TrogdorWBL

I've made a post like this in the past, but then eventually accidentally mentioned the dealership I work at (I am not a sponsor here), and the post was deleted. So, I will try to avoid that mistake this time! But I feel like a thread like this could be useful to people looking to buy a new Evo.

There is a thread on "What's a good price to pay." However, that thread seems to be filled with a lot of misconceptions. So, I'd like to clear up some of those false thoughts, and provide some tips about how to negotiate the best deal.

Before I continue, I should (cautiously) state that I sell Mitsubishis. However, our dealership's philosophy is a little different from the traditional negotiation stores. Best Price is a concept started by Saturn, and has spread widely in some states. Today, all of Sion is this way too. The reason I mentioned this is not to advertise our philosophy. Rather, it is to explain to you that a large portion of our training involved explaining to people how they may be getting screwed by another dealership, and teaching them to compare apples to apples. So I'd like to impart some of that knowledge to you all.

First, lets clear up some misconceptions.

A. One of the most common misconceptions is that paying cash is some how a way to get a better deal. ITS NOT! In fact, paying cash is a lose-lose all the way around. Dealerships make money when you finance with us.

The banks pay us as a way of rewarding us for giving them a deal.

You lose because you're not earning interest on your money, it's just gone, earning 0. Frankly, if you have cash to buy a $34,000 car you probably have a decent credit score (or you're a drug dealer). If you can get a low enough interest rate, and that rate is lower than the rate which you can gain returns on your money... you're basically throwing away interest. Mitsubishi has been offering 0% for 36 months for some time.

So please don't want in to a dealership and say "So, I'll be paying cash, can I get some kind of extra deal?" The answer is no. We're not some street vendor that can benefit from "off the books," cash translations, that we don't report to the government.

B.If a dealer offers a "too good to be true" price, it's because it is. There's any number of sites that will tell you roughly what you should pay for a new car. Edmunds.com, Autotrader.com, truecar.com, etc. It's all smoke and mirrors. Dealerships aren't stupid, we're not going to lose money. There are a number of tricks dealers will use to make you think you're getting an awesome deal.
I. Offer way over for your trade. Dealers have sophisticated software now. All we do is enter the VIN and it shows us KBB, NADA, Manheim Auctions, and a VIN checker all at once. If a dealer offers you well over book for your trade, you're going to end up paying more for the car. Pay attention to the net difference of car price - trade value if you're looking at 2 different offers.
II. Offer a crazy low price. There's a number of reasons for this;
a. They're going to low ball your trade.
b. They aren't showing all of the fees. Dealerships aren't required to advertise the price of their cars including destination charges (generally like $700-$900). They also aren't required to tell you what their documenting fees are. Some places charge absurd fees for this (like $785).
c. They're showing you discounts that you may not qualify for. Dealerships can advertise a price including discounts that not everyone qualifies for, just as long as some people can get it.

As an example a dealership can show a price that does not include $800 worth of destination. Then they show it with a California resident discount, military discount, discount for financing with the dealer, Mitsubishi owner loyalty, and the "you own a Unicorn $2000 discount." Oh and here's another $785 documenting fee. If you don't qualify for those things, all of the sudden and advertised $29,000 price is right back up to $34.5.

Get a list in writing of all of the discounts and rebates that they are offering you, and make sure you are eligible for them all!

So that leads me to how can you actually negotiate a good deal? Here are a few tips

A. Finance with the dealer, and tell them this as you're negotiating the price.
I. Tell them either "sign me out flat" or finance you through a credit union. One way dealerships make money to by adding extra interest to your loan. Banks will give the dealer what's called a "buy rate." That's the actual interest rate they will take your loan at. Dealers are allowed to add on to this and pocket that money. Being "signed out flat"means they don't add anything on top. Credit unions on the other hand don't allow dealers to do this. In exchange they just pay is a flat rate per deal (sometimes more for a certain monthly goal).
B. If they have more than 1 car that matches what you want, take the oldest one they have. Dealerships don't own the cars on our lots. We are paying interest on them as they sit on the lot. The longer it sits, the more we want it gone. So, ask for the oldest one on the lot that matches the color/options you want.
C. Alternatively, take a car coming off the truck! If it's coming off an incoming truck, we don't pay any interest on the car at all!
D. Buy accessories at the time of the purchase. If you're planning on adding things like mud guards, rubber floor mats, clear bras, remote start, window tint, etc to your car, do that at the time you purchase the car and let them know this as you're negotiating the price that you want these things.

The fact of the matter is, if you came in to a dealership with a check in hand and did nothing but buy a car with cash, we would be out of business. We make money on things like accessories, warranties, and financing. By the way, the average profit per car deal, whether you buy from a Best Price store, or a place that full on negotiates, is between $800-$1500. We don't make thousands upon thousands of dollars like most people think we do.

Hopefully this helps people. If you have any questions, please feel free to ask

bKevO

iTrader: (17)

That was a good informative read. Thanks for taking the time to write this up!

adriano_917

iTrader: (14)

Good thing my brother is a new car manager at a local GM dealership! One thing that I dont understand is why not pay cash ? Your saving money on interests, although there's people that dont buy a brand new car with cash on hand, but Ive seen it happen when I was working for Chevrolet 4 yrs ago an old lady bought her daughter (21) a brand new Corvette ZO6 cash.

adriano_917

iTrader: (14)

B. If they have more than 1 car that matches what you want, take the oldest one they have. Dealerships don't own the cars on our lots. We are paying interest on them as they sit on the lot. The longer it sits, the more we want it gone. So, ask for the oldest one on the lot that matches the color/options you want.

