The Trade-In Process (Part 2)

There are two schools of thought to approaching a dealer about your trade. Some say to clue the dealer in that you plan on trading a vehicle early on in the process. The other side says to keep that fact from the dealer as long as possible. There are advantages to both, but I believe that the advantages for holding out outweigh the benefits of cluing the dealer in early.

I would love to have a paragraph here explaining to you why some folks think that you should be up front about the fact that you plan on trading in a vehicle. Unfortunately for both of us, none of the people that say you should seem to give a good reason for it. Maybe the thinking is that it gives you a better relationship with the sales team or specifically your salesperson or maybe they do not believe you will get any extra value for it, but that is not the point.

The main reason for keeping this information out is to extract the exact price the dealer is willing to sell you the vehicle you want that way you can get an accurate idea of what they are giving you for your trade later. This is true with both new vehicles and pre-owned ones, though for most dealers it will be most or only beneficial with pre-owened ones. As far as new vehicles go, as I have mentioned before most dealers sell their new vehicles for about as low as they can sell them right from the start. Some of them still keep a little bit though.

For instance, some dealers will hold onto certain rebates or they will not give you all of the difference between the MSRP price and the invoice price. As I have mentioned in a previoius blog posts, most dealers now sell new vehicles at Invoice Price minus the Rebate. If you go to a dealers web site and they say “Get your E-price” for instance, the dealer is probably holding onto one of those amounts. They just want your contact info before giving it to you.

If they hold onto that initially, they can add that value to your trade-in to show they are giving more to you than they actually are (we call this “blue sky”). Here is the key: Always ask to see the invoice and always ask to see the rebates. You can also find the rebates that are available online. I would make sure to compare what you found to what the dealer shows you. You may have missed some. Be aware that rebates do change regularly (usually monthly). Here is an example of how numbers can be manipulated:
Your trade-in is worth $10,000

The MSRP of the vehicle is $38,920 (and some change)

The invoice price is: $36,873

Rebates are: $3,800

Sale Price: $33,073 (36,873 – $3,800)

So if the sale price is $33,073 and your trade is worth $10,000 you should be able to trade for $23,073. The dealer might show their online price using MSRP minus rebate which is $35,120 initially ($38,920 – $3,800), but once you come in they go ahead and give you the invoice minus rebate cost, but tell you that your trade is worth $12,047. The price to trade is still $23,073 ($35,120 – $12,047), but the value for your trade is still only really $10,000. They just took the difference between MSRP and Invoice which was $2,047 ($38,920-$36,873). That’s not confusing at all is it….

Now you can see why you might want to negotiate the price of the vehicle by itself without the trade initially. Get the actual sale price of the vehicle first and then you will know exactly what they are giving you for your trade. To see if your dealer or salesperson is being honest with you then you could also include the trade early on, get the price after your trade-in, and THEN ask for the invoice and rebates to see if the numbers match up. It just comes down to your preference.

Ultimately, the purpose of either approach is so that you can compare dealers offers accurately. If you go to one dealer that puts the invoice minus rebates price right up front like we do (click here for the example I used above: http://golovegreen.com/Mobile#/Mobile/Vehicle), but another only gives you MSRP minus rebates you might think that dealer is giving you more for your trade then the first dealer when in reality the offers end up the same. In some instances you can get “more” for your trade, but end up paying more!

It can all be pretty confusing so feel free to ask me any questions in the comments and always feel free to ask to see my invoice and all of the rebates available if you come into my dealership!

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The Trade-In Process (Part 1)

For this post, I decided it was important for me to do some research on the subject considering that this is one in which I can see dealers handling the process differently. I was not necessarily surprised to see a lot of misinformation, but I was surprised to see some of the tactics that some dealers use (or have used) in the trade process. Since there is a lot of information to be discussed about this process I have decided to break this topic into separate posts so that I am neither too brief on the subject nor too long winded on it. For today, I am simply going to give you a snapshot of how the trade process should. Then, I will tell you a few things to absolutely not put up with that I found during my research.

