Beware: If you are trading in your old car?

[card21doc]

[QUOTE=ZYAL8R;211319]This post is for card21doc.



I read with interest your response above and all the numbers associated with it the cost of doing business. As a person who has the luck (or curse) of purchasing a new vehicle a year (for personal and business) I feel like I know "how to deal" with or w/o a trade, but i have two ?'s for card21doc. I was told two weeks ago by my salesman that I may get a better deal if I finance through them. They agreed to meet the APR that I already had prior to entering the dealership, so we said yes. Then the finance manager tells us to wait at least until we made the first 4 payments to do any kind of refinance, which we are certainly going to do. Q#1 Why would he say to wait?

And secondly, the one thing that I didn't see you address was the infamous "Dealer Holdback". Everyone knows that the holdback amounts to $1000 to 1500 for the dealer at the end of the year, but how does this figure into your explanation of what it costs for the dealer for his overhead and commisions to be able to sustain his business? The numbers and percentages you quoted seem believable, but then I can't get past the fact that this holdback amounts to a large sum beyond what may/may not be made off the trade and the msrp.

Not trying to be disruptive, just curious.

The banks pay the dealership to finance with them. Sometimes dealers have a "no charge-back clause" meaning if the loan is kept for a certain period of time the bank will not reclaim the $$$ given the dealer. There is no harm/no foul if you are not paying more than you would at another bank.
A good example is a local credit union that we use. The interest rate for 60 months is 5.35%. That is also the rate we charge you. You haven't lost a dime, we probably got the loan cheaper than you could have gotten at a bank, and the credit union pays us 2% of the amount financed. It is a win-win-win situation.

As far as hold back is concerned, that is a payment paid to the dealer to help cover the interest of the dealer financing the car on his lot. Sometimes the dealer sells the car right away and makes money on the deal. Other times the car doesn't sell fast enough and the dealer loses on the deal. Hopefully the dealer can make a little on it or at least break even at year end.

Some dealers live on the holdback, but that is precarious at best.

[The_Blur]

Originally Posted by Barry626

I expect them too with no problem.
But to rip me off on a 09 for $14000-$20000 is not Cool!

It's not a ripoff! Go to the KBB website to look at the trade-in value of a Mazda 6. I did. It apparently doesn't retain value that well, and every buyer with a brain knows that they lose thousands of dollars in value coming off the lot. It's not even 2009 yet and you're trying to offload your 2009 Mazda. It just doesn't make much sense.

[ZYAL8R]

Originally Posted by card21doc

The banks pay the dealership to finance with them. Sometimes dealers have a "no charge-back clause" meaning if the loan is kept for a certain period of time the bank will not reclaim the $$$ given the dealer. There is no harm/no foul if you are not paying more than you would at another bank.
A good example is a local credit union that we use. The interest rate for 60 months is 5.35%. That is also the rate we charge you. You haven't lost a dime, we probably got the loan cheaper than you could have gotten at a bank, and the credit union pays us 2% of the amount financed. It is a win-win-win situation.

As far as hold back is concerned, that is a payment paid to the dealer to help cover the interest of the dealer financing the car on his lot. Sometimes the dealer sells the car right away and makes money on the deal. Other times the car doesn't sell fast enough and the dealer loses on the deal. Hopefully the dealer can make a little on it or at least break even at year end.

Some dealers live on the holdback, but that is precarious at best.

That explains the the "wait and bait" technique. We were perfectly happy with the financing we had prior to walking in, but they talked us into using "their financing" and by my math according to your math they will make a cool $800 on that option alone.

Then, on top of that the holdback. The holdback seems to be a huge moneymaker all on it's own. Albeit some of it may be needed to conduct business, if you couple that with the "wait and bait", then I feel like my dealer made more than enough on one sale from just little ole me. Being a businessman myself, I can appreciate the ins/outs of doing business, but I have a saying that I tell my clients. "I am in business to make money, just not off a few people all at once." Meaning, a little bit here and there but w/o trying to jack as many people as will let me.

[ZYAL8R]

Originally Posted by Mr_Draco

Barry have you actually sat down and done the math?

At $34,000 MSRP you lose 20% just by buying the car which is $6,800 that reduces it's worth to $27,200. Now as a general rule of thumb, dealers (this applies to used car salesman as well) will only offer you at most 75% of a cars worth, they are a business and they are in it to make money, not lose it. On your car, that means that the MOST you can EXPECT to get from a dealer is $20,400. Doesn't mean you won't find a dealer who will offer more but such a deal will be VERY rare. The most I've seen a salesman do is 80% of a cars worth (and fyi he went out of business 2 months ago in part to his practices such as this as well as the bad market) which on your car is $21,760. Anything above this your pretty much guaranteed to never get unless you sell the car yourself.

