Car Buying Guide
Introduction
"Just click here and this beautiful convertible can be yours for $1 under invoice. Unbelievable! And we've got Zero Percent financing. Even more unbelievable! And we'll give you a free computer when you buy from us! And we guarantee the value of your trade-in!"
 Listen to the hype—whether it's on TV, online, or in print—and you'd think saving money on a vehicle is as easy and fast as flipping the TV remote. Wrong!
Did you know a dealer or online auto service can sell or lease you a new set of wheels for exactly what the dealer paid the manufacturer and still make $500 to $1,500 on just the car itself?
Did you know that "Zero Percent" financing may cost you more than financing at a bank or credit union—even if the bank or credit union's rate is 7 percent?
Do you hate dealing with dealers and look forward to buying or leasing a vehicle online—or from a buying service—just so you won't have to deal with the dealer yourself? Guess what: you have to deal with a dealer, even if you use a buying service! All new vehicle sales—repeat, all—have to involve a dealer.
Do you think the Internet has made it safer for you to research and/or acquire a new vehicle? Think again! In just the past three years, the entire auto business has been ripped apart, reinvented, and re-launched. "In an instant, your privacy, your money, and your good credit can be stripped away—and that's if you're dealing with the 'good' car guys!" That quote, from the new edition of my book Don't Get Taken Every Time, sums it up. (Read the Intro and Chapter 1 of the book).
That's why I've written this special buying guide for Elevations Credit Union's RealityCheck for Cars program—and for you. For over twenty years, I've tracked the inner workings of the auto industry. As President and co-founder of the non-profit Consumer Task Force For Automotive Issues, and as co-founder of the Privacy Rights Now Coalition, I've pretty much seen it all when it comes to wacky sales gimmicks, deception, and consumer abuse. And, as spokesperson for Elevations Credit Union's RealityCheck for Cars program, it's my sworn duty to keep those things from happening to you!
And will this program work! If you follow this guide, you can probably keep thousands of your hard-earned dollars in your pocket rather than the dealer's.
A major promise up-front: RealityCheck is about educating you, not trying to hype you. This program provides you an oasis from the pressure, confusion, and deception that is rampant in the auto industry and on the Web. And it gives you straight answers.
For instance, where is it cheapest to finance? If we find out it's cheaper and better for you to finance at some other institution, we'll send you there. Think about that! Do you really think any other financial institution will do that?
We can make that promise because our goals are different than the other players in the auto industry. A dealer or their finance sources have two objectives: to sell you their product or service (whether or not it's the right product for you), and to sell it to you at the maximum price you will pay. Our job, on the other hand, is to make sure you buy what's best for you, and to make sure you pay the least for it.
We're not just being noble here, either. Since you own us, Elevation Credit Union's financial well-being is linked closely to your financial well-being: when you prosper financially, we prosper.
And since we're non-profit and owned by you, our prosperity translates into money and benefits for you. Nice!
Any questions? Why not e-mail me directly at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
? And thanks for reading. Your pocketbook, as they say, will thank you.
REMAR SUTTON
RealityCheck Spokesperson
1
What's Really Happening Down at the Dealership?
 To win in any auto transaction, you first have to understand what the other side is trying to do to you, and why. Since "the other side" always includes a physical automobile dealership—-even if you're buying or leasing from an online service—I'm going to take you inside a typical dealership right now. What's really going on down there?
The pressure game starts before you go near a dealership, either online or in person. Just look at the dealer ads: They promise low payments, sales, big money for your trade, and respect for your intellect. But, as with most selling, these promises come with some crossed fingers. Did you know that many dealers make more during sales than they do at non-sale time? That's because we consumers automatically equate the word "sale" with "save." That's dangerous math. Dealer advertising really has another purpose: To get you to rush down in a fit of excitement ("Really? Just $99 a month?!") without stopping to think.
The "Track" System Takes Over. A "track" system is an automobile sales program designed to put every customer through the exact same sales steps with the sole intent of selling that customer instantly for the maximum profit. The key words here are "instantly" and "maximum profit." When you arrive at a dealership (or log-on to most auto websites) the dealership begins to "work" you: put you through the track system.
