10 things you should say when buying exotics: Exotic Car Examiner auto shopping advice (part 1)
You've entered the exotic car dealership buying zone. Like the Twilight Zone where what is real is very often not what you would expect or have ever been told, a high line buying experience is not the new or used car sales norm. Article one in a series of ten in response to Sam Foley of MSNBC Auto's report, "10 things not to say when buying a car". Learn why you should always disclose to an exotic car dealer if you are interested in getting the lowest payment possible and with the best interest rate when buying a vehicle on credit terms in Part One.
INTRODUCTION: EXPECT THE UNEXPECTED
Car shopping is difficult no matter who you are, what your race, socio-economic status, country of origin native language, or gender. It requires a level of education, skill, and fiscal confidence to successful negotiate a sales contract for any major purchase. Whether buying a house, car, or any luxury product, obviously buyers want to get the best deal they can while knowing the seller has not taken advantage of them.
This article series is an important read for any first time exotic car buyer, because the car shopping experience in reputable high line dealerships is not at all the same as you would expect from a normal buy here - pay here, American, or import auto dealer business. Smart sales people working with high line or luxury products are more interested in preserving their own personal reputation in the industry than they ever are in making a quick dollar on a car deal.
HISTORY OF CAR CULTURE ETIQUETTE
If you do your research about how to buy a car, you'll find plenty of articles that tell you what to say and what to avoid when making conversation with your car salesman. If you are in the market for an exotic car and have never bought one before, these same "skills" used to strong arm sales adviser employees who are required to meet much high average sales quotas each month can quickly get your name or financial application placed at the bottom of the pile when it comes to getting preferential treatment at an exotics dealership.
Yes, exotic car dealers CAN afford to decline a customer they do not think will be a good ambassador for the marquee -- that means the manufacturers who produce the cars have the option to exercise the final say whether or not a potential owner will be able to own their numbered collectible automobile as a long term investment or wealth building asset.
Go to an exotic car dealership and present yourself as the kind of client who is not up front, chooses to answer direct questions in an obscure manner, or is openly argumentative about the price or value of a product in a way that is uninformed or out of pace with the realities of the present market, the sales representative (or client adviser) working with you is very likely to feel an unnerving sense of distrust emanating from your direction. As such, they may feel obligated to report the details of your conversation with them that have given any indication that you are not all warm and fuzzy with the brand or dealership to higher ups in corporate management when it comes time to pass your name through for approval. By following a blue collar plan for treatment by auto industry professionals working with exotics, you might just find your name black listed when it comes to receiving white glove and white linen table type "lifetime friend and client" treatment.
CONFLICTING ADVICE FROM EXPERTS IN THE CAR INDUSTRY
Writer Sam Foley of MSN autos is just one of many journalists who has written an article to help buyers more successfully negotiate the purchase of an automobile. In his article "10 Things Not to Say When Buying a Car: Even in a buyer's market, it pays to watch what you say to your dealer" he creates a list of common phrases and word expressions used buy buyers to explain their purchase motivations and financial situations.
Without clarifying explicitly that the article does not relate to any specialty auto, high line, exotic car, or custom classic automobile, Foley takes aim at car dealer staff and management while trying to give novice (or veteran buyers) helpful hints about wheeling and dealing in any automobile transaction. The theme of his article suggests one of privacy, caution when disclosing purchasing objectives, and mistrust of the dealership professionals you are choosing to work with; price shopping after being presented with a fairly complete contract is encouraged, and establishing an ongoing fiduciary relationship with your sales team is generally discouraged.
Though Foley's intentions in expressing these advice remindders are noble, the opinions presented could not be further from the truth when it comes to working with an exotic car dealer or "investment grade automobile procurement specialist"; more over, taking the suggestions could cost you the opportunity to own your dream car or collection of automobiles. As such, this article series has been written by exotic car buyers, for future exotic car owners.
WHY SHOPPING AT A HIGH LINE OR EXOTIC CAR DEALERSHIP IS DIFFERENT
It's equally as important to know what not to say to a salesperson who is vending a product that is under $100,000 as it is to know how to establish an honest, comfortable, trusting, and long term working relationship with a car salesman who works exclusively with luxury high-line automobile products (that can reach millions of dollars per automobile or car collection). Real exotics dealers are sales professionals looking to retain you as a client for a long duration. They expect customer loyalty from you and in return will provide exemplary service. If they don't know you or trust you as a professional friend or private person, they can't adequately represent your highest and greatest good when it comes to making investments. Of course, there are always those dealerships who offer "bad apple" salesmen or "poor management style" exceptions, but for the most part, the exotic car world is a small niche market industry where each group or executive relies on gaining business from word of mouth reputation. A few quick phone calls to exotic car owning friends should quietly steer you in the right direction regarding finding the right sales people who can access the type of inventory you want to purchase and are trustworthy to work with on a long-term basis.
