Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

Home Cents

Managing your household finances

Entry archive:

What not to say when buying a car
What not to say when buying a car

Home Cents

Lessons learned from a difficult car deal Add to ...

We recently embarked on the tricky task of buying a new car.

The lease on our 2007 Mazda 5 was up, and although we were happy with the car, considering how much we'd forked out over four years of lease payments, the buy-back seemed ridiculously high and just not worth it. Also, we were a bit soured by the hundreds of dollars we had to spend on cosmetic detailing in order to close the lease, so we wanted to comparison shop and possibly try something new.

More related to this story

As parents of two young children, we needed something family-friendly, with ample room to pack for cottage vacations, and we definitely wanted something good on gas -- no massive SUVs -- and something that came with a standard transmission option.

After a bit of research, we found a model we liked at a rival dealership. My husband, Sean, went in for a price quote on a Saturday, and was warned that because it was the end of the month, the price could change with the arrival of new manufacturer incentives.

Four days later, after evaluating vehicles from different car companies, the first vehicle looked like the best option. The sales representative called to ask whether we were coming in to make the deal as discussed. Within hours, Sean arrived at the dealership, confirmed the final price with the sales rep and handed over his bank card for a deposit, assuming everything had been finalized. Mission accomplished, right? Not so fast.

Ten minutes later, the manager appeared and said the manufacturer's rebate had expired. He offered a 0-per-cent financing deal as an alternative. (We were negotiating a cash deal because we were financing it through a bank loan.) The new deal would raise the quoted price by several thousand dollars.

In disbelief, Sean stormed out. He felt as though the dealership had reneged on a done deal, even though no official purchase had been drawn up. It seemed like they had used the earlier offer as an enticement to get him back to the dealership, debit card in hand, then sell him the car at a higher price. We were back to square one.

There's a notion that car dealers employ tricks to persuade customers to pay more for a vehicle (if you're not already familiar with it, check out the "four square" technique revealed by former used car salesman Alan Slone. It's truly brilliant). And while clearly there was nothing illegal about what happened with Sean in that office, it didn't do much in our mind to refute the idea that car dealers are out to "bait-and-switch" you into a higher price.

Could we have done more to prepare and save ourselves the wasted time?

CAA offers a fantastic guide to buying a new car on its website. They go through how to select a vehicle to meet your needs and how to set your budget. Most importantly, they give suggestions on how to make an offer.

CAA advises that consumers get to know the pricing terms when it comes to new cars. The manufacturer's suggested retail price, (commonly known as the list or window sticker price) is set by the manufacturer. This price includes all factory-installed options, preparation and freight charges.

What you really want to know is the dealer invoice price, the price the dealer pays the manufacturer for the vehicle. Through Car Cost Canada, for $39.95, you can get dealer invoice pricing and find out where your starting point should really be when it comes to pricing.

Says CAA, "A reasonable offer would allow the dealer at least 3-per-cent mark-up of the invoice price as profit." So once you find out your car's invoice price, add 3 per cent and go from there. CAA also advises customers to negotiate terms, like down payments, interest rates and monthly payments.

There was another suggestion that particularly resonated with us -- CAA advises that consumers "get everything in writing, including all promises made by a dealership." That's something Sean didn't do. Accordingly, the sales rep's verbal agreement was pretty much useless.

Another interesting tip from CAA: "Before signing anything, learn how to protect yourself as a consumer. Signing a sales offer and leaving a deposit represents your commitment to purchase and is legally binding. The dealer has the right to keep your deposit if the deal is not completed in order to cover his costs. If you wish to have your deposit returned in the event the deal falls through, include a statement to that effect on your offer to purchase. A deposit of $500 is adequate."

In the end, we decided to go with another Mazda 5 and we're happy with the deal we ended up with.

But our experience with the other dealership left us with a bad taste. We'll definitely be more wary the next time we talk prices with a car dealer, and keep our debit cards safely stowed until we sign on the dotted line.

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories