A Step By Step Plan To Conquer Debt

STEP 1 - RESEARCH

It’s a perfect day and you have decided to finally buy that new car you wanted. So you are off to the dealer ship, right. Hold on sparky and make sure you have done your home work before you step onto the dealership lot. There is a ton of research you have to do to make sure that you are maximizing your hard earned dollars.

Once you have decided on the brand, make and model you want go to the manufactures web site so you know what incentives are available to you for that specific model. A lot of advertising will show discounts “up to” but may not include your model so be careful. Make sure you get the correct rebates and dealer discounts and write them down. It’s always good to have a copy of the AD from the newspaper.

Go to Kelly’s Blue Book, Edmonds, NADA or the Automotive Digest and look up the factory invoice for your vehicle. Each one of these is a good reference point and they usually have a copy of the manufactures invoice. The cost on the invoices may vary so always go with the least expensive invoice. A couple of items that might not show on an invoice are advertising cost and hold back. Depending upon where the dealership is located advertising can range from two hundred dollars on up. You can use an average of five hundred dollars and be safe. Hold back is usually three percent of invoice.

Example:

COST MSRP

Base price of vehicle: $18000.00 $20000.00

Optional equipment: 900.00 1500.00

Special equipment Pkg. 1800.00 2700.00

Sub total 20700.00 24200.00

Advertising 500.00

Hold back 621.00

Freight 900.00 900.00

Total 22721.00 25100.00

These figures are for example only. But you get the general idea of where we are going. Now the fun begins. It’s time to NEGOTIATE the price.

Tell the salesmen you have your financing set up. The sales men will always ask some ware during the negotiations how much cash you will be putting down. Don’t say anything till after you have negotiated the price of the car. You will see why later.

STEP 2 - NEGOTIATIONS

If you like to negotiate this can be fun. Remember this is your hard earned money you’re negotiating for. Your salesman is a pro and he knows all the word tracks to try and convince you to spend as much as possible. A good salesman that has been doing this for a while is a “dime store physiologist.” He has been trained to read your body language. If you get nervous or agitated he will do it before you do. Always and I mean ALWAYS keep a cool head. Look at the salesmen straight in the eye and never ever blink when you are going over the numbers or slump your shoulders. If you have children leave them at home. Their distraction will cost you money. Do not come on strong but do not show any weakness in your voice or body language. Remember, the salesman is a “LAND SHARK” and you are his dinner. He does this every day, you do it once every three to five years so proceed with caution. Never ever make a purchase from emotion. No matter how nice the vehicle is or how much you want that car look at it as just another business transaction. The salesmen can read your emotions and it will cost you money.

Before you go into the dealer ship make sure you have gone over the numbers from step one so you no approximately how much profit the dealer is working with. His cost before advertising and freight is $20700.00. The MSRP before freight is $24200.00. That gives the dealership a $3500.00 gross profit. If you add back the freight, advertising cost and hold back you know have a gross profit of $2021.00 you are now up to $5521.00. The salesman if he did his product presentation correctly has you perfectly at ease and will start what we call the trial close. IF YOU HAVE A TRADE DO NOT TELL HIM. Tell him you are going to keep your current car.

Most dealerships will use the four square system. What this consists of is the way the salesmen will present the numbers to you. Let him do his thing with the first set of numbers. He will bring it to the desk for a manager’s approval. The salesmen will always ask you this question, “if the numbers are agreeable today will you make a purchase”. Say yes, it puts him at ease and he thinks he has made a score. Is he in for a surprise.

When he comes back from the managers’ office tell him you want to look at the numbers again. You will hear his back side pucker. You no he is holding about $5500.00. Make sure you have taken with you the invoice information that you have gotten from KBB Edmonds and any other places where you have gotten you information from. Remember all the manufactures are on a tier system. That means the more they sell the more money they get from the manufacturer. Example if they are on a stair step then their money grows as they perform up to a maximum per model. Most dealers figure the max. That information is also available on the internet. Each manufacturer is different. But it is additional money.

So now you say to the salesmen I’ll pay $100.00 over your invoice. At that point you can show him the invoice you got of the internet. He will always tell you it is wrong. Ask, don’t tell, to show me the invoice for this car. You’ll go back and forth a few times but he’ll give in. If he digs his heels stand up and shake his hand. Thank him for his time and let him now that you are going to his competing dealer down the road. He’ll cave in. They don’t want to lose the deal. If he doesn’t cave in go to the dealer down the road. Now that the other dealer has done most of the work they will be more then happy to meet your request. Remember they all have to meet a quota to get the bonus money.

