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March 09, 1999

Confessions of a Car Salesman

The Negotiation

The crux of the car buying experience, the part that everyone always asks about, and the hardest to learn is the negotiation process.

Negotiation is easier for the salesman. He does it several times a day, every day. He also has words put into his mouth by the sales manager. If the salesman ever gets stumped by something the buyer says, he gets up and checks with his manager. Then he comes back and responds adequately to your momentous point.

You need someone in your corner too, but you don't have your own sales manager like the salesman. You'll have to use your logical mind, that part of you that can overcome your emotional mind. Locating and using your logical mind takes preparation and practice. So get started.

First, some negotiating tactics that don't work on car salesmen...

1) Acting like a tough guy. If you scream and point your finger or cop an aggressive attitude, they will show you the door. Machismo runs deep in this world, and they would rather lose your business (gasp!) than lose face.

2) Telling the salesman you've read these confessions and that you know all their tricks. Salesmen hate it when people imply that the car industry is crooked, and that they fit the stereotype, even if it's true.

3) Trying to be somebody you are not. This includes cardiologists acting like simpletons, simpletons acting like cardiologists, etc. It's not hard to smell a phony. You'll make the most progress by being yourself, being the most effective "you" you can be.

4) Pretending that you are going to buy the car for cash in order to get a crazy low price. Any good salesman will ask to see the cash before he gives a price, and he knows the sales manager could veto the price anyway.

Now, some negotiating tactics that will help you...

1) Keep a clear head, don't be hungry, demand to sit in a comfortable chair, and leave if anything isn't to your liking. Trust me, leaving doesn't hurt anyone's feelings.

2) Think about the dealer's cost. Divide the dealer's cost by the number of payments you want to make and remember that number. This is your rough rock-bottom reference number. Dealer cost is $15,000, you'll make 60 payments, that equals $250 a month. This is not a starting number, because it doesn't include any profit or interest on the payments, but it's a rough guide.

3) When the salesman asks you the MAXIMUM you can pay a month, give him your rough rock-bottom reference number, in our case $250.

4) Do not give away any more until the salesman gives you his first proposal. They call this the "starting number." This proposal will be outrageously high (unless you are at a no-dicker lot like a Saturn dealership). Laugh, make a face of disgust, throw your arms up, and wait for the salesman to call your rough rock-bottom reference number unreasonable.

5) Then you say, "Is my offer too low? Well how much is the interest on my $250 payment?" Most car salesmen claim not to know anything about the finance end of the deal. Break out your trusty financial calculator or visit the Fool's car calculator to come up with the figure. In our example, the payment would then jump to $304. Say the salesman's first proposal is $425 a month. Now he looks like the unreasonable one. Your offer is much closer to the cost plus interest. Starting with the rough rock-bottom reference number and making the salesman calculate the interest is a great way to instruct, demoralize, and embarrass the salesman while being polite.

6) With everything -- down payment, monthly payments, lease payments -- start with the dealer's cost in your mind, and then go up VERY SLOWLY in small increments. Don't raise your price unless the salesman lowers his accordingly. No unilateral concessions! Think like the North Koreans -- concede nothing!

7) Have a drop-dead price beyond which you will not go. This should be either your rough rock-bottom reference number plus 3-4% or just the amount of payments you can responsibly afford, whichever is lower. Be tough on yourself. It's your money! Don't give away your drop-dead price until you have stuck to it twice. Then say, "Drop dead!"

8) Don't let the salesman switch you away from what you want. Different vehicle, buy to a lease, vice versa, etc. Salesmen are trained to switch things on you in the heat of battle to confuse you. Stay focused on what you wanted when you went in.

9) Understand that you may be in there for two to three hours. This is painful. That salesman wants all of your money, and he may not give up very easily.

10) Read a great negotiation book like Getting To Yes! by Roger Fisher and William Ury. Negotiation is a skill you can acquire.

11) Do not, for any reason, allow yourself to get emotional. This is business. Be reptilian inside. The mindset you want is to cut their throats while smiling. Polite and Firm Makes a Car Salesman Squirm. No anger, no fear, don't drive home thinking of what you should have said. Think about being cool. Like John Elway in the pocket during a jailbreak blitz. Like Chuck Yeager pushing the stick to Mach 1. Be cool. If you lose your cool, leave until it comes back.

-- Mike Cavendish

Tip # 7 -- Dealing With the F&I Guy

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