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Personal and Business Banking

Auto Buying Step by Step

Chapter 1: The Most Powerful Tool You Have

  • Summary
  • Article

Chapter 1: The Most Powerful Tool You Have

  • You can always walk away
  • About auto advertising
  • About auto dealerships

The Most Powerful Tool You Have

You Can Always Walk Away

It's important to remember that most dealers compensate their people on commission. First of all, this means the salesperson only gets paid when they sell the car. Second, the more you pay above vehicle cost, the more they make. Third, the finance guy makes money when you buy extras or finance through the dealership.

You can't blame dealership employees for wanting to earn more money. Doesn't everybody? But you need to understand how that can influence their behavior.

Remember – no sale, no commission.

Because their number one objective is to make the sale, you are in a powerful negotiating position because you can walk away and go elsewhere at any time during the buying process. And the more time a salesperson or finance person has spent with you, the more powerful your willingness to leave becomes. They've invested their valuable selling time in you and if you walk, it was wasted.

If you don't feel you are making progress in the negotiations, often all you need to do is stand up, put on your coat, and politely but firmly explain you are leaving for a competing dealer. That is often enough to cause a change in attitude. Some members have had salespeople chase them across the parking lot to get them back or even call them at home later. Remember, you are the one with the money and you have options.

The way salespeople are compensated also means you should rely on your own independent research to make sure the make, model, and model year of car you want is likely to be safe and mechanically sound. You should do that research before you shop.

About auto advertising

Selling cars is big business. Auto manufacturers advertise frequently to introduce new vehicles and may also promote special manufacturer financing or leasing offers. Dealers advertise every day on television, on the radio, in newspapers, online, and by mail. Naturally the purpose of advertising is to interest you enough in a car to visit the dealership or at least call or visit their web site.

Dealer ads may promise low payments, sale prices, top dollar for your trade, rebates, and special financing offers. Some mail pieces include simulated checks payable only at the dealership. These promises often come with conditions and restrictions that may not be spelled out fully in the ad. Be a smart, wary consumer. Remember that just because a vehicle appears in an ad doesn't necessarily mean that the price is reduced.

About auto dealerships

As with most for-profit businesses in the community, car dealerships exist to make a return for their owners by providing valuable products and services for their customers. Most dealers understand satisfied customers are essential if their business is to survive and grow. The longevity of many dealerships is testimony to that. Dealers can earn money from everything they sell. That includes cars, add-ons, and financing. Some dealers have told us they actually earn more profit from their service departments than from selling cars. Just remember you can shop around for everything a dealer provides to make sure you get a fair price for what you buy.

It is true there will always be a minority of dealerships, salespeople, and finance people that attempt to take advantage of their customers or worse. They give the whole industry a bad name. Unfortunately, it is often hard for consumers to tell the difference. Fortunately by following the StreetWise Auto Buying Guide, your chances of getting taken by bad actors are far less.