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What Car Dealers know
that you dont! Read on!! |
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Topics covered on this page! |
The Secrets of the Car Business! |
| What's my car really worth? | How to get the most money for your trade!!! |
| Windshield repair example click here | |
| How much profit do they really make? | |
| Paint-less dent repair including hail damage Exp | |
| What is "Wholesale"? | |
| What is "Up-side down" mean and can I avoid it! | Interior repair Example |
| Which cars can you get the best deal on? | |
| What is CSI and is it important to Dealers | Bumper
repair Example Click here for bumper repair for OKC area |
| Should you finance through the Dealer? | |
| Paint
touch up Example Click here for touch up for OKC area |
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| What is Special Financing? | |
| Should you apply at more than one place? | Re-dying sun-faded carpet Example |
| Should you buy or lease? | Mobile detailing |
| What is Buy here Pay here? | |
| Should you buy new or used? | Adding graphics or striping Example |
| Used Car Professionals | |
| Mobile oil changes and tire rotation or balancing | |
| New Car professionals | |
| Auto Dealers with High CSI Ratings (Coming soon) | |
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Mobile Reconditioning (get top dollar from your trade) or just make it look like new! |
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The value of a car is sometimes hard
to determine. When you take a vehicle in and are getting it appraised on your new one, here are the steps that the manger will do to place a value on it. 1. Walk around the vehicle thoroughly checking for paint work and possible previous collision damage. If a vehicle has had paint work done on it, in most cases it depreciates its' value. He then looks to see what all reconditioning it will need to both the outside and inside. 2. Next he will drive the vehicle to check the ride and drive, listening for any motor or body noise. 3. Next he will raise the hood to see if there is any oil leaks that are apparent. 4. Next he will figure out how much money he will need to spend on it to get it ready for the lot. 5. Next, he will consult several different value guides. Usually "black book" which is a wholesale guide based on what cars do through the auto auctions, and then sometimes he also will check a few previous auction guides to see what a comparable car is bringing at the auction. 6. Sometimes, they will make several calls to either other dealers or wholesalers that deal in this type of vehicle also and get their opinion. If this is not a vehicle he is comfortable with keeping for their lot, he will get an "out-side bid". This process is very important to the appraiser for if he bids it wrong, 2 things can happen. He either causes the new car deal to not happen (not giving enough for trade, or he does trade for it and finds out he gave to much. now its his responsibility to get rid of it. This is a very tough position to be in. He may not find out he gave to much until it sits on the lot for 60 days and he decides to get rid of it at the auction. Once there, he finds out that he thought a lot more of it than every one else is. He either takes the loss then, or takes it back to the lot and marks it down to what he has in it to move the vehicle to a retail customer. |
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What a vehicle is worth wholesale gets argued by almost everyone.
Used car managers will argue with other managers on the wholesale value of
a vehicle. Customers all have their own idea what wholesale is. reality
is, wholesale is what a person (dealer or customer) can liquidate a
vehicle for. Turn it into instant money. For an auto Dealer this
means one of 2 things. Either take it to the auction and see what other
dealers will bid on it, or call up another Dealer or
"Wholesaler" (an independent who makes their living by buying
from one Dealer and selling to another", and getting a "Buy
bid". There are guides to help determine this, but there is no set
price as to what a vehicle will bring. A "Buy Bid" is an opinion
of someone else based on their judgment as to what they think its worth. Regardless
of what a book or a guide says, its what it can be liquidated for is the
actual wholesale value of a vehicle. There is a huge difference between
what an average vehicle is worth, and a extra clean vehicle. Other factors
that help determine what a vehicle is worth are.. 1. How many of them are around. Are they plentiful or are they hard to come by? 2. How to the same vehicles do new? Are there big incentives to move the new ones placed by the manufacturer? 3. How about interest rate on similar vehicles new. ZERO interest rates are great on buying new, but because of this it also drives down the value of a similar used one. If you can't save enough money on a used one compared to new, then why get the used one? 4. Has this vehicle been in a wreck? A late model car that has had a collision and been repaired will not bring anywhere near what a like vehicle will, that has never been in an accident. A car that would normally be worth $20,000 wholesale, could be depreciated by as much as $2500. |
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If you asked 10 different people this question, you would get 10 different
answers and they would vary by a lot. Dealers use an "average"
on what they try to make. New cars are different than used cars, and
typically they do not make as much. In most cases, a car selling for
$10,000 will make as much as one selling for $18,000. Sometimes there are
several factors that determine what a Dealer has to make. for example on a
