10 Dealership Myths

What do you do when you walk into a car dealership? Do you have any tips or tricks for getting the best deal? Watch out: you may not be as savvy as you think.

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Episode Transcript

Speaker 1 (00:02):
Go behind the wheel, under the hood and beyond with
Car Stuff from house Stuff Works dot Com. I welcome
to Car Stuff. I'm Scott, I'm Ben, and I'm here
of course as always with their super producer Noel slick
Talk Brown and boy Scott, do we have a deal

(00:22):
for you? Yeah? You gotta love that probably has uh huh, Yeah,
it's pretty good. He's got some snake skin boots on
a glad suit. Good look below tie En Gallant hatt. Uh.
The reason we're talking about all of this stuff is
is not just because Noel slick Talk over here is

(00:42):
a stylish dresser, no relies and gentlemen. It's because we
are going to have some fun with today's episode. It's
about dealerships. Yeah, dealerships and specifically myths they get kind
of passed around from from generation to generation, from you know,
co worker to co worker, friend friend about what really
happens when you go to a car dealership. You know

(01:04):
that you know the kind of the the bigger things,
you know, like oh, you don't want to you don't
want to go in there, um, you know and announce
your trade right away. You want to hang onto that
as like your your your back pocket. Bargaining tool, you know,
things like that. So there's there's ten of these that
we have in an article that is um, well, I'll
be honest then as of today, unpublished on our site,

(01:25):
will be published soon. It's just kind of one of
the things I gotta work through the through the system.
But we're gonna talk about it. We have the rough
draft from our from our author, and it's fascinating enough,
like it's it's an interesting enough story that I think
I felt like I wanted to get it on air
right away so we could talk about it. Um however,
can I can I start out in a in a

(01:46):
very unusual way, please? All right, I would like to
start off by recommending another podcast, a different maybe a
radio program. I guess it's a radio program here to say,
but you can find it online. Uh now, don't do
this now, just write it down and go back to it.
Listen to this episode first. Then go and listen to
this because it is a fascinating story. It's from um

(02:07):
MPRS This American Life, and it is a tale called
one hundred and twenty nine cars and that's the title
of the episode, cars on Cars. Yet it's from around
December it's easy to search and find online. The host
iss Ira Glass and um, the internet version, I'll give
you the heads up on this. The internet version has

(02:28):
a lot of cursing in it. Um. You can find
a bleaped version of this if you want. You know,
it depends on who's in the car with you, I
guess and you're listening. But it is a fascinating story
about a dealership on Long Island, a jeep dealership, Chrysler,
you know, I think it's a yeah, Chrysler Dodge Ram
jeep dealership in rather on Long Island, and their efforts

(02:50):
to reach the monthly sales goal of one hundred and
twenty nine cars, you know, combined from all all the
sales people, and you would not believe what goes on
behind the scenes when the customers aren't there. Well, and
when the customers are there, there's a there's you know,
a full month of recording that's happening here. It's about
an hour and I think it's about an hour and
fifteen minutes long, and it is, I mean, it's absolutely fascinating.

(03:13):
I've listened to it, uh two times fully through since
this is you know, been December, and I'm in the
process of listening to it a third time right now,
because I wanted to listen to it prior to this,
but I only got about midway before we had to
come in to actually record this. So let's let's not
leave the people hanging here. Scott, What's what's one thing
you remember about it that that blew your mind? Well, okay,

(03:35):
here's here's maybe the biggest thing is that, um, they
point out that it's not you know, these numbers, these
numbers that they have to reach. It's not like a contest,
it's not a game to the dealership. These are numbers
that are set by the manufacturer. And we're let's say
that you know the month that they're doing this. Let's
say it's actually I think it's October. They had to
sell one hundred twenty nine cars, and if they sell

(03:55):
one and twenty eight cars, they get no bonus from
the dealership or from the manufact actual, which is a
Chrysler Fiat. If they sold one and twenty nine they
get the full bonus, and the full bonus. Just to
give you an idea of what this amounts to, is
ballpark to eighty five thousand dollars? Is what the bonuses
you saw one car less, you get nothing. You saw

(04:15):
one nine or more, you potentially get that full bonus.
And this is going to go into one of the
myths that we will address in our show, which is
the h the idea about timing of buying a car.
We know what it's like, guys. Uh, Scott, you've bought
a car. No, you've bought a car. I've bought a car.
What what we all encounter, no matter who you are,

(04:39):
is that your friends and family come out of the
woodwork saying, well, well, you know, Scott, if you want
to get a good deal, you gotta go on and
when the weather is bad, you gotta go on the
right day, or something like that. Loads of tips that
are either handed out or dispensed at that time. I
know a guy who knows a guy who met a
dude at Arby's who can get you a deal that's

(05:01):
right to get your best off, your best best bet
is to walk in with a suitcase full of cash, right, Yeah,
a suitcase full of cash and uh, maybe just an
implied threat, maybe a scheme mask but you know, there's
often some bad, bad advice dispensed at that time when
when you're about to buy right, You gotta kind of
pick and choose what you pay attention to what you don't,

(05:22):
because some people really do know what they're talking about. Sure,
you know, maybe they've been involved in the in the
business or something. And of course everybody's intentions are good,
but bad advice or acting on some bad advice can
actually harm your chances of getting the best possible deal. Yes,
exactly right, And just you know, again just not necessarily quote,

(05:43):
but a comment from this pocket you know this cars podcast,
is that you got to remember that the managers and
salespeople are all playing each other within the dealership. Um
the customer is playing them both. Each dealership is playing
the other dealerships in town. So you know, there's not
just one Rysler Dodge g dealership, there's four in this town.