The objective is always the same: Get you to pay more for every item and service than you were planning to pay. Want to spend $450 a month? A savvy dealership will get you to pay $550. Or they will happily sell you a car for $450 per month—but it will be a car you could have bought for $350 per month. Nice of them.
The dealership is concerned about its profit, not your budget. The people at virtually any dealership and most websites and buying services, friendly though they may be, have a little different objective in the car transaction than you do. Their goal is always to maximize profit. And that might mean leaving out an important fact or two.
To take one example, what would you do if you owned a dealership that sold cars ranked lowest on the government crash safety reports? Would you tell all your customers, "Oh, don't forget—our cars are the most dangerous on the road?" See the problem? To survive, the dealership must either lie about the dangerous test results, or simply forget to talk about the results.
What's the outcome of this? The sellers of automobiles generally can't give you good advice about what you should spend, number one. No salesperson in the auto industry ever prospered by volunteering to cut the price on every sale or always telling the whole truth about its vehicles.
Number two, the sellers of a particular automobile generally can't give you the answers you need to questions about such matters as a car's safety, reliability or resale value.
But these questions are important, aren't they? And you'll need the answers before you even look in the direction of the dealership. Why? Because once you're engaged with these folks, the "track system" will take over and speed you along recklessly whether you like it or not.
Dealership Tactics
Here's a look at a few of the tactics track systems use to "work" you.
You stop into the dealership simply to pick up a brochure. Even though you have no intention of buying, the smiling salesperson requests your driver's license, your Social Security number, or simply your address. Or maybe they want to register you for a fabulous free trip to Paris.
Even though you haven't given permission, many dealerships will now search their databases and quickly open a file on you. And because many dealerships are now owned by conglomerates that already have information on you, the dealership has an informal "read" on your credit without even pulling a credit report! With that informal "read," the dealership then begins to plan the maximum profit they can make on you, based upon your credit worthiness. And you really only stopped into the dealership to use their restroom.
The Dealership T.O.s You
"T.O." stands for "turn over." You're sitting in a salesperson's office, thinking about how much more fun it would be to change the oil in your car in the dark rather than go through this, when your salesperson returns with reinforcement—another person. The new smiling face asks for more money. And then the salesperson asks for more. The T. O. system operates on the principle of "fresh faces can work miracles." A miracle, in this instance, is defined as more profit. And as long as you keep giving, they'll keep asking.
The "Note" System
Rather than "T.O.ing" you, some dealerships use the note system: The salesperson steps out, returning with a nice note from the sales manager asking for more money. And then another note, then another. Usually, the salesperson comes back with five notes, and usually the last two ask for raises of odd amounts of money—for instance, $113.29 or, finally, $23.19. The note system has one basic problem. It makes you think the dealership is negotiating when it's really only play-acting. Consider the "odd" raises. These are simply designed to make it look like you're really a hard bargainer. You know, you think you've got them "down to the pennies." A RealityCheck tip: Many Web-based sellers use versions of the note system.
The Four-Square System
The salesperson divides a piece of paper into four squares and then asks for your "wish list." What do you want to pay a month? What do you want for your trade? What do you want to pay for the new car? However ridiculous the sums, each are written in a square. Then they ask for a large deposit, and then they ask for your signature in the fourth square.
Then they begin to "work" you on each square separately. You wanted to pay $20,000 for the car? They ask for $40,000! Very slowly the salesperson negotiates down, constantly scratching through figures. By the time they finish, the paper is illegible, you're frazzled, but the salesperson is smiling. You've agreed to pay an additional $1,200 to $1,500 profit.
The four square system is probably the worst system in use today because it was designed solely to confuse you and so produce some very nice profits. Don't deal with dealerships that use this system.
Spot Delivery, or "Yo-Yo" Selling
"You can drive it off today!" That is the most expensive statement any car dealer or Web seller can make. Spot delivery means emotion is ruling you rather than good sense. It also means you (very conveniently for the seller) won't have the opportunity to compare costs and terms.
The real danger in Spot Delivery: Spot Delivery has become a fraudulent selling technique at many dealerships. These dealerships deliver you a car on any terms you want. Then a few days after you've taken delivery, they call you up and say "Oops, your contract wasn't approved at the figures you wanted. We need an extra thousand in cash, and your payment has gone up $300 per month, and we've added twelve more payments!"
