The "Shady Dealership Techniques" Thread

NYSpeed Automotive
141

I’m not saying profit is bad, I’m pointing out how a dealership can use a warranty, loan markup, etc. to work a deal. Most people simply don’t know this.

$100 or $1,000 it doesn’t matter; I watched them secure lower rates then “lie” to customers about the rate they qualified for. They’d say things like “try to hit him will the full points” when running a customers info, depending on how the negotiations were going. They were even told to express excitement over the “great news!” regardless of the rate when finally telling the customer even if the rate was garbage. Call it a “white lie” or call it “acting” but it’s certainly shady. You could tell that some salesmen had a hard time with this because in their gut they knew it was too. “I know that’s what they said to do but it doesn’t seem right” was a comment I heard.

Speaking of comments, we were standing outside on a lunch brake when a fresh out of high school kid next to me exclaimed that “wow, sales is where the money is!” But then I pointed out to him that it was a self described “master salesmen” who was selling him on the job so of course the pitch was going to sound great. But ask yourself why a “master salesmen” who was making so much money and was so successful is no longer selling cars! He just shrugged me off…

In regards to banks regulating how much of a warranty, etc. you can add onto the loan, this is true. However some banks would allow dealerships 120% loan-to-value so in other words, you’d look up the value of a vehicle (they used NADA) and add 20% as the maximum that the vehicle was worth. It was then the dealerships goal to max out that 120% with a warranty or other product. They’d even lower the asking price of the car so the customer thought the dealer was giving in and giving them a better deal, when all they were doing was making more room at the top of the loan for products like warranties where they’d make the money instead of the lender! Not to mention the customer was instantly underwater on the loan.

Most people’s eyes glaze over when shown their loan documents before they sign them. So things like this can slip through rather easy.

Also as I said earlier, make sure you check with the aftermarket warranty company to make sure the dealer did indeed apply it. There was a local place (long out of business) that would sell aftermarket warranties, fill out the paper work but NOT submit it! Instead they’d bank on the fact that some people would never use the warranty and would never know that they pocketed all of the money. This however backfired a few times. A family on a road trip in Florida had their minivan break down on the side of the road, towed to a dealership for warranty work… only to have the warranty company tell them they’d never purchased a policy. The guy who did this went to jail.

Your examples of what a “good dealer” would do in a given situation are fine, but the fact that not all dealerships are “good” was again the point of this thread.

---------- Post added at 10:15 AM ---------- Previous post was at 10:05 AM ----------

Beck, again no one is trying to go after you or what you do personally. We all know Basil is a great place.

Put it this way; you were trained by the Jedi, I was trained by the Dark Side / Sith, lol. http://www.pixeljoint.com/files/icons/darth_vader.gif

142

YEP!

143

Something else I remembered; when it came time to “book out” (find the value of) a used vehicle, it was important to make the vehicle worth as much as possible in relation to finding a loan. This meant more room at the top of the loan for goodies like warranties, etc. So often times vehicles were intentionally claimed to have options that they didn’t have. Not changing cloth seats to leather, but maybe adding on running boards or a tow package to a truck. Things that a lender / bank could easily overlook… or that they’d never find out about anyway. Again this could cause customers to be instantly underwater on the loan.

144

I’d like to publish this story on my gay little blog. Good stuff :tup:

145

Just throwing the flag on this one. $700? I worked for GMPP and I can tell you there are plans for well over $2,000 dealer cost. But I agree, dealers can be known to mark them up a lot. But I think the internet has curbed that to some extent.
If I were to ask you to guaranty to fix my Cadillac with all the suspension, navi, seat motors, blowers, window regulators, and everything else for the next 5 years what would you charge me? Throw in the powertrain after that warranty expires and I know I wouldn’t do it for less than $2k.

I haven’t read through the rest of this post but I am sure most stories have some truth to them. I called on franchise and used car dealers for a couple of years and have been in the business my whole life. Some dealers make reasonable markups and treat their customers well, but you should always be an educated consumer.

146

.

It’s possible that prices have increased since then and that you currently sell a more comprehensive product that what they did, but yes at the time I was involved in this they were dealing with products that were about $700. And these were sold for $1,200 to $2,000.

147

Fair enough. I saw dealers go from a good A rated insurance backed comprehensive program to a bare bones fly by night program to make a couple extra bucks but it always bites them in the end. F&I over promise coverage, companies go under and dealers have to back the contracts to save face, or the shop has to spend extra hours negotiating to get something covered and they fly in a salvage part.

