Ten
Things to Watch Out for When Buying
a Car Online
Just
because using the Internet can help you with fact-finding on pricing,
leases, and so forth, you still have to stay on your toes when buying
a car online. Here are some pitfalls to beware.
Beware
the Lease Switcheroo Trick
You may not believe
it, but some dealers hand you a purchase contract to look over only
to substitute a lease contract later when the time comes to finalize
the deal. If you've decided to buy rather than lease, this little
switcheroo would likely be very painful and embarrassing.
When you sign
something, the law assumes that you've read what you sign. The solution
is to be sure to read the entire document when you sign it. Even better,
when you go in for your test drive (which should not be the same day
that you finalize the purchase) ask them to give you the sales contract
to take home and read. Then make a small mark on each page so you
can be sure that you're signing the same document that you looked
over.
Sounds paranoid,
we know. But the lease switch trick is alive and well and living in
America. And just because you're paranoid doesn't mean that they aren't
out to get you.
Don't Take Price Quotes as Written in Stone
Try to get a new
car dealer price quote from several sources, such as AutoWeb, Kelly,
CarPrices or other online sites. Each of the sources provides you
with an estimated dealer cost, which is likely to differ in each case.
This doesn't mean that the estimates are inaccurate; several variables
come into play when quoting car prices such as options, destination
charges, sales tax, and new pricing information that may not yet have
shown up at a given Web site.
The estimate that you get from the Internet is often low, even by
several hundred dollars. Why? The quote may not take account of extra
options included on the particular car you're looking at, or extra
costs such as import fees, gas charges, advertising costs, and so
on. At the dealership, ask to see the actual factory invoice for the
car you're buying. This figure is usually higher than the prices you'll
see quoted on the Internet for the "standard" model. Don't
decide your final offer merely on the "dealer invoice" price
you see estimated on the Internet.
WARNING!
Don't settle for an invoice that the salesman or sales manager tears
off the printer. That's not the real invoice price; it's a price guaranteed
to make the sales staff a handsome profit. The actual invoice is a
separate piece of paper that looks like an invoice and has the dealer
as the customer and the factory as the distributor.
TIP!
Don't assume that asking for a price near the invoice price robs the
dealer of a fair profit. Dealerships are paid extra for the space
on their lot by the factory — this is called dealer holdback
and if the dealer sells the car quickly (generally within the first
three months), he's guaranteed to make a decent profit on it, even
if he sells it at $1 over invoice). Of course, if a car is in great
demand, they'll reject your offer and wait for the next customer to
come along (one who they hope has less information).
If You have Trouble Getting Financing
If all else fails
and you get turned down by the various loan sources I've described
in this book, try a finance company. Their rates are generally higher
than other sources, but they consider people whose credit ratings
are too weak to get quick online approval. Don't be too embarrassed
if you have less than excellent (or a too-brief) credit record. You're
in the majority. Research shows that about 60 percent of the adult
population falls into this not-so-excellent category. It's not that
hard to lose a good credit rating either: It can happen if you get
into an unresolved dispute, or let a bill go unpaid for more than
two months.
If
You Have Touble Getting Financing, Part II
If you think you
have a good credit rating and don't understand why you're getting
turned down everywhere you apply for a loan — take a look at
your rating. You can access this information: It's the law. They don't
have to let you see your credit rating for free, but they do have
to let you see it.
You can get a free credit report when you sign up for a trial membership
in the CreditCheck Monitoring Service, or pay $7.95 for a report derived
from Experian (www.freecreditreport.com).
Alternatively, get a $29.95 merged, triple-source report from Equifax,
Trans Union, and Experian (www.icreditreport.com).
Also remember that if you have cash value in a life insurance policy,
you can sometimes borrow from it.
Should
You Lease?
At the end of
the normal three-year lease, you'll be forced to look for a new car
(what's more, you'll have no trade-in either). Also, leases are generally
complex documents and figuring out what they mean isn't always an
easy task. You can bet, though, that if your friendly lessor can find
a way to wedge in some additional profits here and there, he or she
will.
WARNING!
Many people are so pleased when they find out the low initial cost
and low monthly payments of the typical lease, they simply agree to
it without giving the whole purchase much further thought. Don't fall
into this category.
Don't
Give Away Your Trade-in
All too many people
(most people, in fact) quickly cave in when offered a really, really
low price for their trade-in. You're told "our mechanic, unfortunately,
found all these flaws with your trade-in." And you end up being
either too timid or too uninformed about auto negotiating to argue.
If you're trading in your existing car, your first step when negotiating
at the dealership should be to agree on the trade-in price. You should
also try to nail down the price before you tell the salesperson which
car you're interested in.
