Showroom showdown: 3 secrets to success
You're in the market
for a new car, but you're more than a little apprehensive. Your last excursion
into a new-car showroom was a nightmare and the horror stories you've heard are
even worse. How do you make sure you don't get ripped off?
half of all dealers use a scam or several scams to make you pay more than you
should," reveals consumer advocate Jeff Ostroff, who operates carbuyingtips.com.
"They have hundreds of tricks, wiles and ploys in their arsenal.
But if you recognize their tricks, you can beat them at their own game and save
thousands of dollars."
Three simple rules can assure success:
Do your homework, don't become a hostage and be prepared to walk away.
Once you have a good idea of the type of vehicle you
want, get yourself a Ph.D. in the subject. Web sites such as Autobytel.com,
have tons of information on cars' features and options, what the dealers
really pay, current factory rebates, incentives and holdbacks.
Don't wait until your old banger is dying. It takes
six to 10 weeks to kick the tires, choose a car, check your credit
score, set up financing, haggle and finalize a deal, so don't be
forced into hasty decisions.
Know your credit score. Each of the three major credit bureaus --
Experian, Equifax and TransUnion -- keeps tabs on your bill-paying
record. Get all three. Their costs vary. In some
states, you can get one free, or you may be charged up to $9 apiece.
The credit bureaus and many others sell three-in-one combined reports
for about $30 -- these provide your credit history from all three
major credit reporting agencies. It will be vital information for
you to have when the dealer's men "reluctantly" tell you
your interest rate will be higher than advertised because your credit
rating is low.
Put together a folder of information on the cars you
like and their prices. Take it with you to the dealer and make sure
they see it. If your spouse is with you, agree beforehand: No impulse
buys and no discussion of exactly what you are prepared to pay,
even if you're alone in a sales office -- it might be bugged.
When you tell the salesman what you're looking for,
inform him that you know what the car cost the dealer. You're ready
to pay a fair profit to him, but you are not going to hand over
several thousand extra dollars.
"This is critical," says Ostroff, whose
Web site offers free, detailed advice on car purchases to about
10,000 visitors a day. "It will stop most of his nonsense."
be a prisoner
You can also head him off at the pass by letting him know you are
not willing to spend hours playing games. "Sales people will
go to great lengths to tie up your day so that you're tired and
ready to surrender. Plus, it stops you from going to a rival dealer,"
Do not skip the test drive -- but make the most of
it. Don't just cruise around a few blocks and play the radio. Check
things like sight lines and how easy it is to reach important controls.
Test acceleration onto highways and whether you feel entirely comfortable
at the wheel. But when the salesman asks you for your driver's license,
that "Ka-ching" you hear is the sound of a cash register,
and the sound of a scam.
Refuse. Instead, hand him a photocopy. If they have
your license, you can't leave. Don't be held hostage. When you hand
over the copy, write on its face, "No credit checks authorized."
This will prevent the dealer from checking your financial standing,
and automatically lowering your credit score about five points.
Remind them that the Federal Trade Commission levies a $2,500 fine
for an unauthorized check. When you leave the dealership, get the
When the conversation turns to financing, you may
hear that "Ka-ching" sound again. And for good reason.
Tell the salesman you'll be arranging your own financing to avoid
the dealership's higher APR -- but you'd like to know what extra
discounts, such as college student rebates or first-time buyer incentives,
you can expect. He could well come up with some good numbers.
If you're adequately prepared, you can even get dealers
to give up some or all of the holdback -- the hidden 1 to 3 percent
of MSRP (Manufacturer's Suggested Retail Price) incentive the dealer
gets (but will never tell you about) from the factory.
Don't discuss trade-in or early lease terminations
unless you've already decided to surrender a lot of money to avoid
the aggravation of selling your old car yourself -- even when they
promise to pay off your loan or get you out of your current lease.
The dealer wants to "steal" your trade-in
so he can resell it at more profit than he'll get on selling you
a new car. Sure, he pays off your old loan, but you still owe it:
He just adds it into your new loan, spreads the payments out over
60 or 72 months, and makes you think that because you're paying
a little less each month, you're saving money.
Bite the bullet. Sell your old car privately, get
someone else to assume the lease or stay with the thing until it's
paid off. Sometimes, you simply should not be buying a new car,
especially if you are already deep in debt.
Once actual negotiations begin over the price of the new car, the
salesman will usually give you some ridiculous figure he needs "to
put you into this car today." Counter with your lowest possible
offer, based on your homework and knowledge of what the dealership
paid. When he gets up to discuss it with his manager, stop him right
there. Let him know there's a limit on how long you'll wait, say
about 10 minutes. Aren't you glad you didn't hand over your driver's
license? They can't chain you to their showroom, so you're taking
control of the negotiation.
Very important: Be prepared to walk away. There are
plenty of dealers, plenty of cars. You know within a few hundred
dollars what you should be paying, and every minute spent discussing
a figure significantly higher than that is wasted. And don't feel
you have to wait around to say goodbye. The salesman got your phone
number in the first few minutes. If he wants to make a deal, he'll
find you. "Think of the number of hours and days you want to
spend buying a car," advises Ostroff. "The more time you
spend hanging around one showroom, the less time you can spend at
another dealer who may be far more willing to make you a good deal."
Two more valuable tips: First, never leave a cash
deposit. You can always dispute a credit card transaction, but once
you hand over cash, matters get tough. Secondly, if you must finance
through a dealer, do NOT take delivery until the loan has been approved
in writing. That's when you know the lender has accepted your loan,
and the deal's a real one. A common dealer ploy, explains Ostroff,
is to call you back a week or two after you've made your deal to
tell you either that the financing fell through or that they have
a better financing deal for you. Stay away.
-- Updated: July 13, 2004