Shop Right: Bring Your Own Car Financing

January 23, 2010
Although I have written about the sales process before, it's always a good idea to recap what you can expect when you get to a dealership and what you can do about it.


As we've noted, when you get to the dealership, unless you have a specific appointment, you can expect to be greeted by at least one or possibly more salespeople who are just waiting for your business, especially this year as the car business is just beginning to come out of its doldrums (some pundits are insisting that this could be the year the slump breaks, based on many factors, while others are hedging their bets, thinking that there's another shoe just waiting to drop that shoe could be in the form of creeping gas prices, so who knows what is known is that dealerships are still hungry for business).


You have to remember that you should be in the driver's seat, so to speak, at all times because the salesperson wants to assume the dominant position and get you into a new or pre-owned car as quickly as possible. Indeed, there's nothing a car salesperson delights in more than in a spot where a customer comes in; finds a car; finances, and drives off in the new vehicle. This may take some work to happen, but it is also the kind of deal where the salesperson makes the most money.


Let's be clear here who the salespeople are in the dealership, before we go much further. Salespeople include:


  • The salesperson
  • The closer or sales manager
  • The business manager
  • The real sales manager
  • The car service advisors


Each one of these people is, in reality, a salesman because they all work on commission or on bonus so they have a vested interested in not only turning a sales today, but turning as many sales as possible. The service advisory is the type of salesperson who, because most folks aren't mechanically knowledgeable, still has a significant advantage in the dealership's sales picture. Each service advisory must sell a certain amount of business per customer, whether the customer's car actually needs it or not, which is why the person who comes in for an oil and lube special and safety check will likely find the vehicle not only needs four tires, but also may need new brakes, struts, shocks, wiper blades and a refill of washer fluid.


We may be putting it a little tongue-in-cheek here, but we are actually being very serious also. (This is a good place to disclose how we know this: we have spent more than half-a-decade in retail car sales and have also worked with the backshop or service department and know how they do business. This is based on first-hand observation as are all our sales advice stories.)


With that said, the other day we discussed how to handle yourself when you arrive at the dealership. We advocated:


  • Ensuring that you did your homework first

  • Ensuring that you take control and maintain control of the sales process

  • Making the salesperson do his or her job even if it involved showing you five or six cars

  • Making sure that the vehicle was the one you wanted

  • Making sure that the specially priced vehicle was actually on the lot (in many cases, that vehicle has actually been sold, but the ad remains on the website or in the paper and people come in specifically for that car. This is where many upsales incidents occur, where people are sold more car than they want or need)

  • Ensuring that, if there was a deal reached, that a minimum deposit be used as most dealerships will demand a credit card or large check to hold the vehicle. A $100 deposit should be able to hold the vehicle, especially if you are going to finance through the dealership

  • Obtaining your own line of credit before you get to the dealership or, at least, talking with your bank or credit union about a new-car or used-car loan before you talk with the dealership's business manager, who is little more than a glorified salesperson with a manager's title


Let's pickup our narrative here with the post-deal handshake. Let's say you have an agreement on the table that you've held your ground and received an incredible discount as part of your negotiations, simply because you refused to blink first it is true that the first person who blinks or speaks in a negotiation usually ends up paying more (we knew one salesman who presented a deal to a customer and then just sat stone-faced for more than 30 minutes while the customers moved around and became anxious and they blinked first and the salesman won the deal). You have to be the one who holds your ground in any deal.


So, you have the deal you want and, believe it or not, you receive close to the amount of trade-in value that you need, so you're a happy camper (the dealership believes it will be the bigger happy camper when you are introduced to the business manager,who is there to actually sell you things that you likely may not want or need, and you go through the ritual of signing the papers).


With the exception of the final negotiations on your deal, where you received the price you wanted and the trade you needed, this is, perhaps, the most important step for you, in the dealership's opinion. It is where a great deal of profit is generated because the dealership assumes that because they have given you the deal you wanted and it also assumes that you want the car very badly, that they will not only be your source of finance for the deal, but that you will also buy other items such as body protection, wheel protection, enhanced interior protection, as well as an extended warranty (this makes very little sense unless you are buying a certified pre-owned vehicle as most new-car warranties are now at least four years so unless you can negotiate a warranty that kicks in when the factory warranty expires unlikely at best then you're paying for several years of warranty that you don't need; a certified pre-owned vehicle, on the other hand, gives you a long warranty extension on most of the powertrain up to about 100,000 miles, and it gives you one or two years of full bumper-to-bumper coverage over and above anything that might still be on the vehicle).


Your strategy in the business office is to be nice, but firmly decline their offer to find you financing because you have already arranged your own. All you need from the dealership is the signed purchase and sales agreement and any other pertinent new-car information, such as the original CO document (certificate of ownership, the document that is executed when you put the car on the road and is returned to the manufacturer so the dealer can get any money back). If the dealership refuses to provide the information and threatens to withhold your deposit unless you take their financing, it's really no big deal because it's only $100, rather than $1,000 that may be on your charge card. This is why we advocate never giving the dealership your credit card or even admitting you have one. You can likely meet or beat the dealership's rate at your own bank.


If you have arranged your own financing, you will find the first thing the business manager will do is try to beat the rate you get. You can let him or her try, but, remember that you already have financing arranged so you are in the driver's seat. If, at any point, they become uppity and start to try to browbeat you it has been known to happen, although it will be very subtle just smile and sit there and if it becomes really obnoxious, then just put your coat on and tell the business manager to have a nice day. At that point, it might be a good strategy to thank the salesman and sales managers for all their hard work, but inform them it's not going to work, and then just leave.


You will receive many phone calls in the next few hours or days. Why, you may even receive a phone call from the general manager or general sales manager or the owner's executive assistant, all wondering why you walked away from such a great deal. Be honest with them and tell them that you had arranged your own financing and didn't need the dealership's help, but that the business manager had soured things for you. Don't be afraid to pull any punches and don't be afraid, by the way, to take your deal (hopefully you did get a copy of the worksheet or purchase and sales agreement) down the street to a competing dealer where you can get the deal you had arranged.


You still are in the driver's seat, here, and hold all the cards because the original dealership wants to move the car and it may even drop the price a bit if you will come back, but, stick to your guns and use your own finance source. One thing we do urge in any finance package, is gap protection. Because of the way folks have rolled one car loan into a second or third as they have traded up over three or five years, it's likely that if your new car is stolen or totaled you will only receive way you will be able to fully pay off your loans because this insurance covers any gap between what you ultimately owe and your financial institution. It makes sense.


We'll leave the car sales process here for a bit and when we come back we'll take you through the final phase.

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