The first thing that happens when you bring in your trade is that we will get all of the information off of the vehicle so that we can appraise it accurately. First, we will get the make, model, trim level (please, please, please refer to my blog post “What’s In A Name” about this subject), mileage, and VIN (vehicle identification number) of the vehicle. I will also typically do a quick walk-around of the vehicle myself to both make sure the appraiser sees any visual damage on the vehicle and also to make sure that he notes all of the additional options your vehicle has that adds to the value (large dealerships will usually have someone whose main job is to do the appraisals whereas our Sales Manager does all of ours).

Next, we will use the VIN number to run a vehicle report history. This history tells us multiple things about your vehicle including number of owners, number of accidents, and an odometer check making sure there has been no rollback on mileage. There is other information available such as if there were any hail damage reports, water damage reports, or, more importantly whether there is a salvage title on the vehicle.

As you might expect, an odometer rollback is never a good thing. This means that it is now and forever impossible to tell exactly how many miles a vehicle has on it. This can make a vehicle very hard to sell and therefore will likely decrease the vehicles value. Number of accidents is not as important as the severity of an accident, but if the number is high it can impact value. The importance of the number of owners depends on the age of the vehicle. If the vehicle has 4 owners and is fifteen years old, that is pretty normal, but if a vehicle is only five years old and has 4 owners that can be a sign of trouble. Not to mention that one of the first questions people ask is how many owners a vehicle has. For vehicles that are five years and newer people typically only want to hear that the vehicle has one owner; maybe two.

While the salesperson is running these reports and making sure you are comfortable, the appraiser will be out driving your vehicle. Before they go out they will do a quick walk-around of the vehicle looking for any damage to the vehicle and looking at tire wear. After that, they will make the same trip on every drive taking your vehicle through rough roads to listen for something like bad shocks. Then they will take it on the highway to listen for sounds that a rougher and louder road might cover up like tire noise.

While they are out they will also check to make sure everything works such as the air conditioning, radio, automatic windows, etc. This may seem like ways for the dealer to de-value your vehicle, but it is more so that they will know what they will have to fix. Try thinking about it like this: If you were going to a reputable dealership to buy a pre-owned car would you not expect the air, radio, and windows to work? The dealership will have to fix these little problems which will obviously cost them money.

After all of this, the appraiser will take this information and use several resources to determine the value of your vehicle so that they can make you a trade offer. I will discuss this trade evaluation process in the next blog post so that you know exactly how they will come up with your value and I will give you some tips on how to be ready for this step in the car buying process.

I will end this post with two things I read about in my research of the trade process you should absolutely not put up with. Walk out if these things happen to you at a dealership:

1. DO NOT let the salesperson or the appraiser do a walk-around of the vehicle and invite you to be with them for the purpose of pointing out every ding, dent, or minor blemish to your vehicle. They are merely trying to reduce the value of the vehicle in your eyes. This is just flat-out disrespectful. With the internet age and impact of social media, I think this tactic has likely gone by the wayside since they don’t want people openly sharing this distasteful treatment.

2. DO NOT let a dealership lose or hide your keys. I cannot believe I even had to type that, but apparently some dealerships will purposely lose your keys (I heard of one that openly threw the keys on the roof!) so that you will be at the dealership longer and they can keep negotiating with you  and wear you down. Again, I imagine that this has disappeared in the social media age, but the fact that I read it on several current articles absoutely floored me.

Please leave me a comment if either of these things have happened to you.

What’s In A Name

I owned a 2007 Dodge Charger for 7 years. In the years leading up to the point that I got in the car business if had you asked me the “trim level” of my Charger I might have said, “Uh…. 4 doors?” Had I known how important this is I would have probably memorized it better than my own social security number. It is both important in the buying process and the trading process. Let us explore why.

Since getting in the car business I have found that most people think every vehicle is the same plus or minus a few features that can be added, but the Escape for instance actually comes in 3 different trim levels with multiple features available on each one. They are S, SE, and Titanium. They are each so different (especially from SE to Titanium) that they are almost different cars. These can be differences in appearance (ex. an S only has black door handles whereas SE and Titanium have colored) mechanically (ex. the S only comes with a 2.5 liter engine when you can get a 1.6 Ecoboost and 2.0 Ecoboost on the SE and Titanium), and technology (ex. the hands-free liftgate is only available on the Titanium).  Each trim level above the S model has different features that come standard on it and each successive trim level has all of the features of the lower model, plus it’s own standard features. On top of that, each trim level has specific packages and individual features that are only available on that trim level. Understanding this is important when buying a new vehicle for a few reasons.

