What is OAC?

OAC is an acronym for “On Approved Credit.” Dealers use an average interest rate in advertisements for a certain monthly payment promotion. The OAC is an interest rate that they assume will be easily approved by the finance company.

People who have less than ideal credit scores may have to pay a higher interest rate, which creates higher monthly payments.

What is an open-end loan?

Buyers who want the option of paying off their loan in full at any point during the payback term without incurring additional charges and penalties need an open-end loan.

How are car salespeople paid?

There are two pay structures for car salespeople in Canada. Most commonly, the salesperson works for commission on the profit the dealership makes. This rate is usually around 25%. So for example, if the vehicle creates a $2,000 profit for the dealership, the salesperson takes home $500 in commissions. When the dealership makes less than a certain amount on the sale of a vehicle, the salesperson makes a flat fee of $100 to $300.

The second pay structure allows for a flat fee for each vehicle sold, regardless of how much profit the dealership makes. In this scenario, the salesperson works on behalf of the consumer to get them the best possible deal. Buyers tend to favor this pay structure, since the sales manager is still in a position to set the price and the salesperson negotiates on behalf of the customer.

I want to sell my car privately. How should I price it? Why isn’t it selling faster?

In the majority of cases, if your car isn’t selling through a private transaction quickly, you simply have it priced to high.

Research similar cars and price yours lower. If you have a sentimental attachment to the vehicle, check your price and make sure you aren’t charging more because of your personal feelings.

A vehicle is a thing with a certain value in the ever-changing marketplace. Your “story” has no effect on the car’s real monetary value.

If it’s a very unique vehicle, you may have to wait for the right buyer. Most vehicles lose value with time, so be aware of the risks of pricing a car too high and waiting.

Make sure you are marketing the car effectively by taking many photos of both the exterior and interior. Do some research online about taking great car photos. Put as much information as possible in your advertisement.

·       Year, Make, Model

·       Price

·       Condition

·       Warranty

·       Special features

·       Reason for selling

·       Repair history

·       Mechanical or physical problems

·       Tire wear

·       Accident history

Look at your advertisement from a buyer’s point of view. Does it seem like a good deal? Does it seem honest? Show the VIN number when requested and buy the CarProof report to build trust with potential buyers.

How much can I get for my car as a trade-in at a dealership?

When trading in a car, it’s a good idea to look at the situation from the dealership’s perspective. They need to make a profit by reselling the vehicle, or they need to get rid of it quickly so it isn’t taking up valuable space.

The used car manager will conduct an appraisal on the car. Their job is to get as much profit out of the situation as possible. The price will be at a level where they can sell it quickly for a profit.

The offer on a trade-in is the ideal amount that the dealership would like to pay. In many cases, this amount has a bit of flexibility, as the sales manager may anticipate a negotiation in order to close the deal.

The best way to get the best offer for a trade-in is to conduct some research about what the car is worth in the marketplace. Then, show a commitment to buy and let the salesperson know you are serious about doing business with them.

Faking it until you get the price you want and then leaving to continue shopping at other dealerships can backfire. The sales manager isn’t obligated to honor their offer if you walk out.

Dealerships usually account for $1,000 for reconditioning plus any necessary repairs, and they give themselves between $1,000 and $4,000 for profit. If you understand these numbers, you’ll have a better framework from which to negotiate.

The guide (ex: Canadian Black Book, Edmunds) says this vehicle’s price should be a certain amount. Can I get more for my trade? Can I pay less for the car I’m looking at? Why is the actual price different from the guide?

Guides simply offer suggestions about a vehicle’s value based on mileage, its original selling price, condition, popularity, and the marketplace.

In reality, any car is worth what someone is willing to pay for it. Dealerships must find the highest price that consumers are willing to pay for a vehicle while minimizing the amount of time that cars sit on their lot. They also must offer trade-in prices that make customers happy while maximizing their potential profit.

Guides may provide a framework for pricing, but local day-by-day market conditions have a much more profound effect on a specific car’s selling price or trade-in value.

Why is this car priced so high/low?

Vehicles are always priced according to the market value and in balance with the financial and space requirements of the dealership.

If the vehicle is priced low, it’s likely a result of pressure to move the car. It may have been on the lot too long, they may have too many cars in stock and are trying to reduce inventory to make room, or they may simply have too few sales for the month. Some vehicles may have previous insurance claims on them from accidents, which naturally depreciate a vehicle and may be priced lower than “clean” cars. Make sure to check CarProof prior to purchasing a vehicle.

If the vehicle is priced too high, ask yourself why you are looking at it. Does it have some rare desirable feature? Is the mileage unusually low? The reason you want the vehicle is likely the reason its price is higher. If you can’t figure out why it’s priced so high, it’s best to simply move on.

If many of the cars you are looking at are priced too high, you may need to review the market and your personal financial situation and adjust your expectations accordingly.

How can I negotiate a lower price?

Dealerships price cars according to their condition, age, options, and mileage. They understand their inventory and they know the competition well.

Even so, it’s reasonable for any buyer to expect to be able to negotiate a lower price on a car when a similar vehicle is priced lower elsewhere. Using that car as leverage, you can ask the dealership to sell you their vehicle for the same price.

Dealerships know that buyers prefer vehicles with lower mileage that are in good condition and they understand that most consumers are willing to pay a premium for those cars. If you want a car that is sought-after, expect to pay a fair price for it.

Buyers who can’t justify their request for a lower price by showing a similar vehicle for sale elsewhere at a lower price must either pay the asking price or be prepared to walk away from the deal if they don’t get their way.

If a dealership declines a solid offer and lets you leave, you offered less money for the car than the lowest possible amount they are willing to sell it for that day. When you walk away from a car you want, you risk losing it to another buyer, so it’s important to weigh that fact when deciding whether to employ this negotiation tactic.

If you settle on an agreeable price, it’s important to understand that the dealership doesn’t have to honor that same price the next day unless there’s a deposit on that vechicle.

Is this a good price?

It can be difficult to know if the price set by the dealership is a good deal or not. If you are unable to find a comparable vehicle for less money, then you are probably getting a fair deal.

If you can find a car that’s a lot like the one you want and has similar mileage and options but is priced lower, show the vehicle to the dealer or go see that vehicle in person and save the hassle of negotiating.

If the vehicle you want has hard-to-find options, is rare, or has especially low mileage for its age, finding a comparable vehicle for a lower price may prove difficult. In this case, you don’t have much leverage to negotiate the price.

What is future value financing?

With future value financing, you’ll make lower payments that are similar to a lease payment with the option to purchase the vehicle at the end of the term or trade it in for a newer model of the same brand.

The term of the loan is 60 months. The monthly payment amount is equal to the payments on an 84-month loan. At the end of 60 months, the buyer owes a balloon payment on the loan for the remainder of the balance. It’s possible to simply pay the balance and take ownership of the vehicle after 60 months. Some people finance the remainder of the balance and continue making smaller payments for the leftover two years.

One of the main reasons people choose to participate in Future Value Financing is that they can upgrade to a newer vehicle at the end of the 60-month term.

Future Value Financing offers the advantages of both leasing and ownership. There is no guarantee that the vehicle will be worth as much as predicted at the end of the term, however. This is a risk that the buyer takes. If, at the end of the term, the amount owed is greater than the value of the car, the owner has to take responsibility for that cost.