Final Fees and Negotiating Tips
Consumer demand for better treatment and the availability of invoice pricing have been the two greatest agents of change in how car dealerships do business. Combined, they've made price negotiations less pressured — and less profitable for the dealership. There's now more chance for profit on the "back end."
This is why you are far from finished negotiating and protecting yourself when you've arrived at a sale price. You're almost there, but keep the following tips in mind when you're finalizing the deal.
Caveats and Negotiating Tips
- Chill. The second-to-last thing you want to do is get emotional about a car. The last thing you want to do is express that excitement to dealers. They're attuned to such things, and they'll exploit it. Keeping cool can be difficult, but emotions lead to hasty and/or unwise decisions.
- Be aware of the "bump." That's where the salesperson attempts to bump your offer higher, usually by trying to get a range from you. For example, you say you're willing to pay $13,500 for that Honda Civic. He'll say, "Up to ...?" This is where human nature makes us say something like, "Up to $14,000." Mistake! If he asks, "Up to ...?", try this response: "Yes. Up to $13,500."
- Shut up. To inexperienced negotiators, silence is scary. It's hard to throw out a low-ball figure and let it float there in the silence. Do it anyway.
- Guard your personal information. Don't give out too much personal information, and especially not your social security number. There's no need for it unless you've gone through most of the process and are looking into the dealer's financing options. Your social security number is needed to run a credit check, which will determine the rates for which you qualify. If you give it ahead of time, they may run it immediately to help qualify you.
- Keep your eye on all the variables. You may set a monthly payment that you're willing to accept and find out that the attractive loan rate the F&I manager "found for you" came with a longer term, which means you pay more for the vehicle in the long run.
- Don't sign anything until the deal is done. Signatures have power. Even if a random piece of paper would ultimately prove not to be legally binding, a pressured consumer might assume it is or feel obligated. And who wants to bother with lawyers just to get your money back? Avoid the whole thing by not signing anything until all terms are agreed upon and you're ready to close the deal.
- Resist the deposit. Assume a deposit is nonrefundable — even if the salesperson or F&I manager says it's refundable. If it isn't in writing, it's not binding. Don't be too quick to hand over a check in either case because it's seldom warranted. There are a few cases in which a deposit is justified. One is the case of a hot vehicle that truly may be snatched up by another buyer — a car you know is hard to come by and not one the dealer tells you is in short supply. The same goes for vehicles for which you're put on a waiting list. It's also reasonable to put a deposit down when you order a vehicle from the factory.
- Negotiate with words, not clothing. What you wear and what you drive into the dealership tell stories about you. You can low-ball all you want, but if you roll up in a luxury car or wear your best suit, dress, jewelry or watch, the salesperson will read your appearance, not your lips, when you say you can't afford his price.
Fees, Negotiable and Not
There are many hidden fees and charges in the sales process: some inevitable, others questionable and some just plain wrong. The required charges — destination charge, tax, title and license fees — have already been addressed. The following are questionable:
- doc or conveyance fee: This stands for documentation fee, purportedly to cover the cost of paperwork. It's usually less than $50. Some dealers will refuse to budge on it.
- prep fee: The dealer preparation fee is assessed to cover the cost of preparing the car to hand over. This one's pretty bogus. The factory covers the prep fee. Ask precisely what this charge entails. Figure out what it should really cost and negotiate it down or out completely.
- delivery charge: Be careful with this one. The factory's destination charge, which may be referred to as the delivery charge, is required and non-negotiable. Sometimes dealers tack on an additional delivery charge of their own. Don't pay both.
- advertising fee: This one's tough for people to swallow because it can be as high as a few percent of the price, and because they don't think they should pay the cost of bringing people to the store. This is a gray area, though.
Note that the four fees above are labeled questionable, not unreasonable. Be sure to ask for an explanation of any fee you don't understand. The dealer may have taken a loss or slim profit along the way, and your fighting over something like a doc fee when the deal is nearly wrapped up may be counterproductive. Choose your battles wisely.
You must keep an eye on the charges through the whole process. If a number has inflated somewhere along the line, ask about it. Unwanted equipment is something you should not pay for, whether you're aware of it all along or if it surprises you near the end. If you don't want it, don't accept it. If the equipment is an upgrade that you don't mind, insist that it either be thrown in or removed, or demand another vehicle without it. Don't give in now because you were almost done and this is the only thing holding it up.
When to Buy
People always ask when is the best time to buy a car if you want a good deal. Oddly, as addressed above, during a sale is not necessarily the answer. Some good times are:
- during a customer or dealer incentives period, and particularly near the end of a dealer incentives period when the rebates are at their highest level.
- at the end of the month. Dealerships tally monthly sales and attempt to meet targets, on which the salesperson may earn a bonus. A buyer who will help meet a target may get a better deal.
- in the middle of the week, when business is slow.
- at the end of the model year, which is in the vicinity of August through October, depending on the make and model. Dealers are trying to clear the decks for the next year's model, and there are sometimes unreported dealer incentives in the form of percentage increases in holdbacks. Holdback is a portion of a car's sales price (typically 2 percent to 3 percent of either the invoice price or MSRP) that an automaker returns to a dealer, usually on a quarterly basis. It's a way of boosting the dealer's cash flow and helps the dealer keep his lights on. Most dealers see holdback as something that they're entitled to.There may also be greater customer incentives. Be aware of the pitfalls: If you wait too long, the current year's models (or specific trim levels or colors) may run out, which creates a supply/demand scenario that can negate the savings. Also, bear in mind vehicles' precipitous depreciation in the first year or two. As soon as the new models come, your new car is worth even less. If you're leasing or intend to sell within a few years, the car will be valued as a year older even if you drive it off the lot the same day someone else buys the next year's model.