Let’s say he says ok and gets the invoice. Look at the invoice carefully and match the costs of theirs to yours. Trust me the will take the deal at one hundred dollars over the invoice. Remember the invoice figure is before hold back, advertising and freight. You are not paying for that. If there are any rebates or factory incentives that will come off that number. Taxes title and tags are after the rebate. In most states the rebates are taxable so check before you go shopping.

Ah, now for the fun part your trade. Remember you kept that out of the picture and for a very good reason. You didn’t want the salesmen to show you a trade allowance with a discount. Before you go to the dealership make sure you did your research on your trade. KBB, NADA, and the auction reports for your area are a great way to get a true value. If you have any friends in the car business wholesalers etc. they become a good source of information. Remember your car is what it is. If it is a bucket of bolts your actual cash value of the car will be very low. If it is a low mileage late model car that has been well maintained it will be worth more. Remember dealerships major profit is in their used car department. The later model good clean cars they take in are better for them. There is a lot of gray area in the negotiating of your trade value.

Now you tell the salesmen that you have discussed with your wife on trading the car in and ask him what he thinks it worth. Now at this point the salesman knows he has been set up and will come back with a low ball offer. Now you need to keep a cool head and become the salesmen he should have been and sell him your car. Remember you are only going to pay sales tax on the trade difference. If you owe any money on your car it will get added back in after the trade allowance is deducted and all the taxes and DMV fees are added in. Hopefully you are not upside in your trade. Make sure you get a ten day pay off figure from the bank where you financed your car from before you go shopping. Now that you have finally consummated the deal the salesmen will write a purchase order for the negotiated price and recite in any deposit required. At that point you feel as though the hard part is over. The salesmen will then bring you into the Business Manager to go over the paper work with you. REMEMBER THE BUSINESS MANAGER IS JUST ANOTHER SALESMAN.

STEPT 3 - BUSINESS MANAGER

Now let’s back track for a minute. Make sure you have run a credit report on yourself and anyone else that will be on the loan. Your credit score and income determine the loan rate. Check your personal bank or credit union before you go out to make a purchase. It’s always good to get pre approved before you go to the dealership. A FICO score of 720 or higher will get you some very good rates. Some manufactures also have zero financing on some if not most of their vehicles. Interest rates from banks and the manufactures financial companies change on a month to month basis so make sure when you go out shopping for that car you are not using last month’s rates. It will cost you.

If you have an amortization calculator bring it with you. If you don’t then either buy an inexpensive one or get a chart. Staples carry both of them. It’s important to have that information available when you are in the business managers’ office.

Ok now you’re in the business managers’ office and it is the home stretch. Remember what I said earlier that the business manager is nothing more than another salesman here is why.

Since you told the salesmen that you have your financing in place he is going to try his hardest to get you to finance thru the dealership. If the manufactures has zero financing then that’s not a bad idea. Even if they don’t then see if he can get you a cheaper rate then you were quoted from your bank or credit union. While he is running your credit he will try to sell you the “environmental package”. That will be a combination of rust proofing, paint sealant and fabric protection. Let him go thru his pitch and get a price from him on it. Then he will come back with the “extended warranty”. Again let him go thru his pitch and give you a price. He will then take your credit report score and come up with a monthly payment and term. You tell him the term you want and ask him what my monthly payment is with and without the extras. The difference between the first set of figures and the second set will not be too much of a difference because he wants to show you the4 value of what you are buying, right. WRONG. What he has done is packed the payment. What that means is he has added money to the base payment by increasing the rate. Meaning say you qualified for a 5.5% rate. He can add three points to that rate and charge you 8.5% to hide some of the cost of the extras. Hat ‘called packing a payment and in most states if not all it is illegal. Now you ask him what rate did I qualify for? After he tells you take out your calculator or sheet and check the monthly payment and you will see a difference in the payment. Yours will be less. He has packed the payment. The excuse he will use is that his program automatically includes life insurance and disability. Make sure when you first sit down with him you tell him you do not any life and disability. Now you can negotiate the cheapest rate he has based upon your good credit. You tell him you are not interested in any after sale products. If his discounted rate is better then what you can get from your bank go with it. He still gets money back from the bank. The bank gives him a half or three quarters of a point for retention. That’s’ how the system works.

Remember it’s your money. Be careful how you spend it. I hope this is informative and will make you’re buying experience a pleasant one.

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