148

I think with the internet, shoppers are already coming in knowing exactly what they want, these kinds of tactics are becoming obsolete. I simply ask, “What have you seen that you have liked?” Most people respond with either, “Oh I saw…” or “This is the first place I have looked…” (BS) and I probe some more. I find that most people have already shopped and know how much what they wanna buy costs. I also know that when someone says they have to pick up their kids or " I have to get the kids off the school bus…" usually means that what I am showing them is too much money.

When it comes to rates…if I ever get a customer who is complaining about the interest rate or questioning it…“Mr/Mrs customer, it is a known fact that banks offer us rates that are available to be marked up”. This statement works every single time because when they want to negotiate on it, we have already discussed this subject.

When it comes to my loans, credit union rates are stupid low, but only 5 years max usually. I can finance people out to 20 years through my financing.

149

Yep read where I talk about selling warranties and then pocketing ALL the money by simply filling out the paperwork but never submitting it to the company (post #141) … I think they (the seller) would have preferred the warranty company go under, at least then they’d have an excuse to why the customer wasn’t covered, lol.

---------- Post added at 09:48 AM ---------- Previous post was at 09:43 AM ----------

You’re the only salesmen that I’ve ever heard of that volunteers this information :tup:

150

A comment on Jalopnik from a discussion about dealerships:

Question:

why in the hell does it take a dealership 4 hours to sell me a car when I know exactly what car I wanted when I walked in? Talk about wasting time

Answer:

Most of the larger transactions I make with my commercial customers take less than 30 minutes. They're usually 10-20 times higher than a "car deal". Typically if it takes that long it's because someone is being a moron. Here's the price, here's the paperwork. Shake my hand and let's go.

It's the process of this - We didn't make much on the vehicle. What we'll do next is send the customer through the meat grinder. Turn them over to the "aftermarket guy" hopefully he'll sell them some bullshit product. Then while he's working his deal the finance department is busy shopping your rate so they can either make a couple of points on the interest and then squeeze a warranty upsell into that $450-$495 payment you reluctantly agreed on that is actually $425 a month at a lower term than what you agreed to. This way it looks like a great value when they show you that for just a little more you can have all these products that you really don't need. It does take time to finish paperwork, there's a lot of data to be entered into the loan application and at times you have to call the lender to work them for a lower rate. Most banks have what they call a rate matrix based off of where your FICO score falls. Based on your score the dealership can actually do what they call a "spot delivery" where they don't even send the info to the bank until the next day. If you're below about a 675 FICO they may have issues doing this. If you're paying cash, the process should take no longer than 45 minutes.

Where I work, there are no aftermarket guys, the salespeople do the transaction from start to finish. We don't have to ask our boss for anything regarding the price. We know how much margin we need and if we can't get it we move on. We do have a business manager, but he does much more than sell crap, and we use him for just about everything. There's an easy way to do business and most dealerships prefer the hard way because they're too scared to try anything else.
151

I don’t feel like reading this whole thing, but working at a dealership, I’ve seen so many people save a ton of money because of their extended warranty. For example, leaking water pump. Repair costs $700… covered under extended warranty. Worth it!

152

Or my $4900 sunroof replacement on a 40k mile Toyota.

153

I would like to let everyone know if you have an issue with any dealership, even a competitor please don’t be afraid to ask me for help or advice. Many of you do already but I want to make sure everyone knows that.

154

Because I’m sure you’re not the only one, that’s not what this thread is about. As I said;

155

Bought a vehicle from david chevy buick in niagara falls ny, drove it home, and within 2 hours contacted them that I had a vibration on the way home. a week later i thought that maybe the tires were out of balance, i took it to a tire shop, I had 2 bent wheels… long story short, was told to contact the sales manager, tried calling for a few days, left a few messages, no call backs at all. opened a case with GM…

156

Found this today, thought it fits here:

How to Overcome 3 Tricks Car Salesmen Use to Take your Money.

Purchasing a vehicle from a dealership can be an anxiety inducing experience. What I discovered was that the number one emotion women felt when considering buying a vehicle was ANXIETY followed by uncertainty. In this article we will review 3 tricks that dealers and car salesman use that cause this anxiety and uncertainty. I will teach you how to overcome these feelings, and become immune to the tricks.