(06:03):
The manufacturers playing all of the dealership. So there's there's
this huge roundabout game that's going on where everybody's trying
to get the best deal and and trying to outsmart
the other person and just small little ways, and it's
and it's really fascinating to see what happens in this podcast.
And and you know, as we talk about our ten myths,
if we're getting to right now. Um, I think that

(06:23):
you'll find that, you know, a lot of the stuff
that we talk about in this ten Myths podcast come
up in that episode that I'm pointing you to, right. Oh, yeah, absolutely.
We we looked around for a while and some of
this stuff just to gather various sources, and a lot
of the myths that you will find in various magazines
or online sites or podcasts. Uh, a lot of them

(06:46):
are the same myths that keep cropping up, which should
be a good indicator that they are indeed myths. There
is something to them in that case, right, So you
want to I don't know, let's just start with number
ten and we'll count them down down down to number one.
And they're not necessarily you know, the most important number
one or anything like that, but but um, you know,
it's just uh, I guess the common knowledge of stuff

(07:06):
that we should get out of the way about. All right,
So number ten, and this is a big one, the
I have to talk to my boss, which is just
kind of employ to buy time. Now, sometimes oftentimes they
really do have to talk to their boss in order
to to make sure that the deal is on the level. Right. Yeah,
And when people imagine this scenario. Uh, you know, if

(07:29):
you if you close your eyes right now and you
think about it, don't do it if you're driving, of course,
But if you close your eyes you think about it,
then probably what you're what you're seeing in your head
is a table or desk with the sales personnel one
side and you or someone on the other and it's
finally come to the brass tacks, the paperwork and negotiation.
You get your arms crossed and the dealer is scribbling

(07:51):
numbers on the paper there and uh, and you're trying
to work out this deal and he says, after finally
you make your final offer, you say, that's what I'm paying.
That's not gonna pay a dollar more than that. He says,
there's a pause, and he says, let me talk to
my manager, and he walks out of the room. And
then your thought is he's just buying time. He's not
even talking to anybody. And one thing that well, okay,
some pop culture that backs this up, um is that

(08:14):
and what we find really isn't necessarily true. But um,
think of that scene in Fargo where he is, where
Jerry Lendergard is trying to sell truecode to that customer.
Who is I rate about it? You know, the guys
coming into to write the check for the car. He says, Oh,
the factory installed truecode on this car. It's a five
hundred dollar option. Um, you know, it's just adds five
hundred dollars to the price. Don't worry about that. And

(08:35):
the guys flies off the hook and uh. And then
there's this back and forth about how he's not gonna
get taken here, and you know it's he's like these guys,
it's always war. You know, when you come in here,
it's always war. And he says, well, let me talk
to my manager. And he walks in and he says
something about, you know, like the the local team, like
you have tickets to the Gophers game or something like that,

(08:55):
and Uh, doesn't talk about the deal at all. Walks
back and says, well, he's never done this before, but
he said it knock one hundred dollars off that five
hundred dollar options. So, you know, do we still have
a deal at nine nine instead of you know, the
twenty thousand I told you it's going to be. And
you know, it's just that it's fascinating to see that,
you know, they actually played it out like it really
it was playing into the people's idea that this myth

(09:17):
really happens. But when you listen to again the example
of the one nine cars episode, you'll find that they
really do have to go back and and work this
deal with their their sales manager, with the with the
general manager. Make sure that it's okay, because that's a
collective as far as the manufacturers are concerned, that's a
collective quota. That's uh that dyin cars for instance, that

(09:39):
number is something that the entire dealership is responsible for. Now.
They may have internal quotas, but what they are probably doing,
at least at an up and up honest place, is
going to talk to the person charge and saying, how
close are we this month? How much room do I
have to move on this? How much latitude do I

(10:01):
have financially? True? And there's a lot of numbers that
we can talk about, and I don't know, if we
want to get buried in it, maybe they'll come up
along the way. But I do want to say that,
you know, one fascinating part of this, and I said,
you know how everybody's kind of playing each other. It's
possible that the that the salesperson is playing the general
manager as well and the sales manager. I guess maybe. Um,

(10:22):
So the salesperson comes in and says, you know, after
the people agree to a price, you know, what do
you wanna pay per month? And they say, look, I'm
not gonna pay more than two fifty each month. That's it.
So so he goes to his his manager and he says, look,
they're not gonna pay more than more than two ninety
nine a month. And he says to ninety nine, okay,
well we can come down to to you know, and

(10:42):
they bargain back and forth, and they go back to
he goes back to them, and he looks like a
hero too, not only a sales manager coming in with
a better number. They also think that like he's he's
working both ends of the of the deal there in
that case, And maybe I said that backwards. I'm not
sure I think I got it right though. Well, yeah,
he brings it a higher number and then when it
comes down a little bit, the sales manager thinks it's great. Yeah,

(11:03):
the the sales the person that's buying the car thinks
it's a great deal as well. Well. Also, if we're
being ferres Scott, the manager probably knows that trick and
probably welcomes it. That's how they got there. We've got um,
there is one number that we should talking about. Though.
There's this great, uh great thing I found about a
from a former car dealer, from a former car salesman,

(11:27):
and he's talking about the the idea of a secret
hold back amount. Really yeah, which is I think related enough.
We can stick this under the same under the same
myth of course. So you know again that myth is that, uh,
when they go to talk to the manager, they are

(11:47):
going above the They're not really doing anything. They're just
making you think that you have progressed or succeeded in negotiations,
because of course a lot of people prize themselves on that.
And we were talking about, well, the numbers are really
the king here, their paramount. So this guy says that
it's not so much a secret trick. But in the

(12:12):
case of our dealership, he says, we didn't buy our cars,
we floor planned them through g M a C. And so,
just to show the argument for this, he said, we
would pay one percent of a car's uh suggested retail
price to G M a C. Every month, so we
didn't have to pay the full amount of the invoice
to buy the car from GM, and when we sold it,

(12:34):
we received three percent of this m s r P
as what they called the floor plan allowance. So they're
just keeping their lot full, right exactly. Uh, But here's
the rub, you know, Uh, he says, you've probably already
figured out the goal here. If we sold cars in
less than thirty days from when we got them, we
got to check for three percent of m s r
P and only paid one percent, So that's just free money.

