Buyer Know-how

7 Reasons Why You Buy - or Not Featured

Written by  Tuesday, 24 May 2016 09:06
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People tend to believe that there are numerous reasons why they choose not to buy a new vehicle. It may come as a surprise to learn that there are only seven.

Sure, you still have to want to buy a vehicle. Once there, however, there are only seven reasons potentially standing in the way. While this may surprise you, it certainly isn't a mystery to the professional salesperson you are dealing with. He or she knows that when you say you "need to think about it", or you are going to "discuss it with your spouse", you are not giving a reason. 

The fact is, if all seven of the reasons have been resolved, you have just agreed to buy. Waiting, for whatever reason, merely means you are not sufficiently convinced on at least one of the counts. The seven keys to a sales agreement are:

    • Vehicle Price: The manufacturer has the first say in the price of your vehicle. The manufacturer's suggested retail price, or MSRP, is the reference price put forward by the manufacturer. It includes margin over and above the dealer's cost to acquire the inventory; in other words, a reasonable profit margin. This margin is not a defined percentage. It varies from model to model. As a general rule of thumb, the higher the dealer's cost, the higher the mark-up percentage (a rough estimate is anywhere from 5-12%).

      A range of manufacturer credits, rebates, and dealer discounts can also come into play to reduce the vehicle's selling price depending on what's available at the time of purchase. As a reasonable consumer, you naturally recognize the dealer's right to make money, but it will serve you well to know what money is on the table.

      If you are satisfied with the purchase price, the deal will move forward.

      Be careful if this sounds like you. By ignoring all other factors in favour of Payment means that you are allowing the dealer to build a deal to fit that amount. In some cases, this may require the dealer to discount heavily to make the deal work. More often, however, this paves the way for discounts to be rolled back, or add-on packages to be added to your deal.

      That said, if the payment works, and you're happy with the vehicle, you're off to the races, so to speak.
    • Payment: Purchase price is totally relevant if you are paying cash. That is how much money is coming out of your bank account on Day 1. It is also important if you are going out to a third party to source your own financing. It determines the size of your loan. But for many buyers - and you may be one - price is less important than how much money is coming out of your jeans each month. It's an easier, near-sighted, calculation to make. Can I afford $465/month? It's either yes, or no.

      Be careful if this sounds like you. By ignoring all other factors in favour of Payment means that you are allowing the dealer to build a deal to fit that amount. In some cases, this may require the dealer to discount heavily to make the deal work. More often, however, this paves the way for discounts to be rolled back, or add-on packages to be added to your deal.

      That said, if the payment works, and you're happy with the vehicle, you're off to the races, so to speak.
    • Finance/Lease Rate: This is the percentage you are charged for borrowing money. Financing is a complex area that is not always in the dealer's best interest to simplify.

      Whether you are getting finance directly from the dealer, from a 3rd party financier sourced by the dealer, or you have gone to your own bank, the same dynamic applies: the higher the loan amount, the higher the percentage rate, and the longer the term of the loan, the more money you will pay over and above the selling price of the vehicle.

      Once you are happy with these ingredients, the way is paved for you to move forward.
    • Down Payment: Also known as the amount of cash needed at signing, your down payment has two key functions: Firstly, it lowers the amount you will need to borrow. Secondly, it lowers the amount of cash in your pocket on Day 1.

      It has become increasingly common that borrowers are able to finance with "no money down". Regardless of the amount required, the actual number can stand in the way of a deal going ahead. If the required, or agreed amount is to your liking, the issue of down payment has been resolved.
    • Trade Value: This is a common issue. Most buyers have an unrealistic expectation for the value of the vehicle they are trading. Yes, the dealer is motivated to give you as little as possible for your trade. That doesn't change the fact that most people are completely naive when it comes to their valuation. For a more complete description of this see My Trade is Worth What!?
    • Selection: The most favourable financing in the world is not going to make the deal happen if the dealer doesn't have the vehicle you want. Selection is fundamental, but there are degrees of acceptability. In other words, the dealer may not have the perfect fit, but if he or she can make something close work (usually by massaging the numbers), you may be inclined to move forward.

      You'll be the one to decide if the value is there.
    • Sales Personnel: At the end of the day, a vehicle transaction results from a relationship. With that much money changing hands, you want to trust the person you are dealing with. If all the other factors align, you will likely forgive small imperfections. However, if you don't like and trust the people you are dealing with, the personnel can be a reason to "go home and think about it."

Outside of these seven factors, there is no other issue to be resolved in moving on a purchase. That said, you are well advised to ensure you are comfortable with all seven. No one wants to have misgivings spoiling their after-purchase enjoyment.

Read 1134 times Last modified on Tuesday, 14 June 2016 21:17

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