Buying a new car doesn’t have to be a confusing experience. Now you’ll be able to satisfy your desire for a new vehicle with the confidence in dealing with a complicated financial decision. And understanding what salespeople at a dealership are saying is a excellent place to start.
It sounds like they are speaking a foreign language. You might overhear one salesperson tell another, “I got the four square out and the customer had agreed to a price of $1,000 over invoice after spiffs, when suddenly he balked over the out-the-door price.”
Many businesses have their own jargon, and car dealers have been saying things like this so long that they don’t even realize they’re doing it. However, this is going to give you a leg up if you can compreheind what they are saying.
The following are five common dealership terms and laid out what they really mean. If you think you know what invoice price or GAP insurance are, are you confident enough to go toe-to-toe with a veteran salesperson with what you only think you know?
1. Invoice Price
What you’ll hear: “I can’t go below $500 over the invoice price.”
What it means: Most dealers are franchises, and as such, they’ve purchased every vehicle on the lot from the manufacturer at a discounted price. That discounted price is the so-called invoice price. You know that dealers can go below that price; just think of all the ads you’ve heard about vehicles for sale “below invoice.”
So how can the salesperson sell vehicles for less than they paid for them? The invoice price isn’t the price they paid any more than the window sticker price that you’re negotiating from. The invoice price is what the corporation wants dealers to pay for inventory, but many times its a lot less.
Sometimes there may be factory-to-dealer incentives, or the dealer may just have a particularly perswaisive purchasing manager.
2. Spiffs
What you’ll hear: “The corporation has a bunch of spiffs on your vehicle.”
What it means: The corporation is offering cash back, rebates, cut-rate financing or lease terms, or other incentives to get the salesperson to sell a particular type of vehicle.
There are two kinds of spiffs: cut-rate financing or cash rebates. The former is self-explanatory: its money the manufacturer gives back to you after you purchase the vehicle. However, the salesperson will want to include that funds back into the paperwork, so you don’t get a check, only the credit for the cash. Let’s say you’re buying a vehicle with an MSRP of $50,000, but with a $5,000 cash back rebate. With no negotiation, you’d pay only $45,000 on the car. This doesn’t come out of the dealership’s pocket, so you can still negotiate the price.
One other kind is a special loan or lease deal through the manufacturer’s financing arm. If you’re financing these can be a large money saver in the long term, if you have a squeaky clean credit report.
3. Four Square
What you’ll Hear: “Let’s work out your payments on the four square.”
What it means: A four square is a sheet of paper divided up into, four sections. Each section represent your current vehicle’s trade-in value, your down payment, your monthly payment and finally the total price of the vehicle. This is the dealer’s main negotiating tool to determine what you’ll ultimately pay for your vehicle.
The salesperson will focus on the monthly payment section, to show you how small your monthly payment will be. Just so that you know, the smaller the payment, the longer the term. It’s pretty tempting to consentrate on that figure. Don’t overlook the others, especially the final price. Even if the salesperson comes up with a monthly payment that will fit within your budget, if it’s on a vehicle that’s overpriced, you’re not getting a bargain.
4. GAP Insurance
What you’ll Hear: “Make certain you have GAP insurance before you leave.”
What it means: You just purchased a new vehicle for $45,000. On your way home from the dealer, you’re in a bad accident. The insurance adjuster comes out, evaluates your vehicle, and declares it a total loss. You then get a check for $38,000, and a statement saying that’s the car’s fair market value.
And you didn’t have GAP insurance. It’s a well-known fact of thumb that a vehicle’s depreciates 20 to 30 percent the moment you drive it off the dealer lot. However, that lower price is what we call the fair market value, and it’s what the insurance company is willing to pay to replace your vehicle in case of a total loss.
When the fair market value is lower than the purchase price, then you’re on the hook for the difference. You’ll wind up paying $5,000 on a car that’s a pile of rubble.
Here is where GAP insurance comes in. The “GAP” stands for Guaranteed Automobile Protection and what it does is fill in the gap between the fair market value of your vehicle and what you paid for it. When you’re getting a loan or leasing a new vehicle, GAP insurance is mostly mandatory. Even when it’s not, it’s worth the small price to cover the difference. You can contact your insurance company first, and inquire if you already have this coverage.
5. Out The Door
What You’ll Hear: “That is going to be an estra $2,500 out the door.”
What it means: When you’ve negotiated a great deal, gotten the options you want, and even gotten the interest rate you wanted, you’re done, right? Not completely. You may still have state taxes, licensing and titling to pay for, and together they can add up to a sum that you may not have expected. The purchase price, plus the taxes, license and title, is the out-the-door price package.
Let’s go back to our $45,000 vehicle. That’s the dealer price to you. Then there’s the cost of registering your vehicle with the state, usually a couple hundred bucks. Then there is a 6% sales tax, which can add several thousands to the price. Suddenly, your looking at a $48,000 price tag, and that extra money will be a surprise if you don’t budget for it.
Even though these are mandatory expenses, you still have some control over them. These prices are dependent on the purchase amount of the vehicle, Therefore getting a good price will not only lower your monthly payment, but your out-the-door costs.
This article is the intellectual property of Simmons BOSS CREATIONS. Any reuse of the contents must include the following attribution:
Marcus Simmons, ASE Certified
Simmons BOSS CREATIONS
Phone: (248) 461-6977
Email: ceo@simmonsbosscreations.com
http://www.simmonsbosscreations.com