After working in car biz for a year, I learned that no one really knows much about what they are doing at dealerships. Most people don’t even know what the difference between gasoline and diesel is. I have always believed that car buying, finances, job hunting and the general things you deal with as an adult should be taught in school, but the closest the school system has gotten is sex ed. Here are some good tips about car buying and car dealerships to answer many misconceptions:
1) Salespeople don’t actually want to sell the most expensive car on the lot to every customer. A good salesperson will ask you about your finances before anything else. This will include gross income, rent, ideal down-payment, and ideal budget. Once they have figured out your price range, they will show you cars within that range. They may try to stretch it a few hundred bucks, but they will not go too far out of this range. Why? Because they know what the banks will and won’t finance and showing you a car you can’t buy is pointless.
If a salesperson shows you a car below your suggested budget, that may mean they are doubting your ability to get financed. This isn’t fool-proof, though. They really do want to put you in a car that will take care of you as long as possible. If they do try to put you in something out of your budget that you aren’t satisfied with, leave. You do not have any obligation until you sign the contract.
Furthermore, a lot of dealerships have flat-rate commission, which means the salesperson is making the same dollar amount no matter what car he sells. If he or she sells a Nissan Sentra, he will get the same commission he gets from a Ford Mustang. Often, it helps to ask if they earn flat-rate or percentage commission, but don’t let that necessarily change your opinion on a car.
2) Dealerships don’t benefit at all from the APR. In fact, they would rather get you the best deal possible so you are happy. A lot of dealerships, mainly smaller ones, stay afloat entirely based on customer satisfaction, so they don’t want to risk it. If you do get a higher APR, or what many call “loan shark rates”, chances are, that is all you qualify for. I have seen rates upwards of 25% and when customers complain, I ask why they didn’t pay off their first car loans. At some point, you have to realize that the banks just don’t trust you to pay and that is not the dealership’s fault.
3) Don’t go into a car lot without any intention of buying a car and take up the salesperson’s time, especially during a busy day. Salespeople don’t earn money for talking to you and they get plenty of social time at home and after work. If you don’t plan on buying a car that day or even starting a credit application, tell them immediately. Look at the cars on your own without the salesperson and look up the details online. I would suggest edmunds.com for all of your car information and reviews. If you have a question about buying the car, ask a salesperson quickly and be on your way. A lot of people are offended by this, but do you go to work to chat with people or do you go to work to make money?
4) Do research before you go shopping. If you go onto a lot with no clue what you want, they don’t know if you want a truck, a sedan, a van, etc. They don’t know what you want and often write you off as a non-serious buyer. Even if you are a serious buyer, it is annoying to try to sell someone a car who constantly says, “I don’t know,” and nothing else. Think about your main usage of the vehicle, your budget, any features you want, favorite styles, favorite colors, number of seats, etc. All of this can help them put you in your new ride. If you don’t tell them anything, they can’t tell you what you want.
5) If you purchase from a “Buy Here Pay Here” lot (finance payments go directly to the car lot. Built for low/bad credit. Used cars, often not the nicest), don’t take your car to them when mechanical trouble arises. Most buy here pay here lots don’t service cars and none of them have their own service contracts (that I have heard of). They offer service contracts and warranties with the car so that you can call the service company to help you. If you do call the dealership with an issue, they may send you to their mechanic, but you’re probably not even saving money and it often takes more time than just going to your mechanic.
6) Salespeople are people. Yes, their income depends on you. But that is no excuse to be rude to them. They are doing you a service by putting you in a car. They can just as easily send you away and kick you off the lot for being rude and I have seen it done before. I have seen salespeople’s entire days ruined by one rude customer. Any time you go into a car lot, restaurant, grocery store, etc, remember that you are not better than the worker and you should be fine.
7) Your salesperson isn’t lying to you if he tells you he can’t tell you exactly how much your payments will be. That is entirely up to the banks. If the salesperson asks for a $400 payment and the bank says no, he/she can’t change anything. They want you to get good payments just as much as you do, because the happier you are with your new deal, the more likely you are to sign a contract. Essentially, we don’t know what payment the bank will give you and we can’t change it once they tell us.
Your salesperson does not decide on the numbers for the deal. When you go into a lot and decide on a car, you and the salesperson start talking numbers. After a while, they disappear, often claiming to “talk to their boss”. They aren’t lying. They don’t make the final decision and they don’t control the bank. When they go to the back to talk to their boss, they are talking to their finance manager. The finance manger’s job is entirely to run credit applications and get people financed. They may deal with other things every once in a while, but that is their job. The salesperson gives the finance manager the application and the finance manager gives it to the bank. After a wait, there are three options: approval, rejection, or counteroffer. Approval is self explanatory. Rejection means there is something in your application or credit history that they won’t finance no matter what. Counteroffer means that the bank won’t accept the current offer, but think you are a good candidate.
9) Finance Application and Credit Application mean the same thing. It is necessary for them to run your credit. Without that form, and a signature and date at the bottom, they cannot legally run your credit and cannot get you a loan. These terms mean the same thing and are just a way to make you feel more comfortable with the system.
10) Bad credit doesn’t mean no deal. If you have bad credit, ask car lots what is disqualifying. You may not be able to buy from a Primary financing lot (good credit, better rates, longer terms, normally better-known names, won’t normally finance below 600 beacon score), but a secondary lot should finance you (low/bad credit, higher rates, shorter terms). If you have gone to fifty car lots and finally find one that will finance you, don’t complain about the rate. If you cant get financed anywhere else, they don’t owe you anything.
Despite popular belief, car dealerships are not trying to rip you off. I truly wish more about this was taught at a younger age, as I think everyone ought to know the ins and outs of this business, as everyone will one day deal with it. All in all, never hesitate to ask questions when you go buy a car and talk to your saleperson.