Savvy Shopper: Make the Most of the Cash You'll Get for Your Clunker
With a few key strokes, a car salesman can turn the cash for clunkers into gold -- for them.
Now that the Cash for Clunkers bill (aka CARS) has been signed, and will go into effect July 23, it's time to think about how to actually apply the cash credit.
Some readers have suggested that dealers will perform their usual sleight of hand with the government credit of $3,500 or $4,500.
What could go wrong? A lot. Let's take a closer look.
Say you want to buy a car with a sticker price of $24,500. You drive your clunker to the car lot and tell the salesman you know your car qualifies for $4,500 credit because the old beater has a 17 mpg combined EPA rating and you want to buy a car with 10 mpg improvement.
The salesman nods in agreement and says you can now buy this fine car for a cool $20,000.
What's wrong with this scenario? The salesman deducted the $4,500 from the sticker price. He should have deducted the $4,500 from the lowest negotiated price.
So now let's say that you are a smooth operator and you block the salesman's gambit and begin negotiating. Well, now the problem is that the salesman knows what your hold card is: $4,500. He's going to keep his price higher knowing that you are psychologically softened up with a nice federally mandated cushion.
So it makes sense -- in fact, it's essential -- to be non-committal about the trade-in until you have the new car price locked in. But rather than pop the trade on the salesman at the last minute, with an attitude that says, "Ha ha! Gotcha!" there is another route. And that is the internet route.
Don't physically go from dealership to dealership to shop. Send out requests for a quote for the car you want to buy by using Edmunds.com's Dealer Locator.
You will get a flood of emails from each dealership. Shift through them for the best quotes and follow up with a phone call to the internet manager. In other words, shop for the replacement car as if you have no trade-in. When you get your best price nailed down, then introduce the trade-in (clunker). You should say something to the effect of "Okay, so the price on my new car is $20,000 (or whatever). Since I have a clunker to turn in that will be $20,000 less the $4,500, or $15,500 - right?"
Also, keep in mind that the sales tax is now deductible. And the way the new car will be taxed (either on the total or the difference between the new car and trade-in) will vary from state to state.
Yes, the Cash for Clunkers incentive is a nice little incentive for new car buyers. But use it the right way to maximize its value. If you do it right, it's a big win for both you and the dealer.
- Posted by
- Philip Reed July 6, 2009, 1:03 AM
- Permalink
- Categories:
- Car Buying, Car Negotiating, The Savvy Shopper, Used Cars
- Technorati Tags:
- car salesman, cash for clunkers, dealership, incentive, negotiating, sales tax, trade-in
"Don't physically go from dealership to dealership to shop. Send out requests for a quote for the car you want to buy by using Edmunds.com's Dealer Locator."
Oh good, this just turned into an Edmunds advertisement.
Most dealership websites also have email portals to their internet departments. You can also pick up the phone and just call the internet fleet department. But the Edmunds.com dealer locator allows you to email about four dealers at the same time without schlepping from site to site. Plus, when they see the email came from edmunds, they know you've read this blog and you are too smart to mess with!
I didn't intend to discuss the pros and cons of using the Edmunds service. My point is that the primary purpose of the is "article" is promote an Edmunds service. I think it'd be best if titled something like "Edmunds Dealer Locator helps you get the most cash for your clunker". At least, the intent could be clear.
Seems pretty clear that the intent here is to show people how to negotiate effectively when using a Cash for Clunkers credit.
brn,
The point seemed pretty clear to me as well. It explained how to negotiate your new car purchase and get the most out of the cash for clunkers legislation. It only threw in the Edmunds Dealer Locator because it's a good tool to notify numerous dealers in your area with only one click to get the negotiating under way. What should Edmunds do, not point people in the direction of this tool and let people go and look up four different dealerships websites, find the contact info, and type the same message four times?
I had hoped to avoid looking at the pros and cons of using the Edmunds service vs doing it yourself.
I don't mean to disparage the Edmunds service, but it has it's disadvantages. First and foremost, it's limited to dealers that are willing to pay Edmunds for leads. Second, even those are limited. There is a limit (might be 1) of the number of dealers that Edmunds is willing to sign up for in the same geographic area.
If these limitations don't bother you, fine. If you really want to have full access to all dealers in your area, you have to do it yourself. The "article" fails to mention that.
I continue to contend that the article's primary purpose was that of an Edmunds advertisement. If not, it would have revealed these limitations.
I'd like to remind everyone that all Edmunds services are free. You can use them or not. I've devoted a lot of time to experimenting with different strategies for buying cars. I believe Dealer Locator is one of many valuable tools. But, yes, absolutely use all tools available -- either Edmunds related or not -- when car shopping. The main thing is to get the best car for the money and have a satisfying shopping experience.
Any dealer that I requested a price quote from has only forwarded a copy of the window sticker. If they have even replied. In my limited car shopping experience salesman have earned their stereotype.
"Also, keep in mind that the sales tax is now deductible."
Can you elaborate on that Phil? I knew that the voucher credit isn't taxed as income but how does the sale tax come into play?
I had a deal negotiated through for a Honda Fit. The dealer then hit me with a Florida Sales Tax (expected) of over $1200, based on the negotiated price, not on the negotiated price minus the $4500 cash for clonker trade in. He claims the $4500 is subjected to the sales tax instead of the normal "negotiated price minus trade in value=calculation of sales tax due." I found out this applies, according to dealers, to factory rebates also. The sales tax is applied, according to at least one dealer, to the agreed price of the car, not to the agreed price minus the rebate, minus the cash for clonkers trade in value. Taxing the $4500 under the sales tax, I thought, was a State decision. Is Florida going to tax the $4500, or $3500, as the case may be??? If so, the program loses part of the incentive to use it.
Instead of paying a little over $900 sales tax, I would have had to pay over $1200 in that Honda Fit Deal. Also, the dealer then tagged a $299 dealer administration fee to the agreed price of the car deal, which made the sales tax higher. The dealers, at least around Central Florida, all seem to have this dealer admin fees, which only mean they pass on to consumers the cost of cleaning the car and preparing it for the showroom when they get it from the manufacturer. I don't think I go for that.