The games of car salesmen haven't changed much in 50 years or more. But young folks still fall for their antics, on a regular basis.
I bought a Toyota Coralla 2009 in 2012 for 13k. It now has 80k miles and is in very good shape and totally paid off. Only debts are mortgage and wife's car (Camry, almost paid off)
The dealership has called me a few times, which I finally answered last night and they are saying they're low on inventory and are willing to pay retail, as long as it's still in good condition.
We've been talking about upgrading to an SUV or mid size pick up truck, since we've started a family and are having a tough time fitting in the car. We were planning on waiting about a year to do this, but I feel tempted to make the jump if we can get a fair amount for the car.
Questions are: Is this a dealership style scam? Is it even worth checking into or would we be best just sticking to the plan?
No, they are not "short" on used cars to sell. And no, no one is dying to get into a 2009 "Coralla" [sic] as it is a mass-produced car and they are available anywhere and hardly in short supply.
This Jam Handy video from the 1940's illustrates how dealer games are played and how leads are "played" - although they don't tip their hand too obviously in the video:
And yet, people still fall for these age-old gags, over and over again. Young people in particular think that they can go in and "get a good deal" on a car simply by being a "tough negotiator." I know this because it is what I thought when I was 25. And many of them leave the dealership thinking they got a good deal, but in fact were screwed royally.
But what about dealers? Well, you will pay a lot more money for the same car at any dealer - new or used - that you would from an individual. But there are some "tips" if you want to buy a car from a dealer.
1. Separate Transactions: If you are "trading in" your existing car, expect to get hosed. The more complicated you can make any financial transaction, the easier it is to fleece the consumer. And when you have two car sales (the new car sale and the trade-in) tied together, they have double the opportunity to screw Joe Customer. If you want to buy a car, make it a "clean" simple deal - just the purchase of the car. Sell your old car separately - put it on eBay or whatever (I have had very good luck there myself). But more about that, later.
2. Do the Research: We have so many tools and databases at our disposal today to research car prices. Edmunds has a very good site which not only gives realistic used car prices, but also what you should expect to pay as a reasonable price on a new car.
3. Pick the Car, First: My neighbor went into a car dealer once to buy a Volvo convertible and came home - eight hours later - with a station wagon instead. He didn't do any research first, didn't comparison shop, and when he went to make the deal, the salesman talked him into an entirely different car. Not surprisingly, he went to a busy dealership on the weekend with his young children in tow. Pick the make, model, and even trim level and options you want, up front. If you try to compare different makes and models, you lose track of what is a fair value and end up at a data disadvantage.
4. Negotiate the Price First: I've been able to negotiate a price over the phone (which in the old days was nearly impossible to do) and then buy a car at the negotiated price, which was close to, or below the Edmunds TMV price. This saves a lot of time and hassle, and gives you an "out" once you get to the dealer (if they raise the price, you simply leave).
5. Don't Be Afraid To Leave - Quickly: You can't salvage a bad deal, and if the salesman lies to you even once, leave. We went to a dealer once to look at a blue car. He said he had it in stock. We got there and he tried to sell us a black one, as he had lied to us - he didn't have the blue car at all. We left - immediately. Trying to "salvage" a bad deal or trying to deal with someone who has lied to your face is just idiotic.
6. Be Old And White: Seriously, car salesmen are the biggest misogynists and racists around. As the Edmunds article illustrates, they have stereotypes about what certain age groups, genders, and races will buy, and how much they will pay. It had been documented that African-Americans end up being offered higher prices on cars than white folks. A young male coming into a dealership thinks he is "lucky" to get a loan - and to get a car. A middle-aged white guy like me, with an 800 credit score and a checkbook to pay cash with is in a different negotiating position. Salesman will try to screw the young guy, as they assume he is inexperienced (and in the scenario at the top of the this posting, he clearly is). With older folks, they try less (but they still try!). It is sad, and it begs the question as to why the Saturn "flat price" deal isn't the norm in the industry.
My advice for this young man? Keep the Corolla. Why? A Toyota Corolla is a 150,000 mile car, and his is only about six years old. They could easily keep it another five years, at which point its resale value would be de minimus. It is a lot easier to sell a car at that point, as you don't feel you have a lot of equity in it and thus are not worried about "getting a good price" for it. Hell, you could afford to give away the car at that point.
Second, you've cut your transportation costs in half by keeping the old car. The new SUV or pickup truck, in addition to getting much worse mileage (20 instead of 30) will also have a horrific depreciation curve. If you trade every 3-5 years, you are just jumping from one high depreciation curve to the next.
It also means that you will have perpetual car payments. Some folks think this is "normal" and that having a $500 a month car payment for their entire lives is just something you have to live with. But with cars today lasting so much longer than before, there is no reason anyone should have to live that way. And $500 a month in your retirement plan adds up very quickly!
There are also hidden costs, as I have noted before. Here in Georgia, there is a one-time 7% title tax, which means if you trade every few years, you are paying $1000 to $2000 for every trade. It makes sense, in the long haul, to keep the car you have.
Not only that, but trading in wasn't his idea. So he is totally unprepared for the deal, which is ideal for the salesman, but not ideal for him.
This is, of course, not to say you should keep your car "forever". Again, I hate it when people take a piece of advice and then turn it on its head with straw-man arguments. When a car gets to a certain age, the cost of repairs exceed the value of the car. Even putting new tires on some cars may exceed the resale value. And no, not everyone is going to get 300,000 miles out of their car, unless they drive 30,000 miles a year. There comes a point when it is time to sell. But after three years and 50,000 miles, that seems a bit soon.
So yes, you will have to buy a new or newer car, eventually. And over your lifetime, you will buy a few cars . But it pays to do the research and make sure the car you buy is really the one you want, and not just what some salesman sold you. Because you should keep a car a good long time, and if it isn't what works for you, it isn't a very good deal at any price. And if you keep trading in, again and again, every few years, you can bankrupt yourself in short order.