Buyers navigating the car market face a landscape of inflated prices and aggressive sales tactics that can cost them thousands, according to Tomi Mikula, a former car dealer turned buying advocate. New car prices have surged significantly since 2019, with one in five buyers now reportedly paying over the asking price.
Mikula, who spent over a decade in car sales and auto finance before founding the car-buying advocate company Delivrd, is revealing common dealership strategies and offering advice on how consumers can protect themselves.
Addressing Gender Bias
Mikula stated that gender bias remains prevalent in the industry, often disadvantaging female buyers. He described how some sales training encourages staff to direct most communication toward the husband in a couple, even if the wife is the primary decision-maker. This can lead to women feeling overlooked and impacts their ability to secure favorable pricing.
He noted that at one dealership where he worked, deliberately shifting the focus to the woman buyer led to a significant increase in sales, demonstrating how feeling heard can influence purchasing decisions. He recalled CNBC's Becky Quick previously sharing her experience of being ignored and talked over by a salesperson who assumed she was not the primary buyer.
Navigating Dealership Jargon
Dealerships frequently employ confusing terminology to distract buyers from the total price, Mikula explained. Terms like "floor plan assistance" and "invoice price" are often used to create the impression of a smaller profit margin for the dealer. Mikula advises buyers to ignore such jargon and focus on whether the final price is fair, as dealers often recoup perceived losses through financing, service, and add-on sales.
Inspecting for Damage
Mikula revealed that approximately 30 percent of new cars have some form of undisclosed damage, ranging from scratches and dents to paint defects. This damage often occurs during transit or at the manufacturing stage. Dealerships are typically only required to disclose damage exceeding a certain cost threshold, which can vary by state. Buyers are urged to thoroughly inspect vehicles, preferably after a wash, and to document any discovered damage in writing before purchase. If damage is found, Mikula stated buyers should demand a new vehicle or a repair to like-new condition, documented in writing.
Focusing on Total Price, Not Monthly Payments
A common pitfall for buyers is focusing on the monthly payment rather than the total vehicle price. Mikula warned that this tactic, sometimes referred to as creating "room" for add-ons, can lead to buyers overpaying by thousands. He advises consumers to negotiate the full cash price and avoid discussing monthly payments until the total price is agreed upon. Comparing total prices across multiple dealerships is recommended.
Negotiating Trade-Ins Separately
Mikula also cautioned against bundling the trade-in negotiation with the new car purchase. Dealers may offer a higher trade-in value while simultaneously inflating the price of the new vehicle and add-ons. To avoid this, he suggests negotiating the new car price first and then addressing the trade-in as a separate transaction. Researching trade-in values through services like CarMax or Carvana can provide a benchmark.
Scrutinizing Contracts and Fees
Buyers should carefully review contracts for unexpected fees, such as processing, reconditioning, or documentation fees. Mikula noted that dealerships sometimes replace a discount or rebate with a hidden fee, effectively negating savings. He recommends taking a picture of the agreed-upon pricing sheet before entering the finance office and verifying all individual fees, taxes, discounts, and rebates.
The Power of Comparison Shopping
Mikula emphasized that comparing quotes from multiple dealerships is the most effective way for buyers to determine a fair price. Dealers often rely on customers not shopping around. Contacting dealers by phone can help create competition and avoid high-pressure sales tactics often employed in person.
Avoiding Emotional Pressure
Dealerships are trained to use time, urgency, and emotional investment to their advantage, keeping buyers on-site for extended periods. Mikula suggests handling as much of the negotiation as possible over the phone to avoid this pressure. In-person visits should ideally be reserved for when a buyer is close to a final agreement with pricing already established.
Preparation is Key
Mikula likened buying a car without preparation to playing chess against a grandmaster on one's first try, predicting a likely loss. He stressed the importance of researching pricing, practicing negotiation strategies, and knowing exactly what one is willing to pay before visiting a dealership.
Caution with Electric Vehicles
While many electric vehicles (EVs) are seeing price reductions, Mikula warned that some may still be overpriced and subject to rapid depreciation, with bloated inventories as a potential red flag. He suggested that standard hybrids, rather than EVs or plug-in hybrids, currently offer better value as the technology has matured significantly.
Mikula concluded by stating that while he and his company Delivrd offer negotiation services to save buyers time and anxiety, the strategies he shares can be employed by any buyer willing to put in the effort, "work" to achieve a fair deal. He highlighted that there is no "secret sauce" and consumers can empower themselves with knowledge.