“Any new car is a bad deal…”
In the excerpt below, Retirement Insider Editor Bob Irish interviews Mark’s friend, Tony Martorano. He’s a 35-year veteran of the auto industry. And he knows all the ways unwitting car buyers get bilked.
Here are two quick ways you can avoid getting taken the next time you shop for a car…
Bob Irish: Take me inside the dealership. How does the salesman size up a customer?
Tony Martorano: Customers fall into three basic categories: the discount buyer, the trade buyer, and the payment buyer.
The discount buyer tells the salesman, “I don’t like the price of the car.” He’s focused on getting the lowest possible price.
The trade buyer says, “I think my trade-in’s worth more than what you’re offering me.” He wants as much money as he can get for his trade-in. What he’s paying for the car is secondary.
Then, there’s the payment buyer. He says, “Listen, I don’t care what you’re selling the car for. I need my payments to be $400 per month.” The payment buyer is the category most car customers fall into—and it’s the easiest category for dealers to make a profit on. When a customer is focused on the amount of his monthly payment, the dealer can stretch out the length of the loan and keep the car at full list price.
You want to be a discount buyer, always.
Bob: What other tricks do dealers have up their sleeves?
Tony: Dealer add-ons. I’m talking about things like door moldings and pinstriping. And the markups can be outrageous. “Paint protection,” for example, may be listed on the window sticker for $699. But it probably costs the dealer 35 bucks.
The exception is anything OEM (original equipment manufacturer) that’s been added. So, say you’re buying a new Honda, and the dealer’s added a spoiler manufactured by Honda… there wouldn’t be a lot of markup on it.
Another thing dealerships charge far too much for is to etch the car’s VIN number on all the windows. It’s a theft deterrent. (Thieves don’t want VIN numbers on the cars they steal.) And your insurance company might give you a discount for it. But instead of paying the dealer hundreds of dollars, you can buy a do-it-yourself etching kit for around $20. And many police departments do it for free.
Reeves’ Note: The “Wealth Stealers” essay series may be the most popular of all Wealth Builders Club components. It focuses on the six main threats to wealth we’ll all encounter in life.
The full interview above is located in Wealth Stealers essay No. 11: “Can You Buy a Car Without Getting Swindled?”