Other Sources of Savings
Besides what you can save by knowing the dealer's real cost, there are several other opportunities to lower your cash outlay
Factory- to-Customer Rebates- Your Moxey, Not Theirs
Another of the major marketing devices utilized by manufacturers to help move product is the "consumer rebate." The upside of a rebate from the factory's and dealer's perspective is that it generates more interest and more sales. The downside is that consumers have become so accustomed to rebates that they tend to wait until a rebate is announced before they consider buying. That was not the way it was intended to work.
Essentially there are two kinds of rebates:
1. A cash payment direct to the customer from the manufacturer
2. A cash payment that requires dealer participation
The problem with the second rebate is that it requires individual dealers to put up part of the rebate money if they wish to participate. If they don't, there is no way for you to get a rebate from that dealer.Often when a car is offered with a rebate, the salesperson will try to factor the rebate into the negotiation. Don't let them. The rebate is your money-offered by the factory-and not the dealer's unless they are participating.
Rebates or Low Financing
Some manufacturers offer the option of a rebate or low financing. Depending on how much money you plan to put down against the car and the amount the dealership gives you for your trade-in, you may find that one option is clearly better than the other. It's important to take the time to compare both.
Example: A car has a bottom-line sticker price of $16,000. In order to help promote more sales, the factory offers potential customers a $1,000 cash rebate or 2 percent financing. Further, let's assume that your financial institution is offering 8 percent new-car financing on a 36-month loan. Which is the better deal? Take some time to figure it out or call your bank and ask for their help. They have all the tables. Here's a comparison:
Which is better? The $1,000 cash back and an 8 percent loan, or no cash back and a 2 percent loan?
The amount of your interest payment with a 2 percent loan on $10,000 over a three-year period would be $311.22.
If you were to take the $1,000 and use it to reduce the amount of money needed to finance the car, your 8 percent loan (now on $9,000) would cost you $1,153 in interest over the 36 months. Notice that if you keep the cash you end up paying it back in interest.
Appraising Your Trade-in
If you have a trade-in (and let's assume that it's only two or three years old and is in reasonably good condition), take the car to three different dealers and tell them that you are interested in selling the car and that you'd like their best price. No matter what price they quote, show some pain and tell them that if they want the car, they're going to have to do better than that. When they ask, "How much better?" respond by asking for another ten or fifteen percent. You can be assured that they will probably shake their heads and say that the car isn't worth that much. If they don't make a counter offer, they've either quoted you the fair wholesale or they are interested in the car only if they can buy it below wholesale. That's why you need to visit three different dealer-ships. Repeat this with two other dealers and use the highest offer as ?he basis for what your car is worth on the wholesale market.
Now, what if your car is not in all that good condition? Maybe the :nterior is a little ragged, the paint is scratched, the miles are a little m the high side, and the motor needs work. In this case you're prob¬,ibly going to find that used-car dealers associated with new-car lots anen't going to be interested. Independent used-car dealers might, but -hey will only give you a price below what they know they can reasonably expect to get from a wholesaler or at auction. Keep in mind that no one is going to risk any more than they can absolutely be assured of zTetting back. In fact, in most cases they'll whack another ten to twenty percent off the price to be sure that they're protected.
Book Prices
The industry uses any of several books as price guides: the NADA Offiwial Used Car Guide, National Auto Research Black Book, Kelley Blue Book Auto Market, Report, and Galves Auto Price List. These books purport to reflect the average wholesale prices that various cars are bringing across the country. The only problem is that they don't agree. Compare the suggested wholesale prices for a 1991 Chevrolet four-door Lumina from the same month:
Kelley Blue Book: $7,500 (tends to reflect West Coast prices)
NADA:$6,750 (combination of auction and dealer reports)
Black Book: $5,650 to $8,850 (reports from auction sales)
Your objective is to find out how your local market values your car, and the only way to do that is to have it appraised by the people who are putting up the cash. You may find that certain vehicles will be worth more at certain times of the year. A convertible will probably bring more in the spring. A station wagon will bring more as vacation time approaches and the market for family cars increases. A fourwheel-drive vehicle might do better in the North as winter approaches. The bottom line is that you won't know until you test the market.
The appraisal
Frequently, used-car appraisers find themselves having to deal with a customer who has a totally unrealistic idea of what his or her car is worth. For many, the car has become a member of the family, and the dents, rust, and the ripped upholstery have either become invisible or are regarded as part of the character of the car.To help "disabuse" the customer of his or her inflated impression of the car, they will frequently use a technique called the "negative walk-around." The appraiser will walk around the car inspecting it carefully as the owner looks on. The appraiser will touch all the bad spots, rub his finger over the paint scratches, and generally underscore each defect with an "Ummmm," or a. "Too bad," or a "They don't make cars like they used to," every time he discovers a problem or defect. If you decide to shop for a used car and elect to use this technique, keep in mind that you'll want to point out the defects without demeaning the car or putting any blame on the owner. That could create a negative atmosphere. The sole purpose of this technique is to make sure that the owner knows that the appraiser is fully aware of all those things that impact the car's value. Don't be surprised if the appraiser uses this tactic on your car.There are times when customers will bring in true "cream puffs" with no idea of what they're worth. There are more than a few usedcar buyers who will try to steal the trade. That is, they will offer less than the car is worth, knowing that they can retail it for a significant profit. Again, take the time to get three appraisals to make sure you have determined the car's fair wholesale value.
Selling Your Car Yourself
If you've got a car that's in good condition, most used-car dealers would rather take it in on trade than let you sell it yourself. The reason is simple: Most dealerships make more money with their used-car business than they do with their new cars. And why not? Most new¬car markups fall in a range between 12 and 20 percent, while used-car markups have virtually no top.If a dealer believes your car will sell quickly for a good profit, he will try to convince you that the hassle of selling a car yourself is just not worth it. He might even point out that if you trade your car, you pay sales tax only on the "difference" between the trade-in allowance and the price of the vehicle. True, but keep in mind that it will be you, and not the dealership, who will be pocketing the profit.
