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9% of Americans trust car salesmen, a Gallup poll reported. Only 26% of consumers feel confident when shopping for a car a Capital One survey found. And, 87% of car shoppers dislike the dealership experience, says Rethink Retail.
Why is buying a car so damn difficult? Ray Shefska spent 43 years running car dealerships, and in today’s episode he, and his son, Zach, discuss how and why the car buying process is broken.
Buying a new car is no simple task. Stepping foot into a dealership can sometimes feel like you’re entering a new world. The lingo, the slang, the terminology. It’s all intimidating. Not to mention the fact that engaging with many car dealers is like pulling teeth to begin with. Throw in foreign words, phrases, and jargon, and it can be even more challenging to feel comfortable and confident when buying a car. This is why we created The Car Buyer’s Glossary of Terms.
We took the time to compile a glossary of terms, acronyms, and jargon you should know before going into a dealership. Click on any of the links below to jump to a specific section in The Car Buyer’s Glossary of Terms. If you think we missed a word, phrase, or acronym that belongs on this list, please let us know in the comments below.
Without further ado, here is The Car Buyer’s Glossary of Terms.
Acquisition Fee
An acquisition fee, also commonly referred to as a bank fee, only comes into play when you lease a car. This fee is charged by the leasing company to initiate the customers lease and is required on all leases. The lease acquisition fee usually includes GAP insurance to protect both the lessor and the lessee in case of vehicle damage resulting in a total loss. The acquisition fee can range from a few hundred dollars, to more than a thousand dollars. This depends on the leasing company and the car being leased.
Additional Dealer Markup
Additional dealer markup, or market adjusted pricing, is a tool that dealerships use to increase the asking price for a particular vehicle. This is typically listed on the addendum sticker that is placed next to the Monroney sticker to reflect any dealer installed items and adjustments. This usually occurs on vehicles that are in high demand and short supply.
Annual Percentage Rate
Annual percentage rate is as common a term in a car dealership as it is at your local bank. Commonly referred to as APR, the annual percentage rate represents the annualized interest rate on a loan (or credit) of any sort. Instead of getting an auto loan at 0.0000110 per day interest, you get a loan at 4% APR. The annualized interest rate is simply easier to understand and reference.
Auctions
Car auctions represent the underpinnings of the retail car market. Registered car dealers can sell and buy cars at used car auctions across the world. Manheim is the largest used car auctioneer. Dealers have access to manufacturer sponsored auctions where dealers franchised to sell those brands can buy retired company cars and captive lender lease returns.
Blue Book Value
Blue book value refers to the often referenced price sourced by Kelley Blue Book (kbb.com). Kelley Blue Book is well regarded in the automotive industry, having their used-car pricing guide in publication since 1926.
Closed-End Lease
Most car leases are of the “closed-end” variety. A closed end lease means that the customer is not obligated to purchase the vehicle, or guarantee the lease end residual value of the vehicle at the end of the term. This means the customer does not have to buy out the car at the end of the lease. With an open end lease the customer is obligated to guarantee the lease end residual value of the vehicle.
Dealer Incentives
Dealer incentives and factory incentives are one and the same. They are the incentives that the manufacturer pays to the dealership, and dealership personnel in order to encourage the sale of certain vehicles. These incentives can also take the form of monthly and quarterly sales goals as determined by the manufacturer.
Customer incentives, such as rebates, special financing options, and discounted lease rates are what the manufacturer will advertise and underwrite. These are put in place to encourage the sale of certain cars.
Dealer Addendum Sticker
A car’s Monroney sticker provides an overview of relevant information about a new vehicle. Not included on this window sticker are any dealer added accessories. For example, dealers may add aftermarket wheels, undercoating and other features that can raise the asking price above the MSRP. These modifications will appear on a secondary window sticker known as the dealer addendum sticker. This ensures that you, the buyer, have full clarity into what the car includes, and what came from the manufacturer as well as what the dealer added.
Dealer Markup
A dealership markup may refer to the difference between the price a dealer pays to acquire a vehicle (often the wholesale or invoice price) and the price at which they sell it to the end consumer. In some contexts, it can also refer to the markup added to MSRP by the dealership. See Market Adjustment.
