We bought a new car!
Some car buying tips from a psychiatrist.
One of my kids just hit an adult milestone yesterday, she bought a car. This was both a wonderful and stressful experience. Due to the chip shortage, there are no deals to be had. I thought I would share some of the psychology that car salespeople use to manipulate you. Did we get a good deal? No. Did we get an acceptable deal? I think so, our final price was significantly less than what the salesman tried to propose.We went for a new compact car as used cars that were several years old and with many miles were only a few thousand dollars less due to used car shortages.
The first rule is to remember that even in scarce times there are always multiple options. As my friend, Tom says. “A car is just a box on wheels.” A car isn’t a sex or status symbol, it is a mode of transportation. Leave your emotions at the door and you will do better.
Second rule. Check around, call around, research around. We knew going into the purchase that most dealers were charging a surcharge that could be between 10-20%, sometimes much more for “hot” vehicles. The average surcharge for an economy car was around 10%. I knew from personal experience that many car dealers will add BS add-ons to boost the sales price. You need to be on the lookout for these as they can significantly add to the cost of the vehicle. Ask about them before you buy.
We initially looked at a Kia Rio from a dealership in Naperville. The salesman told us that there would be a non-negotiable 10% surcharge. I also asked about and discovered that there was a roughly $1000 dollar add-on package that couldn’t be removed. Dealers have been using this tactic as long as I have been buying cars. Remember being forced to buy undercoating? After asking he told me that he could probably get me this package for $700. Still a rip-off, but better. Always ask.
I was traveling abroad and then got COVID so we stopped our car shopping for several weeks. My daughter decided on the Kia, and we returned for her to test drive and possibly purchase one.
Our same salesman did a computer search and felt he could get a car in about 3 weeks, so we decided to put down a downpayment. At that point, I reminded him that their surcharge was 10% for this particular model, and that he had promised $300 off the required add-on package. He filled out the forms accordingly and then had my daughter sign the form. Psychologically, this is a way to get the customer to commit to the purchase. Signing something is usually a big deal. No big deal for us, however, as she was committed to buying the car.
He then disappeared for quite some time with that sheet and then returned saying he had talked to “his manager.” Now the surcharge was 20% and the discount for the add-ons was $250 instead of $300. When he saw the discomfort in me he immediately tried to friend me by saying that he “thought” that the manager would allow only a 15% surcharge-which was still 5% more than what he originally promised me. This technique is called anchor biasing. Most people go for the middle and his actions were designed to make me feel like I was getting a deal, despite his breach of agreement and the fact that he was really screwing me. I reminded him of what he committed.
Note that when car salespeople go to “talk to the manager” they are really having a smoke or a cup of coffee. Our salesman had worked at this dealership for 8 years and he knew what was allowable and what was not allowable. The talking to the manager BS was to add authority to the decision and to take the blame off the salesman. Sort of like the “I can’t do that because my parents won’t let me” line that I used as a kid to avoid peer pressure demands.
At that point, I had to make a decision, to walk or negotiate. If cars were plentiful I would have walked. Because they are not, I decided to negotiate. However, I already had his number as I knew that he was using common and deceptive practices. He was not my friend.
When negotiating it is important for both parties to feel that they have gained something. I counter-offered to pay a few dollars above the $700 that we originally negotiated for the add-ons and said I wouldn’t pay 15%, but I would be willing to pay 11% instead of a 10% surcharge. Then there was another long absence for a “manager talk” and a return offer accepting the add-on price and offering 12%. I asked him to renegotiate. Then another long wait and another “manager talk.” He came back with a “better deal.” Note that none of the percentages were listed on the datasheet he was showing us, just a bunch of numbers. You have to calculate them yourself, which is a tactic to confuse the consumer. We also only got one sheet at a time, so there was no way to compare older offers. In this case, I asked him, “So what is the new percentage?” He smiled warmly (like he was giving me a Thanksgiving turkey) and said 11.8%! I reminded him that was 12%.
I always treated the salesperson with respect, and warmly smiled right back at him as he made small talk and told us about his family and kid. Naturally, his conversation was designed to normalize our relationship and convince me that he was a regular and trustworthy guy. Knowing this, I went along with his actions. However, I had no illusion that we were going to become BFFs.
Now was the time for me to use my knowledge. I knew that a car sale is more likely to take place the longer a customer stays in the showroom. Hence all of the long waits as he was talking to “the manager.” I also knew that having my daughter sign was another way to legitimatize the deal. However, I had a trick up my sleeve too. I understood that he knew that if we left the showroom his chances of closing the sale would be dramatically reduced. I also knew that (at the least) he could have charged us only a 10% surcharge instead of the 11% that we going to pay, as that is what he told us on our first meeting. He had spent many hours with us, which would be wasted if he didn’t make the sale.
I deliberately put on a sad/frowny face and pushed away from his desk. I knew that he would understand that symbolically I was starting to reject the sale. He persisted with the “talk to the manager” line and this time I took gentle control of the situation. I reminded him that he had worked for the dealership for 8 years. I also noted that he was a top salesman (plaques on his desk) and complimented him about this. However, I added his experience should certainly give him some power in this manner. I was subtly giving him back his authority from the fake manager. I was indirectly taking away his ability to constantly use the “manager” as a tactic.
He continued to push, but I had had enough. Both my daughter and I were both exhausted and hungry. Wearing down a customer is another technique used by car salespeople, as many customers will just “give in” at this point. They want the stress to be over. However, this negotiation wasn’t a one-way street. It was time to play my card. I smiled at him with a somewhat disingenuous smile and started to stand up saying, “Thank you so much for all of the time that you spent with us today. I think we need to reevaluate our purchase. However, we will make a decision one way or another and if we decide to go with the Rio we will most likely call you.” I knew that this would signal to him the likelihood of a lost sale that he had invested many hours to seal. He looked at me and said, “OK, you can have it for an 11% surcharge.” No “manager talk” was needed, and we signed the deal.
Now am I a master negotiator? Of course not, but I knew my limits and I used my skills to move the process forward. We knew that we had to overpay at the start and we did wind up paying a bit more than we expected. However, it was acceptable given the current car shortage situation. Thankfully, my daughter picked up on my method and went along with my wanting to leave. This was difficult for her as she is a new buyer and was definitely caught up in the emotion of not only having her own car but her own new car.
I post this if you are contemplating buying a car, especially if you are a new buyer. Know common dealer tactics and use that knowledge to your advantage. Let the salesperson feel like they are getting what they want without sacrificing too much. Ask to see comparison numbers in a fashion that you can understand, take notes, ask questions beforehand, and write things down. Be willing to walk away. It isn’t a kidney, it is just a car.
There was a small chance that our salesman would have let us walk, but that was a very small chance. You have to be willing to move on if you can’t get a realistic, acceptable deal.
The other way to screw the customer is by showing them monthly payments instead of the total cost. “Oh, that is only $100 more a month. You can afford that, right?” Or, “We can lower your monthly payment to only xxx.” While at the same time extending your time to pay to 7 or 8 years. Cars could need significant repairs by that time. Additional money on top of your car payment. Consider a reasonable length of time to repay, and the amount that you can pay per month. Base your purchase on those factors, not on glitz and glamor. As a person who has owned many cars, they are all just transportation after owning them for a month or two.
I hope this post is helpful to potential car buyers.