Interesting conversation with dealer re: pricing

[Pancho Kornwallace]

I'd disagree. #2 is merely part of #1 and how it's structured. #3 is usually closely connected to #1, which is why it's best to not talk trade in unless and until you need to. And #4 has so many other factors that come from the F&I room....extended warranties, insurances, coatings and the like...and where you finance.

to me, it's #1: Service/communication. Right now, I'm abandoning my first dealer since they only contact me when I reach out to them. Meanwhile, two other dealers keep reaching out.

#2 Price, but this includes what are they going to do in the F&I room? A dealer will find a way to make their money. And if you don't know how, they gotcha.

These 4 elements are used by dealers as a "4 Square". They are very experienced at winning while making you think you "won" using 4 square.

1. The dealer wants you to focus on Price, so they can get you on terms. If you insist on $1000 off MSRP, a sneaky dealer can say "sure, you win, I lose, but only if you take their credit/downpayment terms" which will likely be higher than the 2.5% that I am getting.
2. I think that you need to bring up trade early. I am getting a different vehicle today (an AWD 2020 Escape) today and I got $3000 for my 11 year old Malibu (up from their first offer of $2500), PLUS $1800 in "bonus cash" for trade in ($4800 total). Vroom is offering me a much more generous $4000. However, there is a special deal because I am trading in a vehicle. I am coming out $800 ahead by mentioning the trade and then negotiating on the trade, not the new vehicle.

Sponsored

 

[Broncoak]

I'm not looking to file a suit, I'll just take my business elsewhere. But what they admitted to doing, if true, is illegal.

Thanks all for the replies. This was my first post, despite being a long-time lurker. Looking forward to being a Bronco owner.

Th

Item #1 is really the most important part, because a savvy buyer will control all other items.

Item 2 has no effect on the other items. It only matters for what the financed amount will be.

Item 3 is best avoided where possible. You can 100% guarantee you'll get screwed on a trade-in. The dealer always buys your vehicle for less money than you could otherwise sell it because they need to sell it (either at auction or at retail) for a profit. When you trade in a vehicle, you are accepting less money in exchange for convenience. I've had friends/family claim "what a great deal they gave me on my trade-in". Rest assured, every dollar above wholesale that you got on your trade-in was made up somewhere else on the purchase agreement. Higher finance charges, higher purchase price, True Coat®--something.

Item 4: Never buy a vehicle based on monthly payments. Every other financial item can be manipulated to make a monthly payment whatever you want. The two important items are your purchase price and cost of financing.

Here's my list for buyers:

1. Get your financing arranged. Paying cash? You're set. Getting a loan? Research where you can get the lowest APR based on your credit score. Credit unions are your friend. You will almost certainly get the lowest rates at a credit union. The only time you'll ever do better than a credit union is if the manufacturer is offering incentive financing, which is not the case for the Bronco.

Use your estimated purchase price and a loan calculator to determine your monthly payments based on financed amount (account for down payment, taxes, registration, etc.) and loan length. Pay attention to the amount of total interest you will pay over the life of the loan. Keep in mind that longer loan periods will have higher interest rates. Depending on the lender, the interest rate can jump dramatically above 60 or 72 months. Adjust your expectations based on what you can afford.

2. Agree on a sales price. Agree on a price that is for the purchase price of the car with only tax and license and government-required fees added. Here it helps to know what the dealer doc fee is, because you'll want to lower your offering price to account for any inflated amount of the doc fee.*

3. Skip any and every add-on the finance manager tries to throw at you. Most are worthless and all are over-priced.

4. Don't trade in a vehicle. If you do, use kbb.com or a similar web site to get an idea of just how much money you're handing the dealer. Then re-read #4 again. ?

