Consumer Reports Auto-Buying Experts Help Shoppers Get the Best Deal With 2 Key Checklists: 10 Common Traps to Avoid and 12 Smart-Shopping Tricks
NEW YORK--March 10, 2003--You want a great car at a great price. The dealer wants to make as much profit as he can. Consumer Reports' annual April auto issue helps you resist the dealer ploys that squeeze you for more cash than you should pay. Here are 10 common traps to avoid.(1) The False Credit Score - The dealer checks your credit report
but lies about your score, telling you it is lower than it
really is and saying you don't qualify for the low-interest
car loan that drew you to the dealership in the first place.
You'll have to pay a higher rate. This practice is illegal.
Consumer Reports recommends you know your credit score before
you shop for a car loan. If the dealer says your credit score
is lower than you know it is, buy your car elsewhere and
report the dealer to your state attorney general.
(2) 0 Down, 0 Interest, 0 Payments for One Year - But when the
year is up, you owe all the monthly payments you've
delayed--sometimes plus retroactive interest. You end up owing
much more than the sticker price on a vehicle that is now a
used car. In some cases, the contract states that the buyer
owes the dealer X number of monthly payments at a high
interest rate, then must refinance the balance of the loan.
Don't fall for this gimmick. A "0-0-0" deal costs more in the
long run than a conventional loan. Also, remember to check the
contract fully.
(3) "We'll Pay Off Your Loan!" - Ads suggest that the dealer will
assume your old-car debt or lease to get your business. But
whatever you owe on your old vehicle is rolled into your new
loan. Consumer Reports' advice? Stick with your current lease
to avoid early-termination fees, and don't trade in a car if
you still owe more than the car is worth.
(4) "Pay More or We'll Say You Stole the Car." - The salesperson
says you can drive home today in your new dream car. And you
also qualify for a better rate than you expected--if you
finance your purchase with the dealership. You sign the papers
and away you go, but a week later the salesperson calls and
says you didn't qualify for a low rate after all; you now have
to pay more for the loan, or the salesperson may threaten to
report the car as stolen. If you want to cancel the deal, he
may say you can't; the dealership has already sold your
trade-in, and you signed a contract. CR says accept the
dealer's financing offer only if it beats the best rate you
find elsewhere. Before taking possession of the car, be sure
to have in hand an approved financing agreement.
(5) The Mandatory Credit Check - If you're paying cash, have other
financing, or are just taking a test drive, car dealers may
obtain a credit report only with your written consent. An
excessive number of credit inquiries can lower your credit
score and thus blemish your credit. If you have already
arranged financing elsewhere or plan to pay cash, tell
salespeople you do not authorize them to run credit checks on
you. Do not give them your Social Security number or your
driver's license, and before you sign any papers, insist that
the credit-check authorization clause be stricken from the
document.
(6) The Mandatory Extended Warranty - The finance manager says you
must buy an extended warranty. The bank requires it, he says.
In some states such a pitch is illegal, but it's hard to
prove. Lenders typically don't require an extended warranty,
and Consumer Reports does not recommend buying one unless the
car is particularly trouble-prone.
(7) "We Don't Take Checks from Online Banks or Credit Unions." -
Dealers have the right to refuse a check from a source if it
is stated in a written policy, but this often amounts to
another ploy to try to get you to finance through the
dealership. Point out to the finance manager that online banks
and credit unions have been around for years, and they are in
the business of writing loans. And most U.S. online banks are
FDIC-insured; they don't bounce checks. If the dealership
won't back down and accept the check, or won't offer you a
better rate for financing, leave.
(8) "What Can You Afford to Pay Per Month?" - The dealer stands to
make more money this way because he can arrange the various
elements of the deal so that you can get a relatively low
monthly payment but end up paying more in the long run. CR
recommends that you negotiate the vehicle price first as if
you were paying cash using resources such as the Consumer
Reports Wholesale Price. Calculate the monthly payments only
after you agree on the sale price.
(9) Dubious Fees - You think the deal is complete, but the bill of
sale includes "protection package" fees and "dealer prep"
charges that no one discussed with you. These additional
charges usually include protection you don't need, including
etching your Vehicle Identification Number (VIN) on windows to
deter thieves, rustproofing, and fabric protection. CR's
advice is refuse to pay them; put a line through the items on
the bill of sale. Vehicle bodies are already coated to protect
against rust. Upholstery is typically treated at the factory.
Some states require dealers to offer VIN etching, but you can
do it yourself with kits you can buy online for $25.
(10) The Arbitration Clause - An increasing number of dealerships
say you must agree to arbitrate any future problem you have
with them that warrants legal action. Don't buy from a dealer
who requires that you sign a mandatory arbitration clause. You
would effectively be giving away your right of redress should
a serious problem arise.
12 SMART-SHOPPING TRICKS
In our recent survey of new-car buyers, 38 percent of respondents said they did not negotiate, which is up from 30 percent 2 years ago. Many felt--or were told--that the dealer wouldn't haggle because of special pricing or financing on the vehicle. CR says don't hesitate to negotiate--even if there are special deals. For more information, visit ConsumerReports.org.
(1) Get price information. The Consumer Reports New Car Price
Service provides the CR Wholesale Price, which takes into
account holdbacks and incentives dealers receive from
manufacturers as well as up-to-date information on rebate and
financing deals.
(2) Don't show a salesperson that you are attached to one vehicle.
There are usually several comparable competitors, say, the
Honda Civic and the Toyota Corolla. To see which models
compete within the same category, use our Vehicle Ratings and
Finder in the April issue.
(3) Decide what options you must have and which you can live
without. A car in the dealer's inventory may lack some of the
bells and whistles you had in mind; but you could come pretty
close to what you want and save hundreds of dollars in the
process. Be wary of option packages that make you pay for
equipment you don't really need.
(4) Solicit quotes from dealers and Internet car-buying services.
The more you know, the greater the likelihood you'll get a
good deal.
(5) Never bargain down from the sticker price. Always bargain up
from the Consumer Reports Wholesale Price. Or use the invoice
price, making sure to subtract current holdbacks, dealer
incentives, and rebates.
(6) Don't respond if the salesperson asks what constitutes a
"legitimate" profit. You wouldn't ask a salesperson to set
your salary. Dealers sell cars every day. It's their job to
determine a reasonable profit.
(7) Be willing to walk. If you don't like the deal or if any of
the details make you queasy, tell the salesperson you're
taking your business elsewhere. If the dealer beseeches you to
stay, explain frankly why you're unhappy with his or her
offer. You may end up with a lower quote.
(8) If you are too reticent to bargain, feel sorry for the car
dealer, or are otherwise worried about your resolve, recruit a
tough-minded friend or family member who can do the job for
you.
(9) If you've negotiated a good price and the dealer won't waive a
modest "paperwork" or advertising surcharge, ask for free
servicing or complimentary floor mats to offset the fee.
(10) Don't wait for your old clunker to die before shopping for a
replacement. If you need a car fast, you could end up
overpaying.
(11) Don't leave a deposit to lock in a price unless you're
certain of the car you want. Doing otherwise can pressure you
to act prematurely.
(12) Insist that the sales contract stipulate that you can void
the agreement if something goes wrong, for example, if the
vehicle isn't delivered by a specific date. And make sure the
manager or general manager of the dealership signs the
contract. The salesperson's signature alone may not be legally
binding.
The 50th Anniversary April Auto Issue is on sale March 11 through June 11. The Auto Issue is generally available where magazines are sold and may also be ordered online at www.ConsumerReports.org.