(12:57):
But if we sell it from thirty to sixty day
after we got it, we get three percent and pay
two percent. Sixty ninety days we break even. So in theory,
a fresh car off the truck could sell under invoice.
But the way dealers think, he says, it's a fresh car,
so we're less likely to take a loss selling it
because someone else is more likely to come around and

(13:18):
buy it. So this means that a lot, a vehicle
that stays in a lot longer than three months in
somebody who is floor planning a showroom floor, yeah, is
likely to get a pretty good deal on that because
they're anxious to get that vehicle off the lot because
it's a loser for them, right, that's uh, that's the idea. Um,
and again that applies that that dealership maybe, but and

(13:40):
how do you know which is which? And how do
you know which is which? You can tell you that's
the one they're gonna steer you to first if you
come in looking for that type of truck or car
right like I'm hearing you say F one fifty, but
you the secretly a you go man, I can tell. Okay,
well let's move on to number nine. Number nine, all right,
dressed to depress. So, um, you know, the idea is
that you go in. You don't wear your Rolex watch,

(14:02):
you don't wear a suit. You might wear some jeans
that are a little bit worn. You might wear an
untucked shirt or like one shoe in a garbage bag. Yeah, yeah,
not a good tactic. You might actually appear, you know,
I mean just general appearances. And I know this is
wrong to look at somebody like this, but when you
see that, you might think that they're not necessarily a
great credit risk for the for you, So you might

(14:24):
get less um respect I guess when you're at the
dealership then you would if you were just um, I
don't know, not overdoing it, not like you know, wearing
the pinstripe suit and you know, like the article says,
you're you know, you don't have your butler and toe
with you or anyway, and you don't show up in
you know, your limo U. However, you know, you do
want to appear like you may have enough money to

(14:45):
put together for a down payment. You might have a job,
and you might have good credit, and you might be
uh somebody who is you know, on time with bills.
I don't know how you make that appearance, but you
somehow do you convey that with your the way you dress,
the way you look, the way you handle yourself while
you're at the dealers. Right. A lot of it is grooming.
I mean you, of course you don't have to wear
a suit, but you know, uh, clean clothes, don't wear shoes. Yeah,

(15:10):
don't go overboard in this. That's the thing. It's it's
all moderation. I mean, just just don't dress down intentionally
in order to think that you're gonna get a better
deal on something, and it just doesn't work that way. Yeah.
The key here is moderation. You don't want to look
like a headache and under dressing in some ridiculous way
in something that's essentially a costume makes you look like

(15:33):
a headache. It's a red flag. Uh and it is
and and way over dressing could be just as bad.
All right. Well, let's say that you're in a Rolls
Royce showroom, okay, all right, and you show up and
you legitimately have the money to purchase a Rolls Royce,
but you show up in blue jeans in an untucked shirt. Um,
as would you know some of these CEOs of dot

(15:54):
com companies or something, you know, they were a hoodie
sweatshirt in there and and yet still be able to
afford the product. But they might not get the attention
that somebody you know that that arrives um you know
that is maybe in a suit, as we said, or
maybe someone that has a you know, ten thousand dollar
watch on. They might because they spot things like that.
Dealerships and and I should say sales people in particular,

(16:15):
you know, to look for things like that, you know,
for signs like that. There's signals, so yeah, they really are,
and you know it's very very tricky. I mean, I
would feel um awkward if I went into a Rolls
Royce dealership because I know that I don't really have
the cash the backing to be able to purchase that vehicle,
and they would likely be able to spot that immediately,
because I don't know if it'd be the way that
I'm dressed or the way that you know, I'm apprehensive

(16:37):
about getting in the vehicle or asking questions about it,
you know, a little more cheapish, I guess around them,
but I'd be interested to look, but I just don't
know how, you know, I guess I'm not sure how
they would profile every single person that comes in. And
I know that's an extreme example, the Rolls Royce or
they you know, let's say the McLaren something like that.
It might change depending on the dealership, the price point

(16:59):
to the car you're buying, like luxury dealership may have
a different expectations. But every kind of dealership, I promise you,
ladies and gentlemen, has had a customer who looked like
they were, you know, one paycheck away from living on
the streets, but paid in cash or something for for

(17:21):
a really nice brand new cars. Sure, exactly right, So
like it or not, you're being profiled when you go there.
Just just keep that in mind. But don't they don't
dress down. Yeah, okay, myth number eight, number eight, al Right,
dealerships are making it rain every day, all day, every day.
Money money, money, yeah, yeah, but actually they're barely making

(17:42):
a profit. Now when I say that, I know people
are gonna be outraged. There are some people are gonna
be outraged anyways. Right when you say they're barely making
a profit, you're they're they're thinking, there's no way because
the markup on these cars. There's just no way that
it's working out that way. It turns out the profit
margins are very slim on new cars. On brand new
cars cost a lot to build, you know, at the
at the manufacturing facility, uh, you know, to develop all

(18:05):
the research and development costs and everything go into that
into that price as well. Um, whether the the uh
you know, the people that build them or any union matters,
as well as far as how much the thing costs
when it comes off the line. It's there's there's so
many factors that go into this and shipping costs, you know,
whether it's overseas or not, state fees, regulatory fees exactly right.
But this is this is pretty amazing. According to that

(18:27):
report that I was mentioning before that that dealers make
something like three cents for every dollar on a on
a brand new vehicle that they sell. Now, that's extremely
low profit. And all of this, I know, this kind
of gets jumbled around because they lose money on some cars,
they make more money on other vehicles. It kind of
depends on on and again they're trying to reach that.

(18:50):
In this case cars, every dealership has gotta target and
they will intentionally lose money on some cars just to
sell product, just to get rid of that vehicle so
that they get their number count up, knowing that the
bonus the dollars will cover it eventually. But they can't
do that for every vehicle they sell. They can only
pick and choose when they do that. So it's got

(19:11):
to be the right the right car, the right buyer,
the right situation, the right day. All this comes into place.
So there's there's a lot of factors here and and
it's really this this back and forth chess game between
you the buyer, and you know, the the the salesperson
who has the dealership is their best interests. Of course,
I'm glad you called it the h Well, maybe the

(19:33):
salesperson is the salesperson's best interests. But I guess that
changes on a case by case basis. I will say
that I'm glad you called it a chess game, Scott, because, uh,
the internet has changed the way people buy cars. Uh.
It's allowed people to become much more informed about it,
about what car they want. And also, I would argue,

(19:57):
much more likely to easily go to a different dealership
or much more likely to wait until they get the
exact car they want. So those days of saying, well,
we have a car that's in your price range, it's
a little more than um, we have talked about because
it has you know, I don't know leather seats, well,

(20:18):
because it has heated leather seats, right, Uh, and you
know it's it's a little bit more like this. Uh.
This one has tinted glass and it has that arrow
package and also the nineteen inch rims so that as
a significant amount of a little bit more. And however, yeah,
it's not gonna last long. I've got somebody else looking
at it. Right he's calling right now, ring ring, that's him,

(20:42):
and it's the manager going like pretend to come out
and talk to me, and it's like, excuse me, sir,
I'm in a meeting with someone. Car is still here
for now, he's on the way yea. But the likelihood
is that the customer will say, you know what, if
I just drive four miles down the road, there's another, Um,
there's no there Subaru dealer that has the same model

