Welcome to the first of what will be an occasional series on many things motoring from guest blogger Car Shark, it will not feature anything to do with motorsport as I find that about as interesting as watching paint dry, it will however offer tips and guidance for those looking at negotiating the minefield that is the motor trade in NZ.
Buying a used car.
Buying a used car is not often an enjoyable experience, many of you will be placing your trust in somebody you do not know and in an industry that is quite rightly looked upon with deep suspicion, however, do not dismay, what follows will help you avoid the pit falls and prove that not every dealer is out to rip you off.
To ensure that you get the best possible deal there are a few golden rules that you should never break;
1. Never be tempted by a “minimum trade” promotion.
Minimum trade deals or promotions are never what they seem, while the dealer may well be offering what appears on the surface to be a far better deal for your trade in you will almost certainly be paying more for your new car than you would at any other dealer. Minimum trade deals are usually tied in with finance promotions, if the dealer is not charging you more for the car you are buying you can be sure he is charging an excessively high interest rate.
Minimum trade deals are a rip off, avoid them at all costs.
2. Always try and deal with a Franchise dealer.
As a rule you are always better dealing with a Franchised car dealer, Franchised dealers have a lot more on the line than most independent dealers, try and find one that has been in business for some length of time.
Most manufactures insist on high standards of from their franchised dealers, they have a strong interest in customer satisfaction and repeat business.
3. Do your research.
The internet is a wonderful tool, it saves you time, shoe leather and fuel, once you have decided on the make and model of the used car you want then use the net to find it, as mentioned previously try and find a car you like from a franchised dealer or dealers, narrow it down to three or four examples.
4. Always buy a New Zealand new car in preference to a Japanese import
Forget all the rubbish you will hear from salespeople and dealers, a good clean NZ new used car is always going to be a far better buy than a Japanese (Or Singaporean) import.
Most will have some service history, you can track (via motorweb or carjam) their recorded odometer readings, you can also find out the cars ownership history.
5. If you have even the slightest doubt about a car you are looking at then walk away from it.
Never be afraid to admit that your mechanical knowledge is not great, when you do find a car that you like and before you sign anything have it checked out by a mechanic you trust or the AA.
6. Do not commit to anything.
Once you have found the three or four examples you are interested in then visit the dealer or dealers, make sure you test drive the cars, thoroughly check their overall condition, check when they last had a service, ask if the car has a service history.
If you are happy with the car ask the dealer if he is negotiable on the price, do not ask what his best deal is at the moment as this could end up boxing you into a corner.
If the dealer is any good he will take this as a classic “buying signal” and gently start to try and close the deal, at this stage you should not commit to anything, simply say that you are interested in the car but you want to think about it, also mention that you have other cars you want to consider.
Under no circumstances should you tell him where the other cars are or who the dealers are, that is none of his business.
At this stage of the process many buyers often start to feel the pressure come on, the salesperson will want to know what it is that you need to think about (remember he is trained to overcome objections and will have a sales manager lurking around to ensure you do not leave without buying a car)
Be firm with the salesperson or dealer, tell him that you are interested but you want to think about it for a while, take at least 24 hours to decide, many people buy a car on impulse only to end up regretting their purchase for the next three or four years.
7. Negotiating the deal.
Once you have decided on the car you want (assuming that you have checked it out thoroughly) then the fun begins.
It is vital that you understand how the sales process works, the dealer or salesperson will obviously want to get as much as he can for the car, while price is a consideration it does not pay to get hung up about it, you are far better to pay a couple of hundred more for a good clean example than buy from the dealer who offers you the biggest discount, it also pays to keep as much of your powder dry as you can.
However, remind the dealer that you did ask if he was negotiable and assuming that he is then an offer that includes a 10% discount is a good place to start, look for a $1500 discount on a $15000 car, a $1200 discount on a $12000 car and so on.
When you do make the offer you must say nothing more, the golden rule here is that the first person to talk loses, no doubt there will be some back and forth negotiation, this is normal and as I said do not get too hung up on this as it is better to pay a little more for a good example, and anyway, you have not finished with him yet.
