Confessions of a Car Salesman (2001)(edmunds.com)
edmunds.com
Confessions of a Car Salesman (2001)
http://www.edmunds.com/car-buying/confessions-of-a-car-salesman-pg2.html
13 comments
The question I'd ask is, why do I need the salesperson at all? I know exactly what I want when I buy a car. For my last two cars, I sourced and specified the manufacturer option codes for my order.
The role of a salesperson is to convince someone to buy a product. If I am already convinced, why should I have to involve this person in my transactions?
The role of a salesperson is to convince someone to buy a product. If I am already convinced, why should I have to involve this person in my transactions?
You don't, the dealer does. I sold cars for a short while. The dealer makes money by introducing a spread between what he paid for it (minus bonuses) and what you'll pay (plus financing). They are middlemen pure and simple, something information technology is exceptional at deprecating. The reason the major brands don't have company stores like Tesla is manufacturers don't have to hold as much of a risk with inventory and dealers are well lobbied.
The main issue here is the lobbying component of the dealerships. A lot of states have mandatory purchase the car from the car dealer mandates, thereby requiring a system in which the dealer makes enough money to continue their efforts.
The rest of the world has car dealerships too, and as far as I know has no mandatory purchase rules. As far as I can make out car dealers make so little money in Europe that it is not worth disintermediating them, but I may be wrong.
Agreed. There is a difference between sales and fulfillment.
> I know exactly what I want when I buy a car.
A lot of people don't know exactly what they want.
They have a price range, and that's about it. Someone needs to show them their options. Particularly if they're looking at used cars.
A lot of people don't know exactly what they want.
They have a price range, and that's about it. Someone needs to show them their options. Particularly if they're looking at used cars.
A dealer salesman on a single brand lot is a horrible solution to this problem.
The closest you can get to a simple middleman-free market is eBay, sadly.
Seems like TrueCar (and their various incarnations as AmEx Cars, Overstock Cars, etc.), Costco Auto Program and Cartelligent are working this space from the perspective mentioned - land the customer, help him settle on the right model, then shop around with a dealer who will agree to accept the lowest bid.
Interesting since several of my local dealerships offer internet prices online that are consistently 1-2k lower than the Edmunds "best price".
The article is from 2001.
If you enjoyed this, worth checking out This American Life episode: 129 Cars [http://www.thisamericanlife.org/radio-archives/episode/513/1...].
Thanks; I enjoyed it. Also, it was interesting that the writer of this Confessions series worked as a car salesman and ended up no longer blaming the salespeople for pushy tactics etc., but rather the sales managers and dealership owners. Listen to that podcast and you come away feeling that those people are in basically the same boat, under pressure from the manufacturers.
I was just about to post this!
Lots of good arguments against buying a car (esp in cities) or buying a gas car (tesla) or buying a new car from a dealer (massive depreciation), but there are cases where it makes sense.
The key is to be an informed buyer, and to break out separate parts of the transaction and analyze them individually.
Financing from your credit union, in the absence of a manufacturer-driven promotional financing rate, is going to be better.
You'll get more for your car selling it on Craigslist or whatever (although, more hassle).
Various services exist to negotiate fixed discounted prices for cars themselves: costco, usaa, etc. Founderscard has an audi MSRP discount, too. You might be able to do better negotiating in person at a dealer if you know the structure of manufacturer incentives -- sometimes selling a car at a loss makes sense because it pushes them over a threshold -- but that's a lot harder in a place like the Bay Area and for popular cars (VW TDI when gas was expensive, audi and bmw now).
The great deal that was the certified preowned seems to have become popular enough that it's no longer such a deal.
I really hope my car lasts me another 2-3 years; either get a Tesla then, or a 535d in Germany.
The key is to be an informed buyer, and to break out separate parts of the transaction and analyze them individually.
Financing from your credit union, in the absence of a manufacturer-driven promotional financing rate, is going to be better.
You'll get more for your car selling it on Craigslist or whatever (although, more hassle).