(21:03):
and make that I want without the arrow, without the
rim less. It's not those packages, but it's the one
that I initially look for. I'm going to go down there.
And and the thing is, you know, customers are very
very informed now, so adding these extras, adding these you know,
these add ons, like you said, you know the you know,
well we've got this one, but it's got leather seats
or you know whatever. Um, that's much more difficult for

(21:25):
them to kind of kind of throw in there too.
Uh well, as they say, sweeten the deal, but as
the customer would say, it's it just drives the price up. Yeah.
And speaking of money, let's let's get down into the
next few. Number seven, Scott and this some people might
argue about this one. I think we've talked about this
one on our podcast maybe more than once, even on

(21:47):
deal on Dealerships and Financing and the bank type Number
seven is bringing money from the bank. Yes, And we've
had listeners right in with their own strategies for this,
and some some actually really good rateity very clever, we
have reported, Yeah, very clever. You're right, that's a good
way to say it, extremely clever. And I've actually thought
about those those emails as I was going to purchase

(22:09):
my last vehicle, I was I was thinking about you know,
I kind of went through some old emails and was
reading this stuff and was trying to really play all
this out in my head, like is that really gonna work?
Is that the best option? And then you know, you know,
because we have the internet, because we're able to find
out what the what kind of financing you can get
um at you know, maybe even more than one credit union, uh,
either that or through your bank maybe you know that's

(22:31):
sometimes sometimes that's a possibility. It's usually the credit union
UM or going through the dealership for financing. And and
believe it or not, you know a lot of people
say bring money from the bank, which means from the
credit union or the bank UM sometimes quite frankly, the
dealership is your best option, right because they have an
existing network of their own banks and credit unions and

(22:54):
once they once they run your credit, they can check
against their their group and they can get preferential treatment
because they're such regular um, I don't know, intermediaries is
a good word. They can also, of course get you
a deal from the manufacturer's credit arm. You know, sure,
and so instead of going to the credit union and

(23:16):
you know on your own, you know, as an individual, uh,
and you know you may get some kind of benefit
here there if you're a teacher or if you're a
yea veteran or you know, something like that, you may
get a little bit of a break there. But you're
going to have, um, i'll say, at a percentage rate
of some kind to pay on that loan. Of course.
But if sometimes if you go to that dealership, there
are times, if you're buying a new vehicle, brand new,

(23:37):
there are times when they offer zero percent interest, which, um,
you're not gonna find that at a bank or credit union.
You're just not going to Or you can opt for
the cash back option, you know, the cash cash and
sentence that they give you. And you know you can
play one or two one of those either way that
you want. I mean, you can't have both typically, um,
So sometimes the dealership is the best option for financing.

(23:58):
It's not all the time, you know that I just mentioned.
I bought that that that VW recently, that that car,
and I went in with I had financing already from
a credit union and it was a pretty low rate.
I mean, I shopped around, I found what I wanted.
I got a very reasonable rate, and I went into
them and I, you know, told them that already had it,
and of course they said, well, let's go check and

(24:18):
see what we can do for you. And you know,
I was I was already sitting there with my check
in hand, you know, ready to write it, you know,
sign it over to them. But they had to check,
and I just let them do it. You know, why
not if they can offer me a better rate, I
would switch right then to do it. Why not not
look back? Sure, it makes sense. And I think it
was like one tenth of one percent lower, uh, that
they could offer me. And he said, you know what,

(24:38):
he was very fair, but he said, I'm not going
to beat you up over one tenth of one percent
on this sale. Just stick with what you've got and
let's keep it easy. And it was. It was a
pleasant experience. I mean this car that I bought recently. Overall,
we should talk about this someday, like the whole process,
because I had a great experience. I really did. I
had a bad experience at one place that I almost
bought the car at and I backed out. I walked

(24:59):
away from the deal, which was very difficult to do.
It was really hardly close. I was super close and
you know, cash in hand, ready to go, and I
had to walk away, and it was it was tough.
I mean, I'll tell you it's it's hard to do
that when you're presented with the car that you want
and everything you want, and then you realize it's not
the vehicle for you, and you have to walk away,

(25:20):
and it's hard because you don't have any other thing
in the in the back, you know, um in your
back pocket, maybe to go to. At that time, I didn't,
I was I was firmly said that that was the one. Yeah,
but you you did the right thing, really, oh yeah, yeah.
I mean we'll talk about it some day, as we
said that, But I did the right thing, and I
did walk away, and and I did end up with
a as I said, a very pleasant experience at a

(25:41):
dealership and a lot of the stuff you know that
that we talked about here, it just didn't happen. I mean,
I didn't see I didn't see any kind of backroom
deals going on. I didn't I wasn't you know. I
didn't experience any secret handshakes, No, no, nothing like that.
It was all very straightforward and as I said, pleasant.
So so here's one thing you didn't do, which which

(26:02):
is interesting too. You didn't walk in with a suitcase
full of cash. And that is number six. Here bring cold,
hard cash. The idea being that it will get you
a better deal. And I think a lot of people
maybe maybe think that it will get you a better
deal once upon a time, way back when that was

(26:24):
probably true. But now, uh now, the problem is that
a lot of those incentives that you would get for
uh finance you're beginning a certain car or something like that,
they don't kick in if you pay cash. Now and
we're talking about new vehicles at a dealership again, if
you go to an individual to buy a you use vehicle,
Oh yeah, you know, here's the old deal, like you

(26:45):
know the cars that um and you say, I have
eighteen hundred dollars in cash in my pocket, right, now,
but I don't have more than that, and I'm willing
to give it to you. And there's the back and forth,
like will it will they won't they? And oftentimes they
will bite when they see that stack of bills, um,
you know, ready to sell. But a dealership is not
like that. They're not gonna come down on the price

(27:05):
because you simply have a lot of cash in your hand.
It doesn't work that way for them. So you know,
you're better off to go to them and maybe even
take you know, a short term financing deal like you know,
I think in the article here it says thirty six months,
you might get a better deal with that thirty six
month finance and if you keep it, you know, on
the low end, then you would by paying cash. And
I know it's kind of silly, but all those advantages,

