9/14/2011 6:04 PM ET|
5 things car salesmen won't say
Consumers are arming themselves with information before buying new wheels, and the folks at the dealerships are responding with a few new tricks of their own.
Buying a car can be a phenomenally complicated -- and expensive -- experience. As buyers have gotten savvier about researching and negotiating their purchases, dealerships have gotten sneakier about building in traps that may force you to pay more.
Here are a few to watch out for:
1. "I'm getting a secret incentive to push this car."
Most dealer and manufacturer incentives aren't hard to uncover. Rebates, low interest rates and other inducements are often advertised or easily found with a little research on car sites such as MSN Autos, Edmunds.com and others.
Harder to sniff out is an enticement known as dealer cash. That's a payment, typically of $500 to $2,000, that manufacturers quietly make to dealerships to sell certain slow-moving models.
"It's never advertised," said Philip Reed, a senior consumer advice editor for Edmunds.com. "They try to keep it a secret."
Dealership cash is different from a payment known as the holdback. The latter is a percentage of the car's sticker price (usually 2% to 3%) that the manufacturer pays to the dealership after the car is sold. Not all manufacturers pay holdbacks (Edmunds has a list of which ones do and don't), but it's a form of secret profit that allows dealerships to make money even when they sell a car at invoice.
Dealerships view holdbacks as pretty much untouchable, Reed said. Car dealers think of it as "their" money and aren't willing to give up or share any part of this payment with buyers. The main reason it's good to know about holdbacks is so you can counter the salesperson's phony lament that "we aren't making any money on this deal."
Dealer cash, on the other hand, is up for grabs -- as long as you can find out about it. Edmunds.com lists dealer cash arrangements in its incentives and rebates section, under the heading of "manufacturer to dealer." If you're interested in a particular car, though, you might also want to call a few dealerships' Internet departments to discuss pricing.
If you ask "How much is the dealer cash on this?" rather than "Is there dealer cash on this?" and ask several dealerships, you'll probably get a good idea of the amount available, Reed said.
2. "Sticker shock is built into this deal."
Invoice pricing -- what the dealership pays the manufacturer for a vehicle -- is no longer a secret, said Brandy Schaffels, a senior editor for TrueCar, a new-car pricing service. Buyers can find invoice costs on a number of websites, and many customers focus on negotiating a deal as close to that cost as possible.
What buyers forget is that there are additional costs that can add thousands of dollars to a car's price -- costs that can't be negotiated away.
At the very least, there will be licensing, registration and title fees mandated by your state's department of motor vehicles. These fees are often based on the sales price of the car. Most states also have sales taxes on car purchases.
Early in your negotiations, you should ask what these fees will add to the purchase price so that you can negotiate with those in mind, Schaffels said.
You also may face "documentation fees" that cover the administrative costs of processing the paperwork involved with your purchase. A few states set limits on documentation fees -- in California, it's $55 -- but others don't.
"In Florida, for example, documentation fees can be another $1,000 on top of the price of the car," Schaffels said.
Though these may sound like junk fees, they aren't, Schaffels said, and you typically can't negotiate them directly. State laws usually require dealers to post the same documentation fee on all purchases. To reduce the fee could trigger a class-action lawsuit that would require a dealership to refund fees for every buyer, Schaffels said, and that could put it out of business.
What you can do, though, is ask for a lower sales price to help offset these fees. And it may help to focus your negotiations on the "out the door" cost -- the total price, including all required taxes and fees, that you have to pay to get the car.
What you don't want to do is strike a deal without considering these costs, then wind up with an unaffordable car once they're added in.
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