Saturday, January 20, 2007

WHEN IS A CAR SALE NOT A SALE?

A common definition of the word sale is “an occasion (usually brief) for buying at specially reduced prices”. The problem with many sales advertised by car dealers and other retailers is that they are virtually always advertising a sale, which violates the part of the definition of a sale that it is brief. Also, the price they advertise is not “specially reduced”, but the same price you can always buy that car for.

It is very hard to tell a legitimate sale from one that’s not. One suggestion is to be somewhat skeptical if a dealership is constantly advertising sales and specials. If you are always having a sale, then by definition it is not a sale. Wal-Mart addresses this in a very upfront manner. They advertise that their prices are low every day and that’s exactly how they mark their merchandise. Wal-Mart doesn’t try to trick you into coming in on a certain day or weekend because, if you don’t, you won’t get the lowest price.

There is an axiom of advertising that says you must always have a “cause for action” built into your ads. When you say all the good things about your products and prices, you don’t have a good ad unless the reader has a specific reason to come into your store immediately or within a short time. The reason for this is pretty obvious. Most people are procrastinators. I am. That’s why I am typing this column at 4:26 PM on Friday and my deadline is 5:00 PM. That’s what sales are all about. Make the prospective buyer think that if he doesn’t come in by Sunday at 6:00 PM, the prices will go back up again on Monday. Unfortunately, that is rarely the truth. You can almost always buy that car on Monday for just as good a price.

As you know, buying a car is often a negotiation between the buyer and the seller for the highest trade allowance for the trade-in and the lowest price or monthly payment on the new car. A car dealer will sell you a used or new car at his lowest price, if you are a good negotiator, 7 days a week in almost every case. One of the few exceptions to that is when the manufacturer puts on an incentive for a short time because this effectively lowers the price to the dealer. He is likely to pass along some or that entire price cut to you. Another exception is when a dealer inadvertently stocks too many vehicles of one or more models. This isn’t something that would likely happen very often or certainly not all the time. Many dealers always advertise that they have too many cars in stock. If I owned a dealership that always had too many cars, I think I would consider replacing the man who ordered my cars.

If a sale is legitimate, it should be a relatively rare occasion and there should be an honest, understandable motivation for that car dealer to take a much lower profit on those particular cars. Of course the acid test is to shop the sale price with that dealer’s competitors. I find that dealers usually will quote their lowest price on the Internet and this is a great place to determine the validity of the “sale” price. Be careful when checking prices on the Internet and the newspaper because most dealers charge a “dealer fee/doc fee/dealer prep” on top of the selling price. This price ranges from around $500 up to $1,000. Florida law requires that dealer fees be included in advertised prices, but this law is regularly broken in the newspaper and Internet ads.

Another thing that you should be careful of is to find out how many of the type of cars that you might be interested in are on “sale”. The trick here is to advertise a car at a huge discount but there are only one or two cars available at that price. The chances of you buying one of them are slim and none. They may say, “Many others available at similar savings”, but the trick here is to know what the definition of “similar” is. Scientists say Humans are very similar to Chimpanzees. The other trick on switching you to another car at “similar” savings is that a dealer can now legally add his dealer fee/doc fee to the 2nd car because it was not advertised.

I must apologize to you for a stupid error I made in my column which ran in this paper on Friday December 29, “Should I Pay Cash or Finance My Car?” In the 3rd paragraph there is a sentence, “If you have a 3 year CD paying you 6%, on $25,000, you will earn $9,929.99 at the end of 3 years.” The actual interest earned on a 6% $25,000 CD for 3 years is only $4775.40. This big, dumb mistake did not change the point I was trying to make, but it sure made me feel silly. I sincerely apologize and I will try to be a lot more careful to check my arithmetic in the future.

2 comments:

  1. Thanks for the compliment, Marvela.

    In today's very trying economic times, especially for the auto industry, insincere advertising is soaring.

    They say that "desperate times call for desperate measures" and we are even seeing this more from the manufacturers as well as the dealers.

    That's not to say that there aren't some great buys in automobiles today...there are. But the buyers must be more careful than ever before.

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