QuestionI am a USAA member and they offer a car buying program called Auto Circle, where they have approved dealerships and take the negotiating out of the equation for you and guarantee Kelley blue book on your trade in, etc. Upon reading the reviews, I see some folks love the program and others feel bait n'switched when dealers do not have the specific car available they saw online. What do you think of these programs? I usually have by brother handle car buying negotiations for me as he's more experienced and comfortable w/ it, sort of enjoys it, unlike most people. Of note, I am interested in a 2008 CRV or Rav 4 and am trading in a 2003 Subaru forester w/ 90k miles which threw a cat code and is due for a timing belt, due for inspection at the end of Oct-I don't want to invest that amount of money in that car. I have excellent credit but am in the midst of refinancing our mortgage, set to close Nov 15 so feel torn about what to do when. I'd appreciate any advice, feedback. thanks so much, L
AnswerThere are numerous services like this out there. Most of the ones I am very familiar with hook themselves up to a big credit union or two and feed from their membership base. Back in 1996 after I was finally given full control of my first dealershipm (an independant store not a franchise) One of the first things I set up was an in house new car brokerage/buying service. These services can be very helpful advocates who know what they are doing (you hope) and can make the process so simple and easy that you never have to step foot in a dealership at all....they deliver the papers and the car to your home or office. More times than not they are simply opportunists selling nothing of value and "tweening" themselves into your deal and extracting an undisclosed "vig" for themselves at your expense.
Services like this who are reputtable (and I am almost certain that any company connected to USAA ...the bank and insurance company of this nations fighting men and women among others) is a totally professional legitimate business offerring a totally professional service to USAA's members. These companies are (generally) required to disclose the role they will be playing as well as their fees when the relationship starts. THEY ARE ABLE ACT EITHER AS BROKERS OR AS A DEALER. BROKERS MUST DISCLOSE THEIR FEE STRUCTURE IN ADVANCE AND DEALERS DO NOT. BROKERS PUT BUYER AND SELLER TOGETHER AND A DEALER IS THE SELLER AND IF HE IS SELLING YOU A PREOWNED VEHICLE CAN LITERALLY CHOP YOUR HEAD OFF WITHOUT YOU (POSSIBLY) KNOWING AND WITHOUT EVER HAVING TO DISCLOSE IT TO YOU. DONOT WORK WITH ANYONE WHO WANTS TO ACT AS BOTH BROKER AND DEALER.VERY BAD! VERY UNETHICAL!
This next bit of advice will save you 1000's of dollars and YOU SHOULD NEVER ENTER INTO ANY TRANSACTION TO BUY A VEHICLE ANY OTHER WAY ...EVER!!!!!! SELL THE TRADE YOURSELF .... NEVER TRADE IT IN HERE IS WHY:
A dealer buys cars at wholesale and sells them at retail. when you trade your car in he is able to manipulate the numbers on paper to make you feel like you cut a fat hog based upon the amount he is showing your trade being worth. Your trade in is worth what it is worth and no matter if he shows you getting $1,000 for it or 10,000 for it that same car is going to only have one value on the dealers books and that is the ACV or actual cash value. (The Wholesale Value) when you trade your car in all you are really doing is selling your car to the dealer for it's ACV or wholesale value. People think they need to trade it so the dealer will pay off the existing loan if there is one ...and that is NOT accurate (it's sometimes easier to do it that way but it's also NOT the smart way or the best way to buy his car or to sell yours.DON'T DO IT! I CAn't emphasize that enough!
Here are the 3 ways we make money on a car deal:
1) We sell the customer our car for more than we paid for it! (Front end Gross)
2) We take your trade in for less than it's ACV (also front end gross profit)
3) We provide finance and insurance department services where we provide you with vehicle financing options (AND WHERE WE ARE ALLOWED TO WRITE UP THE INTEREST RATE AND PARTICIPATE IN THE BANKS ACTION ON THE LOAN...THEY PAY THIS PARTICIPATION TO US WHEN THE DEAL FUNDS (USUALLY 70% OF THE EXTRA FINANCE CHARGES WE CREATE FORM THE BANK AND THAT YOU HAVE TO PAY BACK) For example if your credit profile and credit scores tell us you can get financing through one of our lenders at 5.99% then most of those banks will allow us to write the loan at 7.99% and whatever additional income those 2% pts generates through the term of the loan ...the bank will pay us 70-100% of that extra money!!! We also sell Service contracts, GAP insurance Life Accident and health insurance Alarm systems, undercoating and paint sealers, 'tires for life" ..."engine for life" "roadside assistance, auto theft protection systems, GPS real time theft systems, Lojack etc. We make a nice markup on all of these products from 99% to 15/20% depending on the product.
The average auto dealer profit from all 3 of these sources ...per vehicle sold at retail (PVR) is right around $2,400-$2,700 each!
Of that total average profit per car sold roughly 40% of it comes to us from the finance and insurance departments. The people we have in our F and I departments are some of the most highly trained and highly paid members of our team.
As far as your house deal is concerned ...yes I am certain a new auto loan appearing on your bureau will change your debt to income numbers some ... if your new car payment is 300 and your old payment was zero then whether or not it will impact your ability to get your home loan closed depends entirely on your income. For most people it has no impact on the mortgage process at all ...it just depends how close to the DTI line you are sitting.
I will expand on this next part more thoroughly when I answer your next question ... HERE IS ROGER'S #1 RULE YOU NEVER NEVER BREAK WHEN NEGOTIATING THE PRICE OF A NEW CAR (OR A USED CAR) ...NEVER NEVER NEVER NEGOTIATE PRICE OR EVEN DISCUSS PRICE 9EXCEPT TO FIND OUT HOWN MUCHY THEY ARE ASKING FOR IT) WHILE YOU ARE SITTING AT THE DEALERSHIP!!! DO NOT DO IT !! NEVER! Sitting and working numbers at the dealership alloow the dealer to control every facet of the process ...;they get to call the dance and the tune...and you are the customer not them. Feel free to go to the dealership to see a car you might be intetrested in ...touch it, drive it... experience it in every way you want... then take the salesman's card and thank him for his time and LEAVE! No matter what anyone says you will not get a better price if you are sitting in the showroom... the boss doesn't need to see that you are serious about buying the car based upon you sitting in his store... it's another way for the dealer to take control of the process from you .. and you are the customer...right? The negotiation process takes place on the phone or buy email or by fax while you sit comfortably at home!
