You want to buy the Ford Fiesta, and who can blame you? It’s new, it comes in a vibrant green, and you’ll be the first on your street to get it. Now it’s time to begin the most intimidating aspect of car shopping: heading to the dealership. Unfortunately, dealers have a reputation for being weasels who want to dig into consumer pockets to squeeze out as much cash as possible. While there are good salespeople out there, you need to know what to expect before taking a seat at the negotiating table.
Below are four ways dealers dupe you into paying more for the car you want and what you can do to avoid their tricks.
Using Confusing Terms
Some dealers use industry jargon to confuse buyers, and confused buyers can end up paying more. So, how do you tell the difference between a good and a bad dealer? A good dealer will explain terms like Destination Charges to help their client understand where their money goes. Destination Charges are a form of shipping and handling and can range from $500 to $850.
Other key terms are on the car’s sticker, like the car’s manufacturer’s suggested retail price (MSRP). The MSRP is what the manufacturer considers a fair price to ask of consumers. Other key things to know aren’t on the sticker, like invoice and dealer holdback. The invoice is the price the dealer paid for the car, while dealer holdback is the invoice plus two or three percent of the MSRP. If a dealer sells a car at invoice, he’ll still make a profit, but it’s highly unlikely that a dealer will sell a car for less.
A simple way to ensure that you don’t get lost in the confusing terminology and end up overpaying is to know the average price other shoppers paid for the car you want. For example, check out Ford Fiesta pricing data, and you’ll see that most shoppers pay $13,712 for a new Fiesta sedan. That’s $392 above MSRP. Find out what fair new car prices are in your area, and don’t agree to pay a penny more.
Selling Costly Options
Dealers are in business to make money, so it’s not surprising that they’ll try to sell you additional products that you might not need. Common add-ons are dealer-installed options and extended warranties.
Not all dealer-installed options are useful. If your dealer offers you undercarriage and paint protection or fabric sealant, just say no. Cars leave the factory with all the protection they need.
Extended Warranties are a bit different -- get one if you want the peace of mind, but make sure you get one that makes sense for you. These warranties cover your car beyond the factory warranty. They can be bought by either the manufacturer -- the best, but more expensive, option -- or an independent provider like AAA. However, extended warranties aren’t cheap.
While extended warranties can be worthwhile, a lot of analysts consider them excessive. Research before signing because extended warranty down payments and deductibles vary across the industry. If you know you’ll only keep the car for the length of the factory warranty, or the car has excellent reliability ratings, you may not need one at all.
Undervaluing Your Trade-In
A good way to save some money on the price of a new car is to trade your old one in to the dealership. Watch out for dealers who try to undervalue your vehicle. Before making a trade, determine how much your car is worth based on its condition, model year, features and mileage by visiting Kelley Blue Book, which calculates the value of used cars.
Another option is to take your car to a wholesaler like Carmax. They’ll give you an offer that’s good for seven days or 300 miles. Take this appraisal to the dealership, and tell them they’ll have to beat this price to get your business. If a dealer still offers you a lot less than what you determine your car is worth, don’t be afraid to tell him that you’ll sell your car independently -- and buy a new car at another dealership.
Because it’s easy to get duped by attractive deals and incentives, it’s a good rule of thumb to always read the fine print. Certain deals -- like zero-percent APR financing for 60 months -- only apply if your credit is approved. Also, some cash back offers only apply to specific trims and models. Before heading to the dealership, make sure that the deal you’re hoping to get applies to the car you want.
Sometimes, a dealer won’t give you manufacturer’s discounts unless you ask for them. This means that you need to do the research on your own, which can save you thousands of dollars in the long run -- especially if you qualify for zero-percent financing. Begin by going to our Car Deals Page, where you can find the month’s best deals from automakers. Also, if you tell a dealer competing automakers are offering better incentives and know what they are, you’ll be more likely to get a good deal.
To avoid getting duped at the dealership, arm yourself with knowledge: the negotiating table is a battle zone. You need to save money. Dealers need to make a profit -- they’re running a business, after all -- and you represent profits. Arm yourself with information, but always be respectful. The dealer is just trying to do their job and keep their business going. But, the more you know, the more likely you’ll leave the dealership victorious.