Destination Charge
The destination charge is part and parcel of a car’s MSRP, and is listed on the window sticker as a separate line item that makes up the total manufacturer’s suggested retail price. The destination charge is not something that dealers pass on to the customer. It is a charge that the manufacturer imposes.
Disposition Fee
The disposition fee is non-negotiable, and only charged to a customer when they return their lease car and do not lease or finance another car through that lender or leasing company. This fee is charged in addition to any excess wear and tear items that might be discovered at lease end. The disposition fee helps to mitigate the lenders cost to recondition, transport and register the car for sale at the auction.
Document Fee
This is a fee that the dealerships charge to help offset the costs of non-revenue producing dealership personnel such as accounting staff, title clerks etc. Most states cap the dealers as to how much they can charge for the documentation fee, and this amount varies from state to state.
Down Payment
As with any loan, the down payment represents the cash paid upfront to reduce the total size of a loan.
Early-Termination Fee
Another charge only applicable to leases, an early-termination fee is exactly what it sounds like, it is an additional charge for cancelling your lease before the term is over.
Excess Wear Charge
Yet another lease specific charge, excess wear charges are incurred on leased vehicles that (upon their return) contain dings, dents, scratches, tears, etc. At the lease-end inspection (click here to jump to lease-end inspection), you will be notified if there are any excess wear charges. This also includes if you exceed your allotted mileage for the term.
Extended Warranty
An additional product sold by the dealership, that is sometimes referred to as a service contract. It covers service and repair costs that may be incurred beyond the vehicle’s factory warranty.
Finance & Insurance
One of three revenue generating sections of a car dealership, the finance and insurance department is where you’ll sign your paperwork for your new car. The F&I manager will walk you through all of the documentation of your purchase, as well as give you the opportunity to purchase additional products (extended warranties, tire and wheel protection, etc.)
Floorplanning Costs
The cost incurred by a dealer to purchase inventory in their dealership. More on dealership floorplanning can be found here, on the NADA website.
Gap Insurance
Exactly as it sounds, gap insurance provides supplemental coverage for the difference between the cash value of your car and the amount you owe your lender or leasing company at the time of a claim. For vehicles with steep depreciation, gap insurance can be an attractive option.
Interest Rate
The proportion of a loan that you are charged for the privilege of being lent money.
Invoice Price
The price a dealership pays the manufacturer for a vehicle they have purchased.
Lay down
This is dealer slang for a customer who accepts the first offer during negotiations, or chooses to not negotiate at all.
Limited Warranty
Manufacturers offer limited (in terms of scope and term) warranties on their new cars. Terms can be as few as a year or two, and scope frequently does not include general wear and tear items like tires and wiper blades.
Lease-end Inspection
The lease end inspection is mandated by the leasing company. The inspection includes recording the miles on the odometer, inspecting the vehicle for excess wear and tear, including such items as tire wear, scratches, dents, dings and windshield damage, and confirming that no aftermarket accessories were added to the vehicle. Oftentimes the lease end inspection is done by dealership personnel on the lender’s behalf, or if a customer prefers, a third party inspection can be requested.
Market Adjustment
A car dealership market adjustment refers to an additional charge or discount applied to the manufacturer’s suggested retail price (MSRP) of a new vehicle. This adjustment is determined by the dealership and is based on various factors, primarily local demand and availability of a particular vehicle model. The market adjustment is always negotiable.
Market Day Supply (MDS)
Market Day Supply (MDS) in the auto industry represents the number of days it would take to sell current vehicle inventory at the existing sales rate. It helps dealerships and manufacturers gauge demand and adjust production and pricing strategies. A lower MDS often indicates high demand, potentially leading to higher prices, while a higher MDS may result in discounts and promotions to accelerate sales. In a healthy market, you can expect MDS for mainstream models to be between 45 and 65 days of supply.
Money factor
The money factor is utilized by the leasing company to establish the interest portion of a lease payment.
