How can I tell if this internet sales manager is telling me the real “true cost” of a new car to the dealer
I don't buy new cars anymore, but I've helped family members negotiate prices on new cars recently. There are various online services to see the average price paid, as well as the low outliers. I've looked at truecar.com for instance to see what others have paid within 50 miles of my zip-code. I think the only way for you to know you're being offered a good deal is to see if any of the other dealers that have not responded are willing to talk when you offer them $22,300 which the dealer above suggested was break-even point. If none of them respond, then you know you're really at the bottom of the negotiating window. If one of them does respond, then you can go back to that internet sales manager and ask why another dealership (do not disclose which one) is willing to sell it to you for less than $22,400 (do not disclose how much lower they offered to sell it for).  In my experience, most dealers will sell at or just below the break-even price at the end of the quarter so that they can beat other dealerships out for the quota. That gives you a week and a half to find the bottom price before going in on New Years Eve to seal the deal. "Consumer Reports offers a service that can tell you detailed actual cost to a dealer for a specific model and accessories -- real cost after rebates, not just invoice price. It costs a bit to order these reports, but if you are serious about buying a new car they are a highly recommended tool -- cu is independent and will give you the best info available, and simply walking into the dealership with the report in your hand can save huge amounts of negotiating. ""If you can give it to me for $500 over the real price, as shown here, I'll sign now."" Of course, standard advice is that it's usually better to buy a recent-model used car. I believe cu has other reports that can help you determine what a fair price is in that case, but usually I just bring it to a trusted garage and pay them to tell me exactly how much work it needs and whether they think it's worth the asking price."
"At one point in my life I sold cars and from what I saw, three things stick out.  Unless the other dealership was in the same network, eg ABC Ford of City A, and ABC Ford of City B, they never had possession of that truck. So, no REAL application for a loan could be sent in to a bank, just a letter of intent, if one was sent at all. With a letter of intent, a soft pull is done, most likely by the dealership, where they then attached that score to the LOI that the bank has an automated program send back an automatic decline, an officer review reply, or a tentative approval (eg tier 0,1,2...8). The tentative approval is just that, Tentative. Sometime after a lender has a loan officer look at the full application, something prompts them to change their offer. They have internal guidelines, but lets say an app is right at the line for 2-3 of the things they look at, they chose to lower the credit tier or decline the app. The dealership then goes back and looks at what other offers they had. Let's say they had a Chase offer at 3.25% and a CapOne for 5.25% they would say you're approved at 3.5%, they make their money on the .25%. But after Chase looks into the app and sees that, let's say you have been on the job for actually 11 months and not 1 year, and you said you made $50,000, but your 1040 shows $48,200, and you have moved 6 times in the last 5 years. They comeback and say no he is not a tier 2 but a tier 3 @ 5.5%. They switch to CapOne and say your rate has in fact gone up to 5.5%. Ultimately you never had a loan to start with - only a letter of intent. The other thing could be that the dealership finance manager looked at your credit score and guessed they would offer 3.5%, when they sent in the LOI it came back higher than he thought. Or he was BSing you, so if you price shopped while they looked for a truck you wouldn't get far. They didn't find that Truck, or it was not what they thought it would be. If a dealership sees a truck in inventory at another dealer they call and ask if it's available, if they have it, and it's not being used as a demo for a sales manager, they agree to send them something else for the trade, a car, or truck or whatever. A transfer driver of some sort hops in that trade, drives the 30 minutes - 6 hours away and comes back so you can sign the Real Application, TODAY! while you're excited about your new truck and willing to do whatever you need to do to get it. Because they said it would take 2-5 days to ""Ship"" it tells me it wasn't available. Time Kills Deals, and dealerships know this: they want to sign you TODAY! Some dealerships want ""honest"" money or a deposit to go get the truck, but reality is that that is a trick to test you to make sure you are going to follow through after they spend the gas and add mileage to a car. But if it takes 2 days+, The truck isn't out there, or the dealer doesn't have a vehicle the other dealership wants back, or no other dealership likes dealing with them. The only way it would take that long is if you were looking for something very rare, an odd color in an unusual configuration.  Like a top end model in a low selling color, or configuration you had to have that wouldn't sell well - like you wanted all the options on a car except a cigarette lighter, you get the idea. 99.99% of the time a good enough truck is available. Deposits are BS. They don't setup any kind of real contract, notice most of the time they want a check. Because holding on to a check is about as binding as making you wear a chicken suit to get a rebate. All it is, is a test to see if you will go through with signing the deal. As an example of why you don't let time pass on a car deal is shown in this. One time we had a couple want us to find a Cadillac Escalade Hybrid in red with every available option. Total cost was about $85-90k. Only two new Red Escalade hybrids were for sale in the country at the time, one was in New York, and the other was in San Fransisco, and our dealership is in Texas, and neither was wanting to trade with us, so we ended up having to buy the SUV from one of the other dealerships inventory. That is a very rare thing to do by the way. We took a 25% down payment, around $20,000, in a check. We flew a driver to wherever the SUV was and then drove it back to Texas about 4 days later. The couple came back and hated the color, they would not take the SUV. The General Manager was pissed, he spent around $1000 just to bring the thing to Texas, not to mention he had to buy the thing. The couple walked and there was nothing the sales manager, GM, or salesman could do. We had not been able to deliver the car, and ultimately the dealership ate the loss, but it shows that deposits are useless. You can't sell something you don't own, and dealerships know it.  