8 Ways to Outsmart – and Outearn – Your Car Dealer

clip_image002Question: how much money does a dealership make off of every new vehicle it sells? $5,000? $3,000? $1,500? Less than $1,000?

Try $23.

Yep. About that much.

No, that’s not a misprint. According to the National Automobile Dealers Association, dealers netted an average of two tens and three singles for each new vehicle bought by Americans in 2011. That’s better than in 2010, when the figure was negative $180 per vehicle.

So how do auto dealers stay in business? Through their other revenue generators like financing, warranty sales, auto repair, used car sales, and add-on fees. But there’s nothing in the car buyers’ rulebook that says you have to wind up shelling out more for a vehicle than it is worth to a dealer. We already pay enough for our cars, gas, and auto insurance, don’t we?

With that in mind, here are eight ways to save some money by outsmarting you car dealer.

  1. Figure out the true price. There are plenty of places in cyberspace that will tell you the invoice price (which is what the dealer pays) of any new vehicle that you have your eye on. Don’t pay more than $1,000 over that amount – and try to haggle it down if you can.
  1. Identify all possible incentives. Visit both dealer and automaker sites online that can tell you what the rebates, special offers, and promotional rates are for your vehicle of choice. Then be sure they are applied before it’s time to sign the purchase contract.
  1. Get preapproved. Auto dealers make a lot of money from their financing. You can foil them by obtaining preapproval for your auto loan through your bank or an online lending site (like eloan.com). Then make your dealer beat your preapproved rate.
  1. Know your trade-in value. Find out exactly what the Kelly Blue Book value is for your trade-in vehicle. This "book" used to be proprietary information for auto dealers; but now, you can go to kbb.com and figure out the value on your own. This will help prevent you from getting stiffed on your trade-in by dealers.
  1. Challenge funny fees. Some fees are common in auto contracts, like tax, title, license/registration, and destination charges. But others — like additional dealer markup, dealer interest fees, dealer prep charges, drive off deposits, factory holdback charges, and window VIN# etching fees — are either already paid for by other entities or completely bogus. Make sure every fee is explained, and don’t be shy about demanding they be removed from your contract.
  1. Decline the warranty. This is arguably the biggest moneymaker for many car dealers. They’ll offer to sell you an "extended warranty" for a few extra bucks per month. First of all, most standard vehicle warranties today are pretty comprehensive, especially if you’ll be trading in your car for a new one in the near future. Plus, you can always elect to purchase the extended warranty at a later date from the same dealer. Finally, these dealer warranties are easily voidable (for instance, if you miss an oil change), so they’re likely to be useless anyway.
  1. Find an independent garage. Other than warranties, dealers pad their bottom lines with their service departments who charge exorbitant prices to repair your vehicle. You’re better off finding an independent mechanic who is certified by your vehicle’s manufacturer to work on your car or truck. The work will be just as good, and you won’t pay through the nose for it.
  1. Be prepared to leave. As with any negotiation, the old adage rings true: don’t be afraid to walk away from an unsatisfactory deal. (This also means not going into a dealership with the idea that you will definitely drive out in a new vehicle.) There are plenty of other dealers you can visit who will work with you.

Image credit: torange.us

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