Given that you are looking at buying a used car you may have a list of minor faults that you want the dealer to repair, do not disclose this list until you have settled on an agreed price.
I would suggest saying something like “OK, before I sign anything there are a couple of minor faults that I need repaired” remember by law he has to issue the car with a new WOF (or sell the car with a WOF no older than 28 days)
At the very least your list should include having the car fully serviced at the dealers cost, if the car is fitted with a cambelt then make sure you find out when that needs to be changed, if a new cambelt is due then ensure that the dealer covers the cost of this (including tensioners and possibly the water pump)
Check the registration, make sure there is at least six months left to run, and while it may seem silly to point out, ask for, and ensure you get, a full tank of fuel.
Once you have agreed a deal with the salesperson they will want a deposit from you, make sure that any deposit you hand over is minimal and refundable.
8. The paperwork.
In many dealerships you will now be handed over to what they call a Business, or Finance and Insurance, manager, these people have one role and that is to sell you Finance and Insurance.
They will place pressure on you to buy an extended warranty, to take finance and to take payment protection insurance.
Before you purchase an extended warranty you should remember that you are protected by two very powerful pieces of consumer legislation, the consumer guarantees act and the fair trading act, in most cases an extended warranty is a waste of money, the dealers legal obligations will cover most repairs that are needed.
Should you need to take finance then remember that the rate is always negotiable, a dealer will buy his money at a wholesale rate of between 8% and 12% depending on the volume of business he puts through, the dealer makes his money on the difference he pays for his wholesale rate and what he can get away with charging the customer, you should not be afraid to ask what the rate is and to negotiate that rate, if you are paying more than 13% then you are paying too much.
The finance deal will also include a booking fee, this is typically around the $250 to $450 range, the dealer will tell you that this is a cost imposed by the finance company, while he is not technically lying he is also not telling the entire truth. The dealer splits the booking fee with the finance company a booking fee of $400 will usually be spilt 50/50, do not be afraid to tell the dealer that you are not going to pay the full amount.
The dealer will also try and sell you payment protection insurance, as a rule payment protection insurance is not worth the paper it is printed on, if you do want to protect your payments then there are far cheaper options available.
Payment protection insurance is seen as pure cream by the car dealers, on a three year finance agreement the payment protection premium may well be between $2500 – $4000, half of this premium is the dealers profit.
It is worth saying again, if you must take payment protection insurance then do not buy it from the dealer, check out a range of policies and you will find that you save yourself a small fortune.
Ensure that the dealer lists all the items you want repaired on the sales agreement, check carefully to ensure that nothing has been omitted, at this stage you can sign a conditional sales agreement but under no circumstances should you sign the finance contract, do not do this until you are ready to take delivery of your new vehicle.
Never take the car from the dealer at this point, he may well pressure you to take delivery on the promise of getting it back off you next week to repair any minor faults, I cannot stress this enough, do not take delivery of any car that is not 100% to your satisfaction , even more so if the vehicle is financed.
9. The delivery.
Even though you will be excited at the prospect of picking up your new car you must still be wary, before you take delivery check to see that any faults the dealer agreed to repair have been done, if the only way to check is to drive the car again then do so, take the salesperson with you.
The dealer should be able to provide you with any invoices for mechanical work done on the car as part of the sales agreement, if he cannot or will not then remember that it is not too late to walk away from the deal.
Ensure you have a copy of all the sales and finance documentation, make sure that the figures are correct, take five minutes and check that everything you wanted has been done and that no surprises are hidden in the finance agreement.
Once you are happy that everything is in order then and only then should you take final delivery.
The Car Shark is a twenty five year veteran of the NZ motor trade, he has worked in many dealerships and has extensive experience. The Car Shark has held every position in the retail trade from Car Cleaner to Dealer Principal.
The Car Shark has no allegiance to any one brand of car or any one manufacturer, he will always remain fiercely independent and is not afraid to spill the beans on the inside workings of the retail Motor trade in New Zealand.