Long story short, you can't claim a damage you never experienced. Not having something happen that you wanted to have happen is not a damage because you can't show a real economic loss. One other thing, When you sign the paperwork that you thought was an application, it was an authorization for them to pull your credit and the fine print at the bottom is boiler plate defense against getting sued for everything imaginable. Ours took up about half of one page and all of the back of the second page. I know dealing with car dealerships is hard, working at them is just as hard, and I'm sorry that you had to deal with it, however the simplest and smoothest car deals are the ones where you pay full price." "I read a really good tract that my credit union gave me years ago written by a former car salesman about negotiation tactics with car dealers. Wish I could find it again, but I remember a few of the main points.  1) Never negotiate based on the monthly payment amount. Car salesmen love to get you into thinking about the monthly loan payment and often start out by asking what you can afford for a payment. They know that they can essentially charge you whatever they want for the car and make the payments hit your budget by tweaking the loan terms (length, down payment, etc.)  2) (New cars only) Don't negotiate on the price directly. It is extremely hard to compare prices between dealerships because it is very hard to find exactly the same combination of options. Instead negotiate the markup amount over dealer invoice.  3) Negotiate one thing at a time A favorite shell game of car dealers is to get you to negotiate the car price, trade-in price, and financing all at one time. Unless you are a rain-man mathematical genius, don't do it. Doing this makes it easy for them to make concessions on one thing and take them right back somewhere else. (Minus $500 on the new car, plus $200 through an extra half point on financing, etc).  4) Handling the Trade-In  5) 99.9999% of the time the ""I forgot to mention"" extra items are a ripoff They make huge bonuses for selling this extremely overpriced junk you don't need.    6) Scrutinize everything on the sticker price I've seen car dealers have the balls to add a line item for ""Marketing Costs"" at around $500, then claim with a straight face that unlike OTHER dealers they are just being upfront about their expenses instead of hiding them in the price of the car. Pure bunk. If you negotiate based on an offset from the invoice instead of sticker price it helps you avoid all this nonsense since the manufacturer most assuredly did not include ""Marketing costs"" on the dealer invoice. 7) Call Around before closing the deal Car dealers can be a little cranky about this, but they often have an ""Internet sales person"" assigned to handle this type of deal. Once you know what you want, but before you buy, get the model number and all the codes for the options then call 2-3 dealers and try to get a quote over the phone or e-mail on that exact car. Again, get the quote in terms of markup from dealer invoice price, not sticker price. Going through the Internet sales guy doesn't at all mean you have to buy on the Internet, I still suggest going down to the dealership with the best price and test driving the car in person. The Internet guy is just a sales guy like all the rest of them and will be happy to meet with you and talk through the deal in-person. Update: After recently going through this process again and talking to a bunch of dealers, I have a few things to add: 7a) The price posted on the Internet is often the dealer's bottom line number. Because of sites like AutoTrader and other car marketplaces that let you shop the car across dealerships, they have a lot of incentive to put their rock-bottom prices online where they know people aggressively comparison shop. 7b) Get the price of the car using the stock number from multiple sources (Autotrader, dealer web site, eBay Motors, etc.) and find the lowest price advertised. Then either print or take a screenshot of that price. Dealers sometimes change their prices (up or down) between the time you see it online and when you get to the dealership. I just bought a car where the price went up $1,000 overnight. The sales guy brought up the website and tried to convince me that I was confused. I just pulled up the screenshot on my iPhone and he stopped arguing. I'm not certain, but I got the feeling that there is some kind of bait-switch law that says if you can prove they posted a price they have to honor it. In at least two dealerships they got very contrite and backed away slowly from their bargaining position when I offered proof that they had posted the car at a lower price. 8) The sales guy has ultimate authority on the deal and doesn't need approval Inevitably they will leave the room to ""run the deal by my boss/financing guy/mom"" This is just a game and negotiating trick to serve two purposes:  - To keep you in the dealership longer not shopping at competitors.  - So they can good-cop/bad-cop you in the negotiations on price. That is, insult your offer without making you upset at the guy in front of you.  - To make it harder for you to walk out of the negotiation and compromise more readily.  