I actually read this before. It's a fun read for anyone who finds the psychology of persuasion and manipulation interesting. It probably helped me save over a thousand dollars on my family's last car purchase. If you just want the "what can I do to avoid getting cheated" summary, use one of the following options:
1. Have an agency buy your car for you. You might not save as much as you could if you really knew what you're doing, but you won't get taken advantage of this way.
2. If you want to do it yourself, call dealerships up on the phone and compare prices. You might have a lower chance of convincing them to sell you the car than if you went in person, but you'll make sure you won't get ripped off.
3. If you really want to go to the dealer in person (I have used this option successfully), do your research. That doesn't just mean knowing the MSRP and the dealer's invoice cost (much lower than the MSRP), but also looking on edmunds.com or elsewhere for the current promotions (called "dealer incentives") that the manufacturer is giving the dealer. You might not be able to find all of their incentives, but you can get close. When you're at the dealer, don't let the salesman express prices in terms of monthly financing. They'll use the four square technique and rip you off with 100% certainty. First agree on a price and then you can talk financing with the F&I guys in the back. To get the price you want, start really low. Offer a number around the invoice cost and be willing to go barely more than $500 over (at least for non-luxury cars). When they tell you that they won't make any profit that way, you tell them about the dealer incentives you know about. If you still meet with resistance, you can even hint that you suspect they have other incentives you aren't even aware about and that you really will leave the store before buying a car for much more than the invoice cost. If they still won't budge, try again at a different dealership. If you have trouble with this method, switch to #1 or #2.
Regarding your last "if they still won't budge" and going to a different dealership, that part can be your most powerful weapon: always be willing to walk. Walking away is an important ingredient in any kind of negotiation, not just car sales. Many times I've had the salesman call me later the same day with a better price a lot closer to what I'm willing to pay, especially if you visited the dealership at the end of the month.
>> "especially if you visited the dealership at the end of the month."
surprised no one else has mentioned that tidbit. If the dealership closes out metrics at month-end, they'll be in a deal making frame of mind at that point. ++ if you can snag a salesperson that hasn't been doing well.
Having worked in the industry, I know invoice price is not actually the lowest price they can go. All car manufactures have something called "dealer holdback" or some version of it (sometimes multiple under different names). They essentially charge the dealers $300-$1000+ extra for the car so that the invoice is artificially inflated; when the car sells, the manufacturer gives the dealership that money back. So even if they sell you a car for "invoice" they're still making money.
The reason manufacturers do this is not necessarily sinister to try and rip people off, but it's to protect the dealers from themselves and to protect their brands. The trend is changing now, but up until 10-15 years ago, owners of car dealerships generally had NO formal education (many still don't). They would take deals and do things that would cause the dealerships to get into financial trouble; this way the manufacturer guaranteed the dealership made some money... Also, of course, the manufacturers always try to protect the perceived value of their brands through price controls
We used an agency to buy are last car and the process couldn't be any easier. Not sure how much better we could have done on our own but we trust the agency we used and compared to prices we where seeing online it seems that we got a very good deal.
Dealers use term "Hold back" (dealer incentives) that will give them a hint You know how it works.
Also, has anybody used truecar.com - does it really work with prices or its just to get you in dealership to tell you they are out of that specific "deal".
truecar.com (and other similar sites), for better or worse, will be the downfall of the traditional car dealership... The price they give you is generally free (or very close) of ANY profit for the dealership.
They have a contract with the dealerships to honor the price, but b/c they cut so close to the bone there are instances where dealerships end up not honoring the price and try to negotiate anyways. I've seen it first hand, it doesn't work (people generally just walk out, as they should...)
1. Have an agency buy your car for you. You might not save as much as you could if you really knew what you're doing, but you won't get taken advantage of this way.
2. If you want to do it yourself, call dealerships up on the phone and compare prices. You might have a lower chance of convincing them to sell you the car than if you went in person, but you'll make sure you won't get ripped off.
3. If you really want to go to the dealer in person (I have used this option successfully), do your research. That doesn't just mean knowing the MSRP and the dealer's invoice cost (much lower than the MSRP), but also looking on edmunds.com or elsewhere for the current promotions (called "dealer incentives") that the manufacturer is giving the dealer. You might not be able to find all of their incentives, but you can get close. When you're at the dealer, don't let the salesman express prices in terms of monthly financing. They'll use the four square technique and rip you off with 100% certainty. First agree on a price and then you can talk financing with the F&I guys in the back. To get the price you want, start really low. Offer a number around the invoice cost and be willing to go barely more than $500 over (at least for non-luxury cars). When they tell you that they won't make any profit that way, you tell them about the dealer incentives you know about. If you still meet with resistance, you can even hint that you suspect they have other incentives you aren't even aware about and that you really will leave the store before buying a car for much more than the invoice cost. If they still won't budge, try again at a different dealership. If you have trouble with this method, switch to #1 or #2.