You're in the market for a new car, but you're more than a little apprehensive. Your last excursion into a new-car showroom was a nightmare and the horror stories you've heard are even worse. How do you make sure you don't get ripped off?
"About half of all dealers use a scam or several scams to make you pay more than you should," reveals consumer advocate Jeff Ostroff, who operates carbuyingtips.com.
"They have hundreds of tricks, wiles and ploys in their arsenal. But if you recognize their tricks, you can beat them at their own game and save thousands of dollars."
Three simple rules can assure success: Do your homework, don't become a hostage and be prepared to walk away.
Once you have a good idea of the type of vehicle you want, get yourself a Ph.D. in the subject. Web sites such as Autobytel.com, Autoweb.com, CarsDirect.com, Edmunds.com, kelleybluebook.com, cars.com and InvoiceDealers.com have tons of information on cars' features and options, what the dealers really pay, current factory rebates, incentives and holdbacks.
Don't wait until your old banger is dying. It takes six to 10 weeks to kick the tires, choose a car, check your credit score, set up financing, haggle and finalize a deal, so don't be forced into hasty decisions.
Put together a folder of information on the cars you like and their prices. Take it with you to the dealer and make sure they see it. If your spouse is with you, agree beforehand: No impulse buys and no discussion of exactly what you are prepared to pay, even if you're alone in a sales office -- it might be bugged.
When you tell the salesman what you're looking for, inform him that you know what the car cost the dealer. You're ready to pay a fair profit to him, but you are not going to hand over several thousand extra dollars.
"This is critical," says Ostroff, whose Web site offers free, detailed advice on car purchases to about 10,000 visitors a day. "It will stop most of his nonsense."
Do not skip the test drive -- but make the most of it. Don't just cruise around a few blocks and play the radio. Check things like sight lines and how easy it is to reach important controls. Test acceleration onto highways and whether you feel entirely comfortable at the wheel. But when the salesman asks you for your driver's license, that "Ka-ching" you hear is the sound of a cash register, and the sound of a scam.
Refuse. Instead, hand him a photocopy. If they have your license, you can't leave. Don't be held hostage. When you hand over the copy, write on its face, "No credit checks authorized." This will prevent the dealer from checking your financial standing, and automatically lowering your credit score about five points. Remind them that the Federal Trade Commission levies a $2,500 fine for an unauthorized check. When you leave the dealership, get the copy back.
When the conversation turns to financing, you may hear that "Ka-ching" sound again. And for good reason. Tell the salesman you'll be arranging your own financing to avoid the dealership's higher APR -- but you'd like to know what extra discounts, such as college student rebates or first-time buyer incentives, you can expect. He could well come up with some good numbers.
If you're adequately prepared, you can even get dealers to give up some or all of the holdback -- the hidden 1 to 3 percent of MSRP (Manufacturer's Suggested Retail Price) incentive the dealer gets (but will never tell you about) from the factory.
Don't discuss trade-in or early lease terminations unless you've already decided to surrender a lot of money to avoid the aggravation of selling your old car yourself -- even when they promise to pay off your loan or get you out of your current lease. "Ka-ching!"
The dealer wants to "steal" your trade-in so he can resell it at more profit than he'll get on selling you a new car. Sure, he pays off your old loan, but you still owe it: He just adds it into your new loan, spreads the payments out over 60 or 72 months, and makes you think that because you're paying a little less each month, you're saving money.
Bite the bullet. Sell your old car privately, get someone else to assume the lease or stay with the thing until it's paid off. Sometimes, you simply should not be buying a new car, especially if you are already deep in debt.
Very important: Be prepared to walk away. There are plenty of dealers, plenty of cars. You know within a few hundred dollars what you should be paying, and every minute spent discussing a figure significantly higher than that is wasted. And don't feel you have to wait around to say goodbye. The salesman got your phone number in the first few minutes. If he wants to make a deal, he'll find you. "Think of the number of hours and days you want to spend buying a car," advises Ostroff. "The more time you spend hanging around one showroom, the less time you can spend at another dealer who may be far more willing to make you a good deal."
Two more valuable tips: First, never leave a cash deposit. You can always dispute a credit card transaction, but once you hand over cash, matters get tough. Secondly, if you must finance through a dealer, do NOT take delivery until the loan has been approved in writing. That's when you know the lender has accepted your loan, and the deal's a real one. A common dealer ploy, explains Ostroff, is to call you back a week or two after you've made your deal to tell you either that the financing fell through or that they have a better financing deal for you. Stay away.
-- Updated: July 13, 2004