How to Buy From a DealershipLast Updated August 8, 2023 | Meghan Drummond
Buying a vehicle is exciting and fun, but it can also be a little nerve-wracking. This is especially true when you’re purchasing a car from a dealership. Though there are more good dealers than bad, we’ve all heard stories about people getting taken for the wrong kind of ride at a car dealership. The dealer-buyer relationship should be a solid one considering how well-aligned the goals tend to be: They’d like to sell and you’d like to buy. Unfortunately, It often turns adversarial.
Buying a car can be stressful for a lot of reasons, but one of them shouldn’t be fear of a dealership. By arming yourself with knowledge, you can ensure that you have a great experience purchasing a new or used car from a dealership.
Prepare in Advance
One of the easiest ways to ensure a positive experience at a dealership is to prepare as much in advance as you can. Over 90% of people research online in advance of purchasing a vehicle. It’s a smart move, but it’s important to be organized in your research so that you’re able to make the most of it.
There are several guides that dealerships use to determine price: NADA, Kelley Blue Book, and then the local market (not a guide, but by looking at recent sales, you should be able to get a good idea about this one.) You should know the high and low prices for the vehicle you’re looking at as well as what factors and packages should affect the sale price.
Becoming familiar with the options available on your vehicle of choice within individual years is also advantageous.
Though it can be tempting to take at face value deals you hear about in forums or local car groups, it’s crucial to remember that these tend to be “Big Fish” stories. If someone says they got $5,000 off a sticker, push for more details and you’ll quickly find that they actually got a $1,000 rebate, an additional $1,000 credit for financing, and then had a trade that the dealer bumped the value up on. People love to brag about what a good deal they got, and while there’s likely some truth to it, it’s also probably a bit overstated.
If you’ll need financing for your purchase, it’s a good idea to do some research in advance. Apps like Credit Karma can give you an idea of your credit score (keep in mind that there are three credit reporting agencies, so the credit score your bank or car dealership uses may vary) and using that you should be able to figure out an idea of interest rates and loan amounts that your bank or local credit union would be capable of.
Typically car loans are reliant on a few factors: Your credit score, your debt-to-income ratio, and the financial risk of the vehicle (the bank’s view on this, not yours). If you have a low credit score, it may be difficult to finance a vehicle that’s high mileage for example. On the other hand, if you have a great credit score and it’s a brand new vehicle, even if your debt to income ratio is too high, you may be able to get a loan (just not for as much as you need).
These factors will all come together into your interest rate, which is the amount you’ll pay overtime as a financing cost. For example, if you borrow twenty-thousand and finance it over five years at two percent interest, you’ll end up paying twenty-one-thousand.
Check out our car payment calculator to get a better indicator of what your payments may look like.
Checking online for car loans may also help you find additional financing options based on your location, the vehicle you’re interested in, or even if you have relatives who have served in the military. Though it’s good to have a guaranteed loan/interest rate before setting out on your car purchasing journey, not signing anything in advance can ensure that you have the most options available to you at the time of purchase. In some cases, dealerships may be able to meet or beat your financing, but having a number in advance gives you a place to negotiate from and the ability to walk away.
Good vs Bad Dealerships
Just like auto shops, there are good and bad dealers out there, and doing business with a bad dealership can cost you money. On the other hand, treat a good dealership like a bad one and you’ll probably get treated like a bad customer.
So, how do you tell the difference between a good and a bad dealership?
Getting referrals from friends and family should always be your first method for figuring out where the best dealerships are. People tend to remember when they’ve had very good or very bad experiences, making referrals a great place to start ruling out and ruling in dealerships. If you don’t know anyone that’s really into your particular brand of vehicle though, it’s possible that you won’t be able to get by exclusively on referrals. And for some classic Mustangs, it’s possible that the only dealership with your vehicle could be many miles away from where you’re located currently. At which point, you need to contact the dealership.
You’ll learn a lot from the first point of contact. If you’re contacting them about a specific vehicle, an honest dealership will tell you the price, any flaws that may exist, and may even be willing to take additional pictures of the vehicle on the lot for you. These are good questions to ask, because a dealership that ignores these questions and instead pressures you to show up is likely a dealership that’s going to try to railroad you at other points during the sale as well.
On the other hand, a dealership that’s responsive and honest knows that they have nothing that they need to hide, and are comfortable with you shopping around their prices. Taking additional pictures shows that they’re willing to work hard, and answer the questions you want to ask even if they don’t think they’re relevant.
Some dealerships may not respond to email or phone calls right away, but this isn't necessarily a sign of a bad dealership at all. In this case, timeliness is somewhat important, but think of it this way: Would you rather get a prompt and terrible response or a delayed and thorough one? Quality is the most important aspect to look for here. You want someone who has actually taken the time to read and respond to your query, not a generic form. Some of the best dealerships around are small operations, which may not have a dedicated person for handling queries. If when they do respond they’re authentic and genuine instead of simply sending a canned response, it’s not a bad thing that they didn’t respond immediately.
These are essentially referrals from people you don’t know, but unfortunately, they can’t always be trusted. If you’ve ever read the reviews on a business you like and seen some real stinkers you’ve likely realized that some people just have unrealistic expectations. On the other hand, reviews can be a great source of information that you may not be able to obtain in other ways. Is it a great dealership as long as you’re willing to wait? Are there particular things to be wary of? Reviews are a good way to get a feel for the dealership, just take them with a grain of salt.
Bad Dealership Tactics
Even if you spend a lot of time researching and preparing, it’s possible you’ll end up at a bad dealership. These are some of the tactics that bad dealerships use, and how to navigate each.
