Advertised Discounts
Ads are designed to mislead, misdirect, and stimulate emotions. What you
think you are seeing in a car ad is almost always not what you’re really
getting. The real deal is buried in the fine print and most people ignore it.
They form a general notion of “that dealer has some really good deals”
and don’t take the time to investigate further.
Don’t be the unwary buyer!
Let’s review the adverting "discount" gimmicks:
- No money down
- Extremely low monthly payments
- Overvalued trade-in allowance
- Special financing rates
- Special leasing deals
- Ad limited to small selection
- Limited time offer
- Inventory blowout
- No reasonable offer refused
No money down
You don’t really want to buy a car with no down payment because you’re going
to pay a lot more in financing costs in the long run.
Psychologically though, this appeals to the emotional side of the brain which
thinks - “Hmm, no money down. What a great deal!”
Why?
Because psychologically we don’t want to part with our hard-earned cash if we
don’t have to.
On a major purchase like a car, you’ll be upside down on your loan unless you
take 20% off the total with your down payment, trade-in, and rebates.
Those dollars you think you’re saving by putting nothing down are costing you
double that “savings” in extra interest over the term of the loan.
Extremely low monthly payments
The whole story isn’t always apparent and this is another prime example.
Check the loan term and you’ll see 60, 72, or even 84-month loan terms.
The dealer is usually keeping all rebates. The low payment is based on financing
that’s available only for excellent credit scores.
Their advertising goal is to get you into the dealership.
Remember, if something sounds too good to be true, it always is.
Overvalued trade-in allowance
You’ve got to love ads offering to pay $4,000 for whatever clunker you can drive
or tow into the dealership. You know that piece of junk isn’t worth $500 and yet
you’ll get $4,000 for it.
And where do you think the dealer is going to make up the difference?
On the price of your new car, your financing, and your fees.
You always get what you pay for in the long run.
Or, considering how fast the car dealer can turn that deal upside down on you,
in the short run also.
Special financing rates
Designed to build showroom traffic, these special low rate deals are incredibly
effective.
We’ve already talked about 0% financing and the same logic applies to 1.9%
financing and any other flim-flam rate they offer.
You are almost always better off taking the rebate and not the special
financing. The special financing is quite effective at switching “price”
discussions to “monthly payment” discussions.
You can’t convince some people to do the math and see that the low interest rate
is not to their advantage.
Again, it’s a psychological thing. Always do the math!
Special leasing deals
You’ve probably figured out by now that leasing a car isn’t a good deal for most
people. There’s just too many ways to get dinged financially on the deal.
Car dealers love to advertise low leasing payment deals. Why? Because
psychologically people associate them with monthly car payments.
However, it’s really just the rental cost plus the depreciation expense. And the
quoted price doesn’t include taxes or fees and often does include a hefty
upfront payment.
You’re not buying anything with a lease, just renting. And you’re not renting
your furniture or your big screen TV are you?
If you wouldn’t rent something that costs a few thousand, why do you want to
rent something that costs ten times that amount.
You’ll hear a lot of mumbo-jumbo about the tax benefits of leasing. Don’t
believe them. Use Lease Wizard or a CPA to run the numbers. And Lease Wizard is
a whole lot cheaper than a CPA.
Ads limited to small selection
Classic “bait & switch” technique. The car in the ad was gone before the
newspaper ink dried. Again, remember that the purpose of an ad is to build
showroom traffic.
You’ll quickly be guided toward another “great deal” that just happens to fit
into your monthly payment price range.
And of course, that loan term gets stretched out an extra year to keep the
payment low enough to satisfy your emotional “deal meter.”
Be wary of any advertised deal that only has a single unit in stock. How many
times do you think a car dealer advertising to thousands of people can sell the
same low-priced car?
Yep. Just once.
Limited time offer
The purpose is to get you to hurry on down to the dealer before all the great
deals are gone.
By creating a sense of urgency, the ad aids the dealer in the goal of selling
you a new car today.
Always remain emotionally neutral about “deals” and avoid anything that adds
time pressure to the equation.
There really aren’t any great deals that are here today and gone tomorrow.
Inventory blowout
Here the premise is that “everything must go” or “factory model change” or
“excess inventory” has created the perfect situation for you to take advantage
of the dealer.
Nothing could be further from the truth.
You are on their turf, negotiating on their terms, talking about cars, options,
and prices where you don’t have all the facts.
Toss in the element of time pressure - “you must take delivery this weekend” -
and the odds are stacked against you, not the dealer.
Negotiate your best deal from a distance before setting foot inside the dealer’s
lair.
You’ll bargain smarter and your wallet will be a whole lot fatter when you’re
finished.
No reasonable offer refused
Of course not! But, the dealer is the one defining what’s reasonable, not you.
Expect extended negotiating sessions on any offer you make.
You’ll have an easier time wrestling a greased pig than getting your reasonable
offer accepted.
Once again, the purpose of the ad is to get you to the dealership so they can
sell you a car today.
The dealer has multiple ways of making money on the deal. You can be sure that
any offer they accept has plenty of profit in it for the dealer.
Advertising Tips
People get distracted by the picture of the car and the bold, blaring message
trumpeting the particular “deal” being offered.
Always read the fine print. That’s where the real information about the deal is
located.
You can pretty much ignore everything else except the picture!
Caveat Emptor! Buyer beware!
The Romans coined this phrase for a reason. Consumers have been misled for
centuries and today certainly isn’t any different.
It’s up to you to know and understand exactly what you’re getting for your
hard-earned dollars. And that means reading the fine print.
Key fine print phrases
1. Dealer keeps all rebates
2. 72-month finance term
3. 84-month finance term
4. All deals with approved credit
5. 0% financing with Tier 1 credit (or A Plus Tier)
6. Sale prices reflect all available rebates
7. In stock units only - All vehicles subject to prior sale
8. Not everyone will qualify - additional down payment possible
9. Plus tax, tags, and dealer fees
Advertising Deals
The purpose of advertising is NOT to sell the advertised cars at all.
The purpose of advertising is to increase showroom traffic.
The salesmen will then steer you toward whatever deal will allow them to sell
you a new car today at the highest possible profit.
That’s what advertising is all about.
However, there are advertised deals that are worthwhile and you should know what
to look for.
1) Extremely large discounts from MSRP - This means only one thing.
There’s a manufacturer-to-dealer incentive program designed to move this model
now.
If that car is one you like, then target that model with an RFP Buying Campaign.
2) Attractive special financing terms - A new middle ground has emerged
with combination rebate/discount financing packages being offered to those with
“prime” credit (680+ credit score).
Use our loan rebate calculator to deduce how much the offer is really worth to
you vs. your best online loan rate.
3) A “loss leader” ad - Sometimes a dealer will throw out a really low
price on a single model as a traffic builder. If it’s legit (look for a stock
number in the ad) and you want that car, then go ahead and buy it.
Of course, that assumes you have your financing check burning a hole in your
pocket and that you were the first to spot a particularly great deal that
actually exists.
Warning: Never buy a demo model unless you get 30% off MSRP. That’s how
much a new car depreciates in its first year and a demo model is a used car.