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5 Things You Never Knew About About Car Pricing

When it comes to buying a car, knowledge truly is power. There’s a direct correlation between how much you know and how good of a deal you’re going to get on your next vehicle — new or used. It’s really that simple! Know your model, be aware of prices in your area, have a firm grasp on what’s important to you in a car, and understand the ins and outs of the negotiation process.

It’s not enough to just consult Kelly Blue Book (although that’s a good place to start). There’s a lot you can learn about a particular car that KBB doesn’t list. We created CoPilot for exactly this reason: to help you gather this crucial data in an efficient and and accurate way. But there are other things you should know before you go in search of cars for sale. Here are five of the most important (and lesser known) facts about the business of auto sales.

1. The end of the month is the best time to buy a car.

It’s true! The best time to buy a car, truck, or SUV is usually at the end of the month. Most dealerships have sales goals they’re trying to hit, and there’s a good chance you’ll be talking to a salesperson trying to hit a quota or win a cash incentive. It’s easier to get the price you want. The caveat here is that sometimes the very last day of the month isn’t necessarily the best day to buy. Why? The salesperson may have already hit that quota, the incentives might have already been doled out, or the dealership isn’t working against a strict calendar month in terms of quotas and incentives. So delay … just don’t delay too much.

Similarly, the end of the calendar year is the best time to buy a car. Between end-of-the-year discounts and annual sales incentives on top of those end-of-the-month advantages I just mentioned, your chances of getting a good deal are greatly improved. In fact, sometimes dealers even have annual competitions for selling particular models.

The bottom line: Anytime a dealership is trying to hit a revenue number, customers have the upper hand.

2. Most dealers have a policy on how long they’ll keep a car on their lot.

If you’re in the car business, the last thing you want are vehicles sitting on your lot taking up space. There are costs associated with keeping an inventory, since most dealers take out a loan on the vehicles they’re selling. For every day that a car doesn’t sell, the dealer pays interest on that loan.

Generally speaking, a dealer will start reducing the cost of a vehicle around the 60-day mark. After 90 days, these prices start dropping even further. That’s because, when it comes to cars for sale, a dealer can still make more money retailing in his own lot than he can selling at auction.

Kelly Blue Book is an institution when it comes to pricing cars. But that information is general; it won’t tell you about a specific car. How long a car has been at a dealership is one of those crucial pieces of data we capture with CoPilot. Just knowing that can save you thousands of dollars on your next purchase. (Of course, be sure to examine the car carefully — there might be a reason that car is collecting dust in the lot!)

3. The Finance and Insurance office is one of the biggest profit centers at a dealership.

On average, a dealer makes $1,600 per vehicle from setting up loans and selling add-ons in the Finance and Insurance (F&I) office. Just when you think you’re out the door, that’s when some of the big margins get tacked on. The best way to avoid getting fleeced is to understand this, and to educate yourself about the products you’ll be offered. Since there’s lots of money to be made on the dealer’s end, it also means there’s a greater amount of wiggle room when it comes to price. And the more you know about what you’ll likely be offered, the more prepared you’ll be when it comes to negotiating the add-ons that you actually want.

4. Dealers sometimes raise prices in sneaky ways.

The vast majority of car dealers are honest. That said, there are some bad apples. If a dealer senses that you didn’t see a competitively priced vehicle online, they may try to sell you the same car for more money. In other cases, a dealer will advertise a low price on a Friday to lure customers into the dealership. But if that car doesn’t sell over the weekend, dealers may raise the price. In some states, this practice is illegal. But the simple way to counteract these sneaky tactics is to take a screenshot of a deal advertised by a particular dealership in case the price has changed by the time you arrive.

5. Dealers usually mark up interest rates.

Car dealerships are successful businesses because there are many different ways to turn a profit: mark-ups, add-ons, or low-ball offers on trade-ins. But one thing many people don’t know is that there is typically a 2.5-percent markup on auto loans arranged by the dealership.

Here’s how it works: A dealership makes an arrangement with a bank to get a loan at a certain rate, and they tack a few percentage points on top of that to make a profit. It’s also a really good place to negotiate.

How? Bring your own quote. Go to your own bank or credit union and get pre-approved for a loan (the average credit score needed for a loan is 714 for new vehicles and 655 for used ones). Now you’re guaranteed to get at least that same rate from the dealer, and perhaps a lower one if the dealer wants to compete for your business. Read about how to negotiate car price.

To learn more about how CoPilot can help navigate you through the car buying process, visit us at Copilotsearch.com.