This part right here, youre saying that buying the oldest cars on the lot gives a better price ? But if youre paying for interest on the cars that sit on the lot the longest wont that be added to the car when sold ?

TrogdorWBL

I'm not saying everyone should finance a car, in all situations rather than paying cash. What I am saying is that in the case where you have $15,000 in liquid assets, I operate on the assumption that you can out earn interest rates on a loan. i.e. If you invest that $15k at a return of 4.5%, and your interest rate on a car loan is 1.9%, why the hell would you lose that net difference of 2.6% returns on your money? Like I said, Mitsubishi has been offering 0% for 36 months on Evo's for some time now. Any interest you earn is > 0%.

There are certainly situations where buying a car with cash is wiser, like older used cars that typically get higher interest rates regardless of credit. Or your credit score isn't good enough to warrant a low interest loan.

And again, this doesn't get you a better deal if you pay cash. For some reason people come in and immediately say "So, if I'm paying cash, can I get some kind of discount?" or "Is there a better price if I pay cash?" And for some reason most people who ask this, do it with a really smug tone, as to say "I have a lot of cash, that makes me better than the peons, therefore I should be treated differently."

No, we don't add that interest to the price of the car as it sits. Dealers basically just chalk it up as a loss. So, we want to stop the bleeding by selling you the oldest car in our inventory that matches what you want.

RevMatcher

iTrader: (7)

Great info, thanks!

Throttle

iTrader: (1)

stopped reading right there. I pay cash which means the car is mine, not the banks. I don't have to make payments and pay the bank a percentage. and I don't have to have full coverage insurance. sounds like a win to me.

how would I earn interest by making payments? the bank earns interest, not me.

peddle your car salesman bs on a car salesman forum.

TrogdorWBL

Let's think about this one logically for a moment. If I have $35,000 in liquid assets, and I invest that at a return of say... 5.2% over 5 years.

Now lets say I get a car loan for $35,000 at 3.2% for 5 years.

Let say you too have $35,000 in liquid assets and you spend all of it up front on a car.

You earn 0% interest of your $35,000. Where as I still have a net gain of 2% interest on my $35,000.

And you're really not going to put full coverage on your brand new $35,000 car? Really? No.

True wealth isn't about how much money you make, or save. It's about how much money your money makes. Your money makes 0 when you spend it all at once. If the debt is cheap enough that you can out earn it, swallow the foolish "I own it" pride and take the money. Go pedal your poor economic decisions elsewhere.

Throttle

iTrader: (1)

buying new cars ain't worth the money. neither is full coverage insurance for "what if's"

whatever percentage you make from interest is lost thanks to expensive full coverage insurance. following your advice I would have a big car payment, a big insurance payment, and, correct me if I'm wrong, 2% of 35 grand is 700 dollars. thats good for what, 2-4 full coverage insurance payments a month?

i think i'm gonna be sticking to my "poor economic decision" after all. that is pay cash if possible and pick whatever kind of insurance I want. beats listening to a freaking car saleman since your kind would try to sell me a minivan if i went in looking for a Porsche 911.

TrogdorWBL

If you wanted to compound interest once over the course of that 5 year loan, yes. Then again, I would call that poor investing if you agreed to that.

thegoodservant

iTrader: (5)

Just my observation on all of this...
Yes, you lose lots of value on a new car right away, used is generally a better value overall however on an evo this is less true compared to most other cars.
There is more money to be made on investing your cash than there is in savings from buying a car for cash assuming you have reasonable credit to get a decent rate, plus if you have the cash on hand you can always change your mind later and pay the car off anytime.
You generally get a better deal from a dealer if you finance as they make money from the bank then as well, however it is a good idea to prequalify so you know what you qualify for otherwise the dealer may give you a higher rate to make more money on the back end.
Full coverage is always worth it, it is not really much more expensive than liability (general statement). If someone bumps your car in a parking lot and takes off $1000 or if you crash the car yourself, your screwed.

My 2 cents:
Buy used.
Finance.
Get the best insurance you can afford.

EVO'D8

iTrader: (2)

Wait maybe I'm reading something wrong but isn't having interest worse than having no payment at all? Because if you have 35K and there's interest then of course paying off that vehicle you pay more than a flat our 35K compared to just cash right?

thegoodservant

iTrader: (5)

Interest accrues daily, it's not all tacked on from day 1.

Gordian79

iTrader: (5)

Its all about using other peoples money(bank).These days you can get 0% int on almost anything.I often use this method of buying things because i can keep collecting interest on my money while using someone elses money for free.Another benefit it keeps your credit score good by showing activity.

DeeezNuuuts83

If you only look at it like that, then yes. But what the guy was saying was that the money that you could spend all at once to avoid paying interest could be invested toward something else, with an expected return of a certain amount that would be greater than what you'd be paying on interest and then some.

But of course not everyone does that.