T H E C A R M A V E N
© COPYRIGHT 2020. The Car Maven
In a recent article, Forbes lists the 5 Myths of Car Buying (Source: Forbes.com; How Older Car Shoppers Can Get the Best Deal, March 6, 2018). We relish these types of discussions, and felt it would be worthwhile to provide our perspective. While the article is targeted towards older shoppers, it includes 5 Myths, and we feel that our commentary is relevant to shoppers of any age. Read on....
Myth #1: Cash is King
The article describes this as a myth. In our opinion, it is certainly a factor in the process that many car or truck buyers don't understand. However, it may or may not be a myth, depending on your perspective. To begin with, and yes-one should always begin here: THE PRICE IS THE PRICE AND IT DRIVES EVERYTHING. What many are not aware of is that lenders and credit unions want your business. They want you to finance or lease. This means income for them, and the chance to gain you as a customer.
FACT: Dealers are a great resource for lenders, so many lenders offer incentives for dealers in the form of what is known as a "flat". This is one way that dealers are rewarded for a no-cash transaction. The "flat" is simply money to help the dealer decide where to send your business. So, when a customer is paying cash for a new auto, this is one less source of income for the dealer. And, it's not just a one-way street for the lender, believe us. Many times the financing and/or leasing arrangement can enable the customer to drive away in a vehicle that they never dreamed they could afford. And as many of our savvy followers are well aware, many times there is a captive lender (the lender affiliated with the manufacturer), who is offering an additional cash incentive if you finance and lease through them. A very important consideration, especially if you can qualify for a 0% loan, due to excellent credit.
VERDICT: We AGREE, that Cash is not always King.
Myth #2: The best day of the month to buy a new car is the last day of the month.
Hmm. Since most dealers consider the last day of the month their busiest, it is highly unlikely that a shopper will receive the kind of attention that they deserve on this day. Yes, it's true, that the month is made and finalized according to the closing schedule set by the manufacturer (which is frequently a day other than the calendar last day), but many times there are factors at play which mean the deal you will get will be identical to what you will find on any other day. (Why, oh why does it need to be so confusing?)
Our recommendation, and what we work towards with our clients, is a weekday according to an appointment set with a decision-maker at the dealership. We have completed 90% of the work already; we have done all of the research , all of the negotiation, test-drives completed, everyone is on a first name basis, and usually all that is left is signing paperwork and a few high-fives.
Even if you are not working with The Car Maven, we would strongly urge you to do the same. Research, appointment, weekday.
VERDICT: We AGREE, the last day of the calendar month is not typically going to create magic for you.
Myth #3: Sales associates won't be interested in working with you if you're not ready to buy.
In our combined 100 years in the industry, WE HAVE NEVER MET A SALESPERSON WHO IS NOT INTERESTED IN WORKING WITH A POTENTIAL CUSTOMER. If you meet one, or feel the slightest hint of lack of interest, walk, no - RUN from that dealer. As we have discussed in many of our posts, the importance of shopping ahead of time will inevitably help you avoid any risk of the cold shoulder. But, if you don't feel that you are valued, welcomed, AND needed by that dealer or salesperson, trust us when we say, there is one on every corner, or at least down the street. But wait, you say, “what if that dealer has my dream vehicle and it is the only one in town?”
ANSWER: Try to speak to a manager. If not successful, there is this place called social media. That will generate a response, and quickly! We always say that you are in the drivers seat. And you need to stay there throughout the process. Dealers want you on social media, they just want you raving with positive words to say, not that your salesperson didn't treat you well.
VERDICT: We agree with Forbes, who, in their article, suggests you ask for another sales person, or that you visit another dealer. We agree, we just said it a bit more forcefully, and with added color.
Myth #4: Big-city dealerships have the highest car prices.
So, most, not all, but most metro-based franchised dealers are relatively high volume when compared to those in rural areas. Don't be fooled by this though, we know of some pretty high volume truck dealers in Nebraska and central Iowa. So, use this as a general rule, and one that pretty much means that these higher volume dealers will have a little more wiggle room than a smaller volume dealer. Another factor at play in larger cities is the competition. This generally will create price wars by dealers who are working to generate YOUR business. While this happens in smaller markets too, it just doesn't happen to the degree you see in the big cities. So, use this to your advantage.
Here is the nitty-gritty: Higher sales volume can also mean access to higher potential pay outs from manufacturer programs. Many auto companies have what is known as Tier Sales Bonus programs and other reward programs that pay the dealer for performance. While not in every case, most of the larger volume dealers have access to the higher tiers and higher payouts. What this does is enable some dealers to negotiate on certain sales where other, lower volume dealers can't. It can be a bit tricky to understand, but shopping in a larger metropolitan area will generally translate to greater product selection and a bit more wiggle room on the final transaction.
VERDICT: While the statement is correct, we disagree on the explanation as to why. Forbes mentions the concentration of higher-educated people in large cities playing a role. We know that there are highly educated people everywhere, even in rural areas. We don't think this affects vehicle prices whatsoever.
Myth #5: Leasing is the least expensive way to get a new car.
We will reword this statement, which will make it more of a truth; Leasing can be the least expensive in terms of a monthly payment. This is because you are only financing a portion of the vehicle's cost. But, as stated in the article, there is an associated Myth; Leasing is the most expensive way to get a new car. This is, in general, not true. It can be a very expensive alternative if 1) you incur significant wear and tear on the vehicle, 2) you drive more than the contracted mileage and 3) you decide later that you love the vehicle and want to buy it outright at the end of the lease.
In general, we think Forbes accurately described this as a Myth. But our followers are pretty smart and probably knew this already.
BONUS MYTH, ACCORDING TO THE CAR MAVEN: Car Dealers are Bad
While there are a few bad apples out there, and perhaps you have dealt with one, in general - car dealers are not "bad". In fact, they are really no more than independent franchised businesses that want and need to remain profitable. In many cases these are businesses that have remained in people's family for years and years. Yes, there are also many that have become so large and powerful that they are publicly traded and represent billions of dollars of revenue. Your business is their livelihood, regardless of their size. You are someone who can generate significant additional revenue to them, beyond a car or truck purchase via repeat purchases, word of mouth, service income and ancillary purchases. You are their reason for being. We know countless dealers who we consider our friends, and who we trust implicitly. There are good ones, trust us.
That's why WE are here, to help you navigate the process, if you'd like. Reach out to us with questions, we think you'll be glad you did. Simply submit a contact form, and let us know what your interests are.
Hope to hear from you soon.
The Car Maven
Read the Forbes article here: