You make me proud man.
And cool deal Hank Moody. Have you found the CFA to work the way you expected it to in your business?
Hey buddy, I’ll try to answer all your questions the best I can. Your overall experience is typical. The way salesman are trained at non luxury dealerships is to close the deal. There are no “be backs” according to them. They deal with a lot of people who buy a car because they need to, and will sometimes even do so if the financing terms are not good because their credit is bad and they can barely even get financed. Those clients were the best because you could make the most money of them.
And you’d be amazed what you can convince people to buy. The craziest was when I switched this lady who wanted a red sedan, into a YELLOW suv to get a bonus.
Questions:
- Depreciation. I did a pretty elaborate study on this, pulling average market data per year of model vehicle, ect ect. My rough conclusions were that for luxury cars, its makes sense to buy a 2 or 3 year old model (in most cases, there are some exceptions) and for japanese cars in the mid 20s, the depreciation on a new one is not bad and I’d buy brand new.
I did not do them for the models you have listed but this is how you can do it:
I went to autotrader.com and then searched for that model, brand new within 500 miles. At the bottom of the search results, there is an average price. I did this for a brand new one, for a 2013 model, for a 2012 model, 2011 model… I figured with such a large sample, and with each model year being listed at sticker price, and a wide variety of options, each sample would be equally diverse and fair for comparison. Then I calculated the difference between, the new one and the 2013, the 2013 and the 2012 to find out how much the car actually depreciates and when would be the best time to buy in.
All cars sampled had declining depreciation (hardest depreciation early on), basically it drops less and less each year, which makes sense (the luxury ones I looked at had a little spike at the 4 yr mark (less likely to be certified and out of factory warranty). But it really comes down to what you are willing to tolerate.
The weakness of my study is that it does not account for dealer incentives on new cars. Depending on the model sometimes dealers can discount quite a bit. But at the same time, if a dealer get a car in for trade really cheap, they can also discount it much too, so it could all be a wash. If you can negotiate hard on a new one, it may be worth it.
- New vs used warranty. New car warranty and certified pre-owned warranty from the manufacture is best. Non-factory used car warranties are really hit and miss. Company may go broke, deny claims, or they can be great. If you buy from say, an Autonation dealership (largest owner of dealers in the U.S., I think they sell something like an “easycare” warranty, and think with autonation’s backing, you’d be safer, but I’d definately research the warranty. Also know, you can negotiate that number a bit.
Also, if you buy a car before the factory warranty is up (I think within 1 mo/1k miles), you can usually shop around and get a factory extended warranty. Some makes allow them to be sold without inspection, I heard, so you can google around for a dealer and buy nationwide. Some need inspection so you have to buy local.
- the gotcha traps vary by dealer. The first dealer I worked at had a $499, vin etch fee, (basically a sticker on the door jam that cost $39. Managers told us to tell the clients it was a standard fee and that it actually cost the dealership more than that.) Everyone had a documentation fee that varied from $50 to 200. They will say something like, well we gotta pay someone to do the paperwork… not your damn problem.
The best way to not pay them is just flat out tell them to eat it. They will tell you lies like they are required to charge everyone the same amount because they’d get in trouble with the federal trade commission some other agency they make up if they didn’t… just know that some of that stuff is marked up 100-300+%. At the second dealer i worked at, we had every single car tinted. They charged us like $100 because of the volume discount, and we put an addenum on the car that listed $300 charge. Tell them they can leave it on the bill but take it out of the price of the car because you’re not going to pay for something you don’t want. Tell them, you know how much that stuff cost and since he’s such a good salesman, the next guy will make up for losing out on the profit of this one…
The biggest traps I heard happen in the finance office, that is where they sell you stuff like, clear bra, paint protection, warranty, ect so prepare yourself for that. Just say no. Rate can be negotiated in there, just bluff them and tell them if it’s not good, you’ll just write a check (they’ll lose origination fee and all sorts of stuff, so they will work with you).
If I think of anything else I’ll add to it.
It’s very hard to sum up the car buying experience because every car deal, every client, every salesman, every manager, every car (if pre-owned) is different, so i hope my post wasn’t too confusing. It would be akin to asking, “what stock should I buy and why?”
So I’ll leave you with my dad’s O.G. technique for buying a car, know what you want, drive it, low ball them, and grind and grind and grind. Barely bump the offer a little at a time but be prepared for a 4-6 hour+ negotiation and to walk at any time. When i was selling non luxury cars, I’d HATE those clients (which were about 1 in 50, maybe 1 in 100) because my manager would not let me walk them and I would make a minimum commission on those deals. Don’t bring print outs and market data, just negotiate man to man, this is what I can afford, I want THAT car, do you want to sell a car or not?
At the luxury dealers, I’d just say, I think we’re too far apart, thank them for stopping by and go eat.
^ Da Troof! Respect.
Will keep on looking and may come back with other dumb guy questions. I’ll make sure to tell those fckers I’m not paying any invoice prep fee, rust proofing extra, or VIN insurance BS.
This is how I typically roll anyway. It’s good to know I won’t need an arsenal of ish to get these fckers to bid down the price. At the el cheapo dealers, how much flexibility is there with negotiating? I always thought those days were over and the price you see if the price you pay.
Yo CvM,
This coming week is probably the best time to squeeze a dealer on price being the end of the quarter. If you’ve been tracking particular cars, you’ll know which ones have been hanging around for a while. If they come up on the web with a “reduced” price, then they’re probably trying to get it off the lot. Give em a low ball on those and promise to take delivery by the end of the month. probably your best shot to really hammer them on price.
When I bought my car last year the salesman was trying to sell that etch a sketch BS to me. He said there was an admin fee that the government said they couldn’t charge without providing some kind of service. So all the cars came with the sticker on it but I would have to pay $500 for the etching. I declined but found that he still charged me the fee. I asked him why because he didn’t provide a service but he said the sticker was the service. Haha these guys have no shame.
then came the fun in the financing office. I got the zero down, zero percent financing but they did their best to up the monthly bill. They offered the scotch guarding for $500. I said I don’t eat or drink in my car nor do I have kids so I don’t need it. Then came “but what if…” scenarios for 10 minutes.
There’s like 3 types of stores from what I’ve seen: one price with no negotiation, supposed one price but with negotiation if you push, and then old school negotiation. Even the first one, I still think you can negotiate and if you brought them a better deal from somewhere else, I bet they’d match. Doubt anyone would ever turn down a valid offer. Exception being scion or carmax, when they are really hardcore about using that as their business model.
Negotiation can also vary due to supply/demand. Some cars go really quick, some sit and they will discount accordingly. At the last place, for an extreme example, I saw manufacture discounts for up to 15% off while I saw others marked up by about 25% from msrp for a high demand sports car.
I’ll add a few random notes I thought of:
When you don’t bring anything and just low ball, the first thing they will ask is, how did you come up with your offer. I’d be firm and say, that’s how much I want to pay. They will then print out stuff and say, our price is competitive, look at all this proof, we are below average. You gotta discredit the evidence any way possible so you get the upperhand.
For example, if a client brought me edmunds and said, look, I want true market value (which is an okay deal). I’d say, “I think its great you’re doing your research but the thing is, edmunds doesn’t have any cars for sale.” I’d then go on about how great our car is, how bad the car that is sellign for that price could be and that “nice cars aren’t cheap and cheap cars aren’t nice” Gotta discredit the evidence.
What you can say is, the book numbers are retail price, not transaction price Supposedly www.truecar.com is good at estimating that but I haven’t looked at it in a long time. Back when I worked there, we were like wth when we looked up one of our cars and thought it was pretty accurate.
I know you worked at a luxury/high end dealer; what’s your take on the BMW, Mercedes, Audi, Porsche auto lines? My screener has been pulling high milage (80-100K) cars for mid teens.
My old school mechanic said that these cars (tranny, engine, etc) tend to crap out at ~100k, the parts are expensive, and many jobs he is unable to perform leaving them to a dealer/specialist mechanic who will charge ~2x his rate.
The Porsche Cayenne is one in particular that has been showing up in my SUV screener next to Chevy Tahoes and Ford Explorers with comparable year+miles+price.
I plan on going with my gut and my mechanic’s .02, but I wanted to see what you saw in trenches.
I suspect many on this board see American cars as junk; but my Expedition has been a great ride for over a decade with simple maintenance, easy DIY repairs, and cheap shop fees for big repairs. I want my next car to stay with me for a decade as well. If I can grab a decent ride at 80-100k miles and keep it for another 60-80k, that will be a success in my book.
I wrote a couple long post which I deleted but basically my thoughts are, the 6 figure ones are super complex, expensive, and drop like a rock when it comes to depreciation. The entry level ones are less so but brakes/tires/parts/maintenance are going to be more than what you are used to. Some things can’t be reset unless taken to a dealer but that’s usually for more complex systems like air/hydraulic suspension, brake by wire, stuff like that on the 6 figure cars. Maintenance lights can be reset but I’d google first to see if it is possible as I don’t know how its done on every brand.
If you want to keep a decade I’d stay away from a cayenne in the price range, it’ll be 15-16 years old by the time you get rid of it.