Monroney Sticker
Also commonly referred to as a window sticker, the Monroney sticker is a federally mandated label on all new cars in the United States. Named for Almer Stillwell “Mike” Monroney, a U.S. senator from Oklahoma who sponsored the legislation in 1958, the Monroney sticker contains information on the MSRP, fuel mileage, country of origin and more. Ray wrote this guide to understand how to read a Monroney sticker.
MSRP
The Manufacturer’s Suggested Retail Price is the factory’s recommended selling price for a vehicle. Nine times out of ten, a dealership does not sell a car for it’s MSRP. Most are negotiated below that amount, since the dealer can still make money.
Out-the-Door Price
The total cost to purchase a vehicle. Also sometimes referred to as the “on-the-road” price. This includes all taxes, fees, and the selling price of the vehicle.
Rebate
A rebate is cash that is advanced to the customer by the manufacturer as an inducement for the customer to buy the car. In the vast majority of cases the customer opts to use the rebate amount as additional cash down on the purchase. The other option for the customer is to request that the manufacturer actually mail them a check for the rebate amount after the sale. This probably happens less than one percent of the time.
Residual Value
The residual value represents the expected value of a vehicle at the end of a lease term. Cars depreciate, and lease rates are determined based off of the expected residual value of a vehicle at the end of a term. Residual values differ for every car.
Service Contract
Generally synonymous with extended warranty (click here to go to extended warranty), a service contract is a dealer sold product that covers repairs or service beyond the manufacturer’s warranty.
Subprime Loan
Loans granted to individuals who have less than stellar credit scores. Typical subprime credit scores fall below 600. More on the credit scores car dealers use can be found here.
Term
The duration of a loan or lease as agreed to in your contract. Typically anywhere from 24 to 84 months.
Title
Issued by the Department of Motor Vehicle in each state, a title represents a vehicles proof of ownership. Note that if you finance your car the bank will hold the title (known as a lien) until the loan is paid off. Similarly, if you lease a vehicle, the leasing company will hold the title.
Trade-In
When you sell your vehicle to a dealership during the process of purchasing another car. The “traded-in” car’s value is put towards the sale price of the next vehicle.
Trim Level
Cars, trucks, and SUVs come with a dizzying array of options. Trim levels are manufacturer created tiers of standard equipment and options. For example a BMW 3 series comes in four trim levels; 330i, 330i xDrive, M340i, and M340i xDrive. The model is a 3 series, the manufacturer is BMW, and the trim level is the 330i, 330i xDrive, M340i, and M340i xDrive.
Upside Down
Also referred to as “being under water,” or “negative equity,” this term refers to when you owe the bank more money than the vehicle’s current value. A high percentage of people find themselves in this position when they go to trade their existing car in towards a new one, especially if they took out a lengthy loan.
Vehicle Identification Number Or VIN
A 17 digit identification number that is unique to each vehicle. A vehicle’s identification number will include codes for year, make, body style and engine. VINs are typically found under the windshield or along the door jambs of a vehicle.
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When it comes to buying a used car, the process can be intimidating. One way to make it “easier” is to buy a certified pre-owned car. Toyota offers a certified used program, and below we’ll discuss its pros and cons. If you’re thinking about buying a certified pre-owned RAV4, Highlander, Camry, or Corolla, you’ll want to read this brief guide before you sign on the dotted line. Here is CarEdge’s Toyota certified pre-owned review.
Is Toyota Certified Pre-owned Worth It?
CarEdge score: 7/10
We rate Toyota’s certified-pre owned program a 7 out of 10. There is a lot to like about Toyota’s used car certification, and a few things to be left longing for.
Highlights
What’s to love about Toyota’s CPO program?
7-year/100,000-mile Limited Powertrain Warranty, or 8-year/100,000-mile Factory Hybrid Vehicle Battery Warranty, or 8-year/100,000-mile Fuel Cell Vehicle Warranty
1 year of Roadside Assistance.
Free CARFAX® Vehicle History Report™.
Minimum of 5/32″ tread depth remaining across tread width of all tires and spare.
Lowlights
Powertrain, Hybrid, and Fuel Cell warranty begin at the date of first sale, not the date you purchased the vehicle.
We wish the 12-month/12,000-mile warranty was longer.
