Car Dealerships: 2011

I have decided to write up this two page assay in order to warn all of you students (graduate and undergraduate) from the pits and falls of a certain car dealership in New Haven.

The first dealership with whom I had the (despicable) pleasure to work with was Auto Sale Inc. which is located on 1925 State St. NH (just next to the DMV office). Both my wife and I were walking down State St. when we both spotted a beautiful gray 1992 Honda Accord EX which immediately captured our eyes. The car looked great! And I mean GREAT! Hardly any visible dents, a little bit of rust above the rare wheels (a common Honda phenomenon), sunroof, cruise control and a reasonable 145,000 miles on the odometer. As we were looking at that master piece, a nice old chap (named Ted.do not forget this name!) convinced us that he was there for over 50 years, that he knows what he was doing and that he has sold hundreds of cars to the Yale community . He explained every little detail about the car, how to know if the car was ever involved in an accident, stressing out that we are practically getting a bargain (it was listed for $3950) and went on and on about his honesty and marvelous reputation. He then walked us right into his office, trying to get us sign a purchase agreement paying merely $100 deposit, just to make sure that the car will still be there tomorrow if we need the time to sleep on it or take it for a car check in an independent garage. And I have to say we almost signed! Almost.why? Oh, because he mentioned that he is retired and that the dealership is not his anymore, and one more important detail that the 100 dollar deposit is in no way refundableno matter what our mechanic will find.

So we went home without signing italthough I really felt that I am missing out on something good, and oh boy was I wrong! After calling my best friend, and telling him about the car, we both decided to go down again and have another look at the car. A second opinion never hurts. When we arrived at the dealership, a young guy named Bob greeted us and said oh, you are the guy from Saturdaythis accord is a good clean car, I had five people looking at it today, and if you wait too long it will be long gone. Although rough looking, Bobby immediately gained our trust, and we signed the agreement. As for the 100 dollars deposit, I will pay it back to you, if I cannot fix whatever is wrong with the car Bobby said after stressing again that the car is clean and in great shape.

I was so excited. We have been looking for a car for a while now, and with our limited budget, I was so happy I finally found one both my wife and I can agree on. I was in haven.

Before continuing my story, I should say a word or two about my mechanic. Ray from SKF Automotive on Portsea St. in NH is a great guy. Not only that he knows his business he is never too busy to give you some extra info about what he did and what needs to be done when considering your car. He has a great sense of humor which I guess changes according to the customer. Back to our story, following 48 hours the car was at Rays garage, and after a thorough check up, the picture looked pretty grim. The car was, how shall I put it, A COMPLETE PIECE OF JUNK! Every possible lubricated part was leaking, the breaks were off, transmission oil was leaking, and according to Ray the car was previously involved in an accident. The cost of repair.are you ready for this??. around 1300 bucks! I was shocked! 50 years of reputation! Hundreds of cars sold to the yale community! GOOD CLEAN CAR??? Damn I was fooled. No need to say that Ray did not recommend buying the car.

The first thing that came to my mind, I have to get my money back. You all know that 100 bucks for a grad is like 10000 for everyone else. After a long conversation, the bottom line was, Bobby wouldnt not pay. I told you I will give you back the money if I cannot fix the car, right? he said. But, you cannot fix a previous accident! I cried and besides, I do not think that you are going to invest over a 1000 dollars on repairs for a car that costs 3900! Please give me back my money, as I told you before, I am a student and for me every dollar counts, this way we both walk as if nothing has happened ..silence.more silence.and then..I wont do that. I will not give you your money backgood bye.

So, legally he is right. The agreement did mention that the deposit is refundable if he does not fix the defects found by the mechanic! But the fact still remains this guy is a cheater. He knew about all those faultsbut did not even bother to mention them. He gave both my wife and I mischief and distress, but the most important fact is that he just made a 100 dollars from selling practically nothing. And I wonderhow much money will he make doing it over...and overand overand over again. So dont let it happened to you!

Front of the house profit is derived from the MSRP less the invoice price (the price the dealer actually pays for the car). Each deal has a “pack charge” or “lot fee” of $200-600 or more that goes in as part of the dealer cost, so when a dealer tells you for example, our invoice is $22145, you can subtract $200 to $600 for the lot fee. There are also dealer rebates and consumer rebates to factor in.

On the sales contract there is always a “doc fee” of again several hundred, and a fee for title processing and sales tax. All but the sales tax can be negotiated.

Never trade your car in unless it has major problems and you just need to dump it. You don’t really know how much you are getting off the new car for the value of your trade. Most dealers I have worked for use “rough black book”, which is a number that they can start with before they do an appraisal on your car.

The back of the house profit comes from the finance office. Let’s say you have great credit. They could qualify you for 5.5% loan or less, but the finance manager may hit you at 7.5% and tell you that’s the best he could get. This can be negotiated, too. There is a lot of money being made on raising your interest a couple of points.

Do not buy any add-on service contracts and warranties. The profit on those is 50-100%, and the finance manager is a commissioned salesman. Remember that!

Do not try to bluff or BS anyone in the dealership — they are a lot better at it than you are, and they do it far more often.

Most salespeople do not make a lot of money. I have made as little as $300 a week and as much as $3500 in a week. My average is around $40,000 a year working five days and 55 hours a week. It’s a difficult job. The salesman is trying to negotiate between you and his sales manager. He is more on your side than you might think. He wants referrals, and he will work you hard after the sale, so he wants you to understand that he is going to get you the best deal he can and still make a profit.

Most deals on new cars pay minimum commission — $100 to $150 — because the profit margin on new cars is lower and the competition is higher. You can easily compare prices on new cars because every dealer sells the same car. Used cars have more profit built in, and there is no simple way to price shop because condition and mileage on each car varies so much.

Do not offer a price that is way too low. Be realistic. We are there to make a profit, and we must not sell cars at a loss. Give us a break. Don’t lie or steal from us, and we will treat you right.

The best time to buy a car is end of the month and before the new model year comes out. Monthly bonuses for volume can be very good, so they might be more willing to do a loser sometimes and make up for it on bonus.

Most dealers and salespeople are good honest hard-working people with families and lives like yours. Treat them with respect — they deserve it.

Driving through a lot drives us crazy. If you are really interested in looking at cars, stop and get out and let one of us open the car up and give you a demonstration. If you aren’t really ready to buy, go to the lot after hours so you’re not wasting anyone’s time but your own.

Once I had a customer came in and tell that me he and his wife would like to check out a couple of cars. He said he would give me $20 to work with them for a while even if they did not buy. I liked this. Now the salesman is motivated to work for the customer as well as the dealer — he can’t lose either way.