What can you do if they happens? Usually nothing. They've already sold your trade-in, and you unknowingly signed an agreement to let the dealer raise the price! This type of Spot Delivery is called "yo-yo selling" by unethical dealerships, and is endemic in the auto business. It is also the subject of hundreds of lawsuits at this very moment.
How do you protect yourself from spot delivery? Never buy or take delivery of a car on your first visit to a dealership or a web site. A RealityCheck tip: By financing with Elevations Credit Union, you are totally protected from yo-yo selling.
The "Business Advisor" or "Financial Counselor" Scam
Even if you have the cash in your pocket to pay for a vehicle, you'll be forced to talk with a dealership's finance sales staff. Or, as they are quaintly called at some dealerships, "Business Advisors" or "Financial Counselors." Why do these high-pressure finance salespersons insist on talking with you? Because dealerships make much more money on financing these days than they normally make on the sale of an actual vehicle. Many dealerships will do almost anything to convert you to their financing, including shade the truth a bit.
And if the dealership can convert you to their financing, they'll sell you credit life and credit disability insurance that's almost always more expensive than a credit union's or a bank's but sounds downright cheap on a "pennies per month" basis. Then they'll sell you "protection" packages (rust proofing, undercoating, fabric conditioning) "for just $19 per month." Why, you can afford that! But over 60 months, you will pay over $1,140 for products that cost the dealer a hundred bucks. The same approach works for extended warranties or mechanical breakdown insurance, too.
Daily the methods used by many dealerships and online selling organizations grow more sophisticated and subtle. For instance, many dealerships now track customers' movements by computer, rate their moods on scales entered in computers, and flash their progress in the buying process on computer screens so managers and other salespeople can monitor the dealerships' careful plan to sell. How can you avoid the traps? Go right on to Chapter 2: Buying a Vehicle the RealityCheck Way.
2
Buying a Vehicle the RealityCheck Way
MANY NEGOTATIONS, NOT ONE
 Buying a car isn't one negotiation, it's many: your trade, the new car you're buying, the financing—and the newest, most popular profit centers—warranties, protection packages, alarm systems and other add-ons.
If you don't know what you're doing, you can save money in one area and pay too much in the other, no fun at all. That's why dealers can sell cars for "no profit" and still make thousands on you. And that's why you need to pay very close attention to the right steps.
THE RIGHT WAY, STEP-BY-STEP
If you really want to save money and still like your car after the fourth payment, you'll have to look at the car-buying transaction in a new way. Most people find a car and adjust their budget to fit that car's payment. That's the wrong way, and usually means you end up eating pinto beans for years on end.
The RealityCheck approach doesn't start with the car at all; it starts with your budget. RealityCheck also encourages you to slow down rather than speed up. Emotions in car buying should come after you've done it right.
And we define "right" as saving money and buying the right car, too. Doing it our way, versus simply following the dealership's lead, can literally put thousands in your pocket. So, throw out the conventional thinking and consider this:
- All cars are bought for cash.
- No cars are bought with trade-ins or payments.
- Trade-ins and payments only provide you cash.
Right now, based upon your budget and your old car, you have an exact amount of cash available to you to buy a new car. That amount of money is called "Available Cash," and it's—logically enough—made up of all the cash you have available to buy a car.
" Available Cash" is made up of three things:
- The cash your payment will buy you, called "Loan Cash."
- Any cash your trade-in may give you after paying off your current loan. That cash is called "equity."
- Any other cash you may have—rebate money or savings, for instance.
Understanding "Available Cash" Helps You Understand Your Budget!
Here's an example of "Available Cash."
- You tell us: "I drive a three year-old Mustang convertible, and I owe $13,000 on it. I take home $2500 per month after taxes and deductions. I want to trade in my car, and I don't want to make more than 48 payments."
- We say: "Okay, you've got $26,000 in Available Cash to go buy any car you like."
Those sentences say the same thing! Know your Available Cash figure and you'll always be on budget!
What's your personal Available Cash figure?
That's easy to determine. Use the calculator in the right hand column after you complete the following steps (You can use our Available Cash Worksheet). Or after we'll do it for you! Just call us at 303-443-4672 x1741.
Use these steps to figure your Available Cash.
1. First determine a rough "wholesale" value for your trade-in.
"Wholesale" is the amount of money a dealer will pay for your old vehicle. But "wholesale" isn't a definite figure, the amount can vary from dealer to dealer. A dealer's objective, incidentally, is virtually always to give you as little for your old vehicle as possible.
If you are very smart, you need to carefully determine wholesale value: clean up your trade, drive it to three or four used-car departments of new-car dealerships, and tell the manager you are thinking about selling your old car, not trading it. The highest offer a dealer makes to buy your car is its true wholesale value.
Here's a quick way to determine your trade-ins approximate wholesale value: Go to www.nadaguides.com on the web and look up your current vehicle. This figure isn't exact—it's an average for all cars in a specific category, so use it only as a guide.
Caution: This is a great service provided by NADA Guides. But it is a commercial site used by many dealers and others in the business to solicit your business. The credit union has no control over what is on this site. So, be cautious as you use this site, ignore all the ads, and use your "backup" arrow to come back to RealityCheck. Another caution: some sites at times won't let you return to our site. If this happens, simply re-enter www.elevationscu.com in your search engine.
Now, head to the site and determine the rough wholesale value of your car. Write that amount down on your Available Cash Worksheet.
What if you still owe money on your trade-in? If you still owe money on your current vehicle, you will need to know its "payoff" to figure how much "equity"—cash value—the vehicle is worth. For a rough estimate of the amount owed, multiply your payment figure by the remaining months in the loan. Subtract that figure from the vehicle's wholesale value to determine a conservative estimate of the vehicle's equity. For a more accurate figure, call your financing institution and ask for the pay-off (or "loan balance") amount. You'll need your loan account number to get that. Write your payoff and equity on your Available Cash Worksheet.
2. Now think about what you can really afford to pay each month on a vehicle.
Do you want to pay more than you're paying now? Would it make your life easier if you had a lower payment? You decide. If you need assistance, call us at 303-443-4672 x1741and talk to a Elevations Credit Union loan officer—they are always willing to help. Once you decide what would be a sensible payment for you, write the figure on your worksheet:
- I want to pay _____ dollars per month.
3. How many months should you finance?
Elevations Credit Union will finance up to 84 months for certain types of vehicles. But the truth is we hope you won't stretch out your payments to the longest possible time. Financing longer means you're paying vastly more money in interest, and may owe money on your vehicle for years after its useful life is over. To determine how many months you should finance, call Elevations Credit Union's loan department at 303-443-4672 x1741 and a representative will assist you.
By financing for the fewest months that will fit your budget you actually can buy more vehicle. For instance, the difference on a $30,000 loan financed for 48 instead of 60 months is only $4 a day. Pay the higher payment, finance for 48 months rather than 60, and you'll save over $2,000 in interest. Great! You're already saving money. And wouldn't it be nice not to have car payments for that fifth year? So how many months should you go? Jot that number on your Available Cash Worksheet:
- I want to make $____ payments for ___ months.
4. How much other cash do you have on hand that you plan to spend on a new vehicle?
Are you looking at a car with a rebate? Include that figure here. Do you have savings that you plan to use as additional down payment? Include that figure.
Now, let's use the facts on your worksheet to determine your Available Cash using our Available Cash Calculator located in the right hand column.
When you finish, congratulate yourself. Your Available Cash figure rules! To stay within your budget, Available Cash is all the money you've got in your car buying account. That's all the money you have to pay for everything; cost of car, taxes, other charges, insurance everything. Exceeding your Available Cash is like bouncing a check on your budget. And you know you don't want to do that.
3
RESEARCH BEFORE YOU SHOP!
 Don't go near that dealership! Once you know how much Available Cash you have, get the hard facts about the vehicles that fit your Available Cash figure before you go any further.
For instance:
- What vehicles fit your budget?
- What do these cars cost the dealers?
- What is the vehicle's safety record?
- What about mechanical reliability and maintenance costs?
- What about insurance costs?
- What about operating costs, such as fuel economy?
