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Car Dealer Tricks: Monthly Payments VS. Purchase Price - Part I


As the economic downturn continues to play havoc on a national scale, individuals are being forced to reduce expenses to simply stay afloat financially. A major monthly expense for many Americans is the cost to operate their primary vehicle. This can include car payments, maintenance costs, insurance, and fuel to keep up with a busy life.

Downsizing
In an effort to cut expenses, some car buyers are looking at trading in larger gas guzzling SUVs for mored fuel efficient vehicles. Others are getting rid of more expensive cars for lower priced ones in an effort to reduce their monthly payment.

It’s well and good to focus on your vehicle’s monthly payment in the privacy of your home. However, when you make it the main factor at the car dealership when trying to decide which car to buy, you’re falling for one of the major tricks that car dealers use to get more money out of customers than they want to pay.

Selling Price Versus Monthly Payments
When I was Internet Manager for a major car dealer, the customers who got the best deals almost always focused on the selling price of the car, and not monthly payments. Why? Let’s take the example of Bob, who is trading in a large SUV on a fuel efficient, basic sedan that he believes will meet both his downsized requirements and dwindling budget.

Bob tells his salesperson, Dan, that he has to get the monthly payment down to $300 a month from the current $475. This way, he says, he’ll be able to meet his other monthly obligations. Bob is disappointed that the best the dealership can do-- even after taking into account the trade value-- is $360 per month. Bob gets upset, he tells Dan that won’t make the deal at this price, that the payment had to be reduced to $300 or less, or he’ll take his business elsewhere.

A Tale of Two Stories
Bob was laying down the law: “Make the payment $300 per month or I walk out and you lose me as customer forever,” he insisted. Bob was unyielding, knew exactly what he wanted, and was ready to walk out if he didn’t get it. Sounds like a tough, decisive customer, right? It turns out Bob only thought he was in control of the situation.

Let’s switch sides and look at things from the salesperson’s perspective. From Dan’s side of the desk, he has Bob right where he wants him: 1) Bob is committed to getting this car, and 2) he is fixated on the monthly payment rather than the selling price and terms of the loan. This was the setup for the crucial question that was to follow. If Bob answers yes, Dan knows they not only have a deal, but they have a deal that could be classified in the industry as a “homerun” for the dealership.

And The Question Is…
After hearing Bob’s ultimatum, Dan looks down as if pondering the ramifications of the question. He quickly glances up, and staring Bob right in the eyes, asks: “If I can get your payment down to $300 per month, do we have a deal and you drive this car home today?”

Tomorrow: Bob’s answer, and why the dealership is about to make a ton of money on a deal that the customer assumes is too good to be true. (Hint: Bob is focused on monthly payments and not the selling price. Big mistake!)

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