Red Flags to Watch for When Buying or Leasing a Car

The “Big Sale Event"

If you go online or turn on the TV, you will find that most car dealers in your area are having a “sale” of some kind. It may be because of a current holiday, “too large an inventory” of cars, to “reduce their taxes”, “the manager is out of town”, or some other nefarious lure. “Advertising 101” says that you should give the prospective buyer a “motive to act”. Unfortunately, it doesn’t matter whether the motive is real or not. The fact is that most car dealers do not sell their cars for less during “sales events” than they do at any other time. I point this out so that you don’t rush your buying decision. If you don’t buy a car during the tight time constraints of a phony sales event, you can negotiate just as good a price, if not better, the next day. The exceptions to this are legitimate rebates offered by the manufacturer. These often expire at the end of the month which is one reason why the “last day of the month” really can be the best time to buy a car”.

“The Price I’m giving you is only good for today."

If a salesman or sales manager tells you that, it is only a tactic to push you into buying the car. The only exception would be the expiration of a factory rebate. Once again, this is simply a tactic to push you into buying before you have a chance to do your comparative price shopping.

“Take the car home today and see how you like it."

Test-driving the car you are considering buying home can be a good thing. It will give you a lot better idea about how the car performs, etc. However, there are two reasons the car salesman offers this. One is that you must leave the vehicle you might be trading in with the car dealer. This means that you cannot shop prices with other dealers. The second reason is the psychological impact of parking that new car in your driveway where your family and neighbors can see it. The slang expression for this is “the puppy dog”. If you were to take home a little puppy from the pet store, you and your children would fall in love with her and could not return her the next day.

“You must give me a deposit before I can give you a price."

This must be one of the most insulting ways that some car salesmen have of intimidating a prospective buyer. It’s amazing how many people actually succumb to this which allows the salesman an element of control…. you can’t leave until they give you your money back. If confronted with this ultimatum, simply walk away.

“Are you ready to buy a car today?" 

Often, if you say no to this question, the salesman will tell you to come back when you are ready to buy. He will tell you to shop around and come back with your best price so that he can beat it. The salesman is afraid that, if he does give you his best price, you will go somewhere else and that salesman will beat it. Of course, that is the whole idea of competition and that is exactly what you should do. If the salesman is afraid to give you a price because his competitor will beat it, it must not be the best price!

“Make me an offer and I will take it to my manager for approval."

This is a very common tactic which you may have already encountered. It’s not unethical. It’s simply part of negotiating. I point this out so that you are fully aware that this is part of the negotiating game. Be aware, that no matter what price you offer, the manager will ask you for more money. Even if you mistakenly offered a high price that would be a very large profit for the dealer, the manager would ask you for more money. The psychology behind this is that if you suddenly accepted the offer, you may frighten the customer by thinking he had offered too much (which he would have). When you negotiate, you must be well versed on what is a good price for that car. Start out below the best price you think you can buy it for. If you cannot negotiate a price close to your best price, get up and leave. Continue this process with another car dealer.

The “really big” discount”

The other day a friend showed me direct mail advertising piece from a new car dealer with a coupon good for $2,000 discount on any car in his inventory. This is very common for online and TV ads too. Federal law requires new cars to have a price sticker on the window named the Monroney label. A discount from this suggested retail price gives you a fair basis for comparison. Unfortunately, most car dealers today, increase the suggested retail price substantially with the use of an addendum to the Monroney sticker often referred to as a “Market Adjustment Addendum”. This “adjustment” can be several thousands of dollars. Be sure you know what the true MSRP is for the car when you have been offered a “big discount”.

The best protection from all of the above is to find a car dealer that you can trust. Ask your friends about their experiences with dealers and call the Better Business Bureau and the County Office of Consumer Affairs. I have a list of dealers that I recommend and a list to beware of that you can access online at www.GoodDealerBadDealerList.com. All things being equal choose the dealership that has been in business a long time and an owner or general manager who will make himself accessible to you and all his customers.