Car buying “tips” and advice are anything but scarce. We live in the age of technology, where there are endless amounts of websites, forums, and apps onto which buyers find it necessary to word-vomit their experiences of how they conquered the ever-so-cunning salesman! But alas, for all their heavily researched pointers, not all of these fabled heroes’ advice holds true. We’re here to save-the-day and cut out the clutter. Here we have compiled the list of top car buying myths that you, no doubt, have heard over the years of your car buying lifetime.
Salespeople are Out to Get Ya!
It’s about time we blow this one right out of the water. Yes, salespeople have quotas and commission benefits. That’s true. However, this does not mean they stand to profit off of your misfortunes. Making sure customers are happy keeps a business running. Secondly, the commission made by a sale is not always a significant part of the salesperson’s salary. Much of the money made by salespeople comes from reaching a quota. So, in the end, it’s likely they will do whatever they can to sell you a car, not just keep their margin as high as possible.
Financing Through a Third Party is Cheapest
Sorry, but no. Dealerships often have established relationships with many different banks and lenders. In fact, in many cases, dealerships can offer a lower rate than banks will. Keep in mind that this is how many car dealerships make money, while banks have a multitude of ways to do so.
The Mark-Up on New Cars is Ridiculously High
As much as many of the anti-corporation folks would love this to be true, it just isn’t. Dealerships on average do not make very much on the sale of a new vehicle based on the price tag. In fact, they may break-even or take a loss in some cases on new car prices. On top of this, the pay-out and overhead after the sale could result in an even lower profit, if any, on the sold inventory. So, in reality, this is is one of the car buying myths that may be the worst one yet.
The money that dealerships amass comes from dealer incentives and financing department. We’ll discuss that in a moment.
Cash is King
Wrong. But it sounds good, right? Cash offers do not necessarily make dealerships more money. In fact, dealerships may lose profit on cash buyers. As mentioned in the previous car buying myth, the money that dealerships make arrives in the form of in-house financing. The more you finance through them the more they make in the long run. If you offer a 50% cash down-payment, you just significantly cut their back-end profit. Which also means they are less likely to negotiate a lower price with you.
The Lowest Monthly Payment Option is the Best Deal
For those of you who have ever thought this, you have successfully been tricked by the magic of the finance department. Basic math would contradict this myth. A 72 month loan often comes at a, seemingly, significant amount less than a 60 month loan. But stop and look at the numbers and you’ll find that the extra you “save” each month goes out the window with the extra 12 months of payments.
There are plenty of good resources and advice to help you on your journey. Car buying myths often can get you caught up in a cloud of misinformation. The best advice we could give: decide what you are comfortable with and go from there. In the end, it’s your money, your car, and your life; therefore it’s your satisfaction that matters most.