*About dealer doc fees. These are not required by any state or local government. Neither does the government require they be fixed. A dealer will claim "By law, we have to charge each customer the same amount." That is a lie to keep you from trying to negotiate that fee. The only state laws I'm aware of are those that cap the doc fee, not allowing a dealer to charge more than a specific amount. (Thanks to those states!) That fee is what the dealer charges to enter your information and print out your paperwork from the computer. It pays the finance manager his income in addition to all the money he makes selling you window etching and True Coat®. I can live with a reasonable fee, but as a matter of practice, I avoid paying it. Keep in mind that dealers will double-down on the "we have to charge everyone the same price" mantra (which is not true--only government fees are fixed.). Some have even pointed me to a sign they printed up that quotes the state law that says a dealer doc fee is not a government fee (LOL). At that point, knowing that the finance manager doesn't want to get nothing to fill out paperwork, I just use change the tactic: "I don't care if you want to charge me the doc fee, as long as you take the money out of the price of the car." To close the deal, the sales price of the car goes down by the doc fee. Win-win. On paper, I paid the fee, but I had already negotiated the price I was willing to pay and got a price lower to account for the fee. Here's where it's important to pay attention to items 3 and 4. If you have a trade-in or get conned into buying worthless add-ons, those prices can magically and quietly change to build that doc fee back in. If you finance through the dealer, they can change the APR, throw in a "loan acquisition fee" or other things.

TL;DR: line up your financing, agree on a price for the vehicle only, don't purchase anything other than the vehicle, don't trade in, negotiate or back-out the doc fee.

Wow, masterclass on purchasing a vehicle. I'll plagiarize some of your ideas here when I make my purchase. Thanks!

 

[Apples]

These 4 elements are used by dealers as a "4 Square". They are very experienced at winning while making you think you "won" using 4 square.

1. The dealer wants you to focus on Price, so they can get you on terms. If you insist on $1000 off MSRP, a sneaky dealer can say "sure, you win, I lose, but only if you take their credit/downpayment terms" which will likely be higher than the 2.5% that I am getting.
2. I think that you need to bring up trade early. I am getting a different vehicle today (an AWD 2020 Escape) today and I got $3000 for my 11 year old Malibu (up from their first offer of $2500), PLUS $1800 in "bonus cash" for trade in ($4800 total). Vroom is offering me a much more generous $4000. However, there is a special deal because I am trading in a vehicle. I am coming out $800 ahead by mentioning the trade and then negotiating on the trade, not the new vehicle.

You warn against letting them walk you through "4 Square" and then immediately advocate letting them walk you through "4 Square".

Your first point is easy to spot and overcome. The second should only be brought up after you have a price agreement.

 

[MSPbronco]

Wow, masterclass on purchasing a vehicle. I'll plagiarize some of your ideas here when I make my purchase. Thanks!

Also, don't get too personal. You may think that they are making small chit-chat or taking genuine interest in who you are, but they are sizing up your bank account and what you can, and cannot, afford.

 

[Pancho Kornwallace]

Item #1 is really the most important part, because a savvy buyer will control all other items.

Item 2 has no effect on the other items. It only matters for what the financed amount will be.

Item 3 is best avoided where possible. You can 100% guarantee you'll get screwed on a trade-in. The dealer always buys your vehicle for less money than you could otherwise sell it because they need to sell it (either at auction or at retail) for a profit. When you trade in a vehicle, you are accepting less money in exchange for convenience. I've had friends/family claim "what a great deal they gave me on my trade-in". Rest assured, every dollar above wholesale that you got on your trade-in was made up somewhere else on the purchase agreement. Higher finance charges, higher purchase price, True Coat®--something.

Item 4: Never buy a vehicle based on monthly payments. Every other financial item can be manipulated to make a monthly payment whatever you want. The two important items are your purchase price and cost of financing.

Here's my list for buyers:

1. Get your financing arranged. Paying cash? You're set. Getting a loan? Research where you can get the lowest APR based on your credit score. Credit unions are your friend. You will almost certainly get the lowest rates at a credit union. The only time you'll ever do better than a credit union is if the manufacturer is offering incentive financing, which is not the case for the Bronco.

Use your estimated purchase price and a loan calculator to determine your monthly payments based on financed amount (account for down payment, taxes, registration, etc.) and loan length. Pay attention to the amount of total interest you will pay over the life of the loan. Keep in mind that longer loan periods will have higher interest rates. Depending on the lender, the interest rate can jump dramatically above 60 or 72 months. Adjust your expectations based on what you can afford.