The obvious reason is that there is a different starting price between each model (S: $23,600, SE: 25,745, and Titanium: $29,745). Another is that if you go to one dealership and they give you a price of $25,745 and you go to another and they offer you $23,600 you might think you’re getting a better deal, but you’re really just getting a lower trim level with less features. This can even be true within the same trim level if a certain package is available on one dealerships car and not the other. For example, the SE has a Convenience Package that adds $1,395 to the price. You might find an SE at another dealership that doesn’t have this package and think you’ve saved yourself $1,395. This is all very confusing. And it’s on purpose.

Recently, the Chevrolet commercials for the Malibu (trim levels: L, LS, 1LT, 2LT, and Premier) have caught my eye. They tell the story of all of the wonderful technology that is available and the real people not actors “oooo” and “awww” at all of the features available to them. Then they tell us that the Malibu is available “starting at $22,500.” One of the features Chevy often mentions is their new teen driver technology (which Ford has had since 2009; called MyKey), but that feature is only on the 1LT model and up and the starting price is $25,895. I use Chevy as an example because they have been very specific in trying to differentiate based on features, but all car makers do it. The auto-makers #1 goal is always to get you on the lot. They want you to see specific features and come into the dealership looking for them at the $22,500 price. Once you’re there the salespeople have to break the bad news to you that you have to spend $25,895 to get that feature. The hope is that you will either move up your price range or go ahead and buy the $22,500 one any way.

Where it is even more important is on the value of your trade-in. You want to make sure that if you’re trading in a 2013 Escape Titanium that you get the trade value of a Titanium and not the SE. If you don’t understand these differences then a dealer might able to give you less for your trade than it is worth. You will also need to know that your sunroof that is on your Titanium model is also more valuable than a Titanium model that does not have it (Note: specific individual features don’t always change trade value).

Buying a pre-owned vehicle makes tracking these differences even more difficult. For starters, you will want to make sure that you know the true value of a pre-owned vehicle you find on the lot. You don’t want to go home and research that vehicle and think you are getting a steal because you looked at pre-owned Titanium online but the one you saw on the lot is only an S. What complicates matters is that there is no true window stickers to compare the difference from one used vehicle to another.

As I said, this is all very confusing. You might want to read this more than once, because I cannot stress enough how important this is. If you have any questions feel free to call me at 660-342-3715.

“Give Me Your Bottom Dollar.”

There are several variations of this statement:

“What’s your best price?”

“I’m not paying more than…”

“You better sharpen your pencil.”

The goal is always the same though. You want the absolute lowest price that you can get on a vehicle. What you need to know is that the lowest price on a vehicle isn’t always the best deal.

For example, at my dealership, we offer a warranty on used vehicles for the first 30 days or first 1,000 miles, whichever comes soonest, on 20% of parts and 20% labor. The fact of the matter is that any used car, no matter where you buy it and no matter how well it is inspected, is still a used car with many unknowns. This warranty is to account for that fact. Usually these issues will rear their heads in that period.

This is a straight-line policy on every used vehicle with under 100,000 miles. Anything over 100,000 has no coverage. Here’s the deal though. As salespeople, we want our customers to be happy (obviously the dealership does too), not just because we care (it may be hard to believe, but we do), but also because car salesman (who are paid commission) live off of repeat business and referrals. If you’re not happy, neither of those things will happen for them.

So if there is a problem (say a $600 fix) your salesperson will fight to have that problem fixed for you even if it costs him money (it’s likely the salesperson will lose whatever percent of commission he makes off of the profit margin). And not just the warranty coverage. Free. Past your 30 days or 1,000 mile warranty (within reason)? Free. Over 100,000 mile vehicle and no warranty at all? Free. If you fought to get that last $300 off of the price of the vehicle that is harder to do now. I think most people would rather pay the $5 extra dollars a month that $300 will cost them rather than have to front $480 or more at one time.

