The adage, "If it sounds too good
to be true, it probably is," goes double for new car advertising.
The typical car dealer newspaper or radio
ad blares out in large headlines or in a loud pitch why you need
to rush down, right now, and buy at prices and incentives you'd
be crazy not to take advantage of.
Unfortunately, too few people read the
small print at the bottom of the ad or listen to the so-fast-it's-gobbledygook
at the end of the radio commercial.
If they did, they would better understand
some of the traditional advertising gimmicks dealers use -- and
what they can really mean. Here are some of our favorites:
By the way, the experts advise, the ads often will
give you a choice between a cash rebate and zero-percent financing.
Figure out which works best for you. To help, try our calculator.
"With money as cheap as it is now, buyers should
shop around for financing before going to the dealer. You might
be able to get a 3 percent rate on your own and still take advantage
of the rebate," advises Charlie Vogelheim, executive editor
of "Kelley Blue Book."
"$4,000 for your trade
no matter what the condition"
This ad is infamously known as the "push-pull-or-tow-it-in"
concept which dates back to the 1950s. If you believe this ad,
you have to believe the dealer is so stupid and anxious to sell
cars, he is going to pay you far more than that old clunker is
worth. Don't you believe it. If he's paying you too much for your
trade-in, experts insist, he's adding that and more to the price
of the new car and taking away your negotiating power at the same
time. The best defense to this ploy is to become aware of the
value of your car through such Web sites as Bluebook.com
or Edmunds.com,
which can quickly tell you what your present car is really worth
wholesale, as a trade-in, or retail, if you want to sell it yourself.
The opposite of the inflated-trade price trick is
when the dealer tries to "steal the trade" by paying
a lot less than your car is worth. If you don't do your homework
and know the trade-in value of your present car, you could easily
think you are getting a good deal. You should also check Edmunds.com
or bluebook.com for any rebates and incentives being offered on
that particular car in your specific area. Marty Padgett, executive
editor and producer for Thecarconnection.com,
warns you might find that generous trade-in figure has been shaved
off a rebate you know nothing about.
"Buy it now for just
$189 a month!"
When you see or hear an ad like this, you can substitute just
about any figure you like, because no matter what the total price
of the car, you can make your payments come out to any figure
-- depending on the amount you put down and the terms of the loan.
Aside from that simple math, the monthly payment
that entices you could be a lease amount, which involves annual
mileage restrictions and money down at the beginning or end of
the lease. Or the really small print may specify a huge amount
down. Even if it's an offer with nothing down, it will be based
on your credit. If you don't have excellent credit, the payments
will be higher.
It also can be a form of the "bait-and-switch"
tactic, with that price pertaining to only one car on the lot.
Or that particular model may be stripped without any of the standard
options that most people want.
"Never go shopping for a new car based on a
monthly payment," advises Lauren J. Fix, co-host of Talk
2 DIY-Automotive on the Do-It-Yourself Network. "Compare
auto models, with the features you want, in the price range you
want," she says.
"We'll pay off your old
car no matter how much you owe!"
Call this a kissing cousin to pull-it-in, push-it-in, or tow-it-in.
Let's say you owe $8,000 on your present car and it's only worth
$3,000. When the dealer boasts it will pay off your old car, they're
just going to add the payoff amount to the cost of your new car.
The new lender -- the manufacturer or another lending institution
-- is fully aware that the amount being financed exceeds the value
of the new car and therefore will treat it as an unsecured loan
-- and will charge a significantly higher interest rate.
"Huge end-of-year sale:
must make room for 2005s!"
Dealers like to say this is the biggest chance of the year to
save the most money on a "new" car. In some ways, they
might be close to telling the truth. It might be true if you keep
it for seven years or more -- long enough to drive it into the
ground -- and don't figure on getting much for it when you sell
it.
However, if you usually sell or trade in your car
every two or three years, it could cost you big time. "If
you are buying on a short cycle, you are going to get nailed by
buying a car just before the new models come out," says thecarconnection.com's
Padgett. "Unless there are going to be some major model changes,
you might as well wait to buy the next year." Buying a car
just before the model year expires means you're buying a year-old
car and the depreciation over the first month or so will be far
more than the normal depreciation on a new car. Even if there's
a good rebate offer, the car will be considered almost a year
old when you buy it.
"Buy this car at below-invoice
price!"
It's easy to print up phony invoices off of computers these days,
so make sure you are getting the real invoice prices. How? Again,
both Bluebook.com and Edmunds.com are excellent resources. Don't
let the dealer convince you he's selling that car at no profit
just because it is at invoice or below. The invoice price does
not necessarily mean that's what the dealer paid for it. He may
be getting a rebate and he is definitely getting a dealer holdback
fee from the manufacturer. This is a percentage of the price held
back by the manufacturer when the dealer buys the car and paid
to him when he sells it. Depending on the car, it usually ranges
between 2 and 3 percent of the Manufacturer's Suggested Retail
Price.
Rod Gibson
is a freelance writer based in Georgia.
-- Posted: Feb. 15, 2005