(27:27):
you know, like maybe even the you know, the zero
percent um interest deal. Uh, that might work out better
for you in the long run. So so take a
look at that as well. Yeah, don't say no just
because you know, financing has such a bad name. Based
on the incentives, it is possible to be a better deal.
And that's not exactly a secret, which speaking of secrets,

(27:51):
takes us to number five. Scott, this is a fun
when uh trade secrets, right, and I like what this
one is called. There's a there's a term for this
within the industry, within the business, and they call it
parachuting the trade. And this is the idea that you
you wait until the very end of the whole deal
and you say, oh, by the way, I have a

(28:12):
I have a trade in that i'd like to bring
in for you. Can you give me a give me
a price on that? And then you think that you're
sitting on top of several thousand dollars that were at
you know, just moments ago. Unknown to the dealership or
the salesperson, they were gonna be uh, they're gonna have
to buy your vehicle as well. And this does not work, well,
it doesn't. It doesn't work because again, there there's not

(28:36):
a magic thing that dealers have never seen that will
ever like build them over. You're not gonna amaze them
with your powers of negotiation or manipulation. In fact, their
job in some ways if they're dealing with someone who's
kind of, I don't know, combative or hostile about it,

(28:57):
then their job is to make that person feel like
are doing really well, because that's why that's going to
result in selling a car. They know all the tricks,
they have seen, every single one, and this, uh, this
trade thing, it's not it's not some m Night Shamalan twist.
It's not like finding out who Kaiser SoSE is and
usual suspects. It's something where they would just say, uh,

(29:20):
we we got another one. The best thing to do
is be up front, right, be up front and transparent.
This is what I'm looking for. I did my research,
you know, and I'm looking for this, and I also
have this trade in. Yeah, and and you basically know
what you're trading is worth and you can work that
as part of the deal, I mean. And so be

(29:41):
upfront with them, tell them that you have the trade in,
you know that you are trading or you thinking about
trading in, and let them, you know, let them give
you an offer and see if that's acceptable to you.
You can always drive away with your trade envy and
sell it yourself if you want to do it that way.
There there's options for you as well. You know, when
you do it that way, you don't have to give
it to them. Once you say I have a trade in,
it's not like you're it's a done deal and whatever

(30:02):
they give you have to accept. It's not like that.
But this parachuting the trade idea, and that's that's a
funny way to say it is that you know, it
parachutes in at the last minute and to save the
day for the for the person who's the buyer. It's
not that way, I mean they are. What really happens
is it just will cause more negotiation because it kind of, uh,
it scraps everything that you worked on to that point,

(30:24):
So it needs you to having to sit in their
office another hour or two. Well, they work out what
that's worth, what how they're going to renegotiate this deal
because you know, up until this point they didn't know
that you had something that's worth Let's say, I don't know.
They're not going to just knock off the price of
your brand new cars. It doesn't work that way. No,
they're not. And also not just gonna take your word

(30:45):
that it's a the year it is in the condition
it is with the miles a half. They're going to
inspect it, which is you know they're right and of
course or of course they're going to I mean, it's
it's all on the very on the level, or it
should be on the level. I mean, you know, not
every case, I guess, but but it is going to
lead to a renegotiation every single time. So I don't
think that you're gonna get away with this one by

(31:06):
by you know, making the trade kind of a last
minute zing. Right. Uh. Here's here's another thing that gets me, uh,
which which I had not been very familiar with because
I've never pursued this kind of thing online. That's Smith
number four, magical Internet Manager. Yeah. Yeah, And a lot
of people might not even know that they have an

(31:28):
Internet manager pretty much at every dealership at this point. Um,
the idea is that you know, there's somebody that is
is completely disassociated with the with the dealership, but they're
just the Internet manager. They're just they're out for your
best interest. Of course, you know, they're they're gonna set
up the deal. They're gonna make everything work, and that
Internet price is the price that you're gonna pay and
you know, no problems. Just come on in and take

(31:48):
a look at the car, and that's the that's the
rub bind. I've always got to go to the dealership.
You have to set foot on the dealership lot to
look at the vehicle in person and to make the deal.
And the thing is, when you go there and you
say I'd like to speak to John the Internet manage,
they say, okay, we walk more here and and introduce
you to John. And you do meet John, but then
John walks you over to Phil, who is the salesperson

(32:10):
that's going to complete the deal for you. Right yeah,
And that's they're very rarely exceptions to that kind of process,
right uh. There. Now there's a there's one good angle
to this whole thing though. And I've heard this recently
and I can't remember where I read this or where
I heard it, but it was somebody who kind of
was doing a informal study. I guess. You know. They

(32:31):
did one thing. They went out, they walked into a
lot during regular business hours, and they're trying to get
a price for a vehicle from a salesperson. And the
salesperson would just him and how about given the price,
They wouldn't really you know, agree or say that, you know,
this vehicle is this price? Well, the person was on
the lot, they would say, well, let's go inside, let's
let's talk about the options. What's on the lot, here,

(32:52):
and maybe we'll take you over and show you this
this other model here, but that's maybe a little more
because it has leather seats. But you know, I think
you'll be interested because it looks like you know, it's
it's it meets most of the needs of what you're
asking for. And you still never get the price of
that vehicle. And it takes a lot of time, maybe
even up to an hour to get a price out
of that salesperson when you're on the lot, if you're

(33:13):
at home and you look at the exact same vehicle,
and this is what this person did. That the very
next day, they they called and asked about the exact
same stock number, the same vehicle, and within five minutes
they had the price of that vehicle. The Internet manager
gave them the price and it was different. It wasn't
the same price. Uh. Now that is confusing. I I

(33:33):
personally think you should engage on both fronts, uh, if possible,
in the in the modern age here, because there's a
reason the Internet manager exists, and that's that's to do
this sort of thing, to have these conversations true. And
it's well, the main purpose again to bring people onto
the lot. Now, yeah, that's true. There's there's very very
few cases where you can complete the whole sale online

(33:57):
over the phone, you know, whatever you want to do
without going to the dealership. There's very few times when
that actually works out there. They want the bodies in
the door. But we have also we have also talked
about some innovative types of dealerships that are reworking these processes. Uh,
those those would be the exceptions there. There's a couple

(34:17):
of luxury outfits where they'll deliver your car to you
and pick it up to fix it, but that is
rarefied air. My friends, many many years ago, and I
don't know how many years ago, maybe ten years ago,
maybe maybe more. Even um my dad was buying a
new vehicle and it wasn't anything like a luxury car
or anything like that. It was just I don't know,
it's like a Ponti accident of some kind. Um, he