used vehicle.. 1. How long has this vehicle been sitting on the lot for sale? A "fresh unit" or one that has just been placed for sale on the lot, will normally have to bring more than one they have had for a while. Vehicles depreciate sitting on the lot, as well as sitting in your driveways. In most cases a vehicle, is not an investment and is not to be treated as such. They are to get you from point a to point b. Aside from your personal tastes or appeal of that vehicle. 2. How many of the same type of vehicles are on this Dealers lot. If the vehicle in question is hard to come by, then the Dealer will hold out for more profit. On the other hand, if they can replace it easily, then in most cases they will take a smaller profit margin. 3. Is this a program unit. if so, they can normally replace them at will there by accepting a smaller profit deal. There is a saying in the car business, you can replace a vehicle, but not a customer! 4. Is the unit a financeable vehicle. If it is an older piece, than in a lot of cases it is "cash and carry". Industry wide, used cars will average around $1,300 profit. In some areas, it is higher than that as much as $1,800 per vehicle. Remember it takes 2 things to make an average, a low and a high. |
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In
the car business, car people refer to "upside-down" as being
buried or hooked. This is a common occurrence and is cased by many
different things. Most people driving down the road are upside-down. When
you buy a new car and drive off the lot, it is now a used car, like new,
but still a used car. There's a saying "you can't drive a new
car". they are all used the moment you sign the paper work. Being
upside down didn't start being a factor until the mid 1980's. This is the
time that the car companies introduced the American public to 60 month
financing. Now it's not unusual to see 74 or even 82 month financing. But
today, interest is based on "simple rates" compared to what was
referred to as "rule of 78". In the old days (pre-90's)
financing was done using the rule of 78 which meant that each time you
made a payment, the majority of that payment was interest. Only on the
latter part of the term, did it even out as far as how much of the payment
went to interest and how much went to principle. Now most financing is
done based on simple interest. The reason most people are upside down is
very simple. The average customer does not want to put much down payment
and they want the lowest payment thy can get. To do this, Dealers get the
finance companies to stretch out the term as far as they can. In so doing,
it takes a long time to get the finance balance paid down. The average
vehicle is going to depreciate faster than you can make the payments.
Example, if you buy a car for $15,000 and place it on 60 months with
nothing down, you will be hooked for a minimum of 24 months. On the other
hand, you put 10% down, finance it on 48 months, and you are about even in
12 months. |
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Some of the best deals on a Dealer's lot may be a vehicle they have
had in stock for a good while. Most Dealers are on a 60 to 90 day turn. What
this means is if that vehicle is not sold 60 to 90 days after being traded
for, they have to dispose of it either through an Auto Auction, or through
an independent Auto Dealer. Once it gets to within a few weeks of
"knocking it in the head", or forced disposal, they will put
specials on it, or pay a salesman a bonus to sell it. If you happen to
be looking at an "old unit", they will do almost anything to get
it sold. they would rather place a customer in that vehicle at a loss
than take it to the auction and take a loss on it there. Keeping the
vehicles turned before they get to old on a Dealers lot is one of the Used
Car Managers biggest problems. Many Used car Managers have been fired for
having to many "old age units" on their lot. On the other
hand when they take it to the auction and it takes a substantial loss, the
Used Car Manager looks bad in the eyes of the Owner. It will sometimes make
him look like he paid to much when they originally bought it. Autos
Depreciate sitting on a lot as well as sitting in your driveway. The salesman will push it because he will get a Bonus for selling it in many cases. Keeping a lot with fresh inventory is one of the biggest challenges a Used Car Manager faces. Their position is usually the "Hot Seat" at a store. Be aware that in some cases a vehicle will become an "old unit" because it was never re-conditioned right to begin with. When you look at a vehicle you may buy, the last thing you want to see are problems. This is why you are there to begin with. You are either tired of what you have now, or what you have now is giving you problems. If the sales staff think a unit is bad, or not a good car, most will walk around that vehicle to show another that they fill good about. This is one of the reasons a vehicle can get old. It could also be a "Lemon". Some vehicles are just plain lemons. This is true in many other areas of purchasing things. Homes, machinery, appliances and others. Always ask for a "history report" on a vehicle you are considering purchasing. This will alert you to any major accidents the vehicle has been in. Sometimes the best deals come from vehicles that they just traded for. In this respect, they have nothing in them as far as time getting it ready for the lot and reconditioning. Be very aware on these cars that they have not been though service and should be thoroughly checked out. Do not be afraid to have a second opinion done on a vehicle you are considering to purchase. Have an independent Mechanic that you can trust, look it over to see what it might need. Don't think that just because this vehicle is new to you, it is new and free of defects. Used cars have used parts on them!. They are not new. If one is under factory warranty, you have a better car and a better chance of getting it fixed after you buy it in case it breaks down.. |
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What are certified autos? Most of the Manufacturers are now coming out
with ":Certified Autos". what you get here is a used car
that is normally just 2 years old or newer, and has been checked out by much