Bait and Switch
If you show up for one vehicle that seemed almost too good to be true, and now it’s not even there, it’s not necessarily a bait and switch (some deals really are very good and there are a lot of people shopping) but it’s not a good sign and some unethical dealerships will say anything to get you in the door. It’s a red flag, but not a reason to walk out entirely.
The Four Square
If you’re not familiar with this, it’s a tactic designed to get you to think about monthly payments rather than total price. There is something to be said for thinking about the amount you’re paying a month rather than overall (if the car of your dreams really is only a couple dollars more a month? Worth it) but there’s something about this particular tactic that feels just like that: A cheap tactic.
Good car dealerships will remind you that if you’re paying by the month a 100 dollar difference usually isn’t worth walking over, but bad dealerships rely on hackneyed parlor tricks.
The Disappearing Rebate
When you talked over the phone the dealership gave you one price, now that you’re in the door suddenly you don’t qualify, but now you’re three hours away from home already love the car and are seated. They should have been able to tell you didn’t qualify for the rebate before you drove there or should have quoted the price both with and without it. If they didn’t, then they knew exactly what they were doing. It’s a much worse version of the bait and switch since there’s no way someone else took your rebate, and it may be worth walking over.
These are only some of the indicators of a bad dealership, and unfortunately, the truly horrifying stories are the ones that no one can prepare you for. The base rule is that if they’re unprofessional, uncooperative, and in general rude to you before the sale, there’s no reason to believe they’re going to be any different after the sale. You’d do better to walk and perhaps spend a little more at a dealership that you can trust to be honest.
Aspects of the Sale
Absolutely do go on a test drive. Though many car enthusiasts believe that they don’t require it, it’s a good time to evaluate the car for any mechanical failings. If the car salesperson insists on driving with you or is required to, just let them know in advance that it’s going to be a radio off, windows down, ears intently listening kind of ride. Sound is a good indication of many mechanical issues that can otherwise be hard to find.
Make sure to check for obvious signs of common damage, like flood damage.
Give the car a second inspection while it’s still warm from your test drive as well.
First, understanding your dealership’s haggling policy can save everyone a lot of time. Some dealerships have started to transition to strict “no haggle” policies based on feedback from customers. Feelings on this are mixed. This is a great thing for most people who didn’t feel comfortable with negotiating, but it’s had a strange effect on people who really liked to feel like they “got a steal.”
Haggling, or not haggling, is a place where your pre-purchase research really comes into play. If you know what a fair value is, and they know what a fair value is, then you’ll likely not be very far apart on numbers to begin with. The widespread use of the internet has led to an unprecedented high number of well-informed consumers, so for the most part car dealerships have nowhere near the markup they once did and the days of substantial discounts simply for asking are largely a thing of the past.
If you have reason to believe the vehicle should be less expensive, make your case based on evidence. “I don’t want to spend that much” is not a convincing argument, but “the last three of these you sold went for less than that” is.
Don’t be a Jerk
The fastest way to get people to not want to help you is to “play hardball.” Be honest. Be respectful. Be fair. If you come in and tell a dealer that you’ve seen a Mustang identical to theirs that’s five thousand less and they should price match, they’ll likely tell you to go buy that one (which is going to make you look very silly if it’s a lie).
Know what a fair price is, and don’t feel obligated to pay a premium to be seen as a “nice person” but extreme low balling makes you look foolish and like you’re not knowledgeable. People want to help a person they see as being nice, they want to look for a way to get back at a jerk. Treat people well and you can usually expect the same.
Cash Isn’t King (at Dealerships)
Once upon a time, coming into a dealership and waving a wad of cash would have given you some pretty substantial discounts. Now, it’s unlikely to get you anything at all. There not only won’t be a benefit for you to paying cash but since the dealership sees it as a negative, you may even miss out on rebates or incentives.
Dealerships would rather not have the additional liability of having to take care of actual paper money. Plus, most banks actually give dealers a referral fee for helping customers to finance with them. In short, you having cash means that the dealership will have to pay someone to deal with the money and hope that nothing goes wrong while they have it (robbery, forgery, etc.) but also they won’t get the additional money they were expecting to get through the bank.
There’s nothing wrong with paying in cash, and depending on your credit score or your financial plan it may be what makes the most sense for you, but it’s not going to earn you a red carpet, I’m afraid. At least at the dealership. Many auto detailers and repair shops prefer cash since they have to pay a small fee for card usage. These are businesses where asking for a cash discount makes sense. Car dealerships? Really doesn’t.
There are incentives that may make it worthwhile for you to actually finance even if you have the cash up front. For example, if a dealership is doing a “0% Interest” promotion coupled with a $1,000 rebate when you finance through their bank with no penalty for paying off early, then its advantageous for you to take the financing and rebate and then just pay off the loan immediately. It may be counterintuitive that the price ends up being less when you finance, but sometimes that’s just how it works out. Be savvy, be thoughtful, and if you can’t be either of those things at least bring a calculator and scratch paper.
Be Ready to Walk or Sign
Remember: There’s likely another car just like this one. Maybe even better. If something doesn’t feel right, you can walk. Remind yourself of that frequently, it’s your greatest strength when it’s time to negotiate. There’s no reason to yell or browbeat someone when you can just calmly stand up and leave with dignity and take your money with you. But also, be ready to go home with a new car, or know what to do after buying a used car. Most dealerships that have stuck around have figured out that customers like honesty and hate hokey sales tactics. Despite the anxiety that many feel surrounding purchasing a car from a dealership, things have changed substantially in the past few years, and some of those things are definitely better.
This CJ Pony Parts infographic was designed to help you overcome some of the very worst obstacles between you and the car of your dreams. Don’t let dealership related nerves keep you away from the vehicle of your dreams.
[click the infographic below]