Let me clarify that last point. They are using a psychological sales trick to make you feel like an ass for wasting the guy's time if you walk out on the deal after sitting in his office all afternoon, especially since he gave you free coffee and sodas. Also, if you have personally invested a lot of time in the deal so far, it makes you feel like you wasted your own time if you don't cross the goal line. As soon as one side of a negotiation forfeits the option to walk away from the deal, the power shifts significantly to the other side. Bottom line: Don't feel guilty about walking out if you can't get the deal you want. Remember, the sales guy is the one that dragged this thing out by playing hide-and-seek with you all day. He wasted your time, not the reverse." You have a good start (estimated max amount you will pay, estimated max down payment, and term) Now go to your bank/credit union and apply for the loan. Get a commitment. They will give you a letter, you may have to ask for it. The letter will say the maximum amount you can pay for the car. This max includes their money and your down payment. The dealer doesn't have to know how much is loan. You also know from the loan commitment exactly how much your monthly payment will be in the worst case. If you have a car you want to trade in, get an written estimate that is good for a week or so. This lets you know how much you can get from selling the car. Now visit the dealer and tell them you don't need a loan, and won't be trading in a car. Don't show them the letter. After all the details of the purchase are concluded, including any rebates and specials, then bring up financing and trade-in. If they can't beat  the deal from your bank and the written estimate for the car you are selling, then the deal is done. Now show them the letter and discuss how much down they need today. Then go to the bank for the rest of the money. If they do have a better loan deal or trade in then go with the dealer offer, and keep the letter in your pocket. If you go to the dealer first they will confuse you because they will see the price, interest rate, length of loan, and trade in as one big ball of mud. They will pick the settings that make you happy enough, yet still make them the most money. The only issue I can see is that the stranger is looking to undervalue their purchase to save money on taxes/registration (if applicable in your state). Buying items with cash such as cars, boats, etc in the used market isn't all that uncommon* - I've done it several times (though not at the 10k mark, more along about half of that). As to the counterfeit issue, there are a couple avenues you can pursue to verify the money is real: *it's the preferred means of payment advocated by some prominent personal financial folks, including Dave Ramsey "Paperwork prevails.  What you have is a dealer who get a kickback for sending financing to that institution. And the dealer pretty much said ""We only get paid our kickback at two levels of loan life, 6 and 12 months."" You just didn't quite read between the lines.  This is very similar to the Variable Annuity salespeople who tell their clients, ""The best feature about this product is that the huge commissions I get from the sale fund my kid's college tuition and my own retirement. You, on the other hand, don't really do so well.""  Car salesmen and VA sellers." No. At least not in my case. Without divulging too much information. I don't tell any of my distributors how to sell my company's products our engage their customer base, but due to the nature of my business, I am frequently called on for product selection, marketing, quality, etc. Distributors often utilize their account reps and managers to help them push products on their customer base. The only way this could be seen as truthful, in my opion, is direct retail distribution. Because how are you going to track the product after it has been purchased by a consumer. I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show  the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price.  In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check.  The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money.  Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name. "It is a legitimate practice. The dealers do get the loan money ""up front"" because they're not holding the loan themselves; they promptly sell it to someone else or (more commonly) just act as salesmen for a lending institution and take their profit as commission or origination fees. The combined deal is often not a good choice for the consumer, though. Remember that the dealer's goal is to close a sale with maximum profit. If they're offering to drop the price $2k, they either didn't expect to actually get that price in the first place, or expect at least $2k of profit from the loan, or some combination of these. Standard advice is to negotiate price, loan, and trade-in separately. First get the dealer's best price on the car, compare it to other dealer and other cars, and walk away if you don't like their offer. Repeat for the loan, checking the dealer's offer against banks/credit unions available to you. If you have an older car to unload, get quotes for it and consider whether you might do better selling it yourself. ========= Standard unsolicited plug for Consumef Reports' ""car facts"" service, if you're buying a new car (which isn't usually the best option; late-model used is generally a better value). For a small fee, they can tell you what the dealer's real cost of a car is, after all the hidden incentives and rebates. That lets you negotiate directly on how much profit they need on this sale... and focuses their attention on the fact that the time they spend haggling with you is time they could be using to sell the next one. Simply walking into the dealer with this printout in your hand cuts out a lot of nonsense. The one time I bought new, I basically walked in and said ""It's the end of the model year. I'll give you $500 profit to take one of those off your hands before the new ones come in, if you've got one configured the way I want it."" Closed the deal on the spot; the only concession I had to make was on color.  It doesn't always work; some salesmen are idiots. In that case you walk away and try another dealer. (I am not affiliated in any way with CU or the automotive or lending industries, except as customer. And, yes, this touch keyboard is typo-prone.)" "I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. ""99% of buyers take the financing"" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.) In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned ""mom and pop"" shop might.  The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less." Yes, Edmunds gets money from the dealerships in this program. According to this USA Today article from 2013, dealers pay Edmunds a monthly fee to participate in the program.  This contrasts with TrueCar.com, a similar service, where dealers pay a fee for each sale. And yes, it is certainly possible to negotiate a lower price than the Edmunds Price Promise quote, if you enjoy haggling.  