(34:40):
bought the vehicle online and it was you know, across
the state, you know, the other side of the state.
They arranged the whole thing online. You saw photographs ei
there there's you know, like the the inspection reports came back,
all the car facts and all that stuff, and the
whole deal was done. I think. I think it was online.
Some of those over the phone, of course, but they
met somewhere midway, you know, at a coffee shop or

(35:01):
something like that. Um, he was trading his vehicle to them.
So they just exchanged vehicles at this place, signed all
the paperwork while you're there, all the you know, everything
that had to happen, signing checks and all that over
that happened right there, and then he drove home the
new car, and then the dealership employee drove back to
the lot in his old car. Um. It was. It
was a very clean, easy process. And that was a
long long time ago. I know. There there are sights

(35:24):
online now that rather on television that advertised it. You
can lay in your couch and order a car and
it can be delivered right to your house. You signed
the paperwork right in your your driveway. Yeah, I think
Amazon Prime does that there. Really you have to drive
the delivery guy back to the Amazon place. Well you
know what kind of makes sense that you have to
do that. That's but you know, uh, do they deliver
it in a drone? I hope so, I hope so

(35:47):
only only very small car, a giant giant drone. Let's
let's talk about whether, which we mentioned at the top
of the show. Uh, this is our third myth of
the day. Rainy days, mondays, when's the best time to
get a car? Does always bring me down? Ben they
always bring it, They would always bring me down. The

(36:10):
truth is that a rainy day, a sunny day, a
snowy day, or doesn't make a difference. And if the
dealerships open, they're there to sell cars. You would think
that it would make a difference, but it doesn't make
a difference. They'll sell you a vehicle any day of
the week, of course, any day of the month and
the day of the year. Really, I mean that's they're
closed for holiday, but they they were there in the

(36:30):
business sell cars. Doesn't matter if they go out on
the lot with an umbrella, it's not gonna be easier
for you to buy a car that day. Uh, simply
because you know they have to sell again a hundred
cars or whatever. Um, it's still gonna be the same
deal no matter what. They can't. They don't have as
much uh flex room as you think they do. No, no,
because again the numbers are binding, so the numbers don't

(36:54):
take a day off because of weather. Uh, that's a
good way to say it. Yeah, right, And and and
they're not going to um, I don't think. Maybe this
is different in the past, but I don't. I don't
think I've ever seen or heard of in real life
somebody who truly got a better deal because of the weather. No.

(37:16):
And you know, the author here, our author from how
Stuff Works, points out that what if you live in
the Pacific Northwest every day it's raining out there, or
in Florida where it rains, you know, for like an
hour or two every day in the afternoon, Yeah, do
you get a better deal in that one hour? One
to two hours when they think that no one's really
on the lot. There's still deals happening. I know that.
You know, let's say it's a rainy day on Tuesday.

(37:37):
Everything that was going on from the weekend and Monday
is still being processed on that Tuesday. It just kind
of skips over that. So maybe they don't get as
much traffic on the lot. I mean, that does hurt
them a little bit. However, you know that they're gonna
make that up because the people that don't go out
on Tuesday because it's raining will likely wait until the
next Sundaday and then show up, and then they're gonna
end up with more traffic on say, you know, Thursday,

(37:57):
when it's a it's a pleasant day. Um. It just
it doesn't work out the way that people think it
does with bad weather, right. Yeah, it's strange because this
these kind of rules apply to some other things, you know,
like there are general rules of thumb. For um, maybe

(38:17):
restaurants would be another industry you can compare when there
are better days of the week to buy a certain
kind of food or to avoid a certain kind of food.
But that's more of a supply chain thing, right. And
and it is true that weather can affect a lot
of businesses, for sure, some businesses are definitely seasonal. Carbine

(38:38):
is not near as weather dependent as you might think,
not quite. I mean I can see where maybe a
Saturday is a is a bit more busy than would
be say Tuesday afternoon. Yeah sure, you know, I just
think that it works out that way that people have
the time to go do something like that. However, as
you said, it doesn't necessarily matter quite as much, um
in the situation of a brand new vehicle. So we've

(39:01):
talked about and talked about some some weather, We've talked
about some financing, We've talked about some ill faded attempts
to trick dealers into bending to your will. But now
let's talk about the kind of deal you're negotiating. Yeah,
we're talking about purchase versus lease in this case. So

(39:23):
the idea here of the myth is that you don't
lead with the idea that you're going to lease the vehicle.
You lead them into the sale thinking that they're going
to sell the vehicle to you, that it's going to
be a purchase and outright purchase right and then later
I guess in this case, um, not quite parachuting the trade,
but you parachute the lease in once you're in that

(39:43):
back room. Uh. The idea here is that if the dealer,
if you know, Noel slicktoc Brown, walks into a dealership
and says, Okay, I know exactly what I want. I
want this, UM, I want to lease this, you know,
two thousand fourteen Nissan or whatever. I don't want to

(40:05):
least it for three years. What can you do for me? Um?
The the idea is that the salesperson will be like
a shark smelling blood, and the water and drive the
price up over and over, but just to make sure
that they get the maximum amount of money out of
this lease steal. But that's not really how it happens,
right Scott. No, that's true, And in fact, a lot

(40:26):
of people think that, you know, once you mentioned least
that you're negating, negotiating power is gone. I have no
negotiating power like you do when you're purchasing the vehicle.
That's not true. You can negotiate the price of a
lease as well, which a lot of people have. They
have no clue that that's the case. They see that
advertised price, you know, the down the required down payment,
you know, the first month, last month, whatever it happens

(40:48):
to be, title tax, all that stuff, and here's your payment. Um,
it's something that you are you are able to negotiate
with once you go there. A lot of people just
have no idea that that's the case, and they really
don't care how you pay of the car, or how
long you're paying for the car or whatever. And they
know that they're getting it back in three years. They
understand that. But there's programs in place from the manufacturer
for that as well. Like when you Returnal East vehicle.

