This is not personal against the writer, Wil Randolph. Admittedly he was only in the auto business for 4 years, and it certainly sounds like he was working at an undesirable dealership. He is writing what he knows, but that doesn’t nearly tell the entire story.
I got started washing cars when I was 15 years old at a local Ford dealership in Dallas. I worked hard and rose through the ranks of selling cars, sales management, and eventually became the General Manager of that first dealership. By the age of 29, I owned a Buick dealership. In 1996, I became the Owner of a Dallas Ford dealership that became the #1 Volume Ford dealership in Texas, and #2 in America. We won every customer satisfaction award Ford offered. Between 2000 and 2003, I added a Lincoln Mercury Mazda dealership, a Dodge Chrysler dealership in Dallas, and a large Ford dealership in Oklahoma, City.
I was the first two-term Chairman of the Ford National Dealer Council and a winner of the USA Today Dealer of the Year Award. Since 2001, I have been the host of the most listened to auto advice show in America, heard coast-to-coast on 22 different radio stations.
All of this to say that I believe my experience is more rounded and much more extensive than that of the writer of this article. I will address the points in the article one by one. I find Wil’s article to be well written, but mostly inaccurate, and without a doubt, only represents one side of the car business.
There is simply no doubt that there are good car dealers and bad ones like there are good Doctors and bad ones, good Lawyers and bad ones, good Police Officers and bad ones, etc. So bear in mind, I speak on behalf of the good dealers out there, and there are PLENTY of them.
Here are the article points, followed by my rebuttal.
10. Salesmen aren’t car experts
I know. Shocking. But yeah, most dealer salespeople aren’t enthusiasts. Worse, a lot of them aren’t well-educated about the products they sell. They know just enough to move the product effectively, especially to the uninformed customer. If you’ve ever visited a dealer and realized you knew more than the smiling “expert” who tackled you as you walked in, you know exactly what I mean.
But wait—don’t manufacturers require product knowledge training? Of course, they do. But in the business of selling cars, money talks and time is precious, and an industrious staffer can make a lot of cash on the side by taking other staffers’ product information tests. At my dealership, there was one guy who did pretty well for himself doing exactly that.
Of course, the customer loses as a result. I had to listen to veteran salesmen spout nonsense like, “Heck yeah, you can put a lift kit on this Denali and still get great gas mileage. It’s only a V6.”
The sad part is, many customers don’t know any better. So arm yourself with knowledge before you visit the dealer.
JERRY REBUTTAL: At good dealerships, training is ongoing and never stops. Salespeople have to be certified or they don’t get to talk to a customer, much less sell a car. Admittedly in the article, only one person who didn’t know much about cars did pretty well. It is surprising there was even one. The good dealers invest a ton of time and money so their people know every vehicle on the lot from top to bottom and are constantly tested on this. At good dealerships, the sales staff is made clear that lying to a customer is grounds for immediate termination.
9. Salesmen aren’t your friends
No one gets a good deal from a car salesman. Even when I sold cars to friends at what I thought were rock-bottom prices, there was still profit for the dealership built in. Being friendly is a sales technique. Period. It lowers barriers and fosters acceptance. If you believe the salesman is your friend, you’re more likely to believe that he has your best interests at heart. Newsflash: he doesn’t.
One of my worst days wasn’t actually on the car lot. It was listening to a friend talk about the “great deal” he got on a used car. He was amazed that the salesman had been so friendly and helpful.
“Hell, he even took me out to lunch while they prepped the car,” he said. He regaled me with the story like he’d just bagged a 10-point buck, but the reality was a horror show: he paid over blue book, the dealer stuck him for an extra point on his APR, and he sold him an extended warranty that didn’t cover a $1500 brake job he needed 1000 miles later. But hey, the salesman was a nice guy!
JERRY REBUTTAL: The writer starts out saying “no one gets a good deal from a car salesman”. That’s bunk, a ton of people get great deals buying cars and it is the salesperson who does all the work to make it happen. The writer notes that there was a profit made by the dealership when his friend bought a car. Where is the crime in that? Isn’t it the goal of every business in America to make a profit? The article makes it sound like salespeople should all be nasty people with bad attitudes. Who wants to buy anything from someone like that, much less a major purchase like a car? Wil, some people ARE nice and friendly, and shocker-some of those are car salespeople. I can honestly say that some of the best friends I have today, I met selling them a car. Good salespeople DO have a customer’s best interest at heart…they don’t want to sell you one car, they want you to purchase multiple cars. It is just good business.
8. History reports aren’t gospel
History reports like those provided by Carfax and Autocheck are not foolproof. At best, they’re a way to double-check what a dealership is telling you. At worst, dealers can use them to artificially increase the price of a crappy car.
Remember that these services only communicate information that was reported by previous owners. For example, my car has a clean Carfax, but judging by the signs I’ve observed after the fact—overspray, different indication of wear, etc.—it’s pretty evident that the car was in a front-end collision sometime before I got it. But it was never reported.