THA' LIST
FOLEY SAYS #1: Never tell a regular car dealer that you want to keep your monthly payments down.
Telling a regular car dealer that you want to keep your monthly payments down gives a sales person a heads up that they have some flexibility with duration of payment terms. Many will find ways to extend terms and collect higher interest rates because of it. If you choose to pay a car off in less than two years, most American, Foreign, or European car dealerships will offer 0%-4% interest. Paying a car off in 36, 48, 60, or 72 months can cause interest rates to skyrocket by as much as 15 points.
Taking that attractive monthly payment without actually calculating the end value of the car can easily leave you upside down in payments when it comes time to sell the car. As most vehicles tend to depreciate at a rapid rate, you might be better taking that higher payment with a shorter duration in order to be left with a bit of Kelly Blue Book equity and trade value left by the time you pay off your car.
TO POINT #1, THE EXOTIC CAR EXAMINER SAYS
Working with an exotic car dealer, do the OPPOSITE of what Foley suggests: disclose the exact range of low payment terms ranges you would like to remain in to keep your monthly car budget kept in check. Let your sales adviser work with the F&I department to suggest your range of alternatives.
If you are a serious buyer interested in making a payment arrangement with your exotic car dealership, your sales person should actively be shopping for the lowest payment and best interest rates around. A good dealer will tell you that the options you have will depend on your credit. Based on your scores, a dealership can offer to extend payment terms up to 12 years while keeping a low rate of interest. Whether you choose to finance for one year or ten, you won't be hurt with interest the way you are at regular dealerships -- interest rates on long term loans may increase, but typically not by more than 2 or 3 points from where you started.
Rate of depreciation will also be different for an exotic car than it is for regular vehicles. Based on care, mileage, and model, some exotic cars will even sell within the first two or three years of purchase much higher than they were priced at MSRP. To that end, you will want to be sure you work with an experienced and highly qualified sales professional who is well acquainted with the shifting supply and demand schedule of exotics. A good car person can steer you in the right direction to buy an investment grade automobile rather than simply making an impulse buy or "best deal today only" purchase.
Leasing is oftentimes an attractive option when an exotic car value is expected to decline. Though you might have to come up with a more significant initial out of pocket expense [than you would pay as a deposit on a credit term purchase (often financed at 100%)], you can get that payment to where you need it. In addition, if you lease the vehicle you may be able to write a portion of the cars use off as a business expense if you use the car as a transportation vehicle for business travel or are able to sign or show the car as a moving advertisement (allowing a marketing expense deduction for your small business).
Continue to Part 2
10 things you should say when buying exotics: Exotic Car Examiner auto shopping advice (part 2)
10 Things Not to Say When Buying a Car
Even in a buyer's market, it pays to watch what you say to a dealer.
By Sam Foley of MSN Autos
So you’ve decided to buy a new or pre-owned car. You know the make, model and year of the chariot. You even know what features you want. Now it’s time to head to your local dealer and sign on the bottom line, right? Not by a long shot. It’s now time to negotiate price. If you want to get the most bang for your buck, here are 10 phrases you should never utter in earshot of a car dealer — and why.
“I’m trying to keep my monthly payments down.”
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Know the maximum you are willing to spend over the life of your loan before you start to negotiate.
Families think in terms of their monthly budgets, but most experts agree that’s not the way to price out a car. “Don’t be bamboozled by some superficially attractive monthly payment,” says Joe Ridout, spokesperson for Consumer Action, a nonprofit advocacy group. “There are a lot of ways for a dealer to make monthly payments appear low.” Before you walk into the dealer, know the maximum you are willing to spend over the life of your loan. By stretching the term by a year or two, a dealership can easily bring a $400 monthly payment down to a $300 payment, but you could end up paying thousands more in interest.
“Honey, what do you think?”
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Put up a unified front by knowing what you want before visiting a dealer. Otherwise, you can lose your negotiating position.
Dealers love indecisive couples. By subtly playing a husband and wife against each other (“Seems your wife’s really interested in the luxury package; she’s obviously got good taste.”), buyers are routinely talked into things they might not have otherwise considered. “Never show emotion,” says Robert Sinclair Jr. of the American Automobile Association of New York. “If one of you gets all excited or emotionally attached to a vehicle, then you lose your negotiating position.” Couples buying a vehicle should have a very good idea of what model vehicle they want, what options they are interested in and how much they are willing to spend before they walk into the dealership. If unforeseen issues pop up that merit further discussion, don’t be afraid to ask the dealer to give you some time alone for discussion before making a decision — better yet, sleep on it — then come back as a unified force.
“I have a car to trade in; how does that affect the deal?”
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Get the right price on the car you’re buying before even mentioning the possibility of a trade-in, and know the market value of both.
