Most people when buying a car will do some research online and then head into a dealership to test drive a car.
It is at that point that the sales machine of a dealership takes over.
A dealership employs salespeople and those salespeople have targets and a sales system they are trained in to get you into the car.
Car Dealership tactics
Not all car salespeople are sharks, there are some excellent professional car salespeople in Australia – but there are those who don’t really care about you or what you want and are driven by commission.
From pressure tactics to plain badgering through constant follow up calls, going to a dealership can be a stressful experience.
How can you get a good deal when the dealership is in control?
Below we discuss the methods you can use.
Pay cash
In the old days, paying cash was king. Dealerships loved cash because it meant that they were paid straight away, and they were able to move stock quickly. Discounts flowed.
In modern times, dealership models have changed. They have their own finance department and a big part of a dealership’s revenue comes from the finance. Cash is no longer king, in fact, you may expect to receive LESS of a discount if you pay cash, no matter how good a negotiator you think you are.
The other issue with paying cash is you are purchasing a fast depreciating asset. The average depreciation (lessening in value) of a car is 19% in the first year and 15% in the second and third year.
If you were to use the cash you have for something else, like an investment or paying down your mortgage to make money from your cash, that may be a smarter move.
The walk out
Other tactics customers employ include the walk out. In the salespersons office the customer will be presented with a price and they will counter that with an offer. If the offer is not accepted, they walk out. The hope is the dealer will come running after them to concede defeat.
This can be a good method; however, you are reliant on the salesperson being desperate to achieve their targets and for their Sales Manager to approve any deal that you put forward. Dealers are also very savvy and understand this tactic. They employ counter-tactics to deal with this.
Bottom line, a dealership has a price they will not drop below as it costs a lot of money to have a car in stock at a dealership. The overheads in a dealership are huge!
The time of the month will also dictate whether this method works. Towards the end of the month usually the pencil is sharpened a lot more than at the start, this is due to targets.
If your offer is realistic, you may get the deal, but in most cases, you will settle somewhere in the middle depending on the popularity and availability of the car.
Buy ‘old’ and in stock
Car dealers will generally be sharper on price for cars in stock over cars they have to swap with other dealers or order from the factory.
Dealers have a system that measures ‘ageing stock’. The longer the car sits on the lot, the more it has cost the dealer and the more motivated the dealer is to sell that car.
If you are prepared to compromise on colour or variant and settle for what the dealer has in stock, you may find yourself with a very sharp deal. This of course is dependent on the popularity of the car. If a dealer knows they can sell it to another person for more because it is popular, then they will likely reject your offer.
Shop around
In the old days, dealerships were owned by families or individuals and you could shop around if you had multiple dealers in the city you reside in. Now, dealerships are mostly owned by large corporations or dealer groups. The dealer on one side of town is likely owned by the same company that owns the dealership on the other side of town. Shopping around is also time-consuming and somewhat exhausting.
You cannot generally just call up and get a deal, you must go in and spend time. Or you must look at buying outside of your local area which means the car will be trucked in and dropped off to a depot or your home. You miss out on the car handover – which is the feel-good part, with a nice smelling clean shiny car instead of receiving a truck soiled vehicle from a nameless truck driver.
There are other methods customers employ, however, these are the most common. Some work and some do not. When going up against car salespeople, you need as much help as you can get.
Use a car buying broker
There are car buying brokers who can do the negotiating on your behalf. These services aren’t free, but a quick Google could save you hundreds if not thousands off the purchase price of your new car.
Timing is everything
Dealers have targets, both from a business perspective and also the manufacturers they represent. As the end of the month approaches dealers to become far more negotiable than at the start of the month, especially if they haven’t hit their target. Individual salespeople are more likely to bat harder for you if they aren’t hitting their targets that month individually.
Some tips for this. You need to be ready to go now. Have your finance in place and be ready to sign on the dotted line. Most of the deals you’ll be offered in the last 10 days of the month will expire at the start of the next month. You can usually tell if the dealership is busy on a Saturday and don’t be afraid to ask “how’s business? Are you guys busy?”. Looking around the dealership will tell you if they are or not. The quieter it is, hopefully, the more likely they will be to wheel and deal.
Pitch a price that’s low, but not ridiculous
Doing your research prior will assist with this. It should be understood that a base model vehicle will have less margin (profit) for the dealer, so asking for thousands of dollars off a car that sells for $19,990 probably won’t fly. If you start high, you have nowhere to go, but if you start low, you can always come up from that point.
This is my limit
You can also set a maximum limit of what you can spend. Use the husband or wife as the backstop “My partner said I can’t spend more than…” even if there is no partner! Just make sure if there is a partner, they aren’t sitting there with you when you use this – and also are really hard to contact if the salesperson asks you to get them on the line.
Don’t trade unless you absolutely have to
Having your finance in place first and if you can sell your current car elsewhere, do it. What you see your 2003 Commodore being worth, the dealer sees probably 25% of that value. They may give you a discount on the car you’re buying, but they’ll make this up by low-balling the trade.
Accessorise, but don’t go overboard
Accessories personalise the car and make it yours. You just have to ask yourself whether branded floor mats are important to you and if you are willing to pay full price for them. Contrary to popular belief, new cars don’t come with a full tank of fuel or carpet mats, these are all options. Only get the accessories that you need!
Dealer delivery charges… what on earth?
It comes up on every quote you’ll get from a dealer. Most people say “But I’m picking the car up??!!”. Dealer delivery is the money dealers charge to ‘prepare’ the car for you. Detailing and covering their costs. But $2,000+ is just ridiculous. Try to negotiate this to under a grand. If they don’t budge, ask them what’s included in the charge to justify it. Walk out if necessary!
If it’s popular, good luck
If a particular car is popular, you are going to find it more difficult to get a great deal. New models are usually hard to discount unless they aren’t selling well, then you have to ask if it’s the right car for you! Usually after a few months the demand will die off and you will find yourself in a good position to negotiate. If you line up for every new iPhone, then you may have to pay the full price.
The smart choice
Journey Finance takes all this hassle out of the process and negotiates the best deal we can get for you. In 99% of cases, the deal is local which means you get the support of the dealer if things go wrong and ongoing personal service.
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