If you or anyone you know is thinking of buying a new car, then here are just a few of the many tricks used by car dealers for you to look out for:
Bait and switch
The car dealer advertises cars offering great deals. But when you get to the showroom, either the cars featured in the ads have already been supposedly or actually sold so you are offered a different, usually pricier, option. Or else, the salesperson skilfully steers you away from the lower price model to one with lots of extra bells and whistles which, of course, is more expensive.
In most sales situations, the seller wants to get you through the sales process as fast as possible so they can close the sale and get their commission. But many car dealers take an opposite approach. They want to keep you for an hour to an hour and a half. They know that many customers feel uncomfortable in a car dealership and so the longer they keep you, the easier it is to sell you all kinds of expensive extras as you'll start agreeing to buy things just to complete the deal and get out.
Front-of-shop and Backending
Car sellers split the car selling process into two distinct phases. In front-of-shop they sell you the car. But they make surprisingly little profit on the car itself. The big money is made during what they call backending where they sell you all sorts of extremely profitable extras – special treatments, long-term warranties, GAP insurance and so on. Once you've agreed a price for the car, the salesperson will take you to an office to 'do the paperwork'. It's not unusual for the buyer to emerge almost an hour later dazed at all the extras they've been sold.
One Step Negotiation
In the West, we often feel uncomfortable haggling over price as we're used to prices for most of the things we buy being clear and fixed. The car salesman knows this and will often give us some small price cut or concession in the knowledge that we'll probably be aware to have gotten something off the price and so will do the deal. Very few people will do two- three- and even four-step negotiations to push the price down further.
This is a classic sales trick. If we try to bargain too hard, the salesman might say something like, 'look, I can not possibly cut the price any further. But I'll tell you what I can do. I'll go and talk to my sales manager and see what he says'. Off they'll go to supposedly fight on your behalf with the sales manager. They might be away for five or even ten minutes – the longer this is, the more it looks like they've really been battling away to get you a better deal. Then they'll come back with some further price cut or concession. The buyer's problem is that they can not negotiate any further as they can not talk to the sales manager – the absent authority .
If we're paying for the car in monthly installments, the salesperson will seldom mention the real total price we're actually going to pay as we might be shocked by how much more this is the sales price of the car. Instead they price cushion by only talking about the size of the monthly payments which makes the car seem more affordable. Moreover, they can reduce the size of our monthly payments by spreading them out over a longer time. Price cushioning also makes it easier for the seller to get us to buy lots of extras by saying something like, 'you'll get a long-term warranty for the price of a cup of coffee a month' rather than focusing too much on the total cost of the warranty.
If a buyer is hesitating over the price the seller can offer to show them a cheaper model, thereby implying the buyer is too much of a skinflint to buy a quality car. This can be particularly effective – and embarrassing for the buyer – when a buyer's partner or children are with them.
The Law of Contrast
This is very useful during the backending phase of the sale. In comparison to the cost of the car, all the extremely profitable extras the salesperson pushes will seem cheap. So someone, who might try to save a few pounds or even pence when doing their weekly supermarket shop, might end up paying £ 400 or more for GAP insurance – which covers you for the difference between a car's value and what your insurance company might pay if the car is stolen or written off – when that insurance probably costs the car dealer only £ 40 or less