Full Toyota Certified Pre-Owned Review
A complete breakdown of Toyota’s certified pre-owned program can be found here: https://www.toyotacertified.com, and I strongly recommend you become familiar with that website if you are considering purchasing a Camry, Corolla, RAV4, etc, etc. Below we breakdown the key features of each primary component of the CPO program.
Certified pre-owned Toyotas come with two warranties; a comprehensive bumper-to-bumper warranty, and a powertrain warranty. As with all warranties, there are a few disclaimers that you need to be familiar with. For example, on the 12-month/12,000-mile comprehensive warranty there is a laundry list of items that are not covered.
What is not covered by Toyota’s CPO warranty
Accessory Drive Belts;
Batteries;
Body Panels;
Brake Linings, Pads and Shoes, Rotors and Drums;
Bumpers;
Carpet;
Chrome;
Clutch Friction Disc and Pressure Plate;
Dash Cover and Pad;
Door Fabric;
Door Trim;
Filters;
Fluids;
Glass (including Windshields);
Headliner;
Heating Hoses,
Lines and Tubes;
Hoses;
Hybrid Vehicle Battery Pack*;
Hybrid Vehicle Battery Plug Assembly*;
Hybrid Vehicle Relay Assembly*;
Hybrid Vehicle Supply Battery Assembly*;
Interior and Exterior Trim and Moldings (including but not limited to: Ash Trays, Covers, Cup Holders and Vents);
Lamps, Light Assemblies/Housings, and Light Bulbs;
Nuts, Bolts, Clips, Retainers, and Fasteners;
Paint; Rust and Corrosion Damage;
Seat Covers;
Sheet Metals;
Shiny Metals;
Spark Plugs;
Structural Framework and Welds;
Tires;
Vacuum Hoses, Lines and Tubes;
Weather Stripping;
Wheels and Rims;
Windshield Wiper Blades (Rubber Component);
All interior and exterior cloth, leather, and stitching including convertible tops and/or vinyl tops including but not limited to: any vibration, deterioration, discoloration, disfigurement, warping, fading, staining, stretching, ripping, punctures, tearing, and/or scratches.
What does this mean for you? If something breaks in your certified pre-owned Toyota vehicle, the odds are it might not be covered by your one year warranty. On the plus, the powertrain warranty is much more comprehensive, and Toyota stands by that warranty for 7-years or 100,000 miles (from the date of first purchase), whichever occurs first.
Toyota Certified Pre-Owned Roadside Assistance
All certified used Toyota vehicles come with one year of roadside assistance. This is a nice perk and covers a variety of “oh no” moments like:
Flat tires;
Out of gas;
Dead battery;
Towing; and
Locked out of your vehicle.
Toyota Certified Pre-Owned Inspection
To become a certified used Toyota, a vehicle must pass a rigorous 160 point inspection (165 for fuel cell vehicles, and 174 for Hybrids). One thing we love about the Toyota certified pre-owned inspection is that it covers both mechanical and cosmetic aspects of the vehicle, and it must be completed by a factory trained technician.
Overall, our review of the Toyota certified pre-owned program is positive. We wish there were more items covered by the comprehensive warranty, and that the warranty lasted longer. We appreciate the powertrain warranty, 160 point inspection, and roadside assistance programs.
If you’re in the market for a Toyota vehicle and you’re torn between new, used, or certified pre-owned, you wouldn’t be making a mistake to consider a CPO vehicle.
Since the beginning of time, one aspect of business has always held true: cash is king. Without cash on hand, no business can survive for too long. Car dealerships are no exception to this rule, and as Coronavirus disrupts the lives of every person across the globe, consumers are faced with the question, “Is now a good time to buy a car?” We call this the Coronavirus car buying conundrum.
For many, the thought of buying a car right now is unfathomable (why leave the house?), but for others, there is good reason to wonder if now is the right time to buy a car. Regardless of whether your lease is up, your car broke down, or you simply want to take advantage of good deals, the question remains, “Is now a good time to buy a car?”
