EIGHT STEPS IN NEGOTIATING

After doing your homework (see Fact Sheet #4), you will be prepared to visit various dealers to obtain competitive and comparable quotes on the car you want. Obtaining useful quotes will entail a certain amount of negotiating and exposure to various sales gimmicks.

1) CALL THE SALESPERSON FOR AN APPOINTMENT:

If you have visited the dealer before on a fact-finding visit, it makes sense to go back to the person who helped you at that time. Sales people work very hard, sometime for little compensation. Other than being kind, this is smart: you won't have to start over with another salesperson and will know a little of this particular person's sales techniques.

2) WHEN YOU ARRIVE ASK TO GO DIRECTLY TO THE SALESPERSON'S OFFICE:

A dealership track system leads the customer through a pre-determined process in an order designed to maximise their opportunity to make a profit. By taking the initiative, the customer can throw that system off balance a little.

Without committing yourself, you might open by saying something like, "Hi, I'm going to buy a car today, and I've narrowed my choice to one here and one at another dealership. So, I'd like to go to your office right now and talk prices." By indicating that you are looking at the same car elsewhere, you take away the "exclusive product" pitch from the dealer you are visiting.

3) ASK TO HAVE YOUR PRESENT CAR APPRAISED (IF APPLICABLE)

Why have your car appraised right now? Dealers like to "set you in" on a new car before they appraise your old car. They then mix the sale of the old car together with the purchase of the new car. That's where the mythical "allowance" figure comes into play.

The conversation usually goes something like this:

"Well, what is the car worth?"

"Well, that depends on what you're trading for."

That statement is not true. The true wholesale value of a trade stays the same regardless of whether you're trading for a Rolls Royce or a used Edsel.

Asking for the appraisal at this point will give you an idea of whether the dealer is prepared to pay a fair wholesale price. Also by agreeing on the trade before you begin negotiating for the new car, you're simplifying the transaction. Rather than mixing the sale of the trade with the purchase of the new car, you are keeping these two entirely separate transactions apart. Simplifying always saves money.

What it the dealer refuses to have the car appraised first? Just leave. There are many other dealers who will be straightforward, if asked.

Because you may find the salesperson referring to the trade in price as an "allowance", the following step is required.

4) THE BUYER AND SALESPERSON REACH A FIRM AGREEMENT ON THE TRADE'S PRICE BEFORE GOING ON TO THE NEXT STEP:

Just what is an allowance figure as opposed to the price for a trade-in? Let's say you are looking at a new car that has a dealer mark-up of $2,000. You have a trade that has a true worth of $3,000. If the salesperson believes you are more focused on the trade-in price that the other six profit centres (see Fact Sheet #3), he or she might say, "We'll allow you $4,000", which they know is higher than what other dealers will quote. How do they do that? They simply lowered their potential profit on the sale of the new car by $1,000 and added it to the trade. It only means that there is now less give in the discount you will receive on the new car price.

5) AFTER AGREEING ON THE WHOLESALE VALUE OF YOUR TRADE, MAKE A FIRST OFFER ON THE NEW CAR.

Say something like this:

"Now that we've agreed how much you will pay to buy my car, let's talk about what I'll pay to buy your car." Again, you are reinforcing that these are two separate, controllable and understandable transactions.

What should the offer be? That's up to you to decide. Most dealers are going to say no to your first offer. The salesperson, using a track system, will make counteroffers. Expect them. Expect lots of confusing figures to be bandied about. Expect the trade-in to be brought up again, in which case, say: "The trade-in isn't part of this discussion. We have already agreed on a price. I am making you an offer on the new car only. Is it acceptable or not? If not, I have another car down the road to look at."

In bargaining, give ground in small amounts, if you still have room to negotiate. If the dealer asks for another $500, offer $50. If they ask for another $200, offer $25.

If the dealer is not coming to an acceptable figure, within your available cash, it's time to leave, on a polite note.

Leaving always saves you money. Dealers are under great pressure to sell right now because they are afraid a customer will leave and buy from a competitor. If they have your phone number, you may even expect a follow-up phone call.

6) SIGNING THE BUYER'S ORDER:

At some point, often even on the first offer, the salesperson will ask you to sign a "buyer's order", or some other type of conditional sales agreement. Whatever its form, a conditional sales agreement is a contract. Only sign it you are agreeing to buy the car at that price. Never give a deposit unless your offer is approved in writing.

7) THE DEALER AGREES TO A PRICE AND SIGNS THE BUYER'S ORDER:

When this happens, the buyer then gives a deposit---and a very modest one. There is no need to agree to more than $25, regardless of how expensive the car may be. Why? Any deposit makes the contract binding.

How will the salesperson react to an offer of a small deposit? They will invariably say: "Oh, our boss won't accept a deposit that small!"

What do you do? Get up to leave. The salesperson will then probably accept the smaller deposit. If not, go to another dealership.

8) FINANCING:

Whether or not you have a pre-approved credit union or bank loan with affordable payments and clear information about your interest costs, you may still find the dealer trying to convert you to dealer financing, which is another profit centre for them.

As noted in Fact Sheet #5, car dealers have developed a number of methods of hiding the true interest rate, or costs of borrowing, from the average consumer, thereby making comparison shopping very difficult.