Auto add-ons add up to more debt
By Beth O'Connell • Bankrate.com

Buying a car involves more than deciding on the model, make and year. There are also a host of options that can be added to the vehicle, from racing stripes and golden door handles to a moonroof and anti-theft system.

What many buyers don't realize is that some options may be unnecessary and worthless, or simply overpriced items that boost the dealer's profit.

Turned upside down
The add-ons can add up and increase auto loans to the point that when the owners go to sell their cars several years later, they are "upside down." That means they owe more on the loan than the car is worth.

Consumer advocates say people need to negotiate the cost of options just as they do the base price of the car. And, for some items, they should shop around because they will most likely get a better deal on optional equipment at an auto parts center.

"If you go for all the dealer add-ons, you end up losing the advantage of the negotiated price" for the car, says Jean Ann Fox, director of consumer protection at the Consumer Federation of America.

Negotiating a car deal takes preparation. An uninformed consumer walking into a car dealership is "like a 5-year-old getting into the boxing ring with Mike Tyson," says Mark Eskeldson, author of the book What Car Dealers Don't Want You to Know. He also runs the Web site CarInfo.com, which provides consumers with information on how to buy a car.

As a former auto mechanic at two dealerships, Eskeldson believes most people are paying $2,000 to $3,000 more than necessary for a new car. Optional features can easily inflate the cost of a car -- and the size of the loan.

Fox says, "You want to minimize what you're paying interest on."

Avoid "mop and glow"
Consumer advocates say, first, the car buyer should steer clear of options known in the business as "mop and glow." These include undercoating, scotch-guarding upholstery, detailing or other decorative features. A dealer may even try to sell the "door handles in fake gold that you find on some Toyotas," says W. James Bragg, author of The Car Buyer's and Leaser's Negotiating Bible.

"Just say, 'No.' They don't add any value to the car," Bragg says. If the car already has these features installed, he says, buyers should tell the dealer to remove the charge or they will take their business elsewhere.

Another item a car buyer should refuse to pay is called "dealer prep." Eskeldson says the car dealer is already getting paid a fixed amount by the factory to prepare the vehicle for sale.

Fox of the Consumer Federation also warns against "closer" extras such as credit insurance. "You don't need it if you have life insurance," she says.

Most consumer counselors also recommend obtaining features such as power windows, door locks and cruise control from the dealer and the car's manufacturer, if they aren't already installed on the vehicle. But again, "haggle like crazy," Eskeldson says.

Shopping for options
The world of car options, however, doesn't stop there. Some buyers may want to add an anti-theft system, a CD stereo and a roof rack. These extras usually have a high markup and can probably be purchased cheaper elsewhere. That's also true for extended warranties or service contracts.

An example, a Florida Toyota dealer quoted the following prices for Toyota Camry add-ons, including parts and labor: $315 for the CD stereo and $320 for the anti-theft system with remote key access. Total charge: $635.

Across the street from the dealer, a car stereo shop charges $215 for its top-of-the-line Pioneer CD stereo, and $185 for the anti-theft system. Total charge: $400.

To begin with, there's a price difference of $235. If a buyer bought the options from the dealer at $635 and rolled the cost into the car loan at 8.46 percent interest over four years, monthly payments would climb $15.64 and the buyer would end up paying an additional $115 in interest over the life of the loan.

Credit card advantages
Most consumers would be better off buying the options from the car stereo shop using a credit card, which can be paid off at any time.

But even a borrower who uses a credit card at the car stereo shop and simply shifts the $16 payment from the car loan to the credit card saves.

For the savvy consumer, Bragg advises, "Decide what you want on your car, look at the dealer's specs and compare them" to what's available elsewhere.

Tip: If you want to know the cost of a certain option at the dealership, call and ask for the parts department.

-- Updated Oct. 21, 2002