I’ve always wondered what it would be like to be car salesman.  What goes through their minds as soon as a potential customer enters the lot?  Do they see the new comer as fresh meat while anticipating the kill (sale).  Do they profile the customer based on the car that they drive and clothes that they wear?  I came across an article on edmunds.com that answers all these questions (and more).

The article is called “Confessions of a Car Salesman” and it’s a report of how an edmunds.com reporter went undercover and found a job as a car salesman.   The article is quite long, so I took the helpful tidbits that may be useful the next time you decide to purchase a car.

… process begins by asking the customer how much they want for a monthly payment. Usually, they say, about $300. “Then, you just say, ‘$300… up to?’ And they’ll say, ‘Well, $350.’ Now they’ve just bumped themselves $50 a month. That’s huge.” You then fill in $350 under the monthly payment box.

… you could use the “up to” trick with the down payment too. “If Mr. Customer says he wants to put down $2000, you say, “Up to?” And he’ll probably bump himself up to $2500.” Michael then wrote $2,500 in the down payment box of the 4-square worksheet.

This is called the “up to” technique/trick.  A small $50 raise in the monthly payment may not seem like a lot, but it ends up being $3,000 extra at the end of a 5 year term.

Lesson:  Negotiate the final selling price (even for a lease) instead of monthly payments.

The final box on the 4-square was for the trade-in. This was where the most profit could be made. Buyers are so eager to get out of their old car and into a new one, they overlook the true value of the trade-in. The dealership is well aware of this weakness and exploits it.

Car dealerships can make a killing on trade in’s and usually look to low ball the offer since it’s your “old car”.

Lesson: Look up the value of your trade-in before you go car shopping.  Also, don’t mention a trade-in until after you have negotiated your purchasing price.

“But here’s the beauty of this system,” Michael said, “these numbers aren’t coming from you — you’re still the good guy. They’re coming from someone on the other end of the phone. The enemy.”

This reminded Michael of something and he laughed. “Here’s another thing. Never give the customer even numbers. Then it looks like you just made them up. So don’t say their monthly payment is going to be $400. Say it will be $427. Or, if you want to have some fun, say it will be $427.33.”

So what you do is this,” Michael pretended to pick up the phone again, “you ask the desk, ‘What did we get for the last three Tauruses at auction?’ Then they’ll give you some figures — they’ll say, $1,923, $2,197 and $1,309. You don’t have to say anything to the customer. But he sees you writing this down! And he’s going, ‘Holy crap! I thought my trade was worth $6,000.’ Now it’s easy to get it for $3,000. That’s a grand extra in profit. And it’s front-end money too!” (I later learned that front-end money was what our commissions were based on. Back-end money was made on interest, holdbacks and other elements of the deal.)

These are some examples of sales tactics that car dealerships use.  The good cop, bad cop routine (using the phone), and pricing strategies.

Lesson:  Be aware of the number games that car sales people can pull.

  ..whenever someone failed to accept the “first pencil” (the high numbers they begin with) Michael would always have “an idea” or “remember” a rebate or special interest rate program. This avoided the head-to-head confrontation. It also promoted the sense that we were working in the customer’s best interest.

The dealership can always go lower than the sticker price.

Lesson:  Always ask for a better price!

If the minivan was selling for a sticker price of about $24,000 with options and tax, a 60-month loan at 9 percent interest would be $475 a month. However, I later checked Edmunds.com True Market Value prices and saw that this van should have been discounted about $1,700 from the sticker price. Then, monthly payments at 9 percent would have been $430 a month. Over the life of the loan this was a $2,520 difference.

This goes to show that a little pricing research can go a long way when purchasing a new vehicle.  In the states, edmunds.com is popular.  Here in Canada, I’ve read that CarCostCanada is popular.

Lesson: Buying a car is just like buying any other big ticket item, research and due diligence is required!

From my commission check it was clear that the minivan couple could have made a better deal and saved several thousand dollars. So where did they go wrong? Well, first of all, they negotiated as monthly payment buyers, rather than bargaining on the purchase price of the vehicle. When you agree to be a “monthly payment buyer” several variables are introduced that are harder to keep track of: the term of the loan can be extended up to 72 months (six years!) without your awareness and the interest rate can be raised. When you bargain on purchase price, it is a cleaner, simpler way of negotiating.

