It’s time to shop for a new ride, and the local dealership has one you really like. Regardless of whether it’s used or new, to get a closer look, you’ll most likely want to visit the dealership to see it. If you’ve never visited a dealership (or even if you have), there are some things you should know up front about what’s going to happen. Although every car dealership is different, there are some themes that are familiar to most.
If you called on the phone before your visit, the salesperson probably encouraged you to ask for them by name when you visit the dealership. Car salespeople often work on commission—meaning they get a percentage of the sales price. It could be a straight percentage, or it could be part of a bonus plan, but the point is, if they talked to you on the phone they will want to start to get to know you, and ultimately ensure you end up in the right car and with the right deal.
Needless to say, you will want to work with a salesperson who knows the product and provides a level of comfort. A bit of research can help here. Start by checking out the Dealer Rating on any CarGurus listing that interests you. If you know somebody who has recently bought a car at an area dealership, ask for a referral. Check that dealer’s website for salesforce faces and titles that indicate longevity. If they’ve been there awhile, they are probably extremely knowledgeable.
What about negotiation? The first thing to be aware of is that many dealers will base their business model on no-haggle sales: There’s the price, take it or leave it. If a dealer is selling a particularly hot model of car, there may be a shortage of them. Try to negotiate and the salesperson will let you walk, knowing people are standing in line to buy the same car.
If you’re comfortable negotiating the price, there's no harm in trying to offer less than the asking price, but be prepared for a counteroffer. Alternatively, the salesperson may try to deflect by turning the question into one of affordability. For example: “How much do you want your monthly payments to be?”
Assuming you are getting a loan, this is a fair question. But you can defer by asking to talk about the financing later, and instead concentrating for now on price flexibility. Ultimately a salesperson might need to bring their sales manager into the conversation at this point to agree on the deal.
Remember too that if you want to trade in your old car to the dealer, it will need to be inspected and appraised to determine its value. Keep in mind that the salesperson cannot offer you full retail value for your car. They will instead pay 'trade' value, which assumes they can fix whatever needs to be fixed and then re-sell it for what it’s actually worth. Therefore you are often better off selling your old car yourself and using the cash to help buy your new car – assuming you are prepared to put in the effort.
Keep all this in mind, especially if you’re looking at a used car on the dealer’s lot that might have been purchased at a 'wholesale' price. If the dealer acquired the car at an attractive price the salesperson may be willing to negotiate a better sales price with you, because the business has less invested in it. Other factors that determine how flexible the negotiations are include how long the car has been on the lot and the overall desirability of the particular model.
The Sales Manager
When it comes to the point of agreeing to buy the car, a sales manager might well join the conversation. They’ll most likely ask you, “If we can come to an agreement, will you be buying the car today?” It's a reasonable question, because it determines how negotiations will proceed. Say you’re “still looking,” and the serious negotiations will stop. They want a commitment. They will also ask again about financing, and here’s why.
According to NADA, new car sales account for about 2.6% of a dealership's before-tax profits as a percentage of sales. The finance and insurance operations (F&I) account for about the same number. If the sales manager agrees to a low-ball number for the sales price, they may be looking to make it up when you head to your next stop, which will be a visit with the F&I people. Assuming you come to an agreement on price, the sales manager will shake your hand, a sales contract will be signed, and off you will go.
Finance and Insurance
If you come into the dealership with enough money to buy the car without financing, you are a “cash buyer.” If you are planning to get a loan through your bank or credit union, you will be said to “have your own money.” But either way, you have to talk to somebody from the dealership's F&I team. They’ll talk to you about down payments, interest rates, and terms of financing the car.
Even if you have your own money and want to simply buy the car outright, it can be worth listening to what an F&I person has to say. The dealership may be able to beat a bank's interest rate, for example —especially if you’re shopping for a new car. Alternatively, rebates or cash back may be available for taking out finance, and if you’re buying an electric or hybrid vehicle, you should pursue any available tax credits. They will also stress the importance of an extended warranty and additional insurance – these are all things you should consider, even if you don't intend to purchase.
According to a report by Consumer Reports in 2013, 55% of the drivers who bought an extended warranty on a car never used it, and those who did actually spent more on the coverage than the repairs would have cost. Don’t be afraid to say “no” to extras if they aren't what you're after. The last thing the dealership wants to do is lose you at this stage of the deal.
As you approach the finish line, the F&I person may have a few more things to show you, or another member of the sales team may show up to talk to you about undercoating, fabric protection, paint protection, and car alarms. These add-ons and extras might be useful to you, but equally they might not. There is no obligation to buy. Once you have signed title forms, the registration, and any loan contracts, you are done. Find and thank your salesperson, get your keys, and head out into your new automotive world.