Do car dealers ever lose money on a deal?

TABLE OF CONTENTSDealing with Car DealersGuide to Dealing with Car Dealers1. The BasicsFurther ReadingWhat is a Dealer's "Back End" Profit?Why It's Important Dealers Sell Cars Quic

Do car dealers ever lose money on a deal?

TABLE OF CONTENTS

Dealing with Car DealersGuide to Dealing with Car Dealers

1. The BasicsFurther Reading

  1. What is a Dealer's "Back End" Profit?
  2. Why It's Important Dealers Sell Cars Quickly
  3. How Long do Cars Sit on a Dealer Lots?
  4. Four Characteristics of a Smart Car Buyer

Successful car shoppers tend to share four traits.

They take their time researching, don't show any emotion, have lots of patience, and are willing to walk away. If you can stick to these rules, you should have no problem controlling the interaction with car dealers.

The thing you need to know about dealers is that they all want to sell cars as quickly as possible - to reduce their financing costs and increase profits. There's always pressure to get the deal done as soon as possible.

What's surprising to many is that car dealers don't actually make much profit on the sale of a new car. In fact, many dealerships lose money on new car sales after factoring in fixed expenses such as rent, advertising, and labor costs.

The bulk of a dealer's profit is made in areas such as used car sales, service, and other "back end" products such as warranties and maintenance plans.


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2. Dealer Do's and Don'tsFurther Reading

  1. 4 Simple Tactics Every Car Buyer Must Use
  2. Never Tell a Dealer You're Paying Cash
  3. Never Give Cash Deposit Before Buying a Car
  4. Should You do a Dealer Trade?

Saving enough money to pay for a new car with cash is certainly more difficult than getting a loan, so people assume they should be rewarded for this achievement.

But that's not how car buying works. Dealers prefer buyers who finance because they can make a profit on the loan - therefore, you should never tell them you're paying cash.

You should aim to get pricing from at least 10 dealerships. Since each dealer is selling a commodity, you want to get them in a bidding war. If you live in a big city, sometimes the best prices are from dealers that are located about 30 to 50 miles outside the city where rent and overhead are much lower.

Every car dealership has monthly sales goals. If you time your purchase near the end of the month, you could take advantage of a dealer who just needs to sell one or two more vehicles to meet their quotas.


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3. Types of DealersFurther Reading

  1. How to Spot a High Pressure Dealership
  2. The 3 Types of Car Dealerships
  3. Is it Smart to Buy From a No-Haggle Dealership?
  4. How to Check a Car Dealer's Ratings and Reviews

When it comes to car buying, there's nothing worse than having to haggle with a high-pressure dealership.

These types of dealers breed a culture where lying is the norm and salesmen are expected to do whatever it takes to make the sale.

It's a good idea to check out online reviews of dealers. If they have a long string of consumer complaints, that's a good indication you're dealing with a high pressure dealer. It doesn't mean you can't get a good deal there, you just have to be very careful.

DealerRater
The largest car dealer review site. Over 500,000 ratings.
Yelp
Usually has a good number of reviews for local dealers. Worth checking out.


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4. Dealer Scams & TricksFurther Reading

  1. The 3 Main Ways Car Dealers Can Rip You Off
  2. Dealer Trick: The 4 Square Method
  3. The Bait and Switch Scam
  4. Why Special Sales Events Are Usually Ripoffs
  5. Dealer Advertising to Watch Out For
  6. Outrageous Dealer Scam: Switching Paperwork
  7. Car Rebate Scams and How to Avoid Them
  8. Beware of "Dealer Stickers"
  9. How to Spot a Fake Window Sticker
  10. Why Women and Minorities Need to be Careful

Believe it or not, 8 out of 10 car buyers don't know how to avoid being ripped-off.

Getting a good deal is not rocket science, but it does take research to figure out how to do it right. Most people are either lazy or uninformed and aren't willing to invest their time, even though they can save upwards of $5,000 on a typical deal.

Dealers have learned that most car shoppers focus on the price of the vehicle, so they're OK with small profits there. Where they really get you is with everything else that goes along with the purchase, such as the financing, your trade-in, and upsells such as paint protection, extended warranties, etc.

You need to be familiar with the common tricks such as the "4 Square Method", the bait and switch, fake window stickers, and worse. The best way to avoid most scams is to negotiate each aspect of your transaction seperately, and don't ever negotiate at the dealership. Use phone and email only.

Got a Question About This Article?XTABLE OF CONTENTSNew Cars
  1. The Basics
  2. Budgeting
  3. Choosing a Car
  4. Buying Options
  5. Negotiation
  6. Prices & Fees
  7. Incentives
  8. Leftovers & Demos
  9. Timing the Purchase
  10. Legal & PaperworkUsed Cars
  11. The Basics
  12. Research
  13. Negotiation
  14. Before You BuyLeasing
  15. The Basics
  16. Pros & Cons
  17. Calculate Lease
  18. Leasing Strategies
  19. Fees & Taxes
  20. Leasing ScamsFinancing
  21. The Basics
  22. Credit Score
  23. Credit Unions
  24. Banks & Dealers
  25. Bad Credit
  26. ScamsSell Your Car
  27. The Basics
  28. Sell it Yourself
  29. Dealer / Trade-InDealers
  30. The Basics
  31. Do's and Don'ts
  32. Types of Dealers
  33. Dealer ScamsInsurance
  34. The Basics
  35. Saving Money
  36. Types of CoverageWarranties
  37. The Basics
  38. Extended Warranties
  39. Other Add-Ons

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