 As I mentioned above, it’s always best to negotiate final purchase price rather than monthly payments.  Negotiating monthly payments may end up costing you more in the long run.

In Summary:

  • Car sales people commissions are based on the profit that they bring in.  That’s probably the reason why they always push for rust protection, scotch guard, extended warranties.
  • If you’re set on purchasing a car, tell the sales person that you’re going to pay cash.  That way, you can negotiate a final purchase price instead of discussing monthly payments.
  • If you have a trade-in, don’t mention it until you’ve negotiated your final purchase price.
  • The more educated you are about the market value of a vehicle (along with the trade-in), the better the deal you’re going to get.
  • Never feel pressured to buy a vehicle.  The whole meeting with a car sales person is designed to make you feel “rushed” into buying.
  • When negotiating on the price of the vehicle, always be prepared to leave the table.

You can read the whole story Confessions of a Car Salesman.  Make sure you get comfortable though as it’s a pretty long article but a great read none the less.

Do you have any tips when purchasing a new/used car?

Read about how about MDJ reader got a great deal when buying a new car.



  1. nikki on May 5, 2009 at 1:51 pm

    i have a question i went to a dealer over a month ago and look at 2 cars i told him i may think on it and in between time im looking for something else they didnt have the car i wanted this dealer calls me everyday just about i never answer the phone he left a month of messages lol i pick up the phone i was annoyed and told him that i didnt like what he was trying to sale me and the price for the car according to the book was 2500 too much i went back right at closing time cuz i know he would be ready to go home so wont spend much time and he notice me right away havent seen me in a month only once are they suppose to call a customer like this its kinda freaking me out also he is flirting on the side but i know its all about commission for him but are they really suppose to call u like that??????? just wondering

  2. jamie on May 31, 2009 at 9:51 pm

    I read the whole thing. Very good job. I’m impressed. I knew a lot of this stuff, but the inner perspective was quite enlightening. I have never been a sales man. Never sold anything. My skills lie in field work for my company and I hate having to go to the company HQ for anything. Because all that is there is what you described in detail. I cannot stand it. Again, good job. I enjoyed the article. Thank you.

  3. […] in an one-off transaction or in industries where ethics are rather loose (see buying a new car), going into negotiations with your guard up is recommended but, as a white-haired lawyer once said […]

  4. […] With one of our cars already 8 years old, the repairs are starting to add up.  So we’re currently in the process of shopping for a good used car/compact SUV, preferably a late model that is off lease with low kilometers.  We are leaning towards foreign models (Honda/Toyota) as we have had good experiences with them in the past.  Do you have any used car buying tips?  Should I be looking at dealerships?  Or perhaps private sales are the way to go?  Here’s an article I’ve written in the past about negotiating your new car purchase. […]

  5. Craig on July 2, 2009 at 11:55 am

    If you live near the border, make sure to check the price in the US, the difference can be very dramatic. Importing was easy, and warranties were honoured.

  6. Shane Payne on July 2, 2009 at 7:38 pm

    The sales practices I have read about in some of these posts are a big part of the reason car salesmen have a bad name. I have gotten out of the business but I was in it for the last 2 years. I knew it was time for me to get out when during a time when GM was offering employee pricing plus rebates. After telling the customer what the price of a vehicle was, the customer proceeded to ask me how much more I could take off of the price. I had shown customer the invoice and the employee price and then took into account the rebates available. I am going to say the discount was somewhere in the 8k range. When I informed the customer that there was no where else to go the customer said to me, “Well you would think that the shape the manufacturer is in they would give a bigger discount”. My reply made me rethink my career. My reply to customer was, “If people were more willing to pay for vehicles manufacturers would not be in the shape they are in. I have sold Ford, GM, Honda, Toyota, Nissan, and Kia. Of those manufacturers, Honda, Toyota, and Nissan are the strongest and offer the least amount of money off. The customers also have a different mindset. You pay for what you get. There is a reason the resale value is so much better. That in turn gets you a better trade in allowance. It is all linked to discounts and rebates. When I left the business I was making less than minimum wage due to the amount of hours and the lack of sales. Think about that the next time you walk onto a car lot. I am not saying take the first numbers that you get. The dealers I have worked for will usually discount a vehicle. New cars have a lot less mark up than people think. All dealers pay the same amount for the same vehicle. There is no one way to get a good deal. Do your research. There is nothing wrong with that. Dont expect to get 3k off a 15k vehicle. Certified pre owned cars are good to go with as well. You can get something with 10 k miles on it for a significantly lower price with most cars and still have a lot of warranty left.

    • FrugalTrader on July 2, 2009 at 8:08 pm

      Thanks for the comment Shane. Do you have much experience in used car sales? I know that margins are slim for new cars but I’ve heard that used cars are more lucrative. Any ideas what kind of profit margin a typical used car would generate?

  7. STone on July 13, 2009 at 3:27 pm

    I would suggest to avoid financing with the dealer if at all possible. That way, you take monthly payments out of the equation. Next, as was stated above, do your homework. Know what your trade is worth and what you want to spend on the vehicle you are looking at.
    We bought a new vehicle 2 years ago (used but very low kms, felt new to us:). I knew that if I sold our trade in privately, I could expect $1,500 for it. Therefore I was willing to accept anywhere from $1000 up from the dealer for the trade. Next, we found the car we wanted, it was listed at 18,900 and they told us they would give us $1,500 for the trade. I said I was happy with the trade value, but I would only pay 17,500 for the car. Salesman said he couldn’t do it, so I gave him my number and said to call me if he changed his mind. 2 days later I get a call from the salesman, they wanted to keep the price at $18,900 but they would give me $3,000 for our trade in. Deal. They get to say they sold it for list price and I got the $1,500 off that I wanted. Never be afraid to walk away from the deal, the sales guy is not going to let you walk away when a deal is close, especially after they have invested time with you.

  8. Salesgal on August 18, 2009 at 6:21 pm

    I am new in sales and I have found this article interesting. Being new to the business I have to say it was insightful to see some of the experiences people have had. Part of me was also a bit annoyed. As has been mentioned, most sales people make a percentage of the profit. So yes, the dealership makes money off a sale..shouldnt that be the case? I have been successful in the few months I have been doing this and I did not use snakey tactics to be this way. I have been completely straight forward with my customers, followed up when I said I would, and found answers to all of their questions (if I did not know them right away). We are not only trying to sell you something that we believe in (at least I know I do, my family have been GM dealers for over 50 years and I am a true GM believer), but also a service, we really ARE trying to make things as easy as possible for you (again, of course there are some salespeople that arent, but theres people who work at McDonalds that are brutal too). I know when I go to the Manager to set up a deal, the first thing out of my mouth is ‘What is the best we can do for Mr/Mrs … on stock number …”. I try to make the best deal for all parties involved. However, when I get those customers who walk in and just ACCUSE from the get go, I let them walk. I don’t speak with people that way and I expect the same courtesy. I politely explain to them that the car they ‘saw for 2500 cheaper’ is NOT the same car, or that if it is I would be happy to work them a deal. If that’s not good enough, and their mind is made up to be negative, no one has time for that. I have learned some people thrive on being miserable. That said, if you want to have a reasonable discussion (500 over cost is not reasonable…the people who got this were very lucky, or their dealership was very stupid..but nonetheless, congrats to those who achieved it) most sales people will be able to help and be more than willing to do so. At least where I am they will..

  9. James on August 25, 2009 at 2:36 pm

    Telly thats not a thing of the past when it comes to reliability about ford and toyota and honda other cars when it comes to the honda civic your smart in picking the 06 model because that one did have problems BUUUTTTT compared to the rest of the line of cars of civics all the way up to 09 and other honda makes like the fit compared to gm honda is way better on reliability thats the main reason when buying used it costs more cause your going to have fewer problems

  10. Brian on January 11, 2010 at 9:45 pm

    Ahhh yes, the evil necessity of buying a car (a depreciating asset)… I know how most ppl buy their cars, I’ll show you how I buy mine…

    Suppose you buy a $20,000 car and let’s be flattering to say when you drive it off the lot it is still worth $19,000. In 5 years time, you have a car still worth 10K and you want to buy a new car. I will assume that your new car is going to cost $30,000 (inflation, next model up, etc.)… WHen you apply your 10K trade-in, you are now 5 years later needing to come up with another $20,000… Welcome to the treadmill my friends!

    Why don’t you do this:

    Take your 20K and buy an investment that will appreciate in value. Then go to the bank, borrow 20K paying 6% interest only. Your payments per year are $1,200 per year (or $6,000 after 5 years). Then, in 5 years, look at your investment you’ve purchased that increased by 10% per year in a tax-deferred non-registered mutual fund – it’s worth $32,210 (for simplicity, we will ignore capital gains taxation). Now sell your investment, pay the loan, and you have $12,210 cash.

    Let’s summarize:

    Most Canadians look like this when on the treadmill – $0 cash + car +20K out of pocket…

    Here’s the option I gave you – $12,210 cash + car + out of pocket $26K (interest payments plus your 20K to pay the bank back after 5 years)…

    But really, what we do is take the 20K initially and buy the car. Take the banks 20K and purchase the investment paying interest only … When you borrow to invest, the interest is tax deductible. Assuming a 40% marginal tax bracket, your net cost is only $3,600.

    It’s your call…

  11. Raskulz on July 14, 2010 at 6:08 pm

    Excellent information, Im going to be buying my first car with the next year. I will take this information to help me out as i will be buying my first car brand new.

  12. Raskulz on July 14, 2010 at 6:35 pm

    Just a quick tid-bit im not sure if it will work, but bring your own pen to the dealership when you are going to buy. Im just thinking that when the salesman are ready to “pounce” they will hand you there pen and want you to sign without hesitation. Bringing your own pen may help you, so you can read through and make sure the salesman isnt trying to rush something past you, im sure that when you take the paper he wants you to sign and refuse the pen he will be taken back and think you are wiser than we all may be. atleast me =P a first time buyer

  13. Jim Nichols on July 28, 2010 at 10:41 am

    I read the column a few years ago. It needs to be on the front page of every Sunday paper in the nation, serialized. People have no idea. The car business is, for the most part, organized crime. And I have for years, laughed at those who’re going to “save money” by buying ANY new car. Last week, I bought the kind of car you only hear about, an ’88 Buick LeSabre Limited, for $500. Son took car from 83 year-old Mom, who’d been driving it for 5 years w/ no license. Like new, 102K. So…I really don’t CARE what gas costs, and I get 26 mpg to boot. For the new Hybrid crowd, with their socks-under-Birkenstocks, it’s more about saving the planet, than saving money. Equally misguided effort.
    I tried several times in the past, to get rich by selling cars…But I had a problem…I was ‘too nice”. My most vivid memory of “how the game works”, is when in 2001, an elderly couple came in to buy a new Oldsmobile. He was a local minister, and their trade-in was only three years old. Nice car. When the dust settled from all the juggling of the fabricated numbers and the confusing paper, and the discount-to-anybody number was substituted for the “trade-in value”, the slimy sales mgr. literally STOLE their nice old car. In reality, they got NOTHING for it. Zero. They cleaned it up and soon sold it for a LOT of money. And the used cars is where the heavy profit lies. NOT the new cars. But you know that.
    The couple headed for the door, him with his cane, and her holding onto her arm. I was the only person in that snickering, gloating group that rushed to open the door for them.
    The door closed behind them, and before they were even off the sidewalk and into their criminally-priced new car, the sales manager was dancing around the show room, and he yelled loudly, “We ripped their phugging THROATS out !! ”
    There oughta’ be a law…
    Jim Nichols Billings MT

  14. Jim Nichols on July 28, 2010 at 11:01 am

    I haven’t read all the comments, but..
    If you MUST have a new car, go find the exact car, AT NIGHT, on the dealership lot. Write down ALL the window-info. Then research it on edmunds.com. and determine just how much it COST the dealer. Then, decide how much you want them to “make”, on you. Say $300. Go to your bank, and get a pre-buy OK from your banker, to finance it for that sum. Write a check to the dealer for that amount.
    NOTE: If there’s a car you need to trade in, DON’T do it. Look up the True Cash Value of your car in edmunds.com, and run an ad in your local FREE paper (Thrifty Nickel, The Shopper) after you have it “detailed”, and correct any glaring problems, like a missing hubcap, burnt-out headlight, etc. Sell it yourself. It’ll be fun. And you’ll get CASH, not an imaginary, fabricated “trade-in” value.
    Go into the dealership, on the LAST DAY of the MONTH (very crucial timing) and drive the car. Allow them to “do the ritual” and put on their show. When it’s over, and you have their numbers in front of you, thank them, and tell them, “I’ve already decided what I’ll pay for the car.” Then, take out your pre-written check, and lay it on the desk.
    The salesman will look at it, and laugh. At that point, you STAND UP. He’ll get excited, and say, “Wait! Sit back down. Let me go talk to my sales manager!” You may be there for a while, but, they WILL sell you the car, for your offer. They desperately need one more car “on the board” for the month.
    It’s true. You win.