Don’t discuss a trade-in until you’ve settled on a price for the car you’re buying. Making one deal contingent upon the other just allows the dealer more flexibility in his negotiations. Do your research on the value of both vehicles and get the right price on the car you’re buying before you even mention the possibility of a trade-in. The truth is, you’ll almost always get a better price if you sell your old vehicle yourself. A dealer trade-in is a convenience, but he’s not doing you any favors. Make sure you do your research on the true price of your desired vehicle as well as the value of your trade-in (MSN Autos has tools for determining both) before you arrive at the dealership, and be prepared to sell your old car somewhere else if the dealer doesn’t offer a fair price.
“Let’s talk financing!”
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Don’t let the rate of a loan influence the price of the car, and don’t be afraid to shop around. Dealers rarely offer the best terms.
Again, settle on the price of the vehicle you’re interested in before you bring up financing — don’t let the rate of a loan influence the price of the car. These days, loans may be harder to come by, but Consumer Action’s Ridout suggests that credit unions still offer the lowest rates. “Show up at the dealer with an offer ready to go,” he says, “then see if the dealer will beat it.” If the dealer is offering special low financing rates as an incentive from the manufacturer, see if you can turn that into cash back on the car instead. Then go shop around for the lowest rate from a third party. Also, keep in mind that advertised rates are usually for the shortest possible term (usually 36 months). If you stretch out the terms, the price can go up steeply — make sure you calculate the total cost of the loan and make sure there is no early payment penalty.
“Here’s how much I have to spend.”
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Don’t just blurt out how much you want to spend. Discuss the car and the options, then let the dealer make the first offer.
Avoid tipping your hand right when you walk in the door. You have no idea how much the salesperson is willing to deal, but if you blurt out your target price, you can be sure that he’s not going to offer you anything lower than that. Discuss the car and the options you’re interested in and let the dealer make the first offer — these days, inventories are so large that dealers will sometimes sell at invoice just to get cars off the lot. Right now, it’s a definite buyer’s market.
“What kind of extended warranties do you have?”
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Think twice about buying the extended warranty. Closely compare the terms with what you might get from the dealer with a third party guarantor.
Extended warranties are like insurance, so treat them like insurance. Shop around to third parties and closely compare the terms with what you might get from the dealer. Ridout of Consumer Action says that dealer extended warranties never make financial sense. “You’re betting against the long-term reliability of your vehicle,” he says. “You’d be better off taking the money you’d spend and putting it in a dedicated savings account for car repairs.” If that doesn’t offer you enough peace of mind, check with your insurance provider. Usually, policies from insurance companies cost around $100 or so per year.
“I need this car now.”
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Never show desperation. Your biggest bargaining chip in any negotiation is that you might walk away from the deal.
Your biggest leverage in any negotiation is the opportunity to walk away from the deal. If you show a sense of urgency, the dealer may become less flexible. The dealer is always trying to move as many cars off his lot by the end of the month as possible, so try to keep the urgency on him. Maybe the car on his lot is equipped with $400 floor mats, and if you want a car without expensive floor mats, you have to special-order it from the factory, which can take weeks. For a customer who is willing to leave the dealership and shop around, suddenly those floor mats are free.
“I think my credit’s good.”
Don’t think — know your credit score before you walk into the dealership. By law, everybody is entitled to one free assessment of his or her current credit score per year. You can request yours at annualcreditreport.com. If you walk in with your credit score in hand, the dealer can’t back you into unfavorable terms with boogeyman stories about bad credit and difficulties in financing.
“It looks like it’s been kept pretty well.”
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Don’t be fooled by appearances. Before buying a used car, pay a licensed and impartial mechanic to do an inspection.
If you’re shopping for a used car, there is no way to know if the vehicle is mechanically sound just by looking at it. Before you sign anything, pay a licensed and impartial mechanic to do an inspection. According to Mike Brewster, spokesperson for the Automotive Service Association and owner of Gil’s Garage in Burnt Hills, N.Y., a professional vehicle inspection usually costs between $50 and $90, but can save you hundreds or thousands in repairs later. If the seller balks or if a dealership insists that an inspection by their in-house mechanic is good enough, tell him that it’s not good enough for you, then walk away.
“I guess all these fees are pretty standard, huh?”
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Expect to pay sales tax, title, vehicle registration and delivery fees. Almost everything else is negotiable.
Actually, some of them are, some of them aren’t. You should expect to pay sales tax, title, registration and delivery fees, but pay close attention to the other extras that are sometimes tacked on. When you see something such as “dealer prep,” that’s a fee charged by the dealership for peeling off the plastic covers for the seats and cleaning up the car. Ask the dealer to remove the fee. If he doesn’t, tell him you’re going to shop around until you find someone who will. Also, you may have heard that the “rust proofing” coating they’ll try to sell you is a sham — it is. Almost every new car these days already comes with a corrosion warranty good for six to 10 years; that’s because if you clean your car on a regular basis, you shouldn’t have to worry about this.
Sam Foley is a Connecticut-based automotive journalist who has written for GQ, Forbes, USA Today, the New York Post and various other publications.
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