“In business as in life, you don’t get what you deserve, you get what you negotiate” – Chester L Karrass
Some dealerships have developed some pretty sneaky schemes to milk every penny out of you when selling you a car. Here is a little history and things to know and consider avoiding.
If you’ve been to an airport in the past 20 years you likely noticed the cost of food is considerably more than you pay anywhere else and the quality is the same or possibly less. This is many times the case with buying new cars. When cars were first invented they were a luxury novelty. Henry Ford streamlined production with his assembly line and his famous quote, ‘You can have any color you want, as long as its black’. Competition was as equally scarce as the options, and so were the different fees. Nowadays vehicles have become so commoditized that dealerships have developed some pretty sneaky sales schemes to milk every dollar out of you. Here are several to be weary of:
Holdback and Finance Reserves. These are basically the commissions charged on top of the vehicle price. When you are “negotiating” on the price of a new vehicle its these figures you’re likely first talking about. I recommend asking to see the Holdback and Finance Reserves immediately so you can see what they are on the exact vehicle you’re looking to buy. *note: these are usually only on brand new vehicles.
Preparation and Inspection Fees. A new vehicle usually comes with new car wrap and foam, floor covers in a sealed bag, low air pressure, etc. Some dealerships will try to charge you for unwrapping the present and making it ready for sale.
Delivery Fees and Destination Charge. Yes, some dealerships will try to charge you for the cost of shipping the vehicle to their location.
Conveyance/Documentation Fees. Some dealerships will try to charge you for the cost of the paperwork to sell you the vehicle.
Advertising Fees. Some dealerships will try to charge you for their advertising costs.
Credit Life Insurance. Some dealerships may tell you that your heirs will be responsible for your vehicle debt if it is not paid off when you die. This is incorrect. While a vehicle loan does need to be satisfied there are several ways to avoid those fees including bankruptcy. Term life insurance can often be obtained for larger quantities and smaller costs that what the dealerships offer.
Transfer Plates. This one is a little different; you may be able to transfer your existing license plates to a new car for a lower cost with the DMV instead of having new plates put on.
Temp. Tags and Registration. See above, if you are planning to use existing license plates on a new vehicle you might not need to pay the dealership for their temp tags.
Pinstriping. This is minor detail work where tape lines are added to the vehicle for style. I recommend getting a quote from a detail shop before paying for this from a dealership.
VIN Etching. This is an anti-theft procedure where the VIN is etched into your glass. Personally I don’t find value in it.
Paint Sealant. This may simply be another coat of wax put on your car. I recommend taking it home and waxing it yourself or getting a quote from a detail shop.
Security/Anti Theft Systems. Some 3rd party companies offer security systems equivalent to those offered in dealerships so you might get a quote before adding these to the bill.
Radios and Rims. Often you can find equal or better quality brand new, after-market sound systems for less than the dealerships are charging, same for rims. Don’t be fooled, I’ve never seen these increase the value of a car.
Consider negotiating these down or off of the price of your new vehicle. Ultimately the dealership has a vehicle they need to sell and its probably the same or very similar to what many nearby dealerships offer. Also remember anything you finance into your auto loan is likely being charged the same interest rate as your loan amount so I recommend paying cash and/or avoiding the high prices charged by dealerships.