(41:10):
They can then maybe in some cases, certify it as
a pre owned vehicle from the from the dealer, extend
the warranty two years, and sell it to somebody else. Uh,
they can, you know, they can do many different things.
But they can send it to auction. Uh, you know,
they can. There's a lot of options to them. So, um,
they don't really care that you're you're you know, gonna
take the car for three years or whatever. I mean,

(41:30):
They're they're happy just to get it off the lot
for now. Yeah, because it's still moving money and moving
product through the through the dealership. Yep. So now if
we could have a drum roll from a slick talk
over here, perfect Scott, what is number one? Number one

(41:54):
is the deal is the myth that dealers make money
on every single car that leaves the lot, and that
is not the case. They sometimes and I know we've
we've hinted at this, we've touched on this, we've we've
said it, but there are times when they lose money
on certain vehicles, like on demo vehicles or cars that
have been sitting on the lot for several months. As
you mentioned earlier, you know, with the you're playing this

(42:16):
numbers game with you know, the percentage that you pay.
There are times when that happens, and there's again other
times when they will sell a car at a loss
in order to know that they're gonna hit their target
in order to get the bonus payment. And you know,
there's all these these uh, these numbers that are just
swirling around the dealership all day long, every day for
that full month, and it gets it can get very confusing,
but they really know what they're doing. They're watching those

(42:37):
numbers all the time. So these monthly quotas that they
have to meet. Um, you know, it's better to sell
a vehicle than it is to not sell a vehicle
that day or that that that hour or whatever. You know,
however busy this this dealership is. Um even if it's
at a slight loss, then to have the car still
sitting on the lot, you know at the end of
the month when that could have been gone right, yeah, exactly. Uh,

(42:59):
these these lost leaders are part of the calculation of
the larger thing. To write loss leaders. You just said it. Now,
that's a that's a term in the industry that that
they use, and it's cars that are intended to be
sold at a loss. They know that they're gonna lose
money on these cars if they sell them at the
price they're advertised at, and they're sitting on the lot.
But but the idea is and this kind of goes

(43:21):
back to almost like a Halo car situation exactly. I'm
glad it's it's similar to that, and that you know
that they hope that the that the buyer is going
to come in and they're either going to add extras
out of the vehicle. You know, they're gonna say like, yeah,
I'd like that true code that you mentioned for five,
or they're gonna say, um, you know, they came in
for a lesser vehicle, like an economy car, and they

(43:42):
end up leaving in a kind of a mid range vehicle,
you know, they they upsell the customer, right, yeah, yeah exactly.
So that's the idea with the loss leaders is that
they know they're gonna lose money on that vehicle, they're
gonna gain it somewhere else. And this is kind of like, uh,
this is something that happens in video games just for comparison. Uh,
sometimes a video game console manufacturer something will make a

(44:05):
console like imagine, you know, an Xbox or PlayStation. I
remembers specifically which one it was. I think it was
the PlayStation, and they'll sell it for less than it
costs to make the thing because they're making their money
off you in another way, you know, because the games
themselves are eighty dollars each or right, and that's a

(44:26):
that's a similar process. I think one thing that again
this former car dealer had said in the article that
I read by him, was that people are not entirely
just as a rule, we are not entirely aware of
what motivates us or guides our decisions. So one of

(44:48):
the reasons again that the internet manager is such a
crucial piece and getting people to the actual lot is
that dealership spend millions of dollars to put you in
an environment where you are more likely to respond to
the things that you um more likely to respond in

(45:09):
a profitable way for the dealership and hopefully for you, uh,
hopefully find the car you want. But once once they
get you into there, uh, these lost leaders, right, are
part of a bigger picture. And one of the reasons
I'm glad you said Halo cars because Halo cars were,
in my opinion and are in my opinion, just the
perfect way. You want to get me in a dealership,

(45:30):
then get that hell cat out there, you know what
I mean? Sure, yeah, and you'll come in to take
a look at I'll come in to take a look
at it. And you can't afford it, oh, I can't
afford it, But you might be able to afford that
that charger SRT that right, Yeah, you know, sales guy
might drop by, we might have a conversation about what
the what the charger in the hell cat have in
common and what they don't have in common. And then

(45:51):
also the the enormous price difference between the time and
what a deal then is if you get that charger
SRT right, I mean, it could be a fantastic deal
for you, and we do you had just come into
you know, maybe even look at something much much lower
down the product line. Now you're gonna look at a
dart and uh and and you end up walking out
with a charge dress RT and that. And honestly, it

(46:11):
happens because when you're on that dealer lottery in the showroom,
it goes from being a very very pragmatic decision that
you made at home talking to the internet manager with
a piece of paper next to you and a calculator
maybe figuring out exactly what you can afford and what's
you know, what's in the budget, and you know what's
what's what's reasonable, and then you go to the dealership
and it becomes a very emotional purchase. It's it's it

(46:33):
goes from pragmatic two emotional at that point. And and
you're right, and you and I have both talked about this.
I know that there's there's a lot of little tricks
that they play as well when you're at the dealership.
And the one that you mentioned and I saw this
firsthand many times. What's in the last few months, um,
when they when you walk in and they offer you
something and it could be as simple as you know,

(46:55):
you know those little I don't know. It looks like
almost like quarter bottle of water, very very tiny. And
I say quarter bottle, I mean it's like eight ounces
of water. And they offer you a free water as
you walk around, and of course it's got a little
label on it that says, you know, whatever dealership is too,
like uh, Scott, Benjamin crazy Scott, Yeah, exactly. And it's
a it's a welcome thing to have, you know, like

(47:16):
when you're on the lot, it's hot or whatever, you know,
say after your bottle of water and you say sure, fine.
But when they hand you that bottle of water, there
there's this weird psychological thing that happens to you and
that you feel some sort of obligation to them. You
feel an obligation that well, I gotta you know, they've
they've given me something, They're friendly to me. I'm here
on their lot, looking around. I can at least talk

(47:36):
to them for five minutes. I can. I can make
that concession that instead of just saying no, thank you,
I'm just here to look. You then feel like, well,
I do kind of owe them five minutes of my
time because Ceprocity, because they gave me this whatever it is.
And it's silly, I get it, but it really truly
does work. It works on quite a few people. One

(47:56):
one thing that this podcast is has fastening me with
is that it makes me think of a guy that
I've watched for a while, a British mentalist named Darren Brown.
They talked to you about this guy. Oh man, he
is Uh, We're lucky that he's not selling cars because
this guy has mastered body language and these little cues.