Resources for Research
The following resources available online can help you find the information you need to choose wisely. Please remember that these are third-party sites that have no relationship to the credit union and over which information the credit union has no control. These are sites, however, that I have found provide generally sound, helpful information.
- Consumer Reports generally gives excellent, objective information on safety and reliability. You can research copies at the library, or visit http://www.consumerreports.org/. Consumer Reports charges $5.95 per month (or $26 per year) to access their online articles. It's the best money you can spend.
- The Center For Auto Safety provides free information on reliability, maintenance and safety issues. This is one of the most important sites on the Web, so bookmark it then click on "auto defects" in the top tabs.
- The National Highway Traffic Safety Administration has a dynamic site to help you research safety and dependability. Research government crash test results and safety recalls at safercar.gov.
- The Insurance Institute for Highway Safety provides results for its offset frontal crash tests, side impact crash tests, and rear crash protection/head restraint tests.
- Find out the fuel economy rating on any vehicle at http://www.fueleconomy.org/, a service of the Environmental Protection Agency (EPA).
- How much will insurance cost for that vehicle you are considering. Rates can vary considerably between two similar models as well as between insurance companies for the same model.
- The manufacturers all offer "consumer" sites which supposedly tell you objective information about their vehicles. Generally, these sites never tell you bad things, of course. So, they are limited in their usefulness, when it comes to objective information. The sites can be fun to visit, however. Most now offer "virtual" tours of individual vehicles. Just use your search engine and any manufacturer's name.
Now it's time to shop for the one vehicle you like!
Like a chocoholic's first whiff of a candy factory, your first visit to a dealership or website poses the maximum danger to your pocketbook. Those new cars look so good. And you've waited so long. Whether online or in person, sellers know how to turn up the fires of your enthusiasm and singe your reason.
So put your emotions aside. Be wary. Slow down. Save the emotions for the moment you finally drive away in your shiny new car on budget with an extra thousand or two in your pocket. Now that's something to get excited about!
Quick RealityCheck Tip if you're buying used. Buying used is one of the smartest things you can do. But it's the worst thing many people do, because they don't understand the specific problems used-car buyers face, on the Web or at a dealership.
For instance, did you know some dealers and online lenders charge you thousands more in interest to finance a used car than they would to finance the same amount on a new car? How do you stop that from happening to you? Keep reading. We've got a special Used Car section for you, and the information is priceless. But first, let's deal with new vehicles.
4
Buying a New Vehicle the Right Way
Ready to match wits with the dealership? Good! You can match wits and win. Just keep reading.
Simple Rules To Remember
1. Narrow your choice to one or two models or makes before setting foot on a car lot.
Why? Trying to think about a big list will do nothing but confuse you.
Cautions for your first dealership visit: You are under the microscope at a dealership. Many dealerships already have you in a database. Most are anxious to pull a current credit report on you. All want to use information about you to maximize their chances to make a big profit. Don't let that happen! Unless you definitely plan to finance at the car dealership, don't allow any dealership to pull a credit report on you at this stage.
For instance, many dealerships will ask for a copy of your driver's license before they will let you test-drive a vehicle. A dealership has a right to know if you have a valid license. But you don't have to allow them to request a credit report at this stage. How to stop this? Say up front, "I do not authorize you to pull a credit report on me."
2. Now, choose two nearby dealerships that stock the vehicle you like.
If you've done your homework, where you buy isn't important as long asthe dealership is reputable.
3. Find only one car at each dealership.
You can't buy three cars. Keep it simple: Find the one you like the best.
4. Take control of the transaction.
Tell the salesperson you are not buying a car today under any circumstances, but you will buy soon. Today you are just shopping and fact-finding. Check the car out. Take a test drive. But be firm and don't let the salesperson lead you into any discussion of buying today. If you start to feel pressure or confusion leave immediately.
5. Copy all the information from the Manufacturer's Suggested Retail Price sticker before leaving the dealership (MSRP, not the dealer's sticker).
The MSRP is the sticker with the lowest price on the vehicle's window. Copy all the dollar information from that sticker. For instance, the vehicle's base price, then the name and price of options. (Use our "Auto Shopping Worksheet.") For now, ignore the dealer's sticker, which is always higher than the Manufacturer's sticker. The dealer sticker contains hugely inflated profits.
