Additionally, a certified pre-owned model is typically a better bet than an extended service agreement (because it’s backed by the manufacturer’s name. This list is designed to help you save money by not being ripped off by the little tricks that dealers use to maximize their profit and your loss. Don’t be fooled by the variety of payment options and add-on services they offer. 1. service warranty, GAP insurance). Get your answers by asking now. Sometimes a salesman or sales manager will say ‘The lender is requiring 20% down,” or they might say “You’re going to have to pay your taxes in cash. How many cars would you need to sell at $125 a pop to make a decent living? Download full tilt poker and get your games started within minutes with our through pokerworks and make a deposit before march 31st, and you’ll score a free status level, 7-day rolling average, 30-day rolling average, 100-day poker festivals that give players the chance to win some bigger-than-life cash prizes. BB & T will reply with terms (24/36/48/60/72 months), maximum amount financed, stip’s (proof of income, proof or residency, references, etc), and what’s called a “buy rate.” The “buy rate” is the interest rate the lender has approved for the loan- let’s use 7.9%. The profit amount is also different among dealers. If you’re buying a $30,000 car and make a 10% down payment, the down payment would be $3,000 at the time of sale. The immediate profit comes from what is called the ACV (actual cash value). The theory is once the “bump sticker” is negotiated away, then the customer will feel that he got a pretty substantial discount, when- in fact- he’s simply paid full MSRP for the car: not a very good deal. plus a 3 yr./36,000 mi. The bank will finance the car, but they will not finance any taxes or fees.” This is a lie. Before you agree to adding on the down payment side of things...back off of the deal a little bit. Let’s say the car “books out” for $13,125 (this is 100%), and the potential buyer has great credit. No, the down payment usually covers the cost of the car...the rest is profit. The other means the dealer will make a profit is when he sells your trade in. Whats a better buy a 1998 Dakota sport with 105k miles or 2003 ford ranger xlt with 151k miles? Never commit to a firm price you can’t live with. For example: if an educated customer will only pay a certain percentage over invoice, then that percentage is calculated by the “invoice” price before any “hold-back” or advertising is deducted. A “bump sticker” is legitimate-looking sticker that the dealer places next to the manufacturer’s window sticker with a higher priced MSRP than the actual MSRP. At some point in our lives, we all have to buy a car. Example: let’s say the sales manager submits the numbers to a prime lender- we’ll use BB & T- for approval. The sales price for a lease is called the adjisted gross cap cost. If you know your credit rating is higher than you’re quoted hit back, hard. If the dealer can get you to negotiate a monthly payment rather than the purchase price of the car, it's easy to add in — or “pack” — extras and make you overpay. Now, here’s where many factors come is based on the potential buyers situation. And on car sales – I’ve always found that you go to someone that you can trust ( I know that’s an oxymoron with car salesman but everyone should know at least one or two car salesmen) – and pay a reasonable amount because they have to eat too – and you won’t get a lemon. That means the rate you’ve earned is 7.9%, but the dealer can contract you at 9.9% and the bank will pay the dealer the overage from the rate. 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New and Used cars are “packed.” This is a number that is immediately added to the car (in addition to the already existing mark-up). But typically, if a customer is satisfied with their payment, and they don’t have a significant amount of negative equity, then the bank should have no problem lending money to a well qualified buyer. When you can borrow the money from the bank at 3% and charge your clients 4%, you make money on the spread of the loan too. This little gem is another reason car dealers get a bad rap. Extended warranties are typically backed by the private dealer with a lot less public reputation at stake). Well, here’s where the finance manager can steal from you. Scary Car Salesman Earnings. This is the biggest farce of them all. We end up paying more this way. This was NOT a good deal (what do you think? An example would be, if you had $2,200 down payment saved and you wanted to buy a $14,000 car. This puts LOTS of cash in their pockets. With high scores, banks will go off retail which is around or little lower than what the vehicle is selling for. This 2% difference is where the dealer makes their money when they arrange the financing for you. The more experienced and talented the salesperson is, the more money they can make. The bank will finance the car, but they will not finance any taxes or fees.” This is a lie. Sometimes a salesman or sales manager will say ‘The lender is requiring 20% down,” or they might say “You’re going to have to pay your taxes in cash. Half the time, I've found that car salesman limit their own income by being overly knowledgeable (usually about credit, financing, down payment,etc.) Trust me, I wish the markup was as much as you think it is, I’d be making a hell of a lot more money than I am. It’s not uncommon for dealers to get you financing at one rate and then charge you a full percentage point higher. In this case, it may be 7%. Still have questions? 1) Making an affordable payment is relatable and gets your mind off of the actual price. Dealerships often act as brokers for car loans or have associated financing units. This is a dollar amount the dealer says goes to pay for the process of handling your paperwork, tag work, title work, tax work, loaner car, etc. Of course – do some research beforehand too. Remember that. Most car salespeople are paid 25% of the front end gross profit on a car deal, and the average car salesman averages $262/ unit. “If you’re focused on payment, they will stretch the term as far as possible to get you a ‘payment’ you’re happy with, even though you’ve overpaid on the car,” says Simon. Take your down payment amount and divide it by the vehicle’s purchase price. The sales price for a lease is called the adjisted gross cap cost. $20k for a used 2013 Crosstrek with 69,000 miles on it--including taxes, fees, etc. A down payment is seen as a percentage of the car’s purchase price. Additionally, you’ll need to pay a deductible (on top of the $1400 dollars you just paid for the warranty) each time you try and use the warranty. This is a devious little trick! The difference between the dealer cost (invoice) and MSRP is typically 5-10%. BUT>>>>>Banks will only finance a certain percentage over a car's loan value, which makes room for profit and taxes. I already issued a stop payment on my down payment and I'm calling the dealership the first thing in the morning to tell them it's off. It’s all a joke and educationally insulting. “They also make money when you finance, as much as $3,000 in some cases. The mark up for this product is typically mandated by the state you live in, but you can expect to pay twice its original value. Simple example: your trade is bought from the dealer for $10,000. Obviously, none of these people know what they're talking about. Tough business. Join Yahoo Answers and get 100 points today. ? I've sold cars for several years now and NO, car salesman do not get bonuses for getting a down payment. With No Down Payment. That's the minimum the dealership will pay you when a car deal makes no money. This is the most obvious of ways a car dealer makes a profit. While it may feel nice to “stick it to the man” and not allow the dealership to run your credit, you could use the dealer’s desire to make money … You can see how car financing can be a huge profit generator for any dealership. It’s a valid question, but IMO they’re asking far too early in the process. If you don't, you're at risk of being fired. A car salesman without a customer on the lot is like a basketball player without a court. Your insurance company will only pay ACV for your loss, but GAP insurance picks up the “negative equity” you have remaining on your loan. For example, a car that a dealer pays $30,000 could generate a profit of around three-thousand dollars. You can sign in to vote the answer. Whether it be brand new or second hand, we usually end up going through a dealer. Be sure to give other tips for saving on a new car in the comments. Whatever this number is Minus the invoice price will be your estimated gross profit. Most salesman will get 25 to 30 percent of the profit with a minimum vommission for low profit deals being between $100 and $300. Banks will loan a certain percentage of the cars loan value based on the customer’s credit worthiness. Next time you buy a car and finance with one of the dealerships banks ask the finance manager to see the call back from the bank and compare that rate with the interest rate he’s trying to sign you up for. This is where all the legal forms are signed, etc. There is no limit to what a car salesman can make on this kind of pay plan. 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