The five tricks car dealers use and how to avoid them

This post originally appeared on Yahoo7

Used cars

Car sales people don’t have the best reputation – in fact, they have been consistently ranked bottom for trust on a list of professions in Australia for the past 30 years, according to Roy Morgan’s annual Image of Professions survey.

The way their businesses are structured means that 95% of a dealer’s revenue comes from the other things they might sell you while you’re there like finance and insurance, so not only are they under pressure to sell vehicles, but if they get you over the line with a car, chances are you will also be offered add-ons – many of which you won’t need.

It’s something the Australian Security and Investments Commission has been reviewing and recently released a report on so-called “junk” insurances dealers are selling in a bid to crack down on the practice.

Being aware of these questionable products and high-pressure sales techniques will ensure you don’t waste time and money.

“It’s already at cost”
This is a phrase you might hear a car sales person use when you ask for their best price, but you can bet your bottom dollar that car is not at cost price. There is something called a “load” which dealerships put on each vehicle (normally between $2000 and $4000) and add it to the “cost” of a car.

“We’re losing money on this car”
The sales person might say “look at my screen, we’re losing $300 on this car” and -$300 figure might be displayed – but now you know there is a load already built it, this is highly unlikely to be true.

“This deal is only for today”
Sales people need to make their targets in order to get their bonuses (or wages even) so applying pressure to get the deal done sooner rather than later is commonplace. You can be almost certain the deal on offer will be offered to you tomorrow if you went back to the same dealer. The exception is if there is there is an offer the manufacturer is paying for itself like three-years free servicing that might have a fixed end date.

“Do you need finance?”
Many dealerships are structured so that the sales people will be given bonuses based on the different kinds of products they sell. Chief among these is finance, because much of the dealership’s profits are likely to come from the margins on the loan products they sell. Just because the finance is there and seems convenient, shopping around and looking at all your options will help you avoid paying more than you need to.

“You’ll need insurance on those rims”

Will you? Hmm, probably not. ASIC found in its recent report that “consumers obtained little financial benefit from buying add-on insurance, with consumers paying $1.6 billion in premiums and receiving only $144 million in successful insurance claims”. An example might be paint protection – which certainly has value, but when sold with the margins attached, it can work out to an extra $2000.

Before you sign up for any insurance policies, make sure you look at the cost of the item and the cost of the premium to see if you are getting true value.

Luckily, HelloCars offers a transparent alternative where you know upfront how much you’ll be paying for a car and there’s no need for haggling.

Being forewarned is being forearmed in the often combative environment of a car dealership and could help you avoid spending money you simply don’t need to.