car buying tips, car buying, new car buying, new car buying tips

Front Page
Money Saving Tips
How To Buy A New Car
Car Buying Secrets
Car Buying FAQ
Car Leasing Secrets
Leasing Secrets, Part 2
Videos: How To Buy Cars
NewCarBuyingTips blog
Auto Repair Secrets
Tell Your Friends!

Resources:
New Cars/Quotes
Used Cars/Quotes
Insurance/Quotes
Leasing/Quotes
Rebates/Dealer Cost
Vehicle History
Auto Loans/Quotes
Credit Reports
Extended Warranties

 

Car Buying Tips

These car buying tips will help you save money by avoiding common overcharges and outright rip-offs that occur at many car dealers across the country. (These dirty tricks are not used by ALL car dealers, but they are used by too many.)

When you are done reading about these common dealer rip-offs, be sure to visit our How To Buy A New Car page, where you will learn the best new car buying strategies for getting huge discounts on new cars and trucks. And see our Car Buying FAQ page for answers to the most common questions asked by new car buyers.

Money Saving Tip: Free Price Quotes
To get the best possible deal on a new car or truck, do all of your homework before signing any contracts or putting any money down. Dealer tricks (like secret APR increases, packed payments and other common rip-offs) can quickly erase any discounts or other savings that you think you're getting, so learn how to calculate your own monthly payments. Use the Internet to get at least 5-6 quotes before you start negotiating with dealers. For free (no obligation) quotes on new cars & trucks, use TrueCar, Edmunds, Autos.com, and CarsDirect. To make sure you're not missing out on a better deal, get quotes from all four services!
Be sure to see our Money Saving Tips page for more information and resources.

Quoting Packed or Loaded Payments
Quoting "packed" or "loaded" payments is a deceptive practice that is commonly used by car dealers. (It's even taught to their salespeople in training seminars.) Here's how it works: When the customer asks how much the monthly payment would be on a particular vehicle, the salesperson gives them an inflated figure that represents a higher loan amount or APR. For example, if the correct monthly payment was $400, the customer might be quoted a payment of $450 instead. On a 6-year loan, this would end up costing the customer an additional $3,600.

If the customer (unknowingly) agrees to the inflated monthly payment, the dealer then has a number of ways to get his hands on the additional money. For example, the customer might be talked into getting one or more high-priced (and high-profit) items like an extended warranty or car alarm, "at little-or-no extra cost." (At least that's what the customer is told.) Or the customer might be charged an APR of 11% on a loan when the going rate is only 8%, so the dealer can pocket the additional finance charges. And if inflated payments were used on a lease, the extra money could represent a secret price or APR increase.

This little scheme is frequently used to trick people into leases: Dealers simply quote inflated loan payments to make a conventional purchase look a lot more expensive than a lease. You can avoid this scam by using the Internet to find competitive rates on car loans (look for "Online Auto Loans" in our Money Saving Tips page), then calculating your own payments.

Kickbacks for Secret APR Increases
One of the car industry's dirty little secrets is the practice of lenders giving kickbacks to dealers for charging their customers higher interest rates. For example, if a lender's current rate on a particular loan is 8%, but the dealer charges the customer 10%, the dealer usually gets to keep most (if not all) of the additional finance charges. (On a typical 5-year loan for $20,000 that extra 2% adds about $20 to the monthly payment.) This is done on both loans and leases, and because it's done without any disclosure to the customer, it's a deceptive practice.

The Dealer Prep Scam
Charging customers for "dealer prep" is an old trick that's been used to pick up an easy $150 to $200 (or more) in extra profits. Since dealers are already being paid by the factory for new-car preparation, any amount that you pay for this service is pure profit. Don't fall for this, just refuse to pay it.

See our NewCarBuyingTips blog for videos of undercover investigations, car dealer tricks and scams, how to buy new cars below dealer invoice, and other new car buying tips.

Extended Warranty Rip-offs
Selling service contracts (extended warranties) has always been a big moneymaker for car dealers. Since their customers have no idea how much markup there may be on a particular warranty, many dealers have been able to make as much profit on that item as they made on the whole car. Worse yet, instead of selling good factory-backed policies, some dealers have sold practically worthless "brand X" warranties at outrageous prices, just to make more money.

Before the days of four-wheel drives, computers, and turbochargers, dealer's cost on these warranties used to be around $200 to $300. Today, policies for a few well-built, basic models (like a Toyota Corolla) may still cost the dealer less than $400, but most have gone up in price. For many four-wheel drives and vehicles with poor repair histories, the dealer's cost may be as high as $1,400 to $1,800 on factory-backed policies, and the typical "family sedan" warranty usually costs about $800 to $900. However, the price to the customer is often whatever the market will bear, so it's not unusual to see dealers trying to sell $900 policies for $2,000 or more.

