MIKE ZIEMS
BUYING A CAR
Please note that I am in the car business. With that said, some people might be asking themselves, “Why would I take car buying advice from someone in the car business?” This answer to this question is quite simple. I have been involved in close to 600 vehicle purchases as a car salesperson over a three year period. I have been involved in thousands of vehicle purchases as a sales manager and have experience in the financing, trade-in valuations, and negotiations of those deals. This gives me much more experience with the car buying process than so-called car buying experts. Before taking someone’s advice about buying a car it is important to understand exactly how many transactions they have been a part of. The average person purchases 12 cars over their lifetime. This means that most people including experts will have limited experience with going through the car buying process.
Here are the important steps that I feel everyone should take in order to purchase a vehicle, get a great deal, and be happy doing it. Step number 1, assess your needs. Consumers who make the mistake of not figuring out what they really need, end up purchasing the wrong vehicle. This is a step the professional dealership should insist on taking to find the vehicle that best suits a customer’s needs. Ask yourself, “What do I need in a new vehicle?” How many people on average will be riding in the vehicle? Do you need four wheel drive? What is the one thing that you have to have? Are you going to be towing or hauling with your vehicle? These are some of the important questions to ask yourself when assessing your needs.
Once you have decided what you need, now it is time to move on to step number 2, do your research. The internet is an invaluable tool in researching a new vehicle. There are practically unlimited resources to aid consumers with their auto purchase. Most manufacturers have very good websites that provide information such as pricing and options. If you are looking for unbiased opinions, third party websites such as jdpower.com, cars.com, edmunds.com, and many more provide useful car buying information. NADA (National Auto Dealers Association) and Kelly Blue Book are great sources for evaluating your trade-in. However, please note that there is more to putting a value on a used car than just what KBB and NADA say. Dealers will look at KBB, NADA, auctions, and the local market when determining a value on a used car. The condition, whether it has been in an accident, and whether it has a clean title will also be considered. Ultimately, vehicles that the dealer can retail and make money will be worth more than those that they cannot. High mileage and rougher units will be wholesaled. These units are at the mercy of the wholesale market.
Research the dealership you are leaning towards. Check their online reviews, ask your family and friends about their experiences with that dealer. It is extremely important to select a dealership you can trust. This will make the financing process, negotiations and ownership experience much more enjoyable. If you feel uneasy about your dealings with a certain dealer, simply walk away. Find a dealer that you can trust and rely on. Car dealers have a bad name in general, however, there are some really good dealers who will provide a top notch experience.
After deciding what you need and doing your research you should have a pretty good idea of the makes and models you are interested in. Step 3 is to test drive the vehicles you have it narrowed down to. Contact the dealers that have the vehicles you are looking for either on their website or by phone. Set an appointment and ask for the vehicles you are interested in to be ready for you to test drive. I have had customers who insist on not test driving the vehicle. When this happens they often do not realize that the vehicle is not equipped with a certain feature they want or the seat is not comfortable, or there is not enough visibility out of the windshield, or many other possible issues that they can only discover when they actually drive the vehicle. Test driving the vehicle is a critical step to purchasing a car that if overlooked can cause undue frustration.
This brings us to step 4, agreeing on the numbers. New vehicles have much less margin than used vehicles. New trucks and SUVs are going to have the most margin. Cars are going to have the least margin. For example, a basic Ford Fiesta has $200-$300 in mark up. According to a study by NADA new car dealers in 2015 averaged 3.3% gross profit as a percentage of the selling price. This means that on a $20,000 car the average new car dealer is going to make $660. This is before the dealer pays the salesperson, fills the tank with fuel, pays for their building, utilities, someone to wash the car, interest on their inventory, the list goes on and on. Even full price is a fair price on a new vehicle. I am not saying that you should not ask for a discount. However, there is a good amount of car buyers who come to the dealer wanting to battle it out. However, there is not as much margin in a new car as you might think. Also, franchise car dealers are usually pillars of local communities. They are typically the local community’s largest employer and the most generous when it comes to local charities and organizations. Most car dealers are honest, hardworking entrepreneurs who care deeply about their employees and customers. Keep this in mind next time you go to the dealership. This leaves us with the question, “what is a fair price?” The answer is, a fair price is up to you to decide. If the dealership feels right, the vehicle feels right and the numbers feel right, then that is a fair deal.
In 2013 84.5% of consumers financed their vehicles according to a study by Consumer Reports. This brings us to step 5, financing. There are some car buying guides that encourage consumers to go outside of the dealer for financing. This is a huge mistake. Most dealers have multiple lenders under the same roof. For example, our dealership works with Ford Credit, most local credit unions, and most national banks. These resources are made available to all of our customers. The problem that lies in a customer seeking their own financing is they have to go to a lender, get approved and determine if this is the lowest rate they qualify for. Dealerships have teams that work for their customers in getting them excellent financing rates. A dealership can check multiple lenders at the same time. Consumers can do this as well, however, it can be time-consuming and tedious because they have to visit multiple locations or fill out multiple applications online. Using a dealer for financing, the customer only has to fill out one credit application. Take advantage of the great financing resources that most dealers have access to. If for some reason you think the dealer is not giving you a good rate, get a second opinion.
Buying a vehicle can be a stressful and daunting task. Although, it does not have to be. Purchasing a car is the second largest purchase most people make in their lifetime. By approaching it the right way, the car purchase can be an exciting and fun experience. Hopefully, implementing these steps will make your car purchasing a little easier.