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Buying Tips
Edmunds.com Car Buying Quiz
By Philip Reed, Senior Consumer Advice Editor
Email
So you really think you're ready to go out and get a good deal on that new car
you want? Before you head for the door, check out our car buyer's quiz to see
if there are any gaps in your knowledge. It's better to find out now than when
you are in the hot seat, ready to sign the contract and suddenly get that gnawing
feeling that things just aren't right.
Give yourself one point for each right answer. You should score seven or higher.
Otherwise, look out! (And no peeking at the answers.)
1) Define these three pricing terms:
- Sticker price
- Invoice price
- Edmunds.com True Market Value® price
2) You call a dealership and ask for a quote on the car you want to buy.
The salesman tells you his boss won't let him give prices over the phone. He urges
you to "come on down and we'll work up some numbers." Your next move in this case
is to:
a) Hurry into the dealership before the salesman loses interest in you.
b) Call another dealership and hope that a different salesman will give you a
price.
c) Solicit quotes over the Internet through a site such as Edmunds.com.
3) True or False: Incentives and rebates really have no effect on the price
of a car. They are just another tactic to rope you into becoming a "today buyer."
4) In the following list, which financial term might irritate a car salesman
if you use it in negotiations?
a) Rebates
b) Holdbacks
c) Invoice price
d) Sticker price
e) Interest rate
f) Down payment
g) DMV fees
5) At a dealership you ask to see a specific car that you saw advertised
in the newspaper at a great price. The salesman says that car has already been
sold but he points out another model that seems very exciting. Soon you find yourself
seriously considering this car instead. You have just been a victim of what sales
tactic?
a) "The old churn and burn."
b) "Moving metal."
c) "Bait and switch."
6) You call an Internet sales manager and ask for a price quote on a specific
car. She says the car will be "about two hundred over invoice." Your next move
should be:
a) Ask to have the invoice and a "worksheet" (listing all the fees) faxed to you.
b) Head to the car lot to close the deal.
c) Arrange financing with your credit union.
7) True or False: When your credit is weak, you will always get the best
interest rate from the car dealer.
8) You have negotiated aggressively for the car you want to buy and you've
finally arrived at what seems like a good price. The salesman takes you to the
finance manager who says he will draw up the contracts. You should:
a) Relax now that the stress of negotiating is over.
b) Make sure you keep your mouth shut and squint a lot.
c) Keep your guard up because the crucial part of the process is beginning.
9) True or False: When it comes right down to it, the best way to shop
for a car is to drive to the nearest dealership and walk the lot.
10) Finish this sentence as it applies to car buying: "Knowledge is ______."
Answers
1) You should know what each of these pricing terms mean because you will
encounter them in your car-buying adventures.
- Sticker price — the price posted on the "window sticker." This is set
by the factory and is, in most cases, high end of negotiations.
- Invoice price — this is roughly what the dealer has paid for the car
and it constitutes the low end of negotiations. The dealer will try to get
a certain amount of profit over the invoice price.
- Edmunds.com True Market Value (TMV)
pricing — this is the average price at which most people are buying this
car (and this price is adjusted for a number of conditions). TMV is a good
deal for the consumer and it provides a fair profit for the dealer.
2) The correct answer is c) Solicit quotes over the Internet through a
site such as Edmunds.com.
If you telephone a dealership and talk with a salesperson, they will probably
refuse to give you a price over the phone. However, if you e-mail different dealerships,
you will get a quote from some of them. Additionally, if you call a dealership
and ask for the Internet manager, you will get a quote over the phone. Internet
managers deal in volume, not high-profit individual deals.
3) False. If you shop carefully, and research incentives
and rebates on Edmunds.com, you can save thousands of dollars. These can take
the form of customer cash rebates (usually used as a down payment), dealer cash
rebates (often hidden from the consumer, but listed on our site) and low-interest
financing on car loans.
4) The correct answer is b) Holdbacks. The holdback
is money paid by the manufacturer to dealerships to cover their cost of financing
the cars until they are sold. This money is considered sacred to dealers who are
looking for a way to turn a profit in a competitive market. However, knowing that
the holdback is there might help you make a better deal — even without raising
the issue directly.
Some of you might have also mentioned "invoice pricing." This used to be a hot
button, but the good salespeople have become much more forthcoming about showing
the invoice to customers.
5) "Bait and Switch." This is the practice of advertising a car at an unrealistically
low price, then switching a customer to a different vehicle at a higher price.
6) The correct answer is a) Ask to have the invoice and a "worksheet" (listing
all the fees) faxed to you. The invoice will show you exactly what options are
on the car and what the dealer's cost is. Yes, you can get most of this information
from Edmunds.com. But the dealership may have local charges that Edmunds can't
track such as advertising fees. To flush out all the extra hidden expenses and
fees, you should ask for a worksheet so that you can see what kind of extra fees
you will pay, such as document and DMV fees. Once you have the invoice and the
worksheet, and the numbers look good, you can close the deal over the phone —
then head for the dealership to pick up your car.
7) False. You might get credit from a car dealer if your credit is weak,
but you won't get the best interest rate. Dealers often mark up the interest rate
to make a profit on the financing. They justify this by saying that you are a
credit risk, and as such, are on a lower "credit tier." It's a good idea to know
how strong your credit is before going to the dealership. For more information
about credit scores read Tips
for Subprime Borrowers. You can also apply for credit through your credit
union or an on-line lender.
8) The correct answer is c) Keep your guard up because the crucial part
of the process is beginning. The finance manager is really an experienced salesman
who will continue trying to improve the profit that is built into this deal. You
will have to make sure the terms of the deal you have agreed on with the salesperson
are honored in the contract. You will also need to make sure there are no sudden
extra charges. Finally, you will probably be asked to consider extended warranties
and protection packages for your car. We recommend you say no to most of these
offers.
9) False. If you walk the lot looking for a car to buy, you have no control
over what salesperson you will deal with. You have to work with the first salesperson
who approaches you. (Either that or create a stink, go to the sales manager and
demand another salesperson.) If you telephone first, and ask for the Internet
manager, you have a chance to test drive the salesperson. If you have a nice rapport
and feel this is someone you want to do business with, make an appointment to
go to the dealership in person. If you don't like this salesperson, call another
dealership. You've wasted very little time this way and saved yourself some serious
aggravation.
10) "Knowledge is power." Do your homework before you ever set foot on
the car lot. This will help you find the car that is best for you, it could save
you thousands of dollars and it will remove much of the stress of the sales encounter.
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