Various services exist to negotiate fixed discounted prices for cars themselves: costco, usaa, etc. Founderscard has an audi MSRP discount, too. You might be able to do better negotiating in person at a dealer if you know the structure of manufacturer incentives -- sometimes selling a car at a loss makes sense because it pushes them over a threshold -- but that's a lot harder in a place like the Bay Area and for popular cars (VW TDI when gas was expensive, audi and bmw now).
The great deal that was the certified preowned seems to have become popular enough that it's no longer such a deal.
I really hope my car lasts me another 2-3 years; either get a Tesla then, or a 535d in Germany.
See also the 2009 edition: http://www.edmunds.com/car-buying/confessions-of-a-car-sales...
The most egregious cost with these cars is not the thousand or two over in profit to the dealer, but rather the massive depreciation over the first two years. That's a substantial expense that almost everyone overlooks and one that can be easily avoided but just buying something a few years old.
A lot of that ‘depreciation’ is a combination of dealer profit and sales tax. I got a good deal on a 'new' car at the end of a model year and my deprecation walking off the lot was around 5% of the car's value. However, I also got a new car with a 5 year warrantee in exactly the options and style I wanted so it's not really that expensive.
Consider it’s 7 years old with 50k miles and in great condition. Assuming I keep it for another 3 years the net cost of getting the exact car I wanted will be around 10$ a month. Plus the added bonus of fewer repairs and less frequent and easier car purchases saves me time in the long run.
Though, considering it's still in great condition I may keep it even longer than that. In the end it's not buying a new car that's an issue, it's buying a car frequently that's the real issue which costs people a lot of money.
Consider it’s 7 years old with 50k miles and in great condition. Assuming I keep it for another 3 years the net cost of getting the exact car I wanted will be around 10$ a month. Plus the added bonus of fewer repairs and less frequent and easier car purchases saves me time in the long run.
Though, considering it's still in great condition I may keep it even longer than that. In the end it's not buying a new car that's an issue, it's buying a car frequently that's the real issue which costs people a lot of money.
Eh. Certified Preowned and various information sources have reduced a lot of the information asymmetry risk of buying late model/low mileage cars and therefore what was effectively a risk premium has shrunk as well. I'm not a particular expert and doubtless there are individuals who get good deals if they put in a lot of legwork and buy from individuals. However, when I've looked, at least used cars from dealers weren't any particular bargain.
Dealers don't list their used car prices at attractive prices, but they will come down. From the research of done when buying our past two used cars (in 2013 and earlier this year), the information asymmetry was still plentiful. Dealers get cars from auctions, off-lease, trade-in, etc. You have no idea what their cost actually is, unlike with new cars.
An advantage of buying new vs used is that you make the vehicle completely fungible. Used cars are each relatively unique, and if you find one that is the "perfect" combination of model year, condition, options, color, etc, the salesperson has a considerable psychological advantage over you. With new cars, you can contact 10 dealerships within driving range and play them off each other until you get the best price.
You can go to cars.com, punch in a 150 mile radius and probably find multiple cars for sale with the specs you're looking for.
When I bought the car I currently drive, I actually did have a hard time locating exact alternatives to the one I ultimately bought because the navigation package was fairly rare for the lower-end engine I wanted, but I just told the sales person that I'd be fine not getting the navigation package, which opened up a huge number of alternatives. I was also committal to the make and told the dealer so much.
The best way to not give up a psychological advantage is to keep your options open. It's not always possible, but the more options you have to explore, the better.
When I bought the car I currently drive, I actually did have a hard time locating exact alternatives to the one I ultimately bought because the navigation package was fairly rare for the lower-end engine I wanted, but I just told the sales person that I'd be fine not getting the navigation package, which opened up a huge number of alternatives. I was also committal to the make and told the dealer so much.
The best way to not give up a psychological advantage is to keep your options open. It's not always possible, but the more options you have to explore, the better.
When you can afford it, that depreciation is the price of getting exactly what you want, with a warranty, and being able to know that it has always been maintained and driven according to your preferences.
All that said, I'm probably never going to buy a brand new car.
All that said, I'm probably never going to buy a brand new car.
I was a "online sales director" for a small chain of new and used cars for about a year.
Never buy a car new unless you have to. If you're buying the car new you shouldn't focus on the purchase price, but the value for your trade in and your APR.