stricter methods. These vehicles will have a better warranty from them than
the other used cars do. In most cases they will qualify for the same rates
that new ones do (but not the Special Rates"). Dealers will do a certification
to them in service and when done, turn it into the manufacturer. This is how
they get the extended new car warranty. This process runs up the cost some
as the manufacturer does not place an extended warranty on those vehicles
free. These are usually safe bets on owning. Dealers can buy these
type of units from auto auctions through what's called "front line
ready". In these instances, the vehicles are already certified and
ready to be placed on the lot and ready to sell. some Dealers prefer
this type as they can spend less time getting it ready. Also on certified vehicles, they are placed on the manufacturers website under certified only. An example would be www.gmcertifed.com Only certified cars from Dealers are on this site. |
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The question of buying new or used can only be answered by you. It
all depends on what is your main motivating factor to buy a vehicle. There
are good reasons to buy new as well as buy used. One thing to keep in mind
on any purchases, keep the finance term down to as short a time as possible.
The shorter the term, the higher the payment, but also the quicker you can
re-trade the vehicle. Reasons to buy used or (pre-owned) 1. You can trade more often. If you purchase a used auto, you are financing much less and if you do the finance contract on a reasonable time period, you will have equity in a much shorter time. It is recommended to buy a warranty on any used car. This doesn't make your purchase as good as a new car, but a warranty will cover the most expensive things that could go wrong. 2. You payment will usually be less than a new car. If you buy a 2 year old car, and put it on 60 months, your payments will be substantially less than what the similar vehicle would be new. But at the same time, this would be comparable to financing a new one at 84 months. Example. financing $17,000 @60 months @8% is $344 per month while a similar new car financing $22,000 @ 84 months @ 7% is $332 per month. Interest rates will usually be a little higher on used than new. The biggest depreciation happens in the first 2 years of ownership of a vehicle. 3. Buying a vehicle that is only 1 year old (program auto) is a closer alterative to buying new. You can extend the warranty from the manufacturer to the same level as new. Reasons to buy new 1. New car smell. There is nothing that replaces the smell of new cars. 2. You can say it has never been owned by anyone other than you. Interest rates are normally cheaper on new compared to used. You know it has never had any problems since you are the only owner. 3. There are attractive lease packages on some new that make it actually cheaper to drive over the long run compared to a used one. 4. Peace of mind knowing that it is new and has warranty on it. |
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Should you lease or purchase? |
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| All Dealers want you to finance through them. This means in some cases using the same bank you normally would, but going through a different department. The reason financing is so important to the Dealers, they make money from doing the financing. Lets say the bank is charging them 8% for the cost of the loan, they then mark up the cost they charge you by several points. You may leave out paying 9% or even 10 % on your auto loan. This can make a substantial difference in your monthly payments. In many cases if you go in prepared and know how much you can get a loan for at your bank or Credit Union, they will meet or match it. In almost all cases, Dealers will have multiple lenders they can finance you through. Some banks only want the "cream of the crop" Customers who have a great credit history. Dealers run your credit through several credit bureau. These credit bureaus will give you a score taking in all things of your current and past history. This score is referred to as a Beacon. This score is vital as to which lenders they can get you financed through and what interest rate. The lower the score, the higher the rate in some cases. All manufacturers have a rating system also. They will charge you a higher rate if your score is not as good as others. Also most of the low or "0" interest rates are figured on shorter term financing with the better scores from the bureaus. This means a lot of you won't qualify for that low interest rate you see advertised. There is nothing wrong with financing through the Dealer, just be aware of what rate they are charging you. Sometimes it is worth paying a little higher rate for the convenience of having them take care of all the paper work. | |
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The fraise Special Financing was coined back in the late 80's. No one
knows where it came from, but was applied to customers whom had through
special conditions, acquired bad credit. Normally when a car deal is
rejected by the Lender( financial institution), it then makes it way to the
special Finance Department. The requirements that a "Special
Finance" company needs are usually different than conventional
financing. They will charge a substantially higher interest rate because
their customers are a much greater credit risk. In many cases a conventional
lender will ok a loan, if the customer increases their down
payment. This is called "buying credit". The Lender will
look at it in a different light because the potential customer has a lot to
loose if they fail to make payments on the loan. If you have to go through
special financing to get approved you will pay a higher interest rate. But
just because you went through this loan company at the time of purchase, it
does not mean you have to go through them again on your next purchase.