Can't believe how true your statement is, we just traded in our vehicle for $7500 and I just saw online a few mins. ago that the dealer has it listed for $10129. That's exactly 25% more than what they gave me for it plus their $129 doc. fee that they threw in the paperwork while we were signing papers.

[card21doc]

Originally Posted by The_Blur

It's not a ripoff! Go to the KBB website to look at the trade-in value of a Mazda 6. I did. It apparently doesn't retain value that well, and every buyer with a brain knows that they lose thousands of dollars in value coming off the lot. It's not even 2009 yet and you're trying to offload your 2009 Mazda. It just doesn't make much sense.

Sorry if I am posting to much . this will be the last for a while.

KBB and NADA books are old news by the time they are published, and are generally not that reliable.

Most dealers use Black Book, a publication only available to dealers, banks. etc. The info in the Black Book is only a week old. It tells us what a car was sold at in your area auction the week before. It is a more true picture of the worth of a car. It categorizes the cars as to rough, average, clean, and extra clean. There are adds and subtracts for equipment and miles. Once you categorize the trade in, it is simple to use. Most cars are average and very few cars are actually clean or extra clean. (Of course everyone feels that THEIR car is extra clean.)

Now on some cars you can throw away the book. If a car is extra rough, who are you going to sell it to? By the same token, the very few extra clean cars will bring more retail money, so you can pay more.

Generally, on most cars, you can have your car appraised at several dealers, and the price will probably not differ by much. It is simply a case of what is the market for that car in your area. There are specialty cars or rare cars that no one really knows the value for sure. Those cars boil down to an opinion, and can have a different value at every dealership.

A certain car can be worth more say in Michigan than in Florida. (Perhaps a 4x4 as an example.) With on-line sales it is possible to take advantage of that.

Another thing to think about:

Lets take a 2008 Chevy Silverado as an example. Lets say MSRP on that truck is $35000. However, with rebates and at Supplier price, that truck can be bought for $25000. Pretty good deal, right?

Now let's say you have to sell your truck 3 months later. Where does the depreciation start? $35000? No, it starts at $25000. That was the market for a brand new, never titled 2008 Silverado.

You sure wouldn't pay anywhere near $25000 for it, when you can get a brand new one with no miles for that.

Now, let's say that the credit market gets fluid, gas stays cheap, and full size trucks make a "comeback." It is feasible that under those conditions, you might actually sell your truck for more than you paid. With price raises to $38000 and fewer or no rebates, it will cost you more to buy that new Silverado now. Your used truck with a few miles on it might be attractive to somebody for $26000-$27000.

It all boils down to the current market conditions in your neck of the woods.

[zebra]

Originally Posted by card21doc

Sorry if I am posting to much.

not in the least... have you seen some of the people around here?

Originally Posted by card21doc

Now let's say you have to sell your truck 3 months later.

3 months! i think you probably shouldn't've bought it in the first place. (unless there's some unforeseeable extenuating circumstance) maybe it's just me, but when i buy a vehicle i plan on driving it for a long time, not just keep it til the next hot thing comes out

[card21doc]

Originally Posted by ZYAL8R

That explains the the "wait and bait" technique. We were perfectly happy with the financing we had prior to walking in, but they talked us into using "their financing" and by my math according to your math they will make a cool $800 on that option alone.

Then, on top of that the holdback. The holdback seems to be a huge moneymaker all on it's own. Albeit some of it may be needed to conduct business, if you couple that with the "wait and bait", then I feel like my dealer made more than enough on one sale from just little ole me. Being a businessman myself, I can appreciate the ins/outs of doing business, but I have a saying that I tell my clients. "I am in business to make money, just not off a few people all at once." Meaning, a little bit here and there but w/o trying to jack as many people as will let me.

OK, one more post. Keep in mind that the dealer is not selling $1000 tvs, etc. He is stocking million(s) $$$ in inventory, yet is expected to take $100-$500 over invoice. That is not a very good return on his investment. The bigger the dealer, the more millions $$$ he is stocking. On top of that he has to stock parts, pay for a building, maintain a service department, etc.

On the recent and current sales of GM employee for everyone and Supplier price for everyone, the vehicles are actually sold for well under invoice. The dealer is then reimbursed from the factory at 2% of wholesale -$150 (in the case of Supplier, GM employee is more.) That is $350 TOTAL "profit" including
holdback on a $25000 dealer cost car. The dealer really needs the finance income to stay afloat. Most of the time I can find a loan for less than you can find it, so it doesn't cost you anything, but it sure helps us pay our bills.