Buying a car during Coronavirus is unlike any other time in history. This isn’t a repeat of the Great Recession, and car dealerships weren’t around during the Spanish Flu. There’s no “playbook” for how this will turn out. What we do know however, is that there are some really compelling reasons to buy a car right now. Below we’ll discuss what they are, how you can take advantage of them, and what it means for you if you’re interesting in buying a car during Coronavirus.
Are car dealerships even open during Coronavirus?
One of the most challenging aspects of buying a car during the Coronavirus pandemic may simply be finding a dealer who will work with you to sell a car. In a few instances, for our customers, we’ve found it difficult to actually consummate a car deal. Stay at home orders, dealerships laying off sales staff, and myriad other reasons have made it harder than ever to actually go through the car buying process.
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Let a professional car buyer help. We’re former dealership employees that locate, and negotiate on your behalf.
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That being said, car dealerships are considered essential businesses by the federal government. Cybersecurity and Infrastructure Security Agency (CISA) Director, Christopher C. Krebs sent out a memo outlining which workers were deemed essential.
Workers critical to rental and leasing of vehicles and equipment that facilitate continuity of operations for essential workforces and other essential travel. And, Employees who repair and maintain vehicles, aircraft, rail equipment…
The memo is not explicit that car dealerships are to remain open, however it does make it clear that service departments should be accessible to the public.
Service and parts departments (at most dealerships) are open like normal (many with limited hours however). Sales departments in many locations are operating on an appointment only basis.
Federal guidelines can be superseded by an individual state. For example, in Michigan their initial “shelter in place” order deemed sales departments at car dealerships to be non-essential, however a revision was put in place that determined that sales departments are essential, which has enabled remote transactions to take place.
Before you try and buy a car, you need to research your state’s guidelines to determine if sales departments are open. From our research we have found that in most states the sales departments of a car dealership are open, but only on an appointment only basis. That means you need to call the dealership and arrange an appointment to come in and meet with them. Or, if you prefer, nearly every dealer is now offering to bring vehicles to you for test drives and delivery as an option.
Should I buy a car right now?
Currently there are a slew of programs in place from manufacturers to try and sell more cars. Like we discussed in “How do car dealers make money?”, manufacturers desperately want to sell more cars so that they can impress their investors. As a result, from time to time, they will offer incentives to try and sell more cars.
Coronavirus car buying has led to manufacturers offering incentives that we haven’t seen since the Great Recession, in an attempt to sell more cars. For example there are currently programs that:
Increase customer rebates;
First responder benefits have been extended to healthcare professionals;
If you lose your job due to COVID-19, the manufacturer will cover your payments (Hyundai Assurance);
Since manufacturers are offering incentives, does that mean you should buy a car right now? Not so fast… It depends where you live.
In most parts of the country, where there have been substantial limits placed on car dealerships, you should take advantage of current deals. Remember that dealerships incur carrying costs for each vehicle that sits on their lot. Everyday a car sits on their lot, they’re paying interest, and paying interest on a car they can’t sell gets very expensive very quickly.
With that in mind, dealers could go bankrupt in the near future, and the threat of running out of cash means dealers will grow more and more desperate to sell cars. If you’re in an area where restrictions have been severe, the odds are that now is as good a time as ever to buy a new car.
In other parts of the country, where restrictions are less severe (ie central and midwest USA), you may want to wait. In those areas of the country a lot of dealers are still operating like normal (or at least more closely to “normal”). With that being said, they aren’t “feeling the pinch” quite as bad as dealers in other parts of the country. If you’re in one of these locations you may want to wait a few weeks before buying a car.
For example, in North Dakota and Iowa there are currently no restrictions on car dealerships, whereas in Pennsylvania and Vermont dealers have seen virtually no sales over the past few weeks.
Most car dealerships, just like most small businesses, don’t have an emergency fund of cash that they can depend on when sales go south. As you’ve probably heard on the news, businesses of all shapes and sizes are looking for loans from the government to stay solvent. For car dealers that are in this precarious situation, they’ll be more than willing to make a deal with you to sell a car.
What credit score do I need for 0 percent financing?
