Competition is fierce in the automotive industry, and it is particularly fierce in the online marketplace. There is a lot of information online both from the dealerships themselves and from third party websites. Unfortunately, this has led a lot of dealerships to use dirty tricks to take advantage of their customers and get a leg up on their competitors.
When comparing vehicles from different dealerships, it is important to know exactly what you are looking at to ensure an “apples to apples” comparison. From my time in the car business, I’ve seen a number of issues when my customers were comparing our vehicles with the competition.
Bait and Switch
It’s important to make sure the vehicles you are comparing are not misrepresented. Mistakes can happen, but it’s a little suspicious when mistakes seem to happen more frequently in the dealerships’ favor than the customers’ favor. For example, if you search Autotrader.com for a new Ford F-150 Lariat at any distance and sort by lowest price, you will see quite a few trucks priced around $30,000. These trucks even say Lariat in the title of the posting. However, if you go to the dealership websites or look at the original window stickers, these trucks are actually F-150 XLs.
The Lariat trim level is a very nice truck with leather seats and other comfort amenities. The XL is a basic, no frills work truck that is much less expensive.
The best way to make sure you are looking at the right vehicle is to look at a copy of the original window sticker which your dealership should be able to provide you with for any new vehicle and for many used vehicles that aren’t more than ten years old.
On a couple of occasions, I have seen dealerships advertise on a very specific vehicle at an incredible bargain price. Their advertisement may even have a VIN number for the only vehicle being sold at that price. When you show up to buy this vehicle, you find out that vehicle is no longer available, but the salesperson would love to sell you this similar vehicle for only a few thousand dollars more.
Advertising on a specific vehicle isn’t necessarily a red flag unless that price is well below market price. And some dealerships will actually sell a single vehicle at a loss in order to be able to truthfully advertise that price.
Taxes and Fees
If you are comparing pricing from different dealerships, make sure you are looking at comparable pricing. Most dealerships charge some kind of dealer fee. I wouldn’t be surprised to hear that there is a dealership out there somewhere that doesn’t charge a dealer fee, but I have yet to see one in our local market that doesn’t. In some cases, these fees can be thousands of dollars. More typically these fees are in the $400-$700 range in southern Indiana.
In Indiana, there is a small tire tax on new vehicles (currently $1.25) and a 7% sales tax on new and pre-owned vehicle purchases. If you are coming from out of state, you will be paying your local tax rate (based on where you are registering the vehicle), not the local tax rate of the dealership. There can also be a destination and delivery fee on new vehicles which the dealership may or may not include within their advertised price. On new Fords the amount of this fee can be found on the original window sticker from the manufacturer.
When you are looking at an advertised price, it is a safe bet that price is not going to include any taxes or fees. In order to do an “apples to apples” comparison, you should ask for a price that includes all taxes and fees, with a breakdown of the taxes, fees, and any discounts. The dealership will need your zip code to get this number for you, and may need your address to pull up all of the rebates you qualify for with a new vehicle. Most dealerships will know what you are asking for if you ask for an “out the door number” or the amount you would have to make out a check for to drive the vehicle off the lot. Things are sometimes trickier with new vehicles because of rebates as I explain below.
Even if you have gone in to the dealership to discuss pricing and they have given you a pricing sheet with payments, some dealerships do not show payments that include taxes or fees and do not include those taxes or fees on the pricing sheet. Make sure you get that information if you are planning to price shop for the best deal. I once had a customer that thought another dealership was beating our price by about $1000, but their price did not include taxes or fees. Our price was actually over $1000 lower than the competition.
Discounts and Rebates
While most dealerships advertise their pre-owned vehicles at a specific price without any discounts, things are trickier with new vehicles.
Most new vehicles have some kind of dealership discount taken off MSRP (Manufacturer’s Suggested Retail Price). Additionally, most new vehicles have some kind of rebate that comes from the manufacturer. Rare vehicles that are made in very limited quantities may not have any discount or rebate, and they may even be sold at a premium over MSRP. For example, we recently had a Ford F-150 Raptor at the dealership being sold at MSRP with no rebates from Ford. Even at MSRP, we received calls from interested customers all over the country because there were a lot of dealerships out there marking up their Raptors $20,000 to $30,0000 over MSRP. In contrast, some of our other F-150’s have several thousand dollars in discount and several thousand dollars in rebate off of MSRP.
On some new vehicles, the incentives can get tricky. Not all the incentives can be used together, and there are some rebates that only some customers will qualify for. For example, many Fords have a rebate for recent college graduates, military veterans, and members of the American Quarter Horse Association. When our dealership advertises rebates and discounts, we use the rebates that everyone in our region qualifies for. However, some dealerships advertise a sale price that includes every possible rebate in order to show the lowest price possible. They may also advertise the lowest price that uses particular financing options which you may not want to use if you are paying cash or trying to get the lowest payment.