I didn’t follow my own advice and I didn’t look closely before I bought it. As a result, I’ve been chasing wreck-related demons ever since.
JERRY REBUTTAL: I don’t disagree that there are occasional errors or omissions, but I find those to be very rare. I advise people to have a professional look at a car if there is any doubt there was prior damage. I also recommend looking at both an AutoCheck and a CarFax to see if there are any substantial differences. That doubles your chances of discovering issues.
7. Buy what appreciates, lease what depreciates
You’re at the dealership, and you’re thrilled at the prospect of buying a car. Sure, that low monthly payment dragged out over a completely absurd 84-month term may seem attractive on its face, but it’s a trap. In the end, you’ll probably get burned. Once the car is out of warranty, whatever remaining value it has will be eaten up in repair costs. The solution? Lease.
Leasing can keep your payments manageable and let you get in a new car every few years. These days, many leases include standard maintenance, and all you have to pay is depreciation. If you must buy, you’re better off buying used.
In 2006, I ignored this rule. I fell in love with a Midnight Blue Metallic 2005 Pontiac GTO. I didn’t lease because I wanted to modify the car, and I was too impatient to wait for a used example to pop up. I got lucky. After four years of massive payments, I broke even.
Not everyone is so fortunate. If you roll in negative equity from a previous loan, or if the car you’re buying doesn’t randomly turn into a collector car when the company unexpectedly folds, you can find yourself in a tough spot.
JERRY REBUTTAL: The writer really shows his lack of experience on this one. He is advocating that every vehicle sold should be leased, which is absurd. Leasing is great for some people, but for high mileage drivers or people that use their vehicle for work, leasing is a disaster. There is no “one size fits all” when it comes to the best way to buy a car. Every day, I see people lease who should buy, and people buy who would be perfect for a lease.
6. Dealers aren’t charities
Financing companies work with car dealerships because it makes them money, and dealerships recommend certain options because—wait for it—it makes them money. Find your own loan before you arrive, or at least research which rates your bank or a credit union will give you so that you can compare them against the loans offered by the dealerships.
Some states still have usury laws that cap the interest that can be applied to a loan, but the 21 percent interest that the “special finance” division in my dealership ended up requiring is still 21 percent interest. So get financed before you set foot on the car lot.
JERRY REBUTTAL: You are correct Wil, they are businesses and profit is not a dirty word. If a dealer can secure a loan for a customer and he/she makes a little money on it-as long as the customer cannot get a better rate-it’s a win-win for everyone. Customers should know the best rate they can get before they walk into a dealership, but if the dealer can match it or beat it, you can get everything done at the same time in the same place. Your example of the 21% loan is preposterous. If a person has horrible credit and could be charged 21%, they can’t go out and get their own loan and you know it.
5. Beware the extended service contract
In many cases, you won’t get your value back. The service contract is offered because it’s a profit bonanza for the dealer. They’re typically issued by external vendors that work like insurance companies. Like an HMO, each service contract vendor will have preferred care centers. The dealership will probably try to convince you to service through them exclusively so that they can capitalize on their premium labor rates. After all, the service department is where any given dealership really makes its money.
Dealerships charge a hefty labor rate because, well, they can. They’re supposed to have better-quality technicians, and a vehicle maintained at a brand dealership typically has a better resale value. Just remember: You don’t need to buy the service contract, no matter how important the salesman makes it sound, and you have final say in where to have your car serviced. Don’t let anyone tell you otherwise.
JERRY REBUTTAL: You start out by saying “in many cases, you won’t get your value back”. I believe that should read that in many cases, the warranty will more than pay for itself. It is like any insurance policy you purchase, you are buying peace of mind. You don’t really want to use it, but it makes you sleep better because you have it. I cannot tell you how many people over the years who would have been looking at a $4000 repair had it not been for their service policy. On the other hand, I’ve seen people who chose not to get one and ended up with the car repossessed because they could not afford the car payment and the repairs. If people know how much money dealerships spent on equipment and training, so you can get your car fixed right the first time, they would be shocked.
4. No-haggle pricing is for suckers
No-haggle pricing is a marketing ploy designed to ensure the dealership wins. If you agree to a no-haggle price, you’re agreeing to an unknown profit margin for the dealership. Game over. Worse, unless you’re forking over cash, you’ll still have to haggle when it comes to financing your purchase, anyway.
You’re better off steeling yourself mentally and negotiating a deal the old-fashioned way. There’s a reason dealerships love no-haggle pricing, and it has nothing to do with saving you money, time, or hassle.
JERRY REBUTTAL: While it is true that no-haggle pricing might not be the best price achievable, some people do not have the confidence or desire to get into a long negotiation with a trained car dealer. That’s OK for them, it’s their money. I am not a fan of no-haggle pricing either, but if a consumer is willing to pay a little more to have an easy time buying a car, so be it. The writer points out that you are “agreeing to an unknown profit margin for the dealership.” Isn’t the same true if you bargain? It is not like you can’t get online and find out what the dealer paid for a car.
