Monday, January 28, 2008

Save $10,000 Off The Sticker Price... NOT

Lets get serious... Do you really think that a new car has a $10,000 mark up... 99% of the time the answer is no.

As part of this blog I not only want to teach you how to get the best deal possible, but I want to insure you are not chasing an unattainable deal. Some blogs/sites out there will tell you that if you press hard enough you can get the dealer to discount their price of the vehicle upwards of $7000-$10000. The truth of the matter is the majority of the time this is just NOT TRUE. There just isn't that kind of mark up in a vehicle.

There is one rule when it comes to vehicle mark. When you are talking a brand new vehicle the more expensive the vehicle is the more mark up there is, generally speaking. There is more mark up in a top of the line 1 ton truck then there is in a compact car...

Example Ford F350 Lariat vs. Ford Fusion SE. There is more mark up in the $50,000 truck vs. the $20,000 car.

What you need to keep in mind is that quite often the Manufacturers ie. Ford, Chevy, Dodge, etc. provide the dealers with rebates. These rebates maybe as little as $500 or as much as $7,500 maybe even more depending on the time of the year.

Here is how you would see $10,000 off the price of a vehicle...

Lets say you where looking at a $45,000 Chevy Silverado and there is a $7,500 rebate on that new truck you are looking at because of the time of the year. Then because the dealership really wants to move that particular truck, they are willing to discount the MSRP by $2,500. 95% of the time this would be shown to the consumer as...

"$10,000 off the MSRP"
or
"MSRP $45,000 THIS WEEK ONLY $35,000"

Here is the math...

$7,500(rebate) + 2,500(discount) = $10,000

$45,000(MSRP) - 10,000(rebate+discount) = $35,000...

You might be asking yourself why is this important, they (the dealership) have reduce their price by $10,000. WRONG!!!! The dealership has only discounted their price by $2,500 the other $7,500 is a rebate. This is extremely important to remember because next month or maybe even next week the dealer may NOT be able to offer the same deal. If the $7,500 rebate program ends then the dealer will not be able to offer you a price tag of $35,000.

You can not go in to a dealership expecting $10,000 savings by negotiating like a Hard Ass. There just isn't the mark up in a vehicle. If you try to hold out for a astronomical savings like that you may just end up never purchasing that new vehicle. That said, it is important to know when these programs (rebates) end. There is nothing worse then deciding to buy just to find out the dealership can no longer offer you that deal. Once the program ends, that rebate is gone. Trust me that is a horrible feeling.

When you read the upcoming post on negotiating you will realize that it is even more important to remember the difference between a discount on the price and a rebate.

Sunday, January 27, 2008

STOP!!! Its Time to do your homework!!

So your think your in the market for a new or new car to you. Let me just say that when I say a "new car" I don't necessarily mean a "brand new car". The majority of the time I just mean you are going out to buy a vehicle, whether it is a car, truck, or van, doesn't really matter. If its new or used car doesn't matter that much either. Really the only time new or used matters is when you talk about the financing options available. When I talk about specific differences between "New" or "Used" car buying I will make the difference between the two known. Okay lets continue. The first thing you need to ask what are you in the market for. There are so many options out there and when it comes to buying a vehicle if you make an error its going to cost you thousands of dollars and if you make more than once it can really start costing you tens of thousands. So its really important that you take the time and think about what your Needs vs your wants are.

Lets say that you don't do any homework and one Saturday afternoon you decided to drive on the a car lot, I mean not you have already decided that you are in the market for that new or new to you vehicle. Then it happens, you fall in love... from across the lot you see her... her curves, they she looks, her smell, you smile when you think about how much your friends will envy you... soon your desire and lust for her take over. Next think you know you loose control of your common sense, you believe she is the one and you cannot stand being apart from her. So you do it. You take her home, and she spends the night. Then it happens, the next morning wake up feeling high on life, fulfilled, and completely satisfied. You remember how good you looked together and you think to yourself "I'm a Stallion". Then your best bud John calls and asks if your ready to be picked up, you've been planning this kayaking trip all week. In a moment of complete idiocy you say "nah, I'm good, I'll meet you there" and you hang up the phone. At the precise second that you hang up the phone you look outside and think "Oh shit, where the Hell am I going to put my kayak?" The Mustang was the wrong choice and buyers remorse starts to set in.

This story is comical but it happens more than you can imagine and in all honesty it happens very similar to how I have described. It may not be over night but if you haven't thought about what your NEEDS are, it will happen. I am speaking from experience.

I had been working at the dealership for a few months and I was getting a lot of flak from from the guys in the sales department. The reason why... I was working at a Ford Dealership but driving a brand new Honda. I could even park it at the dealership, had to park it across the street and hope that none of my customers asked me "What do you drive?". It happened and more than once.

So one day I went with the New Car Sales Manager to pick up a trade, he needed me to drive it back to the dealership for him. The joys of being low man one the totem pole. You get to be everyone's gopher (they used a different term at the dealership). As soon as I saw it, I fell in love and I could wait to tell my wife about it. That night I took her for a drive in the midnight blue mustang. The moment I cracked the throttle when the light turned green and we rocketed away from the rest of the pack, she was giggling. With that we bought the car. It was an amazing car and we were head over heals for it, but that was the problem. We had bought the car out of complete emotion, we didn't think about what we needed in a car we just fell in love. A few months later we thought we would go camping... the damn cooler couldn't even fit in the trunk. How were we going to keep our beer cold if we couldn't even get the cooler in the trunk. That was our "oh shit" moment.

I worked at the dealership, I had seen it happen to customers and yet I did it myself. This just shows how easy it is to happen, to anybody.

So how do avoid this common mistake? Where do you start the car buying process? The answer is simple but it is something that most of us have been avoiding since we were 6 years old.

DO YOUR HOMEWORK!!!!

First, sit down with everyone who is involved and make a list of what your NEEDS are in a automobile versus your WANTS. This is EXTREMELY important if you don't figure this out you will end up make a decision that does not work for you or your family.

Once you have complete your list rank the items from most important to least important. This way you know where you can make compromises if and when you need to. If you must have seating for six people, rank it as a number 1. If you really would like a 4x4 but if you could go with out maybe you would rank it as a number 2 or 3. Then if you would like a navigation system but you know that its more of a toy then a necessity and you realize you don't really need it, then rank it as a 5. I am sure that you get the picture.

When you have that completed and everyone agrees its time to talk money. You need to decide what you can afford. The easiest way to do this is by figuring out your debt servicing ratio. As long as you stay within a 25-35% total debt service ratio. I will explain debt servicing in more detail in a later post. In the mean time there are many website that have calculators that can help you with this. There is one here . Once you have decided this number stick to it. There is nothing worse then having a beautiful new vehicle but not being able to afford to put gas into it or insurance for that matter. This is also a great time to decide if you are planning putting money down or if you are planning to trade in a vehicle. (We will discuss trades and money in more detail later)

Once you have thought all of this through its still not time to head to the dealership. Its time to hit the internet. There are so many different types of vehicles out there you could spend forever trying to visit them all. There is also no need to go to a BMW dealership if your monthly budget says you can afford $250-300 per month. The internet will enable you to narrow your search to a more manageable number of prospect vehicles.

So now you have completed your homework. Its time to visit the dealerships, its not time to buy its time to test drive and narrow down your prospects.

Remember, do your homework... and don't let emotion get the best of you.