Qualifiying
One of the first steps in virtually any sales situation is for the seller to qualify the buyer. In car sales, the salesperson is looking for two types of information:
1. Vehicle-related: Vehicle-related information has to do with the kind of car you're looking for, the features you want, and how you plan to use it.
2. Financial-related: Financial-related information has to do with finding the answers to questions like:
1. How much are you planning to spend?
2. How much do you owe on your current car?
3. How much do you think your trade-in is worth? 4. Are you a "payment" buyer?
5. Are you a "difference" buyer? 6. Are you a "cash" buyer?
7. Are you planning to finance? 8. Are you planning to lease?
A good salesperson understands that his or her first task after learning your price range is to sell you a car that is both within your price range and satisfies your needs. Then, having convinced you that a particular vehicle satisfies your driving needs, they begin to deal with the financial side of the deal. Unfortunately, most salespeople are so anxious to sell you a car, they cut the car presentation short and attempt to go right for the close.
Depending on what you tell the salesperson about any or all of the eight questions listed above, the salesperson will use that information to decide his or her sales strategy.
What Your Answers Tell the Salaesperson
1. How much are you planning to spend?
If you tell salespeople that ,you're planning to spend $15,000, they'll show you a car with an MSRP (manufacturer's suggested retail price) of $15,000. They know that you will probably want to negotiate the price. It's their hope that they will sell you the car for around $14,000 and then make up the additional thousand by selling you an extended warranty, rust proofing, life insurance, and anything else they offer as add-ons.
If you have allocated $15,000 for a vehicle and want to get the maximum car, van, or truck for that amount, you should enter the dealership knowing the true "invoice" or "dealer cost" of the car. In this example, if you've got $15,000 to spend, then the car ought to have an invoice price of something less than $15,000. Therefore, you should ask to see a car that is 15 to 20 percent above your budget. In this case you'd tell the salesperson that you're thinking about some¬thing in the $17,000 to $18,000 range.
2. How much do you owe on your present vehicle?
Assuming you plan to trade in your current car, your answer to this question tells the salesperson:
1. How much equity you have in your current car, and
2. If your payoff is so large as to make it difficult to structure a deal
For example, let's assume you bought a car last year for $15,000 and financed 75 percent of the car, or $11,250. Further, let's assume that you've paid that down by $3,000, leaving you with $8,250 still owed. Now here's the shocking news: With few exceptions-those being certain luxury cars and high-demand sports vehicles-your one¬year-old car, van, or truck has dropped in value anywhere from 40 to 60 percent. That means that on the wholesale market your car is now worth, at best, about $9,000, leaving you only about $750 equity in your trade.
Should you decide to try to sell the car on your own, you might be able to get a couple of thousand over the wholesale price and use that as a down payment on the new car. On the other hand, if the sales¬person knows that your car is fully paid for, that tells him or her that:
l. You've got $9,000 in equity to put against a new car, and
2. Your additional out-of-pocket payment is only $6,000
This information could then lead the salesperson to try to sell you on a more expensive car. What's another two to three thousand dollars?
3.
How much do you think your trade-in is worth?
Once you have made it known that you intend to trade in your current car, the salesperson will try to establish if you have a price in mind. If you suggest a number that is higher than the car is worth on the wholesale market, that will suggest that either:
1. You need to be educated, or
2. You are one of those buyers who is more concerned with get¬ting a "good price for their trade" than they are about the total cost of the transaction
If your estimate is lower than the car is worth you've told them that:
1. Their used-car department can "steal" your trade.
2. They can quote you a low trade-in figure at the outset and then use the difference between your estimate and its real wholesale worth as a means of reducing the difference between the trade and the price without hurting their profit margin.
The lesson here, and one that we will discuss frequently in this book, is to know the true wholesale value of your trade-in before you start to shop. We'll provide instructions on how to do that later.
4. Are you a "payment" buyer?
While they won't ask this question in so many words, they will try to determine if you're one of those people who is really only concerned with the amount of the monthly payment. If you are, you've given them a license to steal.
