Why are you paying dealer prices?

This post comes from Angela Colley at Money Talks News 

The first time I bought a car, I got ripped off. I traded in my car for less than it was worth, bought a clunker for more than I should have, and got talked into a $950 warranty to cover rust as I was finalizing the paperwork.

The salesman saw me coming and pulled out every trick in the book — from saying my credit wasn’t good enough to tacking on “mandatory charges” during the final sale.

Here are some tips you can use to avoid becoming the victim of common dealer tricks of the trade:

1. Payments

Dealers want to talk payments; you need to talk price. For example, the last dealer I met asked me how much I could afford to pay a month. When I didn’t answer, he offered a “great deal” at $385 a month. He never mentioned the total price of the car or the length of the loan.

By focusing on payments and not price, it’s easy to trick consumer into thinking they’re getting good deals. Steer the conversation to the total price, and let the payments take care of themselves.

2. Financing

A dealership can make as much money on the loan as it can on the car, which is something it’s not likely to disclose. Instead, the salesman will make it seem that he’s doing you a favor by getting you a great interest rate — or getting you a loan at all.

Don’t fall for it. Financing is big business for dealers, and you’re not winning a prize when they get you a loan.

Step One in any purchase that requires a loan is to secure financing. Never head to the lot without first shopping for — and getting preapproved for — a loan. Use online auto rate searches and talk to banks and credit unions to find the best rate. Then apply and get approved. This serves two functions: You won’t overpay for dealer financing, and you’ll be ready to pull the trigger when you find the perfect ride.

3. Bait-and-switch advertising

Bait-and-switch gets you in the door by advertising a super deal on a car, but switching you to another, lesser deal when you show up.

Read the fine print before you go to the dealership. If you’re not sure, call ahead.

4. High-pressure tactics

The salesman’s goal is to close the sale today, and he’ll try any number of sales tactics to make it happen. My personal favorite: Insisting the car won’t be there tomorrow.

Don’t bite. If you feel uncomfortable or unsure of any decision, ask to speak to someone else or just walk away. Keep looking until you find someone you can work with.

5. Extras that add up

Car salesmen work on commission, and the more you pay, the more they make. One way to increase the sale price is by adding on extras, like wheel and tire protection, a warranty extension or rust protection. To help sell you on these, the salesman will break them down to the total price per month. For example, when I bought rust protection, the dealer told me it was a “great service for only $25 a month.” I ended up paying $900 over three years for something I didn’t understand or even know how to use.

6. Undervalued trade-in

If you’re trading in your current car, know its value. These sites can help:
Edmunds.com
NADA Guides
Kelley Blue Book
MSN Autos
Also, check eBay to see what cars like yours are selling for in your area.

If you’re trading in, don’t expect any dealer to offer your car’s retail value. To get maximum value for your car, sell it yourself.

7. Manufacturer’s suggested price

The “manufacturer’s suggested price” is often used to make a deal sound better. For example, if the manufacturer’s suggested price is $35,000, but the dealer is asking only $32,000, you might think, “Hey! I’m already getting $3,000 off and we haven’t even started negotiating.”

Sites like KBB.com can tell you what people are actually paying for specific models.

8. Your credit score

When I was buying my first car, the dealer pulled my credit report and told me my credit wasn’t that grea,t but that he’d be willing to work with me. I felt a sense of relief, thinking, “At least I’m getting a loan.” I later found that my scores were fine and that I could have gotten a better interest rate elsewhere.

You can get your credit scores for a fee at the websites of Equifax, Experian and TransUnion or from myFICO. If you find that your scores are low, improve them before you apply for a loan.

9. Negotiations

Buying a car isn’t one big transaction; it is actually three smaller ones: getting financing, pricing the trade-in and buying the car. I didn’t realize this when I went to the dealership alone for the first time. Rather than look at each piece, I looked at the total cost and thought, “OK, I can afford this.”

Negotiate each part separately to get the best deal.

10. Mechanical issues

Don’t take the dealer’s word for the condition of a used car. Never buy any car from any source without first taking it to an independent mechanic for an unbiased inspection.

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