The purpose of the program is not to get you the best price, just the easiest buying experience.   From the USA Today article: Edmunds.com's price promise business model is designed to take the uncertainty out of pricing, speed up the buying process and also comes with the expectation that the customer will be given top-notch customer service. Dealers who have participated find that they are able to sell their cars for $300 to $500 more than consumers who go through the more traditional price quote request process. Customers, [Edmunds.com president and chief operating officer Seth] Berkowitz said, are willing to pay a little more than the best possible deal if they can save time, get great customer service and know they are getting a fair price. "If there's one reasonably close to you, you could go to a no-haggle dealership.  Instead of making you haggle the price downward, they just give a theoretically fixed price that's roughly what the average customer could negotiate down to at a conventional dealer.  Then just do your best broken record impression if they still try to sell you dubious addons:  ""No.  No.  No.  No.  No..."" The last time I bought a new car (06), a no haggle dealer offered the second best deal I got out of 4 dealerships visited.  The one I ended up buying with made an exceptional offer on my trade (comparable to 3rd party sale bluebook value). - My guess is they had a potential customer looking for something like my old car and were hoping to resell it directly instead of flipping it via auction." "—they will pull your credit report and perform a ""hard inquiry"" on your file. This means the inquiry will be noted in your credit report and count against you, slightly. This is perfectly normal. Just don't apply too many times too soon or it can begin to add up. They will want proof of your income by asking for recent pay stubs. With this information, your income and your credit profile, they will determine the maximum amount of credit they will lend you and at what interest rate. The better your credit profile, the more money they can lend and the lower the rate.  —that you want financed (the price of the car minus your down payment) that is the amount you can apply for and in that case the only factors they will determine are 1) whether or not you will be approved and 2) at what interest rate you will be approved. While interest rates generally follow the direction of the prime rate as dictated by the federal reserve, there are market fluctuations and variances from one lending institution to the next. Further, different institutions will have different criteria in terms of the amount of credit they deem you worthy of.  —you know the price of the car. Now determine how much you want to put down and take the difference to a bank or credit union. Or, work directly with the dealer. Dealers often give special deals if you finance through them. A common scenario is: 1) A person goes to the car dealer 2) test drives 3) negotiates the purchase price 4) the salesman works the numbers to determine your monthly payment through their own bank. Pay attention during that last process. This is also where they can gain leverage in the deal and make money through the interest rate by offering longer loan terms to maximize their returns on your loan. It's not necessarily a bad thing, it's just how they have to make their money in the deal. It's good to know so you can form your own analysis of the deal and make sure they don't completely bankrupt you.  —is that you can comfortable afford your monthly payment. The car dealers don't really know how much you can afford. They will try to determine to the best they can but only you really know. Don't take more than you can afford. be conservative about it. For example: Think you can only afford $300 a month? Budget it even lower and make yourself only afford $225 a month." "I'm going to ignore your numbers to avoid spending the time to understand them.  I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value.  I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value.  You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000.  Mr. Banker wires over $10,000 and you drive home in your car.   Say in a year you want a different car.  This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you.  They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000.  You've made 12 payments of $188.71.  Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car.  They'll send the $7,000 they agreed to pay for your car.  Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value).   Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for.  All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is ""loss"" is an extremely vague number to derive primarily because your utility of the car has a value.  But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost." "Ditto other answers, but I'd add there's a lot of psychology going on in a sale. If you're paying cash, you presumably have a pretty fixed upper limit on what you can spend. But if you're getting a loan, a large increase in the price of the car may sound like just a small addition to the monthly payment. Also, these days dealers often try to roll ""extended warranties"" into the loan payment. Most people can't calculate loan amortizations in their heads -- I'm pretty good at math, and I need a calculator to work it out, assuming I remember or wrote down the formula -- a dealer can often stick a piece of paper in front of you saying ""Loan payment: $X per month"" with fine print that says that includes $50 for the extended warranty, and most people would just say, ""oh, okay""." Believe it or not, what they're asking you is not as unusual as you might think.  Our company sells a tremendous amount of expensive merchandise over the Internet, and whenever there's something odd or suspicious about the transaction, we may ask the customer to provide a picture of the card simply to prove they have physical possession of it.  This is more reassurance to us (to the extent that's possible) that the customer isn't using a stolen card number to order stuff.   It doesn't help too much, but if the charge is disputed, at least we have something to show we made reasonable efforts to verify the ownership of the card.   I think it's pretty thin, but that's what my employer does.