10 Car buying myths: debunked
MYTH #1: THE MARKUP ON NEW CARS IS RIDICULOUSLY HIGH
According to an online survey conducted by J.D. Power, 36% of people believe that dealerships make over $3,000 per new vehicle. In reality, J.D. Power estimates that dealers on average make under $1,000 per vehicle if selling the vehicle without any negotiation. That being said, dealer profit often falls well below this amount if the consumer negotiates.
MYTH #2: PAYING CASH OR BRINGING IN MY OWN FINANCING WILL GET ME A BETTER DEAL THAN DEALER FINANCING
It's no secret that dealers make money on financing customers through the manufacturer's financing options. The manufacturer even often runs highly discounted rates to incentivize car sales (we are known for offering 0% financing!), which is significantly lower than what your bank or credit union may offer. When buying used, the dealer will also find the lowest rate for you to get you the best rate possible.
Financing is also a huge component in getting you the deal that you want on your vehicle. If you pay cash or bring in your own financing, the dealer will profit less on the sale, and in turn be unable to get you the deal that you were looking for on your vehicle. If you finance with the dealership, they are able to budge more on the price than if you were to pay cash or bring in your own financing.
MYTH #3: YOU SHOULD WAIT UNTIL THE END OF THE MONTH TO BUY YOUR CAR
If you wait until the end of the month and a particular dealership is a few cars away from a manufacturer's sales target and you buy something that they have in stock (you may need to compromise on colors or options), then there is a chance that they may be more likely to accept a lower offer than normal. However if they have already hit their target for the month, the deal you could get on the 31st will be no different than the one you would've gotten at the beginning of the month, and you wouldn't have had to compromise on colors or options.
MYTH #4: I DON'T NEED TO TALK TO A SALESPERSON
Car salesman are extremely knowledgeable and can help you in multiple ways. The salesmen know the inventory and the vehicles inside and out, and can even end up getting you a better vehicle or a better deal than you were expecting before you came into the dealership. You may try to avoid involving a salesperson because you think you don't need one, but you may be missing out on the perfect vehicle or an incentive that you may qualify for had you not talked to one.
MYTH #5: IT'LL TAKE ME ALL DAY
Begin the shopping experience online, or by phone or email before arriving at the dealership so we know you and your needs before you even walk in. Setting an appointment with a salesperson also helps so that there is no lag time between when you walk in and when you get helped. We will be ready with vehicles pulled up for you before you even walk in the doors. Also let your salesman know about your trade when you set your appointment. This way, we can start on your trade-in quote the second you walk in the door.
MYTH #6: DEALERS WILL RIP YOU OFF IF YOU TRADE IN YOUR OLD CAR
Those of us who have experienced trading in a vehicle might still cringe at the trade-in value we were quoted for our car. The truth about trade-ins is that dealers really don't make much on the sale of your trade - and that's IF your car even makes it to the dealer's showroom floor! A large amount of trade-ins end up either remarketed at auctions or sold for parts.
There is also a huge tax advantage of trade-ins. Buyers are only be taxed on the net purchase price of the new vehicle (purchase price minus trade-in value), which can result in a sizeable discount on sales tax.
MYTH #7: EXTENDED WARRANTIES/COVERAGE ARE A RIPOFF
We tend to think that every addition that the dealers try and sell us on are complete scams, so we tend to gloss over extended warranties with the same critical eye when it reality these coverages can be extremely helpful down the road.
Typically, dealers only sell manufacturer extended warranties, or ones backed by a large company with a long history and good reputation. The newer the car, the cheaper the warranty is. In terms of other coverage such as GAP coverage, hear your finance specialist out. They are there for you to give you all of your options and will provide great advice for you. They also see hundreds of different scenarios and know if the investment would be worth it in your particular situation.
MYTH #8: ALWAYS AVOID THE FIRST YEAR MODELS
This myth goes back at least to the late 1970s, when there were more American cars getting recalled than were getting sold at dealerships. The public assumed that carmakers would try and pawn off a recalled lemon and it would take a little while for the government to catch up and get the problem fixed.
That's not the case anymore at all. Car manufacturers spend years testing and developing parts before it ever reaches the showroom. There are hundreds of legal restrictions now before a vehicle even leaves the manufacturer. You have every right to be cautious, but don't think that this year's new cars are all junkers.
MYTH #9: SPECIAL ORDERING YOUR VEHICLE COSTS MORE MONEY
Special ordering can actually save you a considerable amount of money on many vehicles by configuring the vehicle to exactly how you want it and not have to pay for features that you won't use. You are also saving the dealership many costs involved with putting a car into its inventory.
Henry's tips on special ordering:
Special ordering typically takes around 4-8 weeks. If there is a good incentive on the vehicle that you're looking at special ordering, make sure to order the vehicle at the very beginning of the month so that the incentive will still be valid by the time you actually purchase the vehicle.
MYTH #10: THEY'RE GOING TO TALK ME INTO SOMETHING I DON'T WANT
The myth that you're going to go into a dealership looking for a reasonably-priced sedan and come out with a fancy sports car is outdated! Dealers are here for you to listen to your needs and get you into a vehicle in your price range that best suits your needs. Dealers are also keen to make you happy because unhappy customers inevitable lead to nightmares and bad reviews on their part, as well as looking bad to the manufacturer that they report to. "Tricking" the customer into purchasing something that they don't want it just not worth the dealer's effort.