Sunday, December 13, 2009

Topic Four: Used Car or Truck Purchase Process Variables and Tips

Keep Your Wits

So now you are with the salesperson or finance person at the dealership and have landed on the vehicle of your dreams.  Be careful not to get caught up in the moment - save the euphoria for when you take delivery as it is a great feeling.  For now, put on your bankers hat. 

Don't Get "Hot Boxed"

Some dealerships are very aggressive in closing the deal, expect a certain amount of discussion designed to get you to move forward but if at any time you feel extremely uncomfortable,  say so and/or get out.  There are many variables in how much you ultimately pay for a vehicle, including repairs based on it's condition. 

Trade In Effect

Make sure you confirm the actual sales price for the vehicle, tease out any trade in valuations - used vehicle trade ins are only worth what the market bears - dealers can give you more for the trade than book value ( is a great source as is Kelly Blue Book or but they are just charging you more for the vehicle you are buying. 

What Dealers Try to Make

There is a certain amount of gross profit it takes for a dealer to net any amount of profit on the deal.  Seems odd that they may shoot for a $2000 margin on you and end up taking $150 to the bank but that's why volume is king.  Thus they will find a way to make something somewhere.  It's like squeezing a ballon in different sections, one section may get squeezed but another section expands and the same amount of air (profit) is still in the balloon.    Profit allows the dealer to eat so do not begrudge them something. 

When To Buy A Car Or Truck

One note - cash buying is quite beneficial for you as well as purchasing at the end of the month.  We want to hit our numbers - it's how we live but also part of our psyche.  "One more on the board" feels good and feeds the kids so help us hit our goals and maybe shave a few hundred off the deal.

Interest Rates

If you are getting bank financing they are all fairly comparable.  If you are getting dealer financing sometimes called "Buy Here, Pay Here" or signs say "We Finance" that means the dealer is the bank as well as the dealer.  States set top interest rates just like for credit cards and they are just as high i.e. can get up to 26%.  If you need a vehicle for work you need a vehicle for work but see if you can demonstrate some credit worthiness.  Years on job, years in house, owning a home, good paycheck, multiple references all point to stability.

Monthly Payments

One way for not so good dealers to make lots of money from you is to have you pay for years.  I realize you need a certain payment to live but try to pay the car off as fast as possible!

Down Payments

Put as much down as you can.  Use the "Friends and Family" approach - I do not care where your money comes from - collect what you can and pay those folks off with your next paycheck.  The more you put down the more likely a dealer is to sell you a car and finance you himself.  Look to put down about 1/2 of what the list price is.  You can get $500 down but that barely covers registration and title and sales tax.  The dealer will get good profit on these kinds of deals but try to collect more than that.


Fees are fees, most are legitimate - the only one you might fight is a documentation fee - I use it to pay my brother to go to the DMV.  You don't have to pay it but if you want the car, I'd let the dealer have his $50.

So those are the variables and notes on bringing each one down as best as possible.

More next week on the actual documents leading up to the "Golden Moment"!

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