6. Compute the dealer's invoice cost.
A very important step. Call us and we'll help you do this or use one of the online price guides below to calculate this amount. Why? Dealers want you to negotiate down from their inflated asking price, a very expensive way to negotiate. The RealityCheck approach negotiates up from what a dealer paid for the one car you like. Don't ever think percentage discounts from dealer asking prices; don't ever think "sale" price. Know what the dealer paid for the car you like and negotiate up from that. You may use a good online service such as Edmunds.com or nadaguides.com to determine the dealer's cost. Just remember that these are third-party, commercial sites that have a number of ads and links with a primary interest in selling you something.
7. Check to see if the car will fit your "Available Cash": Here's the moment of truth.
After you pay for the car, and give the dealer a profit, and pay tax and other charges, will you still be in budget? We have a simple RealityCheck Vehicle Buyer's Fact Sheet to help you compare your figures and determine this. But first decide how much profit you want to pay a dealer, the last variable in the transaction.
What's a fair profit?
You have a perfect right to pay all the profit you want. But if your objective is to pay the least profit a dealer will take for the car, you'll need to start negotiating up from what the dealer paid the manufacturer for the car. That figure usually already has "hidden" profits in it. And at times, a dealership will be happy to accept "cost" rather than lose a sale. The only way to know whether a dealer will do so is to offer that figure and stick to it for a while. But if starting at "zero" bothers you, add any figure you'd like as a profit figure.
5
Your Second Visit to the Dealership — The Buying Visit!
Negotiating the Right Way
 You are way ahead of the game right now. You've been patient, and all that homework is getting ready to pay off.
- You know how much money you can spend (your "Available Cash" figure.)
- You know what the one vehicle you like cost the dealer.
- You know what your old car is worth.
- The dealer—not you—is under the gun: They can lose a sale if they don't do it your way.
The secret to winning (saving lots of money) is to stay in control, keep things simple, and never be pushed. The following steps will help you.
1. Make an appointment with your salesperson.
These men and women work hard and work on commission. If you liked the person who waited on you during your first visit, go back.
2. Put these pieces of information on a summary sheet or take your Buyer's Fact Sheet with you.
- The wholesale value of your trade-in if you're trading.
- Your available cash figure.
- Your maximum offer on the one car you like.
- Your maximum difference figure, if you're trading.
3. When you arrive at the dealership, ask to go to the salesperson's office.
You take the initiative; you take control of the situation. Tell the salesperson you are definitely going to buy a car, but not necessarily from that dealership. Say there are other cars you like as well as this one. Why say this? To increase your bargaining power.
4. If you have a trade, ask to have it appraised.
Do this before you discuss the new car at all. Keep the transactions separate. But beware: many dealerships will at first refuse to give you the true wholesale value of your car at any time. They'll want to talk about "allowance," a meaningless figure, or worse, may refuse to have your car appraised at all right then. If you run into a dealership that refuses to deal straight with you, find another dealership.
5. Agree on the amount the dealer will give you for your trade.
6. Make an offer, and be prepared to negotiate on the new car.
You've finished talking about trades. You've agreed what they will pay to buy your car. Now it's time to see what you must pay to buy their car. Two separate transactions. Your goal now, using the cost of the car you like, is to set the scale of bargaining in your favor. How do you do that? Whatever your first offer, expect the dealership to counter offer. And don't be afraid to counter offer yourself—just offer a very small amount of money.
The conversation might go like this:
Salesperson: "What if I could give you a ten percent discount?"
You, the smart shopper: "No, let's do it my way. I'll offer you $15,000. Invoice cost on that car."
The flustered salesperson: "But, my boss will never accept that!"
You: "Well, why don't we offer it and see? I'll even sign a buyer's order saying I'll buy at that figure."
A now calmer salesperson: "Okay. Let me fill out this sheet. And I'll need a deposit before I can take this offer to my boss. To show him you're serious, you understand. "
You, very firmly: "I'm sorry, I won't give you any deposit until my offer is approved in writing."
Salesperson: "But we're not allowed to do it like that."
You: "If you can't, I've got an appointment at a dealership that will."
The salesperson leaves, then returns and agrees to do it your way. You've offered $15,000. They now ask $20,000.
