Ever notice how the advertised price of a new car is never the price that you actually get? Have you also noticed that once you settle on a price for a new car with a dealer, that it tends to creep higher and higher before he actually hands the keys over to you? You can fight back, at least partially. You can lower new car prices by refusing useless options.
In previous posts I’ve discussed the dealer dog-and-pony show that’s designed to create enough confusion to weaken your resistance, and that’s a big part of the reason why you’ll pay more. But there are more tangible reasons too.
Options and add-ons that inflate the cost of a new car
When a dealer senses interest from you—when he’s convinced he’s got a “live one”—it’s time for him to start juicing his paycheck. One of the best ways to do this is by inflating the cost of the car with options and add-ons that are at best questionable, and at worst worthless.
Paying for worthless options and add-ons is also one of the main reasons people end up being upsidedown on their cars. This is because the extras add nothing to the resale value of the car, and the price paid for them essentially evaporates on purchase.
Some of the More Prominent Add-ons…Credit life insurance This is usually tacked on during the final phase of the finance negotiations, when you’re already worn out from going the distance and all you want to do is go home. You don’t need this, especially if you already have life insurance in place.
They may tell you that credit life insurance is required in order for you to get the loan, hinting or declaring that you have bad credit, but this is nonsense. Credit life insurance is a policy you take out to payoff the loan in the event of your death; it has nothing to do with your credit rating since it doesn’t pay out if you default. Arrange financing yourself through an outside lender if the dealer tells you it’s required.
Extended warranties. In theory these sound like a solid idea, but it’s one of those brilliant concepts that falls apart on the details. The problem with extended warranties is that they usually contain exclusions and limitations that make them close to worthless in too many situations to be worth having.
Put the money you’d pay for an extended warranty into a special savings account earmarked for car repairs, find yourself a good backyard mechanic and a good source of low cost car parts and you won’t need the coverage.
Option packages. There are probably some legitimate options packages—bundles of options in a neat package to keep the cost down—but never assume it’s true. Before accepting one of these, go down the list and pick out the ones you truly want, then see how the a la carte price stacks up against the package price. There’s no need to pay the extra cost for options you don’t want in order to get the ones you do.
Fabric protection treatments. Ever hear of Scotchguard? Insiders have told me that this (or an equivalent) is the vaunted fabric protection that dealerships treat your car’s upholstery with. They’ll charge a couple hundred dollars to spray this on your car seats, but you can buy a can of it at a grocery store or big box retailer for a few dollars and spray it on your car seats every few months to help keep them moisture and stain resistant.
Undercoating, rust protection and sealants. These have a more industrial sounding connotation to them, but their basically the hardware version of fabric protection. Car surfaces wear and weather better on new models than they did years ago, so routine maintenance, like regular waxing is most of what’s needed.
If you do wish to try more advanced methods to protect the car finish, check out the products available at any auto parts store. You can get the same products there that the dealer will treat your car with, but at a fraction of the cost.
Rear seat video player. This is a popular option, but one where you have choices. For a few hundred dollars, the dealer will install a permanent unit in the car, and it may have attractive features like front seat controls. But you can buy a portable unit at Target for around $100 like we did.
In addition to price, there are a couple of advantages to this. For one, when it finally breaks or malfunctions, it will be cheaper to replace. For another, unlike dealer units which are installed in a fixed location, like the ceiling of the car, a portable unit can be moved to what ever position is comfortable.
Special colors or editions, etc. A few years ago a coworker of mine paid an extra $1500 to have his car in black. This is no joke! He happily paid it. Had it been me, I would have gladly settled for gray, or blue or brown.
But this is what happens when you fall in love with a car, or with a certain look for a car. The color of the car costs the dealer nothing, so what exactly are you paying for? Same goes for limited or special editions—will anyone care about that in a few years when it’s time to sell or trade the car?
Keep options limited, and last minute add-ons out of the deal. Since you probably only have a fixed amount of money for a down payment, any extra costs will be added on to the loan amount, increasing the monthly payment, the length of the loan or both.
Have you ever paid for options or add-ons for a new car, only to realize after the fact that they were mostly for the benefit of the dealer? Can you think of any other options or add-ons that are mostly or completely useless?