BTW, our dealership has several credit unions and banks that send us business that we cannot sell "indirect." They send us the business over their local dealers because they know we will not try to convert them to our financing. Most dealerships would bad mouth those institutions to get the financing themselves. We appreciate the business that they send us, and it's "hands off" on the financing.

Sorry I have been a windbag, but i enjoyed the conversation.

[card21doc]

Originally Posted by zebra

not in the least... have you seen some of the people around here?



3 months! i think you probably shouldn't've bought it in the first place. (unless there's some unforeseeable extenuating circumstance)

Yeah, I was talking about an unforseen "fire sale." Although some people actually trade 2 or 3 times a year. We had one guy like that. One time his wife told us "he doesn't drink, smoke gamble or chase women." Trading cars several times a year is his only vice, so I'm willing to put up with it." lol

[ZYAL8R]

Thanks card21doc for all the info. It's people like you that make us commoners understand a little bit about your profession. It has been interesting to say the least. I may not be happy about some of it, but it may the sting out of some things at least.

[USAFJeeper]

Card21doc, keep talking I have bought many cars over the years and always dread the salesman "going to talk to his boss" or the "finance" guy. Over the years thats where I have been shanghaied! Sometimes I would just beg to have them throw in window tinting and a full size spare so I can feel good about myself (03 Dodge Intrepid at 0% financing, I knew I wasn't going to get much of a deal there.)

My question is this. How do dealerships look at vehicles like mine that holds it value well, 04 Jeep Wrangler X, aftermarket tires and rims, jungle rack, 2 bikini tops. Bluebook shows it at 9-11K for trade in. Frankly, my wife told me I could only have one toy at a time, so I had to choose Camaro or Jeep. I chose Camaro and I am too lazy to sell it on my own without having the Camaro in the garage. The Jeep is paid off and in good condition - no body dings, no rust, no wrecks, low mileage. Thoughts?

[card21doc]

Originally Posted by USAFJeeper

Card21doc, keep talking I have bought many cars over the years and always dread the salesman "going to talk to his boss" or the "finance" guy. Over the years thats where I have been shanghaied! Sometimes I would just beg to have them throw in window tinting and a full size spare so I can feel good about myself (03 Dodge Intrepid at 0% financing, I knew I wasn't going to get much of a deal there.)

My question is this. How do dealerships look at vehicles like mine that holds it value well, 04 Jeep Wrangler X, aftermarket tires and rims, jungle rack, 2 bikini tops. Bluebook shows it at 9-11K for trade in. Frankly, my wife told me I could only have one toy at a time, so I had to choose Camaro or Jeep. I chose Camaro and I am too lazy to sell it on my own without having the Camaro in the garage. The Jeep is paid off and in good condition - no body dings, no rust, no wrecks, low mileage. Thoughts?

Need a little more info.

How many miles?
Does it have a hard top?
any other designations?
type of transmission?

I'm on my way to bed, but I'll get back with you tomorrow.

[Primus]

In my personal experience dealers won't give you credit for aftermarket upgrades. This may be a case of dealers just trying to pay the least for my trade-ins but that's what they've told me in the past.

[USAFJeeper]

Originally Posted by card21doc

Need a little more info.

How many miles?
Does it have a hard top?
any other designations?
type of transmission?

I'm on my way to bed, but I'll get back with you tomorrow.

34000 miles, ragtop (2 bikini tops as well), Just X as a designation. Standard tranny.

I added in a aftermarket radio with removeable face (Jeeps are pretty much open ) I also have lockable cargo boxes behind and on sides of the rear seat. American racing rims, 31 inch tires (only 6000 miles on tires - Toyo Open country ATs)

Thanks for your expertise!

[card21doc]

Originally Posted by USAFJeeper

34000 miles, ragtop (2 bikini tops as well), Just X as a designation. Standard tranny.

I added in a aftermarket radio with removeable face (Jeeps are pretty much open ) I also have lockable cargo boxes behind and on sides of the rear seat. American racing rims, 31 inch tires (only 6000 miles on tires - Toyo Open country ATs)

Thanks for your expertise!

BB calls it $8050 average and $10,000 clean. (This is for the Indianapolis area.) This is not taking into account the 2 tops or tires and wheels.

It would be easier to sell with a hardtop and ac.

I think if it looks really sharp (almost like new) you should get some credit for the tires and wheels. I'm guessing that wholesale against msrp on the Camaro you should be able to get anywhere from $9500 to $11,000 for it, depending on how much the dealer values your add ons. I am inclined to say closer to $10,000.

Try listing it on Auto Trader or Craig' List. Put a price on it of $13,900 and see what happens. You might be pleasantly surprised!