Most used car sales generally only brought in $1,000-$3,000 in profit. The dishonesty in the business doesn't revolve around the pricing, it's in the details of the cars. Salesmen will lie about resale values, maintenance records, previous owners and so on.
My advice is to identify 2-3 cars you'd like and then buy that car with 30K-50K miles on it no more than 3-4 years old. You'll still be able to get a low APR, and you'll have cashed in on a car that will hold it's resell value better than a brand new car.
Never buy a car new unless you have to. If you're buying the car new you shouldn't focus on the purchase price, but the value for your trade in and your APR.
Most used car sales generally only brought in $1,000-$3,000 in profit. The dishonesty in the business doesn't revolve around the pricing, it's in the details of the cars. Salesmen will lie about resale values, maintenance records, previous owners and so on.
My advice is to identify 2-3 cars you'd like and then buy that car with 30K-50K miles on it no more than 3-4 years old. You'll still be able to get a low APR, and you'll have cashed in on a car that will hold it's resell value better than a brand new car.
Previous discussion: https://news.ycombinator.com/item?id=3779735
It is an interesting article, even though things may have changed since it was published.
It is an interesting article, even though things may have changed since it was published.
I sold cars for a month back in my early 20s. This article is spot on, right down to the training class and not knowing how much you REALLY make on each deal. Half of the customers wouldn't qualify and the other half didn't realize how math works so you can't get a $30k car for $300 when you are $2000 upside down on your trade with no money down.
I wonder how things have changed in the last 14 years. I bought a car a couple of years ago, and the "Internet price" is now a thing. I found it harder to negotiate numbers since now "no haggle" means that they have the same high prices as "haggle" places, but are just not willing to go lower on them.
Oddly, the "carsdirect.com" mentioned here has evolved into Internet Brands, a media behemoth that owns a whole bunch of forums. https://en.wikipedia.org/wiki/Internet_Brands
I've never bought a car from a dealer. Has the Internet affected car selling very much since this article was written? The author mentions the beginning of some trends like with carsdirect.
It's very frustrating, I bought three over the last couple years. I think the biggest help to consumers is TrueCar.com which basically uses the information they gather about prices people recently paid for cars to negotiate a fair price for both parties. Whenever I mentioned TrueCar the salesmen were kinda disappointed because they knew they couldn't squeeze any extra money out of you. I started a website to help people get good deals on cars and then just decided to quit because TrueCar was efficient enough. Even the dealers that didn't participate still respected their pricing. At that point it was just a question of making sure not to get screwed on the financing and trade-ins.
I've bought three new cars in the last three years. In all three cases I've used following internet technology: communicate with the dealers via email to negotiate sale price, and only use dealers for the test drives and to finalize the deal.
I knew exactly what car (including trim, color and options) I want to buy. In one case I knew VIN number of the car on the lot. But I still negotiated with other dealers within 100 miles from my zip code in order to drive the sale price down by letting them 'beat the competitors'.
I had money or financing arranged before closing the deal. Only considered dealer financing if there were incentives to use them. Did not trade in any cars as part of the same transaction.
I've considered buying a 2-3 y.o used car, but dealers were not willing to negotiate. Main reason is that every used car is a unique snowflake, so it is harder to pitch comparable cars against each other. On the other hand, one can get exactly same new car from any dealer, and they understand this.
I've tried using Truecar and Edmunds to get a good deal on a car. No much success there. It's just a dumb lead generators for dealers. I would get great initial responses from participating dealers, but then they will not have the car that they offered to sell and would push something they have in stock.
Bottom line, when you send a copy of the competitor's email with the "out of the door price" for a specific car and a promised to close the deal tonight, dealers tends to become really accommodating.
I knew exactly what car (including trim, color and options) I want to buy. In one case I knew VIN number of the car on the lot. But I still negotiated with other dealers within 100 miles from my zip code in order to drive the sale price down by letting them 'beat the competitors'.
I had money or financing arranged before closing the deal. Only considered dealer financing if there were incentives to use them. Did not trade in any cars as part of the same transaction.