Then when you get down to negotiating price, the salesperson shows you the real price which is higher. Some dealerships won’t even show you what the vehicle is going to cost you with all rebates, taxes, and fees until you are signing the paperwork in the finance office. They figure that by this time you are so emotionally invested in buying the vehicle that you won’t back out. And they may not even point these numbers out to you when you are signing the paperwork.
When you are comparing pricing on new vehicles, it is important to know which rebates are being used and whether or not you qualify for those rebates or any other rebates.
The rebates come from the manufacturer, not the dealership, so you will almost always be able to get the same rebates regardless of which dealership you purchase from. There are occasionally exceptions where a dealership has a limited number of rebate coupons that can be used on certain vehicles. And again, some dealerships advertise a sale price that includes these limited quantity rebates on all their vehicles even if they don’t have enough coupons to do this.
A lot of car buyers are payment sensitive. If the payments don’t fit in their budget, it doesn’t matter what the price is. Particularly when looking at advertised car payments, it’s important to read the fine print. Dealerships advertising payments want to be able to show payments that look fair and competitive. As a result, they usually advertise payments with a long financing term, a substantial down payment, a low rate that may not even be available, and without including taxes and fees.
When shopping by payment it is important to read the fine print.
Speaking of payments, some customers are focused on getting the lowest price without looking at the payments. Some dealerships will sell vehicles at a loss with the intention of making a nice profit overall by making their money on the back end in the Finance Office. They do this by tacking on financial products to the sale and charging you a higher interest rate than what the bank would charge you. And some dealerships will do this without your knowledge or consent and won’t point any of this out when you are signing your purchase agreement. If you have ever been to a dealership where the price is higher after you tell them you are paying cash or have outside financing, this is the reason why.
If you are trading your old vehicle when you make your vehicle purchase, there are some games that dealerships can play with your trade value. Because some buyers are very sensitive to getting the highest value for their trade, even to the point of ignoring what the full deal looks like, there are some dealerships that hold back the discounts on the vehicle they are selling in order show their customers more for their trade than what it is actually worth. If you are shopping at a dealership that does this, you may notice that they change the value of your trade depending on which vehicle you are looking at. This is why some of the vehicle shopping guides out there suggest hiding your trade till after you see numbers on their vehicle.
And if you aren’t trading a vehicle, a dealership that does this may still try to get you to pay the inflated price for their vehicle.
Personally, I prefer to deal with a transparent dealership that is going to show me a fair price for my trade and a fair price for their vehicle. A great way to find out if your dealership is being transparent with their trade value is to ask if they would buy your trade at that price even if you don’t buy their vehicle. There are some dishonest salespeople that will lie in order to bluff you, but in my experience most salespeople will give you an honest answer to this question. I know because when I have a customer that tells me another dealership is offering $2000 or $3000 more for their trade, I ask the customer to ask the other dealership if they will buy the vehicle outright at that price, and it’s rare for the other dealership to say yes when the trade value is more than a couple hundred dollars higher than ours. In fact, it only happened once with one of my customers in the last two years, and we were able to get the customer a better deal by selling him our vehicle while he sold his vehicle to the other dealership.
There is an issue I didn’t find out about until working at the dealership for about six months. I’ve had quite a few customers looking at pre-owned F-150’s comparing our pricing with vehicles on third party sites and other local dealers. This was primarily an issue with trucks that were two or three years old with 30,000 to 40,000 miles. And they noticed that our trucks were priced about two thousand dollars more than the competition. However, there was a very good reason for the price difference. They were comparing our trucks which had only been owned in the United States with trucks that had been originally purchased in Canada.
We avoid stocking Canadian vehicles on our lot, but if a customer wants one we can get one for them with the discounted price. A lot of local dealerships have these vehicles on their lot.
Because of differences in currency and pricing of vehicles in the United States and Canada, there are frequently opportunities to make money by shipping Canadian vehicles to the United States. Most of these vehicles are manufactured in the same factories that US vehicles are built in. So it may look like a great deal. However, there are two issues.
Many manufacturers responded to this flow of vehicles into the US market by refusing to perform warranty work in a market other than where the vehicle was originally purchased. So if you purchase a Canadian vehicle and you live in the US, you may find yourself effectively without a manufacturer’s warranty.
On top of that, a lot of Canadian vehicles have issues with corrosion even after just 2 or 3 years. With the colder weather in Canada, it shouldn’t be a surprise that some places in Canada are going to have more salt on the roads than in most of the continental United States.
A lot of these vehicles coming to the United States are trucks, but there are other vehicles coming here as well, and it is an important issue to be aware of. The easiest way to find out if you are looking at a Canadian vehicle is to look at the CarFax or AutoCheck to see where it was first registered. On F-150’s there is also usually a Canadian maple leaf in the door jam near the sticker that has the VIN number, unless someone has removed the sticker. You can usually get the CarFax or AutoCheck from the dealership’s website, or you can ask for it at the dealership.
If you are tired of all the games that other dealerships play, give me a call at 812-331-2200 and ask for Robert Kobey.