You: "I'm sorry, no. How about $15,025?"
Startled salesperson: "What?"
You: "Okay, make that $15,030."
Do you get the idea? Set the scale of bargaining in your favor. Raise your offer a time or two, that's part of the game. But don't raise it much. And don't give a deposit until your offer is approved in writing. Dealerships use deposits simply to make it harder for you to escape. Warning! Some dealerships, rather than taking money, will ask for your driver's license or credit cards as a deposit. Don't give those to them.
7. When you reach agreement and you are looking at a completely filled out "buyer's order," compare the "amount due" line to your "difference" figure from the RealityCheck Vehicle Buyer's Fact Sheet.
Quick RealityCheck tip: Beware of hidden fees in the price that are not itemized on the purchase order, such as extended warranty and rust-proofing fees.
If you don't see the difference figure, ask the salesperson. Make sure it includes tax, tag, title, and any other dealer charges. Are you on budget? If this figure is below your difference figure, you're home free. If it's above it, stop the transaction. You've just gone over budget.
8. If the difference figure is okay, give a small deposit.
Dealers will ask for hundreds or thousands, but, unless you're asking them to order a Cadillac without air conditioning or to paint your car pink and purple, don't do it. Any amount of money makes a contract legally binding. $50 should be enough.
9. Now be prepared to deal with one or two or even three other "salespeople."
You're not free yet. Even if you're paying cash; even if you have a credit union check in your pocket, many dealerships will virtually force you to talk with finance managers (also known as "financial counselors" or "business managers"). They'll also insist that you talk with their "after-the-sale" manager. This might be a separate person or the finance manager. Whatever, as we noted earlier, this person will try to sell you warranties, "protection" packages such as rust proofing and undercoating, and add-ons such as alarm systems.
10. Be prepared for the leasing switch.
And don't forget, this is the time a dealership may try to switch you to leasing. Don't automatically fall for it. Remember that the dealership wants to convert you to leasing because the dealership generally makes a lot more money leasing you a car than they would selling you the very same car.
11. If you're buying, RealityCheck recommends a simple approach for evaluating the value of dealership financing, insurance, protection packages, warranties, and other add-ons. After the sales pitch, which invariably presents dealership products and services as the cheapest and best, simply say something like this.
"That sounds fine. And if your loan and products are cheaper, I'll certainly finance with you. Now, would you mind giving me a copy, completely filled out, of the contract you want me to sign so that I can compare it to other sources?"
Banks will be happy to give you exact figures. The credit union will be glad to do that, too—to tell you exactly what we will charge for the loan itself, life insurance, disability insurance, and warranties. If the dealership is cheaper, shouldn't they be willing to give you these figures, too? To the penny?
If the dealership does that, the credit union will be happy to help you compare costs, and will send you to another source if they're cheaper. But if a dealership won't give you the details, what does that say?
What about their insurance, protection packages, warranties, and the like? At times, it might be sensible to buy extra rust proofing and undercoating protection—though many consumer groups doubt the need for extra protection. And at times an extended warranty might make sense—though manufacturers' warranties are good these days. But it never makes sense to spend hundreds and thousands more than you need to for these products. Unfortunately, some dealerships are now trying to charge $1,200 and more for rust protection they used to sell for $200; they're trying to sell $300 warranties for $1,900 or more. We don't think you should spend that type of money without very carefully comparing products. Who wants to throw away an extra $2,000 without thinking?
12. After you're finished with the finance salesperson, don't celebrate quite yet. If you're financing at the dealership, many will insist that you take the car home that minute. It's called "spot delivery," remember. But don't do it. Go home and diffuse a little. Check the dealer's figures again. And give the dealership time to fix the little things wrong with any new car. You did check it over carefully, didn't you? Make a list of the squeaks, rattles, sticking knobs, and scratches, and have them fixed before you agree to take the car.
If you're financing at a bank, make sure you have all your paperwork necessary for their loan. If you're financing with the credit union, just stop by or call, and we'll have you ready to roll in an instant.
13. When you finally pick up your new wheels, check it over carefully. Don't look at it in the rain when it's hard to see flaws in the finish. If everything's okay, smile. You did it the right way and saved a lot more than change!
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Buying Guides