2. Agree on a sales price. Agree on a price that is for the purchase price of the car with only tax and license and government-required fees added. Here it helps to know what the dealer doc fee is, because you'll want to lower your offering price to account for any inflated amount of the doc fee.*

3. Skip any and every add-on the finance manager tries to throw at you. Most are worthless and all are over-priced.

4. Don't trade in a vehicle. If you do, use kbb.com or a similar web site to get an idea of just how much money you're handing the dealer. Then re-read #4 again. ?

*About dealer doc fees. These are not required by any state or local government. Neither does the government require they be fixed. A dealer will claim "By law, we have to charge each customer the same amount." That is a lie to keep you from trying to negotiate that fee. The only state laws I'm aware of are those that cap the doc fee, not allowing a dealer to charge more than a specific amount. (Thanks to those states!) That fee is what the dealer charges to enter your information and print out your paperwork from the computer. It pays the finance manager his income in addition to all the money he makes selling you window etching and True Coat®. I can live with a reasonable fee, but as a matter of practice, I avoid paying it. Keep in mind that dealers will double-down on the "we have to charge everyone the same price" mantra (which is not true--only government fees are fixed.). Some have even pointed me to a sign they printed up that quotes the state law that says a dealer doc fee is not a government fee (LOL). At that point, knowing that the finance manager doesn't want to get nothing to fill out paperwork, I just use change the tactic: "I don't care if you want to charge me the doc fee, as long as you take the money out of the price of the car." To close the deal, the sales price of the car goes down by the doc fee. Win-win. On paper, I paid the fee, but I had already negotiated the price I was willing to pay and got a price lower to account for the fee. Here's where it's important to pay attention to items 3 and 4. If you have a trade-in or get conned into buying worthless add-ons, those prices can magically and quietly change to build that doc fee back in. If you finance through the dealer, they can change the APR, throw in a "loan acquisition fee" or other things.

TL;DR: line up your financing, agree on a price for the vehicle only, don't purchase anything other than the vehicle, don't trade in, negotiate or back-out the doc fee.

Really good thoughts.
But there are some qualifiers I would suggest.

#2: Downpayment. The reason why this is used is to get people a "monthly payment" that they are negotiating for. They can "win" and brag about their $299 payment, but not mention the downpayment.

#3: Trade In: This one is tricky because sometimes there is an a trade in offer bonus cash. I am getting a new Ford Escape AWD today. I got $800 more than VROOM (which gave me a really good price for my 11 year old Malibu) by taking the lower trade in but higher with the "cash on the hood" bonus for trade in:

Vroom: $4000 cash offer
Ford: $2500 trade in... but they upped it to $3000 after negotiation, PLUS I got $1800 in bonus cash for trading in.

I would say you should mention it, but be willing to sell on VROOM or Carvana too and get a quote from them for leverage.

#4: I have used a monthly payment as a negotiating element for leases, but I always say I want $0 down or "sign and drive" (bringing nothing to the dealer at all). It can work if the Dealer knows what they are doing to maximize discounts, etc. Make sure you are clear on how many miles you want per year and make sure they include taxes in the payment. Sometimes, there are back end incentives for the dealer to manipulate the numbers as you say, but if they hit the payment number that you are looking for, it should not matter to you.

After the negotiation, you can say that you are bringing a downpayment if you like.

 

[Headsong]

You warn against letting them walk you through "4 Square" and then immediately advocate letting them walk you through "4 Square".

Your first point is easy to spot and overcome. The second should only be brought up after you have a price agreement.

I'd add that they try to get the customer to focus on the payment quite often....and laugh at all the profit. I like your explanation....gotta watch ALL those squares.

 

[Used2jeep]

Other than the dealer outright admitting this is going in MA I’m running into the same thing.

With whom? I'm not buying locally but am curious.

 

[Pancho Kornwallace]

You warn against letting them walk you through "4 Square" and then immediately advocate letting them walk you through "4 Square".

Your first point is easy to spot and overcome. The second should only be brought up after you have a price agreement.

The answer is "it depends". I trust my dealer, so it is easier than if you don't trust your dealer.