As an alternative to the high prices that dealers often charge for their policies, reliable extended warranties can also be purchased from other sources. These policies are sometimes called "service contracts," and they're available for most new vehicles at customer prices that are typically around $400 to $700. (Keep this in mind when the dealer tries to sell you his warranty for $2,000 to $3,000 -- plus $400 or more in interest when he adds it to your car loan.)
Money Saving Car Buying Tip: Don't pay those high dealer prices on extended warranties! Get free online quotes and discount prices at SmartAutoWarranty.

Overpriced Car Alarms
The increasing popularity of car alarms has given dealers another opportunity to make huge profits. An inexpensive ignition/fuel cut-off system (which is not even a real alarm) typically costs the dealer less than $50 to install, but the customer's price is often $200 to $250. (This type uses a special key that's inserted under the dash to start the vehicle, but it has no real "alarm" features.) Dealers often charge at least $500 to $600 for the installation of a decent (full-featured) alarm system, even though their cost is closer to $150. And some dealers have been caught charging $2,000 to $3,000 for systems that were only worth about $250.

If you're interested in saving money on an alarm for your new car or truck, check the local Yellow Page listings under "Automobile Alarm/Security Systems." A good system can usually be installed by an aftermarket alarm company for $200 to $250 (or less), and some even offer lifetime warranties.

One-Price, No-Haggle Dealers
A "revolutionary" concept is being tested in the sale of new and used cars: fixed, no-haggle prices. Saturn dealers have always had this (supposedly) "consumer-friendly" policy, and now a growing number of used-car dealers are showing up with similar practices. Several automakers are even attempting to convert some of their new-car dealers to "one-price" after seeing used-car superstores like CarMax and AutoNation getting good customer satisfaction ratings.

Is improved customer satisfaction the only motive behind this trend toward no-haggle prices? Maybe not. A recent survey of used-car transactions suggests another reason for dealers to embrace this radical change: On average, no-haggle dealers are getting more money for cars than dealers that allow price negotiation. How much more? Usually $500 to $600, sometimes as much as $1,000. (For more details on this survey, see "And They Call This Consumer Friendly?" on the CarInfo.com Editorial Page.)

Warning to Car Buyers
Many car buyers who rely on the Internet as their only source of information end up paying a lot more than others who do a little more homework. How much more? Typically $500 to $600 on your average $20,000 vehicle, and sometimes as much as $1,500. (Even more on higher-priced cars.) Why are these people paying so much more -- for the same vehicles? And what secrets do the "smart shoppers" have that enable them to get better deals? INFORMATION! Car buyers with the best information get the best deals, and smart shoppers know how -- and where -- to get the best information. (They also don't mind paying for it.)

Too many people make the mistake of thinking that all they need is the magic "dealer invoice" number to get the best deal. Thinking that "dealer invoice" is the same as "dealer cost" is mistake #1, which is usually followed by mistake #2: thinking that they can always get accurate dealer cost information on the Internet, for free. Mistake #3 is not knowing the actual prices that "smart shoppers" are paying for the same vehicle. Mistake #4: thinking that a dealer who belongs to an Internet buying program is going to give them the lowest price in town. Mistake #5: not researching loan and lease rates before visiting the dealer. Mistake #6: believing the dealer when he says, "The best rate I can give you on a loan (or lease) is X%." Mistake #7: not knowing how to calculate their own loan/lease payments. Mistake #8: buying a service contract from the dealer at the quoted price. Mistake #9...Are you beginning to get the picture? There's a lot more to getting a great deal than most people realize, and you're not going to find all the information you'll need in a Web site.

Here's a true story of mistakes made by one Web-surfing car buyer: "Fred" works in the computer industry and is an experienced Web surfer. When he mentioned to a friend that he was in the market for a new car, his friend told him about a car buying book he had read and how much money he had saved by following its advice -- which included paying for accurate "dealer cost" information. But Fred thought that was silly because he knew how to find everything on the Internet, for free. (Or so he thought.)

When Fred was ready to buy, he used a popular Web site to get his free "dealer cost" numbers. Then he went to the dealer to make an offer. After a little haggling, the dealer agreed to sell the car for $800 over invoice, stating that "normally, we like to make more than $800 on a car, but we'll accept your offer." Since Fred thought the dealer was only making $800, he was convinced that he was getting a great deal. What he didn't know was that the dealer's real cost was a lot lower than invoice due to secret dealer incentives that were worth about $1,300. (So the dealer made $2,100 on Fred's car, not $800.) And he also didn't know that other people (the smart shoppers) were buying the same vehicle for hundreds below invoice. The bottom line: Fred overpaid by at least $1,000 because he tried to save a few bucks by using free "dealer cost" information.

Money Saving Tip: Don't overpay on a new car or truck, be a smart shopper! Read our New Car Buying Tips page to learn how to find the real dealer cost numbers, how to buy at huge discounts from sticker, and other useful car buying tips.

 

[How To Buy A New Car]

Copyright 1998-2013 Technews Corp., All rights reserved