The policy we have in place is to protect the dealership (and even the salesperson) from the unknown. If there’s a $2,000 problem the dealership had no way of knowing would occur in the first 30 days or 1,000 miles they can’t be expected to fix it for free. From my experience people understand that and understand that used vehicles are a bit of an unknown. I’ve been at Lovegreen’s now for 9 months and NOT ONE SINGLE TIME have we used the 30 day or 1,000 mile and 20% rule. That means one of two things or both: 1. We sell reliable vehicles and 2. We take care of our customers.

“Just Looking”

It’s the oldest trick in the book. When you’re out on the lot and you see a salesperson walk up, the default response is “I’m just looking.” This seems to be the conditioned response for everyone, even if they aren’t actually “just looking.” I know I have used it before myself in other situations. There are a few problems with this response. None of them help you, the consumer.

For starters, salespeople have adjusted to this response. A good salesperson knows how to move past this response now. At a minimum they will say, “Well thanks for stopping and looking at our dealership. Are you looking for a car, truck, or SUV.” Salespeople know that 99% of the time if they walk away after you say it, they won’t get a chance to talk to you again. The salesperson’s chances increase heavily just by moving past this. It’s hard to blame someone who makes their living off of commission for pressing on. The other problem is that people are so used to this working that they actually get a little upset when a salesperson doesn’t bid them adieu. This doesn’t do anyone any good.

So what do you do now to deflect the salesperson who comes out on the lot. Well, I’m not sure you’re going to like my response, but bear with me: Talk to them. Rarely is a person just looking. You have come to the lot for a reason. Just tell the salesperson what you wanted to know. If you are just looking for price information, just ask. If you want to know if the car you’re looking at has remote start, just ask. Or maybe you just wanted to look around the vehicle and see if you like it in person. Just tell them that. If you at least give a salesperson something to go off of they will feel like they have done their job. If you make them feel like they have won something by moving past this you are likely to end up with a less pushy salesperson. A lot of the time a salesperson just wants to be able to come back and give the boss some quality information since “Oh, they are just looking” is the fastest way to the doghouse.

Lastly, unless a dealership has the option of doing the entire sales process online, you are going to have to work with a salesperson at some point. So have a conversation with that salesperson for the purpose of finding out if you are comfortable working with them and that, most importantly, you think can trust them. The key here is to come to the lot with a plan and with information that you have already gathered online. Ask them what the price is and see if they give you the sticker price (which we’ve already talked about is never the actual price anymore). If they do, you might not be able to trust them. Ask them if the vehicle you’re looking at has remote start (knowing full well this one doesn’t). If they tell you that it does, or if they don’t know, you’ll know whether that salesperson knows their stuff.

The fact of the matter is that the salesperson is a necessary evil. Skipping “just looking” will relax the salesperson and take pressure away from them feeling like they have to sell to you. Use the salesperson to get all of the information you came looking for and find out if they are the person that you would like to work with or that you even want to buy from that dealership. How that salesperson treats you will most likely be how that dealership expects them to treat you.

 

 

 

Reading a Window Sticker

You might be familiar with the term “sticker price,” but there is a lot more information available to you on a window sticker. You will find the standard options on the vehicle, the optional equipment added to that specific vehicle, estimated miles per gallon, annual fuel cost, comparisons to the average fuel cost, smog and gas ratings, and safety ratings. Every brand’s window sticker looks a little different. I’ve provided an example of what a Chrysler (Chrysler, Dodge, Ram, Jeep) and Ford window sticker look like at the bottom.

Looking on the Ford window sticker for instance, you’ll find all of the standard equipment that goes on any 2016 Ford Explorer Base model 4WD vehicle in the upper left hand corner. This means that any 2016 Ford Explorer Base Model 4WD vehicle, no matter where you find it, will have those features. Below these standard features (below the line on a Ford sticker) are optional features that this specific vehicle has. There are group packages* or standalone options available on most vehicles.