I've considered buying a 2-3 y.o used car, but dealers were not willing to negotiate. Main reason is that every used car is a unique snowflake, so it is harder to pitch comparable cars against each other. On the other hand, one can get exactly same new car from any dealer, and they understand this.
I've tried using Truecar and Edmunds to get a good deal on a car. No much success there. It's just a dumb lead generators for dealers. I would get great initial responses from participating dealers, but then they will not have the car that they offered to sell and would push something they have in stock.
Bottom line, when you send a copy of the competitor's email with the "out of the door price" for a specific car and a promised to close the deal tonight, dealers tends to become really accommodating.
Can someone summarize the secrets to me? I noticed the article was 11 pages long.
* Car salesman deliberately waste your time to wear you down. "I have to ask my manager. I'll be right back." is bullshit, they go in the break room and have a coffee. If you want a test drive, "OK let me go find the keys. I just need your drivers license." that's another 40 minutes wasted, and you can't leave because they have your driver's license. After spending 4 hours at a dealership you're tired, your resistance is low, but you've invested so much time in this process now, it's human nature to want your time investment to produce something, so you don't want to leave empty handed without a new car, so now they start talking about numbers you asked about 4 hours ago, and get you excited that you might drive the car off the lot tonight, you just need to sign and here are the keys ... "oh actually, the car is being cleaned now ... can I get you something to drink?"
* Car salesman DoS attack the customer with numbers and options, for example using 4-square grid of options: overwhelm the customer with at least 4 different financing and trade in options, too many decisions to compare, lot of numbers, math, options, numbers, more options, overwhelm the customer, then steer them into the set of numbers that maximizes your commission.
* That amazing deal of the week advertised in the paper? Sorry, we don't have it anymore, we just sold the last one (bullshit) but this one here is similar model for just a little more (bullshit)
I read this article over 10 years ago, and it remains the gold standard of what you must read before stepping into a car dealership. Basically stand firm on what you will pay total and if they start playing these games then be prepared to walk away without the new car.
* Car salesman DoS attack the customer with numbers and options, for example using 4-square grid of options: overwhelm the customer with at least 4 different financing and trade in options, too many decisions to compare, lot of numbers, math, options, numbers, more options, overwhelm the customer, then steer them into the set of numbers that maximizes your commission.
* That amazing deal of the week advertised in the paper? Sorry, we don't have it anymore, we just sold the last one (bullshit) but this one here is similar model for just a little more (bullshit)
I read this article over 10 years ago, and it remains the gold standard of what you must read before stepping into a car dealership. Basically stand firm on what you will pay total and if they start playing these games then be prepared to walk away without the new car.
Maybe then the objective becomes to deliberately spend as much time there as possible and keep alive the idea that you're going to buy the car then the salesman will also not have wanted to waste his time and not have anything to show for it. Always be prepared to walk away knowing he spent 6 hours with you and won't get a deal while his buddies sold a couple cars a piece. Psychologal warfare.
The secret is basically that they're ripping you off, which pretending they're helping you, and under no circumstances should you buy a car on credit because they use that to obscure the real price.
Also, even if it pisses them off, haggle and get prices from multiple dealerships, then play them off against each other. If they won't play, walk away to another dealer.
Also, even if it pisses them off, haggle and get prices from multiple dealerships, then play them off against each other. If they won't play, walk away to another dealer.
It is actually possible to buy a car on credit without getting ripped off. The way I did it was, having already gotten agreement on the selling price, and having a good estimate of the likely interest rate, I decided what loan term I wanted and computed the corresponding monthly payment based on these variables -- all before sitting down to do the final negotiation. I declined all dealer add-ons and all financing offers that didn't match my precomputed numbers. Eventually they made one that did.
I'm not saying I got the best deal possible; I didn't shop dealerships. (OTOH I'm not sure that would have worked, as the model I was buying was in demand.) But basically, I think I did okay.
I'm not saying I got the best deal possible; I didn't shop dealerships. (OTOH I'm not sure that would have worked, as the model I was buying was in demand.) But basically, I think I did okay.
