Dealing with Car Dealers

1. The Basics

Successful car shoppers tend to share four traits.

They take their time researching, don't show any emotion, have lots of patience, and are willing to walk away. If you can stick to these rules, you should have no problem controlling the interaction with car dealers.

The thing you need to know about dealers is that they all want to sell cars as quickly as possible - to reduce their financing costs and increase profits. There's always pressure to get the deal done as soon as possible.

What's surprising to many is that car dealers don't actually make much profit on the sale of a new car. In fact, many dealerships lose money on new car sales after factoring in fixed expenses such as rent, advertising, and labor costs.

The bulk of a dealer's profit is made in areas such as used car sales, service, and other "back end" products such as warranties and maintenance plans.

2. Dealer Do's and Don'ts

Saving enough money to pay for a new car with cash is certainly more difficult than getting a loan, so people assume they should be rewarded for this achievement.

But that's not how car buying works. Dealers prefer buyers who finance because they can make a profit on the loan - therefore, you should never tell them you're paying cash.

You should aim to get pricing from at least 10 dealerships. Since each dealer is selling a commodity, you want to get them in a bidding war. If you live in a big city, sometimes the best prices are from dealers that are located about 30 to 50 miles outside the city where rent and overhead are much lower.

Every car dealership has monthly sales goals. If you time your purchase near the end of the month, you could take advantage of a dealer who just needs to sell one or two more vehicles to meet their quotas.

3. Types of Dealers

When it comes to car buying, there's nothing worse than having to haggle with a high-pressure dealership.

These types of dealers breed a culture where lying is the norm and salesmen are expected to do whatever it takes to make the sale.

It's a good idea to check out online reviews of dealers. If they have a long string of consumer complaints, that's a good indication you're dealing with a high pressure dealer. It doesn't mean you can't get a good deal there, you just have to be very careful.

4. Dealer Scams & Tricks

Believe it or not, 8 out of 10 car buyers don't know how to avoid being ripped-off.

Getting a good deal is not rocket science, but it does take research to figure out how to do it right. Most people are either lazy or uninformed and aren't willing to invest their time, even though they can save upwards of $5,000 on a typical deal.

Dealers have learned that most car shoppers focus on the price of the vehicle, so they're OK with small profits there. Where they really get you is with everything else that goes along with the purchase, such as the financing, your trade-in, and upsells such as paint protection, extended warranties, etc.

You need to be familiar with the common tricks such as the "4 Square Method", the bait and switch, fake window stickers, and worse. The best way to avoid most scams is to negotiate each aspect of your transaction seperately, and don't ever negotiate at the dealership. Use phone and email only.