Something I've written up to help people avoid heartache when buying a new car :). It's actually part of a bigger study of mine on methods of deception in society at large, but I felt this section was most applicable to everyday living.

Willingly allowing oneself to be deceived has myriad root causes.  For many, a need for recognition or validation will open them up to false authority.  In others, a feeling of low self worth or lack of confidence makes social pressures awkward; they will gladly give out their money to make the sales pressure stop.  Yet others seek to avoid blame and responsibility but can’t resist the finer things in life.  Used car dealers are notorious for exploiting both of these facts, and we’ll explore some of their methods below:

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Provide free coffee

-Coffee and sugar are stimulants, and will increase the level of agitation in a customer.  Agitation has the effect of amplifying emotional states and decreasing careful and logical thought.  “Can I get you a soda or a cup of coffee?”  Notice that there is usually not food served at dealerships or near dealerships.  If you’re trading in a vehicle, expect to have your keys and license taken from you; you can’t leave to get food during the negotiating process.  Hunger, mixed with sugar and caffeine, is a recipe for poor decision-making.

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Build Confidence/Secret Sharing

-The salesperson uses this technique to create a personal connection with you.  She may tell you about how long she’s been working at the dealership, what a great work environment it is, etc.  She may also tell you an item of personal interest, in confidence, in order to gain your trust.  Example: “I have a lot of friends who ask me how I can get by with this job.  I have two kids at home, and a husband to support, but I always do really well.  I guess it’s just because I love what I do so much.”  By telling you about her past life or current circumstances, she has gained a lot of return for very little investment.  Another common technique is for her to contrast her sales attitude with other salespeople, and tell you how lucky you are you got her.

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Isolate the customer

-Many car dealers will allow the potential customer to wait for extended periods of time.  This solo period allows the customer to become more emotionally involved in their purchase.  Studies have shown that the more time spent in a store, the more likely a purchase will be made.   Good car dealers will use the “Higher Authority” method to isolate their customer and to build trust.  This serves the added benefit of placing the dealer in the position of advocate and confidante.  See below:

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Consult with a Higher Authority; “I need to talk with the Manager about our deal”

-Using a closed door method to fix a price on a vehicle, putting the salesperson in the role of a purchase broker.  This is a false position for a variety of reasons.  First, a good dealership will have already done the math in advance on every car on their lot (that’s been there for 24 hours, at least).  They know exactly how much they’re invested into the vehicle, the cost of the services they usually provide to make the vehicle ready for sale, the cost of storing the vehicle, the likely cost of salesperson’s commission, the amount of profit they’d like to make, and thus the minimum amount they can sell the vehicle for.  Second, the salesperson works for the dealership, not for you.  He is not your friend or business partner, and will not fight for you to get you the best deal.  His commission depends on selling you the illusion that he is your advocate.

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Create Scarcity

-This technique is about forcing a decision/contract on the customer.  Sample speeches follow this pattern: “Well, I talked to the manager, and he said we can do $20,500 instead of $18,000.  After all, this is a [Model Name] and they’re always in high demand…this offer is only good for today; if you come back tomorrow I can’t guarantee you this price.”  A seasoned salesperson will then take this opportunity to point out the features you mentioned liking in the vehicle, while feigning disinterest in your decision.  Alternately, he will give an emotional appeal by telling you how hard he fought for you, and what a great deal he got you on your trade-in or payment.  He may mention the Blue Book value, and what a good price you’re getting.  He may also use this common line:  “Just yesterday I had someone come in and make an offer on this car.  There’s a lot of interest in this car, but if it’s not right for you we can look at something cheaper.”

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            With apologies to car dealers, I must point out the obvious: You don’t need to buy a car from a dealership.  There are many fish in the sea and there are many new and used cars out there.  The moment you start feeling overwhelmed, ask for your keys and leave.  Until and unless you’ve signed a full contract for the vehicle and provided payment information, you can walk away.

            The First Dilemma:  Not wanting to hurt the feelings of the salesperson.  This is the point where all of the salesperson’s confidence-building pays off.  By expressing hurt and disappointment/confusion, a good salesperson can turn a reluctant customer into a sale.  The Solution?  Walk.  Tell the salesperson you are not ready to purchase this vehicle.  Hint, this is where he will throw the “Limited Time Offer” spiel at you.  Say you understand, get your things, and leave.

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            The Second Dilemma:  Not wanting to have wasted your time.  This one can be a big problem for people who fancy themselves as efficient.  The Solution?  Prevent this by doing your research in advance and creating a budget for yourself.  What do you want in a car and how much can you afford?  Present your payment needs to the salesperson as inflexible and have him work for your custom.  If you haven’t taken these steps, just consider your experience at the dealership a paid lesson.  The cost of the lesson was four hours of your life, but learning from it will save you thousands of dollars in the future.

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Personal experiences of the author:  I have been burned many times while buying a car, and slowly learned some painful lessons that I would gladly share with you!  I have bought cars under time constraints several times, and each time walked away unhappy with my purchase decision (I bought the car).  The ONLY good buying experience I have ever had was at a dealership where I set the terms and rules.  I drove away in a car that I was happy with, at the price I wanted to pay (less than the private party Blue Book!), and was in and out in less than two hours.  My experience was dumb luck, but you can learn from it to develop your method.

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            How it worked:

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I knew that I wanted to spend around $7,500 on a car.  I walked up to a salesperson, smiled, and told him I was willing to buy a car from him for $7,500.  I didn’t care about the make/model, as long as it was German or Japanese and less than five years old.  He first tried to sell me a Chevy Cobalt and a Ford Focus.  I reiterated that I didn’t want an American model and started to leave.  He quickly found a Volkswagen and tried to sell it to me for $10,000.  I thanked him for his time and started walking away.  I told him that the car he showed me was too expensive and that I would just shop elsewhere.  He stopped me and asked me to wait while he put in an offer for me.  Moments later he returned with a price of $7,999.00 and told me it was the lowest he could do.  When I looked skeptical he started frantically assuring me that it was the absolute rock-bottom price.

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I knew that $8,000 was more than I wanted to pay, but I felt that everything had gone according to my plan, and decided to buy the car.  Had I held out, I may have been able to get a lower price, but I may not have.  With taxes, I paid $8,400 for the VW.  The Blue Book value at the time was $8,700.  When I sold the car to a private party, I received $6,600, for a difference of $1,800 / 21%. (I was under time constraints to sell the VW, otherwise I probably would have gotten closer to $8,000).  All in all, this was a very positive experience for me.  The salesperson wasn’t very happy, but his happiness is not my job!

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By staying disinterested and sticking to a price, I was able to get a decent car for slightly more than I wanted to pay.  I wasn’t afraid to walk away, and that saved me time and money.