What can you learn from a car salesperson?

The Art of the Car Deal

by J.A. Livingston


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The purchase of a new vehicle is the second largest investment a person makes in his or her lifetime. In some cases, buying a vehicle will be the largest purchase that person will ever make. Information is the key to keeping as much of your hard-earned money in your pocket as possible. I sold cars for 16 years, and during that time, I learned quite a bit about the "car deal." I would like to pass along some helpful hints, which will help you obtain a fair deal the next time you are in the market for a vehicle.

Timing can be very important in the purchase of your next vehicle. Every automobile salesperson, sales manager, and general manager of a dealership are trying to get out as many cars as possible during the calendar month. Buying near the end of the month, when the pressure is on for a few extra deals, can result in a better selling price for the consumer. You can wear down a sales department by showing up every couple of days for a period of a week or two. I have had customers who started to take up so much of my time that I cut the deal down to nothing just to get rid of them. Trust me, it works. The most important thing to remember is to not get in a hurry. If the dealership sells the vehicle you are interested in, don't fret. They can always dealer trade for another one. If the dealer is unwilling to dealer trade in a vehicle for you, look elsewhere. That is not the store you want to do business with anyway.

Sell your trade-in yourself. A dealer will never put as much money in your trade as you can receive by selling it yourself. Selling your old car can be time consuming, but the difference can easily be $2000 to $3000 more in your pocket. Selling your trade is easier if it is an older vehicle because the prospective buyer can pay cash. If you are buying a used vehicle, pay as close as possible to the trade-in figure in the yellow NADA book available in most bookstores.

Be careful when you go to the finance department in the dealership. Every transaction made in this department makes money for the dealership. The interest rate that you pay is more than likely a higher rate than the finance manager got the lender to agree to. The difference between the "buy" rate and the rate the finance manager gives you is called the "finance reserve" and the dealership and the finance manager get paid on this. Shop around for the best rate that you can get at local lenders first, and if the dealership can beat the rate, great! If not, make it a cash deal to the dealership and bring them back a check from your bank.

Related: 7 Dealership Fees to Avoid

Extended warranties are another way the dealership makes money. If you do decide to buy an extended warranty make sure you will keep your new vehicle longer than the warranty period that comes with the car. If not, you have wasted some money. If you do sell or trade your vehicle before the extended warranty is up, go back to the store where you bought the car and the finance manager can get you a partial refund. New car extended warranties have a retail price of $1200 to $1800 with the cost being more like $600 to $900.

Considering buying a car? Compare vehicle quotes and lock in the lowest price!

There are plenty of books and Internet sites that can give you the dealers cost of the new vehicle in which you are interested. A good rule of thumb is that 10% to 12% of the sticker price is dealer invoice and that is a good buy price. Dealers actually get a rebate of 2% to 3% of the invoice price at the end of the year. This refund is called "holdback" and the dealer very rarely gives up any portion of the holdback unless the vehicle has been on the car lot a long time or it is a demo with some miles on it.

Hopefully, this information will make your next vehicle purchase less stressful and you can be confident of coming out on top.


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