Blog

The second largest purchase decision we will have to make (followed by our home) is probably buying a new vehicle. Some of us begin our adult lives with vehicles on loan from our parents or ‘hand-me-down’, used, rebuilt, pieces of tin and plastic held together with bailing wire and a little chewing gum. Most of us are not dancing around a titanium silver metallic BMW M3 with a red ribbon around it on our 16th birthday.

So, for the rest of us, after years of saving (or building an acceptable FICO score) we can buy our first new vehicle. Buying the first NEW car or truck should be a fun, exciting, experience… right?

Depreciation
Well, not so fast. Many people know that this purchase decision will be the worst financial investment they ever make. Most new vehicles depreciate faster than you or I can fill out the finance and insurance paperwork and unless you put some money down, you owe more on the vehicle when you drive it off the dealership’s lot than it’s actually worth. Just thinking about it can get depressing!
Beyond Dollars and Cents
For many people buying a new car still makes sense. Their needs change, their lease is up or they visit with their repair shop service advisor more than their family. So, the conservative new car buyer does their homework. They make sure this new vehicle will suit their needs. They research things like performance, passenger room, fuel economy, and safety… and find the right blend that will suit their lifestyle.

The Buying Experience
Choosing the right vehicle is probably the easiest part. Today many people are finding their next vehicle from the comfort of their own home on their PC. My grandparents even purchased their last vehicle over the phone and had it dropped off at their home where they signed the paperwork. AutoPacific research shows that this example is atypical; most people still need a tangible experience. They want to see, touch, drive, and experience their new vehicle before they make the purchase and this is where your local dealership comes into play…
RESEARCH NOTE
AutoPacific research shows that factors influencing car and truck shopping differ by age and gender. Young buyers with less experience with vehicles depend much more on friend and relative advice, the dealer salesperson and the test drive. They need to experience the car before they buy. As the ages, they more likely have settled on a type of vehicle and possibly even the brand. Then personal experience factors more strongly into their decision and test drives and salespeople are less important. Increasing Internet research has also dramatically altered the customer to dealer dynamic. It used to be that the salesperson sometimes knew less than the buyer. Now, with almost perfect information on the Internet, the advantage goes to the buyer who has done the proper homework.
Personal Experience
I’ve always purchased used vehicles (even restored old cars and trucks) but I’ve never purchased new. Many things prevented me from buying new but last week I pulled the trigger. My dealership experience was relatively painless. I feel as though I was lucky however; the dealership had just changed hands that week and the ‘vultures’ (dealership salesmen) didn’t catch me entering the lot. The auto manufacturer had loaded this particular dealership up with a larger than usual inventory to help them get things rolling and the dealership wanted to offload them ASAP. (Dealerships typically pay interest on every vehicle, every month – that’s why some people shop for a new vehicle at the end of the month. The thought is that you can negotiate a better deal.)
Internet Sales Guy
After I found the vehicle with the right specifications I was able to sync up with a younger, less ‘slippery’, Internet sales manager who worked upstairs. I had him show me the vehicles lot # (which matched), Manufacturers Suggested Retail Price (MSRP) and dealer invoice. (FYI: The factory invoice may be the actual ‘bill’ that the dealer gets for a vehicle, but it often does NOT represent the true cost. The dealer will sometimes get what is known as a ‘holdback’ which is a rebate the dealer receives on each vehicle they buy from the manufacturer).
Laying Down the Law
I made sure that there was no speaking or writing in code, no clamoring to ‘buy it now’, no pushing of hot buttons, no tugging on heart strings or ego, or inducing fear that someone else was also interested in my new vehicle. If that happened I was walking away. It might have been amateur day for me but the rules of engagement were made clear from the get-go, he could leave his desk twice and if any decisions needed to be made by anyone else he needed to get his sales manager right then and there. He took my requests pretty well, so I also mentioned that I did not want to spend more than an hour in F&I (Finance and Insurance). He balked and said that it might take a little longer (and it did – about an hour and fifteen minutes).
What’s a Due Bill?
During negotiations the use of the term “Due Bill” really came in handy. I’m not certain that every dealership uses the same term but for most it is a slip of paper used by dealerships to identify items due the customer. On the “Due Bill” options or accessories can be written down that are not included with the vehicle as part of a package. Before negotiations were complete $300.00 worth of accessories for the vehicle had been written down, which were due me (free of charge) and procured through the parts department. In the end the vehicle was purchased for just under dealer invoice. (Don’t worry. They still made money!)

F&I
In my particular experience no one tried to stretch the term of my loan in an effort to squeeze me into a nicer vehicle. However, when I was passed onto the F&I guy there was some pressure on the ‘backend’, which almost became a pain in the backend! The ‘backend’ is really a less obvious area for dealerships to turn a profit but it happens every day and dealerships can end up making more on the ‘backend’ than they did selling you your new vehicle. They tried this in the F&I portion of the transaction. Which was (for me) by far the worst part of the process. California State Law requires full disclosure on certain matters but it was obvious that they were trying to force feed me Gap Insurance, an Extended Warranty and a Service Agreement. After a long speech I simply said “No Thank You”, signed some documents and left with a ‘fuel chit’ to go fill up my new vehicle. Most, if not all, new vehicle window stickers do say something like “This vehicle comes with a full tank of gas”. Typically dealerships will wash, refuel, and present you with your vehicle at the end of the transaction and this dealership was no different. The only difference was they were dealing with me and I wanted to be the one to refuel my own vehicle.
RESEARCH NOTE
A Full Tank of Gas means just that. It does not mean that the customer has to go fill up his own new car. This can be a significant dissatisfier in the new vehicle delivery process.
Nice Touch
There were many unexpected, but pleasant perks that were part of the experience. They washed my girlfriend’s car free of charge (Didn’t want them washing the new one!), Due Bill items were handled with alacrity and a week later I received an invitation to attend a dinner catered by an Italian restaurant at the dealership. I thought for sure they would try and sell me again on a warranty or service agreement (They missed me the first time around), but they didn’t. Although there were speeches by the Sales Manager, Service Director (Handles Service and Parts), and Finance Director, I didn’t feel any pressure to buy anything. They discussed ‘Hours of Operation’ (M-F 7AM-8PM, Sat. 8AM-5PM and Sun. 9AM-5PM), their appointment system, Maintenance Requirements, Warranty Information, opened the forum up to questions, offered us a 20% discount on parts (for one night only) and then we all had desert.