Clearly, car buying is not a negotiation you want to get into without knowing what nifty tricks car salespeople have up their sleeves. This thread on reddit gets right into the most common and costly tactics used by car dealers to get you to sign up for more than you can afford. Read on and learn as a former employee at a car dealership walks you through the top methods used by the car industry to make a profit on their sales.
1. Emotional manipulation
The first tactic is emotional manipulation. "Subliminal tricks" are a key tool in any good salesman's tool belt. A test drive may seem like an innocuous thing, but the car seller wants you to feel a sense of ownership of the car. Once you take that new car around a few corners on the test drive, you start to form a feeling that this is your car. You can adjust the seat to feel just right and fire up your favourite radio station. Go anywhere your heart desires! As your excitement builds, your emotional brain starts to take over. Wouldn't it be nice to own this thing? Say goodbye to your money.
Redditor u/charlottechewie has a handy trick to avoid these emotional pitfalls: be aware of your feelings. If you are mindful of your emotions, you gain power over them. Take your time, sleep on any decisions, and don't let your emotions dictate your spending. If you truly love the car and it makes sense for your budget, you can always wait a day or two to be absolutely sure. Don't rush into buying anything on the spot!
2. Small payments, aka 'only' payments
The next tactic used by car sellers to tap into paying customers' wallets are the payment plans they offer. The human mind is pretty good at "goat farmer math," or simple calculations and arithmetic. But absorbing complex payment plans and higher-order operations aren't as intuitive for our monkey brains. Car salesmen know this, and they are keen to use it against you. Focusing on payments is a great way to trick you into buying something you can't afford. When you break down the ownership across a month (or worse, "only this much per week"), you can easily lose sight of the final price of owning that car. Breaking up the payments into the smallest possible amounts makes you feel like you can afford it. But the longer you pay out these tiny amounts, the more interest you're paying on the loan you have to take out to fund the purchase. That original sticker price on the windshield goes up with every dragging month and year. Don't fall into this trap!
The best way to overcome this problem is to focus on the final price BEFORE you start planning your payment schedule. Get your handshake on the sticker price, and then you can turn your attention to payment plans, interest rates, and term schedules. Don't be afraid to push them on this point. A crafty salesman will act like your friend, chopping the price into digestible bites that make it seem like you can afford the car. Remember that you want the "out-the-door price," including any shipping, freight, and other fees they love to add! By getting a clear understanding of how much you will actually have to pay, you can make a more informed decision on whether or not you can afford the car. And after you have all this info, walk out the door, go home, and think about it some more.
3. The finance office
The final tactic used by car salesmen to tip the scales is the dealership's finance office. You can drive a tough bargain and talk the sales price right down to cost, but you need to continue the fight in the finance office. People often let their guard down after they settle on a final price. Don't be fooled — many good deals go to the financing office to die. The finance officer will try to squeeze you to get extra profit with warranties, high interest rates, and services like dealer oil changes and tire rotations. The original poster points out that most "finance guys" at the dealer aren't finance experts in the traditional sense. They often come from the top ranks of the sales floor outside and they don't necessarily have a finance background or training in loans and banking. They're just really good at selling.
The best way to overcome expensive mistakes in the finance office is to never let your guard down. Educate yourself on reasonable interest rates and be prepared to pay cash or use non-dealer financing. Dealers make money on cars, but they also make money on loans. When you can borrow the money from the bank at 3% and charge your clients 4%, you make money on the spread of the loan too. If you can increase the increase rate by 0.1%, your profit goes up by 10%. Don’t be fooled by the variety of payment options and add-on services they offer. It's great to get convenient oil changes by "brand-tested professionals" but your local garage can often do better for cheaper.
Redditor u/UWMcGill makes a great point in the top comment: be ready to walk. Don't go over your walk-away price without walking away. Following through on a threat to leave is the most powerful tool you have as a buyer in any negotiation. Businesses need sales to survive, and they need the sale more than you need to buy a car from them. Don't be afraid to "waste their time" — do not for a moment allow yourself to be pressured into a sale by something as nutty as feeling bad for wasting the seller's time.
More: Save yourself the hassle — Carvana offers you a reliable way to purchase a car entirely online without ever having to set foot in a dealership.