The worst thing that can happen to us as consumers is purchasing something and quickly regretting it. This is called buyer’s remorse and it is a terrible feeling. Why? Well you just spent $20,000 and you are married to a monthly payment for 3-6 years. I do not want this happen to you! The following tips are designed to prevent you from being pushed around by the salesman and to ease your mind of worries in regards to overpaying.
1 ~ Emotional Manipulation

During my car salesman days, we were taught many subliminal tactics to get customers interested in vehicles. One is emotional manipulation. The reason salesmen often insist on test driving is to get you to create a sense of ownership in your mind. “Ma’am take a seat, adjust the mirrors, now adjust the seat until you are comfortable . Go ahead and turn on your favorite radio station and flip back the sunroof.” Is your heart beating faster and you excitement increasing? You are unknowingly getting excited and your mind is taking mental ownership of this nice new vehicle. That awesome new car smell isn’t helping either is it? That feeling of euphoria is a very human response. They are counting on you to feel this way.

What happens next is quite primitive. As our excitement builds, the emotional part of our brains begins to take over. When this happens, we are much more likely to make a choice based on emotions. Have you ever heard of dogs that go crazy and get scared during lightning and thunder storms? I had an adorable shizu dog that would run miles away when thunder rumbled the house. RIP Bootsy. During these storms the logical part of his brain would turn off and the emotional part would take over. In this case fear dictated my dog’s behaviors. Much like my old boy Bootsy (my mom named him btw), this happens to us when we take mental ownership of a new car. The budget we set and the price we wanted are now more likely to be negotiable.

How to overcome trick #1 “Emotional Manipulation”

Be mindful of your emotions. Simply being aware of this tactic beforehand and how our mind/bodies will respond is a half of the battle in not making a poor emotional based decision. I always recommend that we sleep on it. My rule of thumb is to never make a large purchase the same day. This isn’t the same as picking up a Snickers while in the checkout line. This is a 5 figure purchase that we will be married to for the next 3-6 years. Be smart, go home, sleep, and revisit it the next day when your mind has had a chance to tend to other matters.
2 ~ Pushing you towards Payments

After the test drive we will be directed to go inside, sit down, fill out our contact information, and discuss the price. Car salesmen are taught to negotiate the payment with us instead of the price of the vehicle. This has two benefits for them. 1) Making an affordable payment is relatable and gets your mind off of the actual price. We end up paying more this way. (See Ex1 at the end for a math based scenario) 2) The interest rate and the length of the loan can quickly fall into the background with this payment focused presentation. The payments method works because we are more likely to digest the affordability of a a monthly payments versus the 5 figure sticker price. Over six years, a $100 dollar increase is not that much, but by doing the math it will add on $6K to the total price - wow, that’s mind-blowing! See below how Customer 1 saved $4,200 by focusing on a $70 lower payment. This is worth repeating…A $70 monthly difference saved $4,200!!!

How to overcome #2 “Pushing you towards payments”

Tell the salesman up front “I am not interested in going over payments right now, let’s stick to the price of the car out the door.” You must be proactive here. A skilled salesman may even give you a rebuttal of “well ma’am, I just want to make sure you get something that is affordable and fits your budget”. Just smile at your new adversary and politely say “While I appreciate your concern, I have all of that figured out, please just get me the out the door price”. (Make eye contact and smile for added value and enjoyment). They will get the picture. You want the individual price of the car and that is what you want to negotiate. You have now become a formidable opponent. You have now indirectly saved yourself hundreds if not thousands of dollars by directing the negotiations down this road. (See Ex1 at the bottom for a math based scenario on why this works) Also, the out the door price is the price of the car plus all of the fees that the dealer adds on. Better to know sooner than later what fluff fees the dealers will add.
3 ~ The Finance Office

After a price has been agreed upon, we are sent into the finance office. Here you meet the Finance Manager. This person finishes your paperwork, gets you financed (or takes your check), and offers you products to protect your new vehicle. This is where even the toughest buyers lose. Why? They lose because their guard is down. When we agree upon a price, we get a handshake and a congratulations. Usually the sales manager gets in on this as well. You give out a big sigh of relief. In my sales days, I will never forget this one customer who was an excellent negotiator. He knew what he was doing and worked us down to a super low profit. He clearly was prepared and this resulted in the dealership making around $100 on the car (Nice job!). What happened next really opened my eyes. He ended up paying $4500 on the warranty and GAP products as well as accepting an interest rate 2% higher than he should have. (explanation of these products below in Example 3) All of the money he had just spent his energy and time saving was washed away in the finance office. Customers let their guard down when a price has been reached with the salesman. Don’t let this happen to you. Being aware of yourself and the situation is half the battle.

