The most common belief among many car buyers is that dealers are out to make a quick buck on them. However, in most cases, all car dealers want is to do their job, which is to make a sale that would satisfy their customer. The last thing any salesperson wants is a customer returning to complain about their purchase.
While we will not go into specific reasons as to why car dealers are so reviled, we will share some of the most common misconceptions about them:
9. New-Car Dealerships Don’t Sell Used Cars
New-car dealerships are just as good for buying used cars as they are for buying new ones. Whenever someone trades in a vehicle at a new-car dealership, it gets resold. After all, dealerships wouldn’t just pay you for a vehicle and then cast it aside – they want to profit from it first. The good thing about new-car dealerships is that they allow you to purchase a certified pre-owned (CPO) car. It costs a little more than a regular used car, but it comes with the manufacturer warranty and a promise that it’s been thoroughly inspected and repaired.
8. New-Car Dealer Mark-Up is Exceedingly High
According to an online survey conducted by J.D. Power, 36 per cent of people believe that dealers make $3,000 or more per new vehicle on average, while at least 26 per cent of people think that the amount is between $1,500 and $3,000. In reality, however, J.D. Power estimates that dealers make an average of $1,161 per new car. For instance, the 2015 Ford Edge costs $23,799, which puts the dealer mark-up over invoice cost at $1,011. If the consumer decides to haggle, then the dealer mark-up may go down to about $700. It’s not a lot of money, especially if you consider how much it costs to sell a new car in the first place.
7. Car Dealers Like Keeping Prices High to Rip You Off
Most dealers don’t really “rip off” their customers, but some leads do pay off more than others – especially when it comes to used cars. That’s because a used-car dealer can acquire a vehicle for a relatively low cost via an auction or a trade-in and then resell it for a much higher price. New-car dealers, on the other hand, don’t have the same luxury since invoice prices are already quite high. That being said, some dealers can drive the final price up by adding fees like VIN etching, rustproofing or administration. Fortunately, most of these fees are optional, and many dealers are smart enough to realize that such tactics don’t always work.
6. Car Dealers Hate Internet Customers
With online-focused companies like Unhaggle and TrueCar growing in prominence, more and more car dealers see the internet as a cost-effective marketing channel. As such, the majority of dealerships welcome consumers who is use online car buying tools with open arms. After all, you are yet another potential buyer. Why would they say no to that?
5. You are Just a Number to Car Salespeople
Just because consumers contribute to the dealer’s income, doesn’t mean they should be treated as walking wallets. Though it’s true that a sales person’s main motivation is to profit themselves and their company, it’s not their only goal. Most car salespeople are happy to help you get the car you want. Moreover, plenty of dealers actively support their respective communities by sponsoring sports teams, charity car washes and so on. Now, there are salespeople who don’t understand that it’s more rewarding to be helpful, but we prefer to think that there aren’t many of them.
4. Hidden Fees are Everywhere
Some dealers use words like “security” and “registration” to disguise optional charges like VIN etching and rustproofing. However, a dealer would never conjure up a fee without listing it on the price quote first. So, if something doesn’t add up, then it’s either a mistake or you are missing something. All quotes should include the vehicle’s MSRP, mandatory fees, sales tax and incentives. Mandatory fees tend to be freight, PDI, air tax, tire stewardship and a regulatory charge like AMVIC or OMVIC. So, if you see any strange additional payments, ask the dealer what they mean. The salesperson should explain everything to you and allow you to opt out, if the fees in question are indeed optional.
3. New Cars are More Profitable Than Used Ones
As the aforementioned J.D. Power stat points out, a dealer makes an average of $1,161 per new car sold. Since new cars cost more than used ones, the seemingly logical assumption is that pre-owned vehicles are less profitable. The truth is that dealers acquire used cars for relatively low prices thanks to auctions and trade-ins, which allows them to earn from $1,400 to $1,600 on each vehicle – according to J.D. Power. So, if you think that you are hurting dealerships by buying used, think again; it’s the other way around.
2. Dealers Use Unethical Tricks to Close You
Every decent salesperson has a certain set of tactics that they use to close their leads, but most of them are hardly unethical. For instance, a dealer may ask you to offer them your ideal price during the negotiation process in hopes that you will name a number only slightly below the MSRP and allow them to close you as quickly as possible. You may not like it, but it would be absolutely your fault if you fall for it. Your best bet in this case is to name a number that’s three to seven per cent above the dealer price and slowly work your way up from there – or stand your ground, if you prefer. Some dealers may also use percentages and monthly payments to confuse you, but if you do your research, then none of these so-called tricks should affect you.
1. Car Dealers are Greedy
The biggest misconception of them all is that car dealers are consumed by greed, which is supposedly the sole reason why they overcharge and trick consumers. In reality, salespeople are simply interested in meeting their sales goals because falling below them will result in a lower salary or possibly even a job loss. This means that every time a dealer sells a car, their livelihood may potentially be at stake. So, whenever you negotiate, consider their needs and they will consider yours in return. If they are rude, pushy or manipulative, then it’s likely because they are not good at their job, not because they are greedy.