car Salesman
Jan 11 '00
So ... I used to be a car salesman. Perhaps it is telling that we salesmen spent countless hours that summer playing a game called Liar's Poker, a variation on poker played with the numbers on dollar bills. So, basically, we sat in a circle and practiced lying to each other, with the end goal of cleverly tricking each other out of our money. The irony of it all didn't hit me till I sat down to write this editorial.
I've included some anecdotes from that time in the ensuing paragraphs for illustrative purposes.
I learned a couple of things while I was selling cars, a gig that happened, by the way, while I was in college and lasted less than three months. First, to even get the job, I had to take a personality test. There were basically four personality categories: dominant, sociable, practical, and ornery. The theory was that if you were going to sell cars, your primary personality trait should be sociability, so that people would like you. Your secondary trait should be dominance, so as soon as they liked you, you could make them buy a car. I was sociable/practical, the second-best combination, which was a good start, and got me to the interview stage of the process.
"Why should we hire you if you're just going to go back to school in three months?" the recruiter asked me.
"I'm not going back to school," I replied. "I don't know what I want to do. I don't have any money to pay for school. I need to establish in-state residency before I go back to school." I spewed forth a series of lies, each of which could be logically defended, but none of which had an ounce of truth. It was an artistic performance, so much so that I almost believed myself.
One of the greatest fears people have when they go to buy cars is that they will get swindled. They'll wind up with a lemon. Or they won't get exactly what they want. Or, perhaps worst of all, they'll pay too much.
This is one of the reasons Saturn has been so successful. They pray on people's fear of getting overcharged for their cars. Does negotiating with cut-throat salesmen frighten you? Come buy a Saturn. You don't have to negotiate. We overcharge everybody, but just a little, and we don't gouge anybody, so everyone gets a fair price. In this case, the fair price is fair because everybody pays it.
Ultimately, before buying a car, you should take precautions against each of these pitfalls: (1) getting a lemon, (2) buying a car that isn't what you want, and (3) paying too much.
Avoiding the Lemons
If you're buying a new car, consider the warranty information. If the car has problems, find out what the dealership will do to fix them. Will they pick the car up and bring it in for repairs? Will they give you a loaner while your car is being fixed? Once you've brought your car in a certain number of times, will they just replace it with a car that runs. The unfortunate reality is that every so often, a new car is going to roll off of the assembly line and have a bunch of unforseeable problems. Somebody will buy this car and feel like they've just been taken to the cleaners. Find out, if you're that person, what the dealer will do to make it right.
If you're buying a used car, there are a few factors to consider. First, how many people have owned the car in the past? Does the dealer have paperwork for repairs done by previous owners? For example, if you're buying a former rental car, you have little to no idea whose been testing your engine. Have used cars checked out by your mechanic. You may want to take used cars to two mechanics. Also, find out what the remaining warranty is on the vehicle or what the dealer is providing if there is no remaining warranty. (Get this in writing.) Some dealers say that you buy a car as is. Others give you 30 days, during which time they'll fix repairs.
Making Sure You Get What You Want
Before you start looking for a car, figure out what is important to you. Whether it's trunk space or a sun roof or a removable third seat, make a list of all of the things you want -- the things that are absolutely necessary -- and don't look at cars that don't have those things. In the same sense, make a list of the things that you absolutely don't want -- an automatic transmission, vinyl seats, green paint, etc. -- and don't look at cars that do have those things. The unfortunate reality is that if one of your requirements is monetary, you may have to lose something you want to meet your budget, and it is important to be prepared to make this trade-off, if necessary.
I was working on a Saturday afternoon when a pregnant woman and her husband came in to our dealership, looking to trade in their pickup for a family sedan. "I don't want a grey car," was the first thing she said. She didn't know what she did want, but it sure wasn't going to be grey. So we looked at a green Ford Taurus. She liked it. Too expensive. So we looked at a green Mercury Sable, pretty much the same exact car, with a different brand name; the Mercury models were generally a bit less expensive than the equivalent Ford models at the time. She liked it.
So how much was it? "We don't want to pay more than $200 per month," they said.
(A common misconception is that car salesmen know what car payments will be. Not true. They can approximate car payments, but payments can vary wildly with interest rates, undercoating charges, extended warranties, and the like. One of the worst experiences I had during my tenure was finding out that a woman who'd bought a $13,000 Mitsubishi van from me had gotten saddled with four years of $440 monthly payments.)