  15. Gerard on June 11, 2011 at 3:51 pm

    Jeez, sometimes I am so glad that I ride a bike…

  16. moncherion on September 18, 2011 at 11:04 am

    The rule about negotiating the final price and NOT monthly payments is incredibly important but also seems pretty basic. Oddly enough though, we don’t think that way when it comes to buying homes. We got to the bank and figure out what monthly payments we can afford and then look for houses at or near that peak based on the interest rate we locked in at during pre-approval.

  17. Nathan Dickson on September 10, 2012 at 4:36 pm


    Car sales men, in the province of ontario are regulated by a governing body by the name of OMVIC. “the ontario motor vehicle industry council”.
    any misleading information leads to a $50,000k fine on a salesman, with an additional $100,000k fine to the associated dealer.
    WE show up for work for free everyday. no pay until we have not only sold a car, but done all of our due-dilegance to ensure the car is handed to the customer in a timely and professional manner. we are certified in auto-motive law and ethics.
    so to say that we are the one’s ripping customers off for them having to pay a market up when it comes to a retail item.
    im sorry but that is grossly misunderstood by the masses.

    we work long hours, with no guarentee of what our pay will or wont be come the end of a pay period.
    selling isnt easy to begin with, and withholding any offer from a customer does not benifit any salesman. they are offers made to the purchaser only.

    is it too much for a sales man to ask, to make a couple hundred dollars after dealing with a customer who has come in with all of these horror stories embedded in their minds after doing “their research”…

    its sad that so many people are so petty these days…

    you argue about the 200% mark up on a bag of milk or banana’s, but you will scream about the less than 10% mark up (at best) of a new car imported from japan….

    yes to all the customers reading this…. please do your research…
    you are being mislead, and its mostly by the non sense you are reading here….

  18. Jay on October 12, 2012 at 1:08 pm

    From my (considerable) experience with dealerships, the commission for extended warranties, 3M, undercoating, Scotchguard etc all goes to the person arranging financing for you, not the salesman.

  19. Gregg on December 16, 2013 at 4:49 pm

    Hi, Nice post indeed. I wanted to share something I learned and what was previously said. It’s all about “Walking away from the table”.

    I recently purchased a Acura TSX which I made on thier website totaling $38,977.
    When I went to the dealer I explained that I saw the car on a commercial and wanted to purchase it with cash ( with all the perks I customized with it online ) and do you know what the Salesman said ? He could do all that for me for “Just under $42,500” Which ended up being $41,700

    When I explained to him that I had roughly $40k cash and was willing to spend it, He said he could give me a flat rate of $40k(get this) + tax that I could “Easily put on my credit card and pay it off next month”. ( The original $38,977 was INCLUDING tax. ) When I offered to pay $37k flat He grined and said “We need to get real if we’re going to make a deal.” So I bumped it up to the Website’s price and said “Ok $39k.” Again he smiled and said “Ok kid I might be able to bring it down to the $40k flat.” Now I was getting somewhere. I offered a deal to him that I would give him $38k flat and take the car right now (Which was $1000 off the price I was going to pay) and he disagreed. So I got up and said ” Thank you for your time and patients, but I do not think I can afford “his car”. When I stood up, He quickly called me back and said “Will you really sign the papers now if I can give it to you for $38k flat?” I said OK I can do that, signed off on paper, came in 2 days later with the cash and Drove off with a brand new car.

    LESSON: Study this post and how I negotiated. It will ALWAYS get you a better deal, and in some cases..If a Salesman sees you are about to walk away from a sale he had in the bag, he will do what he can to sell you the car, for less of a commission. He gets payed either way….Just not as much.

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