Among the many offers from manufacturers aimed at selling more cars, most are offering some sort of special financing option. Many are offering 0 percent financing for up to 84 months on the purchase of a new or certified pre-owned vehicle that is financed through their captive lender.
For example, if you were thinking about financing the purchase of a new Jeep Gladiator you could get a loan from your local credit union, a big bank, or through Chrysler Capital (Jeep’s captive lending company). The “0 percent financing” offers you keep hearing about? Those are only available if you finance through the captive lender. And, before you get your hopes up too high, know that not all vehicles are offered for this special financing. Chrysler Capital actually isn’t offering 0 percent financing for the Jeep Gladiator, for example.
Another consideration to qualify for 0 percent financing is that you need to have a certain credit score. Car dealers use special credit scores to determine your creditworthiness. In order to qualify for 0 percent financing you’ll need to have a credit score at least above 700, and in some circumstances that won’t even be enough. Although manufacturers are advertising these “great” financing options, the reality is you won’t know if you truly qualify for them until the dealer runs your credit application.
That being said, even the “second tier” offers, like .9 percent financing, are still available for those that don’t qualify.
How long of a loan should I take?
Don’t be tempted by 84 and 72 month loan offers. It’s wise to limit the length of the term you take on your loan, or else you’ll be buried in negative equity if/when you go to trade in your car. Even with 0 percent financing, you’d be wise to take a 5 year loan or shorter.
Buying a car during Coronavirus may seem like a daunting task, and it certainly is a lot different than it would have been just a few shorts weeks ago, but don’t let that stop you from taking advantage of good deals. And remember, if you want a professional to negotiate your car deal, get in touch, our team is here and happy to help!
What's happening across the globe right now is unprecedented. Coronavirus and COVID-19 are drastically changing the way human beings live their lives. Yet, having said that, car manufacturers are still determined to sell cars. Whether you're in the market for a new car or not, there are officially "Coronavirus car deals" for the taking.
As we continue to negotiate car deals for our customers, we are coming across more and more special offers from manufacturers. For example, Hyundai has recently brought a slew of special Coronavirus & COVID-19 specific offers to the table.
If you had been thinking about getting a new vehicle, but hadn't made your final decision yet, now may be as good a time as ever to make your purchase. Manufacturers have put into place very aggressive offers to try and sell cars during the Coronavirus pandemic, and we thought we could compile all of those offers in once place for you.
Never negotiate alone again!
Let a professional car buyer help. Let us do the hard stuff.
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We've compiled the incentives and offers currently available as a result of Coronavirus from each car manufacturer. This page will be updated frequently to reflect the most up to date information. Note that each section of this page has a link back to the relevant source. Please refer to the source for more information about a particular offer.
Without further ado, here are the current Coronavirus car deals out there for the taking.
Brand
Model
Incentive
Eligibility
Good Thru
Source
Acura
ILX, MDX, RDX, RLX, and TLX models
No payments for 90 days if you finance the purchase of a new car through Acura Financial Services.
$750 toward Cap Cost Reduction or Down Payment Assistance on any 2020 or newer Acura vehicle when financed or leased through Acura Financial Services
Law enforcement, firefighters, EMT/EMS, 911 dispatcher, healthcare professional (All Medical Doctors, Nurses, Physician Assistants, Medical Technicians, and Nurse’s Aides)
$750 toward Cap Cost Reduction or Down Payment Assistance on any 2020 or newer Honda vehicle when financed or leased through Honda Financial Services
Law enforcement, firefighters, EMT/EMS, 911 dispatcher, healthcare professional (All Medical Doctors, Nurses, Physician Assistants, Medical Technicians, and Nurse’s Aides)
Up to six months of payments for Hyundai owners who purchased or leased a Hyundai vehicle between March 14 and April 30, 2020 if they lose their job due to COVID-19 this year
Law enforcement, firefighters, EMT/EMS, 911 dispatcher, healthcare professional (All Medical Doctors, Nurses, Physician Assistants, Medical Technicians, and Nurse’s Aides)
If you are aware of other special Coronavirus car deals and offers, please let us know. We will update this page accordingly. Also, if you found this post valuable, you might also enjoy this blog post on how car dealerships make money.