3. Knowledge is power
When a dealer says it can’t show you some bit of information pertinent to the car you want to buy, it’s doing so because it doesn’t want to, not because it can’t. Short of the previous owner’s personal service records, the dealer can show you everything about the car, including invoice price, holdback, and even the money spent on repairs if they performed the service. You’ll have to harass the salesperson to get this info, but the knowledge gained can be invaluable.
My favorite example is “Pay 310.” Pay 310 was a line on General Motors invoices just for holdback. Holdback is a a charge—a percentage of the price built in by the manufacturer to help dealers defray the costs associated with advertising and marketing their products. Customers who asked for the invoice knew to look for this line, and haggling over it generally saved them hundreds of dollars.
Ask for invoice information late in the deal as a closing negotiation. Assure the salesperson that you recognize there has to be profit in the deal but that you want to know how much profit. Don’t be taken advantage of.
JERRY REBUTTAL: Why go through the whole deal and THEN ask to see the invoice, Wil? If you are going to require a dealer to show you an invoice, why not do it upfront? Pay the dealer a profit and make it easy on both parties. To do as you suggest is only going to frustrate the consumer and the dealer. Although most dealers are willing to show you the factory invoice, I often wonder if people do this with any other business. I certainly wouldn’t ask Walmart what they paid for the TV I want to purchase. I wouldn’t ask a homebuilder how much it cost to build the new home I want. The car business is the only business where you can go online and find out what the seller paid for his product, which is why most dealers don’t mind showing you the invoice on a given car. The thing to remember is what the dealer paid for a car is not important-what matters is that you, the consumer, got the best possible deal.
2. If it seems too good to be true…
You know that 22,000-mile Subaru WRX STI you found at the scuzzy bargain dealership under the overpass that seems to have a new name every three months? Either the car won’t be there anymore in the two or three minutes it’ll take you to drive to the dealership (this is a bait and switch, and it is common), or there’s something seriously wrong with it. The same goes for oddly cheap Benzes, BMWs, Cadillacs, and so on. There’s an ocean of difference between a cheap car and an inexpensive car. You want the latter.
Dealerships aren’t exempt from this little rule when quoting trade-ins. I had a manager who lusted after all things Toyota. He made a fortune in Arizona strong-arming old ladies into Camrys and the like, and he believed that any Toyota, no matter how cheap, was worth its weight in gold. So when a customer came by promising a 60,000-mile Toyota pickup as a trade, the manager fell all over himself to give the buyer $3500 for the unseen truck. He figured he was stealing it.
The customer drove off in a new ride, and our best lot tech left to pick up the trade-in. He barely made it back alive. The Toyota could barely hit 45 mph, it had a visibly bent body and bed, it ran on three cylinders, and it had a screwdriver for a key. But it was too late. The papers were signed.
JERRY REBUTTAL: The writer is broad-brush painting again here. To say you can’t get a clean car at a used car dealership is just not true. Every car stands on its own, and even tote-the-note lots get clean, low mileage cars from time to time, especially the last few years when so many people traded down to lower or eliminate payments. Your example of the manager who traded for cars sight unseen doesn’t hold water either. I don’t know of a single dealer who would finalize all the papers without seeing a trade-in. Nor should the consumer finalize all the paperwork on a car they haven’t seen, whether it is new or used. That’s just not good business.
1. There are no great deals
There are relatively good deals that get you a good car for a period of time, relatively bad deals that leave you underwater when you want to trade in the car, and there are deals where you get screwed, plain and simple. If your salesman high-fives a colleague while you’re in “the box”—aka Finance—chances are you’re among the latter.
Do your best to prepare beforehand, stay calm, be reasonable, and try not to forget these rules when you go in to buy a car. The experience will be better for you.
JERRY REBUTTAL: Define “great deal” Wil. You seem to think a great deal is one where the dealership makes no money. The dealership’s profit is not important, PERIOD. The consumer getting the best possible price is all that matters. Case in point, I just purchased a 2014 Corvette Stingray convertible. The dealership I bought it from made $2000 or so on the sale and I am TICKLED TO DEATH FOR THEM. Why? The price I got was $3000 better than I could get anywhere else.
In closing, jaded articles like this one want you to believe that every car dealer in America is a low-down, rotten thief. Sadly, some are. However, I know hundreds if not thousands of dealers who are honest, truly care about their customers and employees, and are involved in the communities they serve with their time and money. As a consumer, if you want to research before buying a car, you are wise to research the good dealerships and avoid the bad ones. This is the essence of my radio show, and frankly, why it has been so successful. I have no ownership in any car dealership, but I will not stand by and have my former colleagues lumped together as crooks.
Jerry G. Reynolds
Owner, Car Pro Radio Network