This is exactly how I buy them. I used to sell them. Know exactly what you want. Pit three dealers against each other for the same car (exact product code) for a few days. Have funding secured already from a credit union but don't tell the dealer until you're in their finance office and they fail to provide better terms than your CU did
That's how we got our Sienna. I got it down to 2 salesmen at different dealers (one a fleet sales), and was about to save a last $300 on one, but the competing dealer agreed to come to our house and deliver the car (which was huge at the time b/c we just had twins which was the reason we went minivan), so we went with him. Felt the pricing was much fairer this way.
I'll probably go with TrueCar.com or something like that to automate the process next time, unless I get a Tesla.
I'll probably go with TrueCar.com or something like that to automate the process next time, unless I get a Tesla.
Going back and forth between a few dealers on the exact car I wanted to buy worked for me. When I got the price down to where one of the dealers would rather pay me $200 than lower the price, I was done.
I documented my experience at http://xn.pinkhamster.net/blog/misc/buying_an_audi_under_inv...
I documented my experience at http://xn.pinkhamster.net/blog/misc/buying_an_audi_under_inv...
I bought my last car on credit, but I did it through my bank and got an insanely low rate (1%). The salesman whined constantly about how my bank was terrible at their job and that we should just use the super convenient in-store financing instead.
I still got ripped off, especially on the trade in--but my wife was rather pregnant and close to being put on bedrest at the time and we didn't want to have to deal with Craigslist or whatever for selling her old car.
I still got ripped off, especially on the trade in--but my wife was rather pregnant and close to being put on bedrest at the time and we didn't want to have to deal with Craigslist or whatever for selling her old car.
I'm not sure what secrets you're referring to, but it is a great piece that is well worth the read.
I'd probably word grecy a bit differently. As much as possible, separate the purchase from the financing from the trade-in. Easier said than done for some to be sure, but get an idea of alternative payment options if you don't have the cash or existing line of credit. And know what you'd be willing to take for a trade given what think you think you could get for the vehicle on Craigslist or donating it. And, of course, have your max price for the vehicle in question given invoice price and other factors.
I've had more luck negotiating with a monthly payment in mind. I know what my trade is worth, how much I can put down (easier if you can just answer zero), and what I what to pay for the car. After my first visit where I learn exactly what car I want; the rates for the captive finance company (which are usually the best).
I can do the math to figure out monthly payment for the price I what is at that point. Then I just negotiate using that number, if they bump up the trade allowance or reduce the price of the car it really doesn't matter. I precompute a few numbers to know where we are (e.g., Invoice, Invoice + 3%); but also know the cost of a $1 worth of financing so that I know how much they're charging me during a back and forth.
I can do the math to figure out monthly payment for the price I what is at that point. Then I just negotiate using that number, if they bump up the trade allowance or reduce the price of the car it really doesn't matter. I precompute a few numbers to know where we are (e.g., Invoice, Invoice + 3%); but also know the cost of a $1 worth of financing so that I know how much they're charging me during a back and forth.
One thing to keep in mind, if your trade in has significant value, is that your trade in amount reduces the tax you pay on the new price. For example, if you buy a $25000 car, and have a trade in value of $10000, you only pay tax on $15000.
Good point. In my case, I basically only buy a new car when the old one is on its last legs so we're talking about $1K-$2K at most.
This is not true in California; you pay tax on the whole price, even if part of it is paid via a trade in.
http://www.boe.ca.gov/sutax/faqpurch.htm#9
http://www.boe.ca.gov/sutax/faqpurch.htm#9
That also assumes the dealer doesn't rip you off on the trade in, which is pretty rare. Selling the car yourself for cash is pretty much always better, even if you aren't a slick salesman type.
Page 10 contains a summary.
Anyone know if there is an Edmonds.con variant in Germany?
I think there really does need to be some kind of change to the process here, sales people just literally cannot survive on what Edmunds would consider a fair price. As a sales person though, I can't tell you how many times someone had a fair price worked out before coming in to the dealership and then expected to negotiate more. Most people just seem to expect it, so you're in a weird limbo land where it's difficult to A sell a car to most people without a big negotiation, and then at the end the same people complain they have to negotiate, but had you just given that price up front, they never would have bought. Lots of interesting psychology :)