We approximated the Mercury at around $250 a month, a little over their expected budget, so we looked at the same car, one year older. It looked like it would be around $215-$220 a month. We got it down to $210 monthly payments. She liked the car. Her husband liked the car. I know it's none of my business, but they could afford it. But they wouldn't go for the extra $10 per month. So they settled on a grey car that they both hated. Ultimately, they didn't buy that either because the payments were $202 per month, so I have to give them credit for standing on principle, but if you're shopping for a car, you shouldn't even put yourself in this position. Don't buy something that you really don't like. You'll walk away feeling cheated.
Deal With People You Like
By the way, if you're feeling pressured, or if you don't like the salesperson you're dealing with, or if your salesperson doesn't have enough product knowledge, excuse yourself. Walk away. You can walk away from the person or the dealer. If you'd just like to talk to a different person, find the sales manager. Ask to speak to another salesperson because the one you've got now makes you uncomfortable. Or just tell the salesperson that you don't like him/her and would prefer to deal with someone else. You shouldn't buy from someone you don't like, anyway.
Getting a Fair Price
Some people like negotiating. Many people dislike negotiating. In most cases, your salesperson has more experience negotiating prices than you do, and you'll may get all sorts of lines about the price you're getting being a fair price or a great price or the lowest possible price available on that car. I worked with someone who had sold a new Ford Escort for $18,000. You may also get tag-teamed by a salesman and his manager. The salesman will tell you that this is "the best we can do," then the manager will come in and, just to show he really cares, he'll sweeten the pot by knocking an extra couple hundred bucks off of the price. Or he'll give you an extra couple hundred for your car. You get the picture.
There is a very simple way to figure out whether you're paying a fair price for a car: Do you think the price is fair? If you don't think the price is unfair, it doesn't matter whether the price is fair or not. You'll either buy the car and feel cheated, or you'll shop around until you find out what the "real" fair price is.
To reach a price that you think is fair, there are a couple of things you can do. If you're buying a new car, you can probably do a little research and find out what the invoice price of the car is. This is the price that the dealership pays the manufacturer for the car. It is not the sticker price, which is the suggested retail price of the car. I suggest you don't pay that price. In all likelihood, you will pay something between the invoice and the sticker prices. You may also be able to find out what customers pay, on average, over invoice. For example, when I was selling cars, Ford Escorts typically commanded around 3% over invoice. Ford Explorers got around 8% to 10% over invoice. The more popular a car is, the more you'll have to pay for it.
If you're buying a used car, research the Kelley Blue Book price for the car. There should be two Blue Book prices: the wholesale price and the retail price. The dealer probably paid a little less than the wholesale price. You should shoot for a fair price between the wholesale and the retail price.
If you are trading your car in, the dealer will want to be able to make a profit on your trade-in. This is a fair expectation. If you are still making payments on your trade-in, figure out how much it will take to pay your car off. To do this, call your finance company and ask what the remaining balance would be to pay your car off immediately. Add this sum to the price of whatever car you are looking at; it is money the car dealer will have to pay out. Once you've added the cost of the "new" car you're looking at to the cost of paying off your trade-in, subtract the value of your trade-in. To get the dealer's perspective, subtract the Kelley Blue Book wholesale value of the car.
For example, you're looking at a $10,000 used car. You are trading in a car with a Kelley Blue Book wholesale value of $3,000. You owe $3,500 on the car. So, $10,000 + $3,500 - $3,000 = $10,500. This is the new price of the car you're looking for in the dealer's mind. (This price is probably several thousand dollars more than the dealer actually paid for the car. Negotiate accordingly.) If it's a new car, the same example holds. You owe $500 more on your trade-in than the car is worth to the dealer. So don't expect to buy your new car at invoice price. To sell you a car at invoice, the dealer will be losing $500, not breaking even.
Generally, it is simpler to figure a fair price on a new car if you are not trading a car in. To do this, decide what you think a fair price is. More specifically, decide what you think a fair profit is for the dealer to make in selling you a car. This is your final offer. For example, you might decide that you are willing to pay $700 over invoice for a new car. If that is what you are willing to pay, research the invoice price, then make the dealer pull out the dealer invoice (a sheet of paper or a computer record) and add $700 to the invoice price. Or add 5 percent. Or whatever you think is fair.
I hope all this stuff helps you to find and buy a car you like at a price you think is fair.
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Epinions.com ID:
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Location: Brisbane, CA
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