Sunday, June 14, 2009

A Car Salesperson is Not Your Friend

My friend Jen Mehigan bought a car this week, and I am very proud of her, because she did a good job negotiating. When I was in college, I took a persuasion and propaganda course, and we spent one entire lecture talking about car buying. We reviewed the common persuasion techniques used by car salesmen. The three tips that I most often talk about are below:

1) Do not test drive the car until you are sure you can buy it. Often I say, don't even bother to test drive the car. You know it's going to run fine if it's new. The reason you should resist is because the salesperson desperately *wants* you to test drive the car. When you drive the car, you start to feel ownership for it. That means you are willing to pay more for it. Car dealers know this; it's one of the reasons it is very easy to drive a car you don't even own and have not even indicated any interest toward buying.

It's funny sometimes to see how badly the salesperson wants you to take a test drive. If you resist, they will say they can't get you a quote on the car or negotiate a deal until the test drive is out of the way, almost as if your check will not cash otherwise. To be sure, a test drive is somewhat of a commitment from you, the buyer, to show that you are serious. But there's no reason why you need to test drive the car in order to buy it.

Since you you really should be ok with the feel behind the wheel before you drive the car off the lot, I concede it does probably make sense at some point to take the potential new car for a spin. Here's the key: Do not test drive the car until you are absolutely certain you can afford it. Literally, have everything else taken care of-- dealing with financing, making sure the monthly payment is one you can put in your budget, knowing what initial payments will be necessary, etc.

2) You don't have to buy the car *TODAY*. The car salesman wants you to buy it today. They don't want you to go home and "think about it," which is why you should go home and think about it. You will hear that the deal you were guaranteed today may not be available tomorrow. Something tells me it will be, if you show up ready to sign the dotted line.

My college professor used to say that you never want to make a difficult decision without a good night's rest and a good breakfast. The same goes with buying a car. Tell them you will be back tomorrow. And while you are at it, wait until tomorrow for that test drive, too.

3) In general, the more badly the salesperson wants you to take an option, the less likely you need it. My friends will tell you I am not a fan of warranties or insurance. Think for a second about why insurance exists. You probably don't realize this, but the main reason you have car insurance is not to fix the car if you are in an accident but so that you can pay to fix the car of the other person you hit, and as protection if that other person decides to sue you if it happened to be your fault. This is why so many people drop "collision" from their insurance when they own the car and have paid off any loans. The car at that point isn't worth too much, so it makes sense to get rid of coverage to fix it.

The insurance company is a business; it makes money by betting on the fact that you won't actually file a claim. And the system works pretty well. As car owners, we are protected if something really bad happens, and as businesses, the insurance companies are doing pretty darn well.

Given the model, let's look at the classic extended warranty, which is insurance in case something goes wrong with the car not caused by routine wear or neglect. The salesperson *really* wants to sell you it. And that's because it's a cash cow. You will pay an additional fee every month, and chances are you will never have a claim to file. Any repairs you have will be in the variety of routine maintenance, which is not covered. And if something catastrophic
happens, chances are you will no longer like the car and will want a new one.

The key here that I always point out is the salesperson will try very hard to sell you an extended warranty. Generally speaking, if they really want to sell it to you, I don't want it. The salesperson is not out to help you; they are out to help the dealer and themselves. Remember that. And that applies to other "offers" beyond insurance, including offers made to you by the finance team, etc.

So there you have it. Three tips courtesy of my persuasion and propaganda course taught at BU back in 1997. My college education at work.

Have a super Sunday.

1 comment:

VR718 said...

Another tip: Be as vague as possible when answering all the "getting to know you" questions, like:

- What do you do for a living?
- What do you drive now?

If you're a lawyer living on Newbury Street driving a BMW now, they know that they can squeeze dollars out of you.

When I've bought cars in the past, I'm always at an entry level job with a car borrowed from a friend.