In the deal I am doing today (see other comment), I would be $800 behind if I did not mention the trade in to him and/or if he did mention the $1800 bonus incentive to me.

 

[Skmac]

There are 4 elements to a deal and we are only focused on one and you really need to look at all of them closely:
1. Price
2. Downpayment
3. Trade In
4. Monthly Payment/terms

Add a number 5. Delivery make sure your dealer understands when and how you will be picking this up.

 

[Pancho Kornwallace]

I'd add that they try to get the customer to focus on the payment quite often....and laugh at all the profit. I like your explanation....gotta watch ALL those squares.

If you signal to the Dealer that you know what is going on and that you have a trade, if it helps, but you are willing to sell it on Carvana/VROOM too, you have control 2 of the 4 squares.

 

[CoolTech]

I'm sorry, but respectfully, you are very wrong. Sure, there's nothing illegal about a single dealership selling a vehicle at MSRP. But you are missing the key point here: a dealership cannot work with other dealerships in the area to agree, be it written, verbal, or inferred, on setting a price. That's collusion and price fixing, it removes competition from the market, and it's highly illegal. There is nothing imaginary about any of this. There are very specific anti-trust laws set forth by the FTC on this topic.

Dave, as if you needed any confirmation, you are absolutely right with respect to the laws.

You are also right to not pursue - as you would have virtually no chance of proving /winning (which is independent of you being right).

Yep, just move on. Several dealers on here already identified to be at MSRP or better. Simply call Ford Customer care, move your order, and don't look back. Life's too short. (Wish I'd follow my own advice! LOL)

 

[Aman]

This is not the time for negotiations. Ensure they are not charging ADM, weigh your options with going with a dealership that is advertising a discount, and move forward.

The time to negotiate is when you and the dealership are ready to make a deal, your trade, your down payment are on the table, and the loan and monthly payment is being discussed.

That's when the fun starts. I love this game.

This is terrible advice.

You can play the "game" when a vehicle is readily available, but not when it's in high demand. The dealer will have no problem saying "buh-bye" to you and selling the truck to someone else with a high ADM.

 

[Broncoak]

Also, don't get too personal. You may think that they are making small chit-chat or taking genuine interest in who you are, but they are sizing up your bank account and what you can, and cannot, afford.

So true. When I was a Private at FT Bragg (long time ago), dealers would see your haircut a mile away and start making "chit chat".

Salesman: "How's it going?.....You in the Army?"
Me: "Yep, I'm just looking arou-"
Salesman: "Oh yeah? Me too, did 12 years in the 82nd....What rank are you? Private First Class, Specialist, 2nd Lieutenant?"
Me: "Never mind, have a good day."

 

[Bradyrufenacht]

I have been working through my build with my local dealership. Throughout the process, they have been super vague on pricing. My sales rep is working on the build sheet this morning, and I finally forced him to have the pricing conversation. He told me that their dealership made an agreement with all other dealers in the area that they would price at MSRP. I told him, "That's interesting. That sounds a lot like you just admitted to collusion and price fixing, which is illegal per anti trust laws." It looks like I will have to change my order to Granger and lodge a complaint with Ford.

Anyone else have this experience?

For those of you who have switched your dealer, do you need to call them first to confirm that they would accept it, or do you just deal with Ford Customer care, and then sit back and wait for the new dealership to contact you?

PS - I am in no hurry for the truck to arrive. I'd be fine with a MY22.

Just go through Ford Customer care. The new dealer will contact you within a few days to get a new deposit since the original one will be refunded. I just switched mine to Stephens 2 days ago.

 

[Headsong]

So true. When I was a Private at FT Bragg (long time ago), dealers would see your haircut a mile away and start making "chit chat".

Salesman: "How's it going?.....You in the Army?"
Me: "Yep, I'm just looking arou-"
Salesman: "Oh yeah? Me too, did 12 years in the 82nd....What rank are you? Private First Class, Specialist, 2nd Lieutenant?"
Me: "Never mind, have a good day."

Well, you do what works for you. I like folks that I can be transparent with and can trust for the same. If not, I'm at the wrong place.

Sponsored