(48:19):
He you know, you remember, um it was Kevin Neil
and who did the subliminal message guy on Saturday Night.
I think that was. This is like a real life
version of that guy. You can go on YouTube right now.
I know it's sort of a tangent, but you can
go on YouTube right now and watch this guy again.
His name is Darren Brown. You can watch him do
things like go into jewelry shops and delis and paid

(48:41):
for things with fake money with with blank pieces of
money sized paper, and he just like through whatever whatever
way of suggesting that suggesting he's giving them an honest payment,
and they're they're gonna take it, and they don't even
look at it. They see it, but they don't see
that it is clearly monopoly money. Yeah, they just they

(49:03):
just process it. Now, he's one of those guys I
think who could maybe do a secret trick on a
dealer or something. Now. I've seen these guys in action before,
and I don't know if this is the one in particular,
but they are extremely clever with the way they do this,
and very slick and and it's easy to sit, you know,
behind your computer screen and say, well, what's you know,
that's what I would I would never have fallen for that. However,

(49:24):
if you're in this situation, if you're if you're there
and that's really happening, and you're you're distracted with whatever
else is going on, sleight of hand type stuff, and again,
power of suggestion, all that is so powerful, and you know,
you know, dealers use this to a certain degree. It's
not quite as extreme as what you're talking about with
this mentalist, but um, it really is. It's it's a again,

(49:48):
a cat and mouse game. It's a back and forth,
it's a chess game, it's a it's a it's a
game of uh not necessarily that uh, someone is gonna
come out, you know, as a huge winner, but no
one wants to be taken. They want to I feel
like they've got a little bit of an edge. And
and there's little things that they do to allow the
customers think they're getting that the little bit of edge,
they're getting a deal. And there's also things that you know,

(50:11):
the the customer does that makes them think, you know, I,
I we can make a concession on that point. But yeah,
but that's that's the thing. If you're in a situation
where you were talking to a professional salesman, a professional saleswoman,
a professional salesperson. Then just be be very skeptical of
the times when you feel like you are getting a

(50:33):
concession from them. It might be all part of the
game and it's not. It's not a bad game. This
is how it's done. I do want to say one
thing that wasn't on our list, but the old bargaining
trick of being prepared to walk out. Yes, I think
that that is. I think that's valid. If you're on
a lot, don't ever let if you're in person, just again,

(50:56):
where you know where the dealership certainly want you be.
If you're in person and you feel like this is
going south is not where you want it to go,
to me, that's okay, be prepared to walk out, but
only if you're really prepared to walk out. Don't be
that person who's like, you know, I can get up

(51:18):
and leave now if you don't intend to do so. Yeah,
you really have to be ready to do it. And
also you don't want to be the guy that walks
out and then the next day has to come, you know,
come back sheepishly and walk of shame. You know what
you guys really did have the best deal, and I'm
sorry that we we didn't work out yesterday, but let's
talk it over again, because that's never gonna go well

(51:39):
for you. You're gonna have you're gonna lose some power
in that negotiation of that right. And you were already
antagonistic in these and you know, uh, people who work
at car dealerships are trying to make a living like
everybody else. And you don't make a living um or
at least you can't for a long time, make a
living by well, I'll say it to be ended. You

(52:00):
can't make a good living by screwing over people. You know,
you can't be a charlatan and stay in business. It
just doesn't work that way. I mean, we've we've talked
about that so many times with other things too, like
you know, with with whether it's oil changed places or
use car dealer lots that show up on street corners.
Sometimes you can't remain in business, you know, at as
one location with the same group of people, if you're

(52:21):
going to cheat them all the time. It's not like
it's not gonna work. You have to be upfront, you
have to be a reasonable responsible, um you know, upfront
person and and honestly, I mean, this is a this
is a very tough gig. I mean when you listen
to and I hope that you do. I hope you
go and listen to that on nine Cars available online,
This American Life. Yeah, exactly, go search that and you'll

(52:43):
find it. I promise you. If you like this podcast,
I promise you you're gonna love that episode of of
This American Life. It is. It's fascinating. I'm gonna go
finish the one that I'm listening to right now, and
this will make time number three for me to listen
to this. It is. It's a amazing what you see
or what you hear when the when the curtain is
pulled back. Yes, And can I say one thing for

(53:05):
we end uh, for everybody out there listening who has
worked with or in a dealership or is currently a salesperson,
I want to I want to see what you guys
think about this. This is something um one of my
relatives told me a long time ago, which was that
for UH car dealership, but really for any business, the

(53:28):
best advertisement is a satisfied customer. So let me know
what you guys think about that. I would love to
hear and I hope I'm not opening a crazy door here, Scott,
but I would love to hear some dealership horror stories,
either from salespeople, managers or people you know, mechanics, or
from customers themselves. Just horror stories, or do you want

(53:49):
to hear good stories as well? I like to hear
good stories too, But come on, man, I want the juicy.
Well that's what That's what sells the papers, right, the headline,
the the catchy headline, the you know, the trade magitty sells.
So all right, So that's a that's a good idea
if you could please descend in like, you know, keep
it somewhat concise, so that you know, we can we
can actually maybe read them on air someday if we

(54:09):
get to another Nuts and Bolts episode. Change the names
if you need to. Yeah, yeah, let's let's protect the
innocent here in some cases. All right, But but honestly,
I bet there's some pretty interesting stories and some some
unusual tactics. The person that I sit next to here
at how stuff works at my desk, The person I
sitting next to had a pretty bad experience recently, just

(54:30):
before I went in and had my really good experience,
and I was. I was a bit apprehensive based on
what I heard that person go through versus mind, and
I was pleasantly surprised. As I said, so you know,
there's there's good and there's bad out there. Hopefully you've
had much more good than bad. But if you have
had a bad one, let us know about it. Yeah,
and hopefully you've had You've had as much fun listening

(54:53):
to this episode as we have had making it. Let
us know if we missed any car dealership myths that
you picked up on. You can tell us on Facebook.
You can tell us on Twitter. We your Car Stuff
hs W at both. You can visit our website. That's right,
Scott Noel and I are moving up in the world
at our very own website, car Stuff show dot com,
where you can hear every podcast we have ever done,

(55:14):
and there are quite a few. But if you look
through our podcast lists and our blogs and our videos
we do videos as well, and you think, hey, guys,
why haven't you covered this? We want to hear about it. Uh,
write to us directly and let us know. Our address
is car stuff at how stuff Work dot com. For

(55:38):
more on this and thousands of other topics at how
Stuff Works. Dot com. Let us know what you think,
Send an email to podcast at how stuff Works dot com.