When comparing prices from dealership to dealership it is incredibly important to be able to understand how to read this portion of a window sticker. It is one of the biggest mistakes buyers make in the buying process. We have seen many times where a customer is looking at our vehicle, sees a feature on it, shops elsewhere, and thinks they are getting that vehicle cheaper at another dealership with all of the same features. For example, the Explorer window sticker provided shows that this specific vehicle has Sirius XM radio as equipment added to it over the standard base model. The XM radio costs an extra $195. A person might go to another dealership, not get the XM radio, get a price that’s $195 cheaper, and think they saved money at that dealership. If a person does not want XM radio, then they did save money, but what happens too often is that they bought the vehicle for $195 less THINKING they got XM radio only to find out later that they did not. This example is a pretty minor one, but imagine thinking you’re getting a rear view camera or navigation and you didn’t!

There are other things that might be important to you on the window sticker as well. You can see that the mpg estimate* on the Explorer are 19 combined, 16 city, and 23 highway on the upper right. Make sure you compare these 3 numbers equally and that you don’t mistakenly compare the city mileage on one vehicle to the highway mileage on another. You can also find an estimated cost for fuel in a year, and how much that vehicle’s gas will cost you more than the average new vehicle. Another piece of information is the smog rating and gas rating of that vehicle on a scale of 1 to 10. Anymore, unless it’s a hybrid or an electric vehicle it will not be very high.

Lastly are the safety ratings of the vehicle on the bottom right. These are all usually pretty high on vehicles anymore no matter the brand. That’s why you don’t see as many commercials about safety ratings anymore. There might be another reason for that though. I’ve been in the business for less than a year and we always get these reports on what the most important things are to a buyer in their search for a new vehicle. One of the things that always tops that list is safety features, yet in my time in the car business I have not had one single customer asks me about safety features in a vehicle like crash ratings, air bags, etc. Either car companies have figured this out or customers are catching onto the fact that, safety wise, these vehicles are all pretty well the same quality*.

Ford Window Sticker

Chrysler Window Sticker

NOTE: An * by text means that this item will be discussed further in a future blog post

 

INTRODUCTION

I have been in the car business for less than a year, but I have learned a lot in that short period of time. It has been astonishing to me to find out how little I knew before getting in this business and I am far from the only. The main reason I decided to start this blog is to educate the public on the buying process from someone on the inside. I often look online for articles on the process and I run into things like “8 Tactics Car Salesman Use to Trick You” and the like. I believe that with the passage of time, the advent of technology, and the growth of the internet, there is no reason for a buyer not to get the best deal on the right car for them. All of the information needed to accomplish this goal is available to buyer. Therefore, these “tactics” should be irrelevant. A buyer shouldn’t be able to be tricked.  That is why I don’t fear divulging all of the information you will find in this blog. It’s available to you anyway! My purpose is not entirely selfless. Of all of the things I’ve learned, the number one thing that can keep me from a sale or even keep me from being able to talk to someone who is in the market for a new or pre-owned vehicle is fear. It is my hope that by being transparent, potential customers will be more comfortable coming to the guy that shows he has nothing to hide. I’m going to write articles that have varying levels of complexity. From simple things like “What is a Window Sticker” to more complicated like “How the Trade Process Works.” I hope that the information I provide helps you become a more educated buyer, helps you get the best deal, and helps you get it from me.

For my first post, I’m going to keep it simple and explain Manufacturer’s Suggested Retail Price or MSRP. We hear the term or it’s abbreviation a lot, but what is it exactly? The MSRP is the price that a brand, such as Chrysler, recommends that a dealer sell the vehicle they made for. You will find the MSRP on the window sticker* of the vehicle and it should also be on the dealerships website*. If a vehicle has the same trim level* it will have the same MSRP or “sticker price” no matter where you buy the vehicle. The only exceptions would be if the manufacturer offers a discount for certain features at the time of manufacture or if there is a different type or brand of part that is used in the making of that vehicle*. Typically, this difference is very small though. Now for the most important part. Never, under any cirumstances, pay that amount. Most dealers now sell all of their new vehicles at invoice* (how much they paid for it) minus rebates* (discounts available to the buyer). If you get your new vehicle from me, you will NEVER pay MSRP.

NOTE: An * by text means that this item will be discussed further in a future blog post