Car Buying Tips - Back End Profit Center

The ‘back end’ of the car deal is essentially all the variables and salesmanship that you are confronted with once you enter the dealer’s F&I (Finance and Insurance) department to sign all the necessary paperwork (and then some).

On the back end of the car deal is where a buyer can really get lost in the numbers and the dealership can score very well on the profit… particularly if the buyer has opted in for letting the dealership arrange for the financing .

And by the way… it’s probably O.K. for you to let the dealer ‘compete’ for your financing. I say compete because I know at this point you’ve done your financing and have a good idea of what you qualify for in a loan, what your credit is, and what your interest rate will be. If you don’t know this or haven’t researched your financing situation… you DO NOT want to have the dealer do this for you! Remember the ‘back end’ is where a dealer can make a lot of money on your car deal.

Bottom line… get yourself pre-approved before you even set foot on a car dealership’s lot.

One aspect of car deals and car buying tips that we’ve not touched on is the element of cash… and more precisely… if you are going to pay cash for the bottom line amount.

We all should be so lucky to even have this as an option. But, if you do, it is probably not in the best interest of you getting the best car deal possible if you tell this to the sales person right up front.

Why you ask…

Remember… we just talked about the back end of the deal and how dealers rely on the back end to make additional money on the whole deal itself. If the dealer / sales manager knows that there is not going to be a back end because you are going to pay cash; then (s)he knows that they are going to have to make their number on the front end of the deal… this means getting them to come off the selling price of the new car or squeeze some additional money out of your trade-in is going to get much tougher.

The same will probably hold true if you’ve been pre-approved for your financing… in essence you’re taking away the ‘back end’ profit for the dealer, so it’s best from a negotiating perspective that you hold those cards close your vest.

Having said this though, there is certainly nothing wrong telling the dealer up front that you would welcome offering the dealership a chance to beat the financing numbers that you’ve already got in your pocket.

Selling cars for dealerships and sales people is a very competitive business and something that you as a consumer can certainly leverage. Many times you may decide on which deal to go for between multiple dealers based simply upon how you were treated at each of the dealerships… whatever the ultimate reason… the numbers you arrive at are greatly determined by your diligence in your research and homework and your patience at the car dealer.

Car Buying Tips - Smoke, Mirrors, and Shells

Last time out we we’re talking about what not to say or talk about when you are on the car lot trying to get your best car deal. Number one is monthly payments… don’t get into this type of conversation with your sales person.

When money and profits are involved, a dealership will absolutely trying to engage you in a monthly payment discussion or focus.

The sales fundamentals for dealerships and car sales people are essentially one of moving the numbers and money around.

Because of this it probably not in your best interest to mention right up front that you are going to be introducing a trade-in into the equation. Again, another mathematical variable that the dealership has to work with if you do. And once this happens the shell game really begins.

With a trade involved the psychology of the deal really begins to come into play at this point. If you focus on the amount that you want to get out of your trade in, you’ll (at least temporarily) lose sight of the selling price of the new car. And it’s only human nature that if you dig your heels in and fight for your trade in value and feel like you won one; then the law of reciprocal respect engages in our brain and we allow the dealer to win back on the new car price even more than we though we gained on the trade value!

Answering the trade in question can be difficult for most people when they feel like they’ve been told to not mention the trade or to save it to the very end then spring it on the sales person. My car buying tips take on this is bit different in that when asked about the trade, just insist to the sales person that “we’ll talk about the trade a bit later.”

After all, if you’ve done your homework on the selling price of the new car and the value of your trade-in, you only have to keep one number in your mind that you want to hit and that is the ‘trade difference’ and this makes it much, much easier.

For example, if feel like a fair deal is the value of your trade minus the selling price that you want for the new car is say… $15,000 then until the dealer gets to a bottom line or ‘trade difference’ of $15,000 then there is still work to be done and you only have to focus on that number.

If the sales person comes back and presents you with $15,500 on the bottom line, you can mention that it really doesn’t matter to you whether they get you $500.00 more dollars for your trade or they come off the selling price of the new car by $500.00… or a little of both… either way the number that makes you happy is $15,000.00 so it’s up to them to ‘git er done’.

The value of knowing what the ‘trade difference’ is that you want to ultimately have to come up with is, this allows you to keep the numbers very clear and substantially reduces the ability of the car dealer to shuffle numbers around on you.

Next time out we’re going to discuss the ‘back end’ of the deal and why once you get to the ‘trade difference’ number you like; you’d better not let your guard down.