This is one way to re-establish your credit for future purchases.
After having a repossession or a bankruptcy, you will more than likely be
able to only purchase through "special Finance". However on the
bright side, if you make timely payments over the next 2 years, you should
be able to qualify for regular financing on your next purchase. If at
all possible, you should try getting approved through your credit union
first. In many cases they will loan you money, but not near as much
which in turn requires you to have a much greater down payment. Special Finance Companies will not loan as much money on a vehicle as a conventional company will. They also will not give you as long a term to pay it back. In many cases it reduces the availability of cars that are affordable. Interest rates can be as high as 21 % or greater depending on what state you are in. The higher the rate, the higher the payment. |
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CSI means Customer Satisfaction Index. It has become one of the most
important things to a car dealer. All Dealers are graded on CSI by their
manufacturers. A low rating can cause a Dealer a lot of headaches. Each time
you purchase a new vehicle, you will be schooled by the Dealer about getting
a form in the mail (survey). The manufacturer will mail one out and in
most cases the Dealer will mail one out. It will be full of questions about
how you were treated by the salesman, the finance department, and your
overall impression from the Dealer you bought from. There will be
questions about the vehicle you bought and the vehicle you traded in.
questions like, was the vehicle ready at time of delivery. Was it clean and
full of gas. Was there any defects you found wrong. Did the salesman explain
how to operate it and did they explain how to use the owner's manual. This has become so important to Dealers, that they hire CSI managers. These people do nothing but try to keep you happy with your new purchase. Dealers know that having a low CSI, can get them in trouble with their manufacturer. In some cases, to low of a CSI will keep a Dealer from qualifying to purchase an additional store. Keeping you happy as a customer is very important to a Dealer. The manufacturer will usually send several CSI surveys over a period of 2 years. These are follow ups. They want to know how your vehicle has done. It also lets them track you as far as when you may want to trade again. Customers who buy a vehicle and are more than pleased with it, will repurchase through the same manufacturer the next time. The way they look at it, if they get you in one once, they stand a good chance of getting you in your next one also. |
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| You should not apply anymore places than what you have to in order to purchase a vehicle. Having credit inquiries on your credit bureau can hurt your credit score. This score is used to determine your interest rate and has a lot to do with getting approved. Never apply for a loan unless you are going to purchase there. To many credit inquires can get you turned down for a loan. | |
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What is "Buy Here Pay Here" commonly know as "toting the note". |
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| Buy here pay here should be considered your last chance to purchase. Most buy here pay here lots will finance anyone regardless of their credit history. They usually get enough money up front for down payment to keep you in the car. In most cases, you have to make your payments directly at the store where you bought it. In a lot of cases, this is not building you any credit history. If you miss a payment, you stand the risk of the Dealer re-possessing the car. If so, there goes your down payment and everything you have paid on it. Most cars that are handled by these type of stores are vehicles that the bigger Dealers didn't want to keep. Beware of these cars and have them checked out thoroughly by a trusted mechanic. There are some people who will spend their lives buying from these same Dealers. In reality, their credit is good enough to purchase a vehicle through a regular Dealership. | |
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