I want you to know the background of the Finance Managers and how they get that job. It’s not by going to business school and majoring in Finance. They get there because at some point they were the top car salesman in the dealership selling 20+ cars a month. That is part of the car sales business ladder. It takes a different set of skills since they are selling an intangible product. You can’t put your hands on a warranty or an interest rate. Therefore it takes a higher degree of sales skills to be successful here. They are the best at what they do and that is why they get paid the big bucks.

The first move when we enter the finance office is to make us feel comfortable. Let’s nott let his smile and firm handshake fool us. He has one clear goal. Convince us to buy what he has. He doesn’t make as much money otherwise. He will once again show us the NEW payments if we were to purchase products A, B, or C. They make money in 2 ways. The first is by increasing the interest rate we are charged. They borrow your loan money from Bank A for 3% and charge you 4%. The dealership gets a part of that and the Finance Manager gets around $500 per % point he charges us. See Ex 2 to see how a 1% increase can cost you well over $500. The second way they make money is by selling us the company warranty or gap products which can vary drastically.

How to overcome #3 “The Finance Office”

As before, we want to ask for the total price of the product we are interested in. It really is a personal preference whether you want any of these or not. I personally have and never will get any of them even if they do add free oil changes. Don’t let my stance deter you though because there are some amazing packages out there that add free oil changes for years. Be ready to pay a little extra than you would normally though. The convenience is worth it for some. (See example 3 below for more information on products and how to get the best deals.) Next if not already done, we want to clarify what the interest rate is.

Good luck! I hope that this information will allow you to walk into a dealership with confidence. I hope this was helpful for you and will aid you in saving hundreds, if not thousands of dollars on your next purchase.

Example1

We are purchasing a $25,000 car. Let’s say we go in wanting to pay $22,000. The salesman comes out and says you can choose from a payment of $460 or $391. “Which one works better for you sir?” Do you see what he did there? He changed your $3000 price reduction to a payment and asked you a question directing you to pick from HIS two options. Many people lose here. They say they like one of the payments and lose OR they say they negotiate and say they want to be at $350 a month. The salesman takes your $350 request to his sales manager, they come back at $360 (They always come back higher). Great. Car is sold. Let’s do the math though. You wanted to be at $22,000. By accepting $360 you just paid $23,000 for that vehicle AND you have no idea what the interest rate is. The lesson here: Keep things simple and stick to the vehicle price first. When that is settled THEN work on payments.

Example 2

A $23,000 car loan for 72 months at 4% ~ You will pay $25,920 over the life of the loan assuming you pay 72 normal payments A $23,000 car loan for 72 months at 3% ~ You will pay $25,200 over the life of the loan assuming you pay 72 normal payments That is a difference of $720 Know your local credit union or banks rates before you finance a vehicle.

Example 3

Be familiar with the products BEFORE you go into the finance office.

GAP Insurance: http://www.bankrate.com/finance/insurance/car-gap-insurance-is-it-right-for-you.aspx Extended Warranty: http://www.consumerreports.org/cro/magazine/2014/04/extended-warranties-for-cars-are-an-expensive-game/index.htm

The $4500 example above was many years ago. Competition in the warranty market has increased and they are much less expensive nowadays. Still, do your homework and check around. Credit Unions often offer much cheaper products that do more if you finance with them. Companies like State Farm Insurance now do auto financing and will give you GAP for FREE if you finance through them! My credit union charges $349 for GAP. Dealerships charge $750 and above. I hope you can appreciate the value.

http://www.reddit.com/r/personalfinance/comments/36pnp0/3_tricks_car_salesmen_use_to_take_your_money/

157

This should definitely help in the car buying process for my mother-in-law later this year :tup:

158

It blows my mind that more people don’t understand the correlation between, price, rate and payment. I’ve never bought a car or anything really that I didn’t know what my payment would be before committing to buying it. I also pretty much knew what it was going to cost before calculating that payment.

All this nonsense of getting forced to buy a car and having buyers remorse is a foreign language to me. The only issues I ever had were the service department dropping the ball and not fixing the things that needed to be fixed.

With the online payment calculators available and being able to get your own financing through credit unions now, there is no reason that a salesman should be backing anyone into a payment, that is of course unless it’s a buy here, pay here…

159

Meh, /r/personalfinance is a huge circle jerk. The Tesla circle jerk is the worst. 99.9% of the people who praise Tesla, can’t buy one.

Basically, buy cars from good dealerships and via referrals you won’t have to worry about this nonsense. If you go in with a shitty attitude about the experience, you’re going to have a shitty experience.

160

I think there are enough people out there that don’t understand this basic (to us) info that it’s worth pointing out.