I think the steal at the moment if you want one of those brands is a MB CPO 2011 C300. You get 1 extra year of warranty beyond factory warranty. The car has to meet CPO standard, which are quite comprehensive (brakes/tires won’t have to be replaced in a while, maintenance up to spec). You can qualify for 1.99% up to 66 months right now. The car originally cost $38k-ish depending on options and is going for $25k around my area The car is not as complex as a 2012 when they switched to a turbo 4 to replace the proven 3.0L V6. If you keep it for 10 years and sell it for $5k, that’s $2k/yr depreciation, less than $200/mo. New body style is coming this year so I think you can get a good deal.
lol still ignoring my advice. good luck cvm. let us know what you get
HP - why do these german cars have such shoddy reliability? I would think given the amount you are paying for an MB, and its reputation for build quality, it should come with some assurance of reliability, but MB, Audi, and BMW are all pretty bad, although I find it interesting that you say Porsche is also a low-reliability brand…I had thought it showed better reliability rates.
Black folks have an inherent fear of auctions.
CFAvsMBA,
I would suggest the following:
1] Negotiate the best price you can with the dealer and lowest finance rate for a new car.
2] Find a car broker and tell them that you are looking to purchase new car in the near future. Tell them the make, model year and options you want. The broker work for you, not the dealer. There should be no out of pocket cost to you, as the dealer pays them a finder fee.
Once the broker gets back to you, see which is the better deal. Then tell the broker that you will do the deal if the dealer knocks $xx amount off the price (i.e. $3k).
LMAO ur a funny cat
I can think of a few reasons:
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Some of these cars can be incredibly complex. We had cars with 16 way power seats, massage, heated, fan cooled, adaptive (so that when you turn, they will inflate on one side to hold you in)… We had cars with 24 SPARK PLUGS. Even our base car, had SAM units all over the car (that could tell the driver when a light burned out) Our flagship sedan had 22 or so computers to control everything. Equivalent of a super complex excel model, more can go wrong.
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The german lines are innovators. If you googled you’d find out what brand I worked at but our brand was the first to put an airbag in a car, first abs brakes, first to crash test, first to use crumple zones… and in 1886, we built the world’s first car. When you are introducing new technology in low volumes, problems can arise.
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Last reason I can think of, and rarely mentioned is these cars are much heavier than a normal car. Brakes/tires and all wearable items you can think of are replaced more often. More heat and stress.
I researched Porsche quite a bit, since I thought about getting one. I’ve read stories of IMS failures in the 996/997/boxster/cayman all the way up to 2009 until they started to use direct injection.Then after that I read about direct injection pump failures (though at a much lower rate than BMW 3.0L twin turbos). I read how to change the transmission fluid on a cayenne… 5 page procedure which required temperature probes and a ton of steps compared to any car I’ve seen. Complex procedures cost money, and won’t get done.
And as any topic, there are people who swear by them, saying they have been perfect for 200k miles… If they were all like that, I don’t think the market would depreciate them that hard.
I plan to get a nice german luxury car though despite all that. (gotta see how the next few years work out, considering a mba). If you want luxury and want reliabilty, gotta go with Lexus or Acura. I can’t explain why their reliability is better but you can see it in the resale values.
I’m thinking of some Asian or American made car. I can’t justify the maintenance costs for German cars. While the Cayenne I found costs $16k for an 04 wtih 80k miles; an oil change will be $150+ and labor rates will be a 2-3x multiple of an American/Asian made labor rate.
I learned how to work on cars back when I had a Caprice which had a huge open engine bay. Now that the engines are crammed into the frame; it’s a little harder for me. Hyundia/Kia is starting to catch my eye. Basic no frills with a good warranty.
As much as I want sexy performance luxury, I have to realize that I do live in Harlem on a not so great block where most folks don’t take care when parking. My Ford bumper shows it.
Go with an Acura. You won’t regret it.
Today I learned that it is literally illegal in most states for car manufacturers to revoke a franchise unless said dealership is clearly breaking the law. Kind of makes sense that all dealerships are terrible businesses that exist solely to rip you off. I hope they die a quick death, however unlikely that may be. I want to go to one Carmart and have my pick of any car brand on the same lot.
I would disagree with this.
Negotiate the best price you can, knowing that you’ll finance the car through them. If they think they can make money by sticking you with an 18% interest rate through their in-house financing, they’ll come down on the price.
Then you can pay the entire loan on the first payment. (Make sure there’s no prepayment penalty.)
^ I somewhat agree with that, if there isn’t a prepayment penalty. I still think you’ve got more hammer if you’re paying cash though. Walking in with a draft for your price means you’re ready to do business, and they’ll be really relucant to let you walk with cash in your hands.