After the salesperson knows which car you're interested in, you can't
be sure of how much they're actually giving you for your car. They
can make you feel really good by saying that they're giving you way
more than the car is worth, but they're probably just taking a bit
of the top-end profit off the car you want to buy.
Dealers usually
want to talk to you in terms of trade difference between the car you
want to buy and the car you have. The trade difference is the amount
of money that you will have to refinance after the dealer pays off
your existing loan to buy the new car. Your goal is to get them to
quote you the amount they'll give you for your current car before
they know which new car you want. Then you can bring down the price
of the new car to as close to invoice as you can. Then the price should
be: ( New car price + Options + Extras & incidentsls ) - Trade-in
value
Suppose that your
car lists for used retail at $12,000. It's then likely to list for
around, say, $9000 wholesale, with an auction price of about $8,300.
A sales-person is likely to offer you around $5,700 and, if you scream
and moan, the salesperson may be willing to go up to $6,500, weeping
all the way about what the sales manager is going to do when this
shockingly high price becomes known. There won't be any Christmas
goose for his son Tiny Tim this year. Thanks to you.
REMEMBER
You have to be realistic about the value of your trade-in, particularly
if you financed it for 60 months with little or no down payment and
want to trade it in after 36 months. In reality, the payoff on your
loan is probably more than the value of your trade-in (a condition
that car salespeople call being upside-down). If you buy a new car
under these circumstances, then rest assured that you will be financing
the difference between the value of your trade-in and the payoff on
the loan in the price of your new car. If you're paying on a loan,
then you should go into the negotiation with your eyes open. To do
so, do these things:
· Visit www.kelley.com
and find out the value of your trade-in.
· Call the financial institution that holds your loan for the
payoff on your car.
· Expect to have to add any value shortfall to the price of
your new car.
TIP!
If you like to have a new car every three or four years, then you
should put as much money down as possible and finance the car for
as short a term as your budget allows.
Be Prepared
If you do your homework, as described in this book, you'll enter the
negotiation process with a valuable attitude. Don't wander into the
car dealership with vague notions about the value of your trade-in,
worries about the problems in securing a loan, no idea of the real
cost of the new car, and confusion about other factors involved in
buying a vehicle. Have the facts already in hand when you first visit
the dealership. The Internet is the world's greatest research engine
ever — and it can completely and thoroughly prepare you for buying
a vehicle. You'll come out a winner if you take a little time to prepare
yourself.
Be
Aware of Your Wants
Before you enter
the showroom, it's important to sit yourself down and make two lists:
what you must have, and what you'd merely like to have, in your new
vehicle. These are two different lists. All too often people come
away from the dealer's lot with a CD changer and moon roof (things
they wanted), but too little room for their four kids and the dog
to fit comfortably for a vacation trip (things they needed). Don't
be confused and get a sports car if you need a station wagon.
List the things you must have, then list the things you would like.
The second list, your wish list, should be pared down until it fits
your budget. It's important to make these lists, and arrive at decisions,
before you get into the sales situation where you're likely to either
bust your budget, or trade off things you really need for things you
merely want.
Be
Willing to Walk
In any negotiation, it's highly important that you have a willingness
to walk out the door and go somewhere else. Your diction, body language,
and other behaviors will all convey whether or not you feel you can
drop the haggling process and simply walk out.
If you have the feeling that you must get that red beauty sitting
out there in the lot, you've been maneuvered psychologically. You've
allowed yourself to be manipulated into thinking that there's an emergency,
and you feel that you've got to conclude the deal if at all possible.
There are many ways to get you to feel this way. They'll tell you
they can't get that color again for months, that the model you want
is rare and popular, that it's now or never. Don't be pushed into
this corner. Be prepared mentally to go to a different dealer (this
attitude will show, and it will make all the difference). But you
must be mentally strong enough to believe that you can walk, and you
must also be prepared to walk if necessary.
Get
It in Writing
It's important
to take notes during the negotiation process. If you and the dealer
agree that you won't be charged for rustproofing, write that down
in your notebook (you did bring a notebook, didn't you?). Also nail
down all the other "extra" charges, including such items
as dealer prep, undercoating, interior protection, paint coating,
sealant, "shining," or any other extra.
You don't want
surprises that can balloon the cost. As you eliminate these unnecessary
extras, write each agreement down in your notebook. Then, when the
final contract is given to you, make sure that these items are all
in writing. Take nothing for granted. Check the contract to ensure
that all the verbal agreements (the ones you wrote in your notebook)
are also spelled out in the contract. Double-check everything for
omissions or errors.
