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?
Good points! I remember when we purchased our car and the dealer tried to push us to get a alarm/remote starter for $600! We said no (at least 10 times because they were so pushy), and went to a few shops to get quotes. I think the most expensive quote was about $350 and we paid $260 – with 4 remotes!
The place that we went to said the do work for the dealership all the time – can you imagine the markup (since they charge the dealership much less than I paid)?
Khaleef – I found that out with car parts. Even on new ones the markup is out in orbit.
“The sale after the sale” is one of the main reasons that auto dealers have (rightfully IMO) earned a bad reputation. Here’s a simple way to avoid all of this (except the extended warranty which will always be offered even if it is worthless):
Buy a pre-owned vehicle … and if you have to borrow money to do it, get the loan from your local credit union. A new car loses so much value the day you drive it off the lot, it really doesn’t matter how many worthless add-ons you’ve put into it – you’re still throwing away money.
John – I completely agree, and covered that in an earlier post. The “sale after the sale”, that’s well put and pretty much describes the process. In fact I’d guess that the longer you stay in the store, the higher the price will get as they pile on more extras…
My favorites are being charged for color (I think I’ll ask for my next car to be transparent) and mud flaps (I wish I could get the old Yosemite Sam: “back-off” image).
CNC – Get a bunch of people together and we could probably come up with a bunch. I agree though, paint and mudflaps are pretty weak reasons to pay a premium price.
How about mentioning toys and options that actually ARE part of a car and make it unnecessary too expensive without any choice to opt them out?
How about: power seats, navigation, power mirrors, heated seats, automatic ac and all this junk that likes to break frequently. Also leather surfaces, bigger wheels, metallic paints. Who needs airbags in the rear if most cars have one occupant 90% of the time?
Bigger engines also cost more than smaller ones. ABS and traction control is another hidden 1-2 grands. I “used” ABS only once in my lifetime when trying to stop on the stop sign on a slippery winter road.
All those things add at least few thousand dollars to the car price. If someone needs them (or thinks so), let them be offered as options, but some people are happy with basic cars and small engines.
That’s amazing that nobody even mentioned them here at all, talking only about some dealer crap.
John–They probably weren’t mentioned because they’re part of option packages (you take the package, you get them all). Those are features within the package and you can’t separate them out. I think the focus has been on true options–the ones we can opt out of. But you’re making a good point. Personally, I think a lot of those options are added on to pave the way for more repairs in the future. We don’t normally think about this at buying time, but the more options we have, the more things will go wrong and need to be repaired or replaced. It’s a guaranteed future cash flow for the auto industry. Which is another reason why simpler is better!
The problem is that it’s debt driven economy, so people really don’t care if they buy $5k more in useless options, since it’s “only” $85 a month more. It applies to all purchases that don’t involve cash.
Options aside, the thing that suffers most is the fuel efficiency. European and Japanese manufacturers don’t bring efficient smaller engines, because most people don’t care and in one swift of a signature they will happily pay for all those gas guzzling motors, options and who knows what. American manufacturers don’t care either. Bigger is better and brings more money.
I wish cars were sold as basics with multitude of options available.
You’re hitting on something that’s really important John–I’ve heard car salesman say “we’re not selling cars, we’re selling monthly payments”. That is to say that if they can find a payment that fits well within someone’s budget they’ve basically got a sale. Shame on us consumers for making it so easy! But that’s really what it is. In reality, the payment has little to do with price–that can only be determined by what the actual purchase price is, but if you’re focused on a payment, that gets lost. Is it any wonder so many car buyers are “underwater” on their loans??? Most times, they aren’t even aware of that either because they’re only concerned with the payment–once again!
In 1996 I bought a new truck and knew exactly what I wanted. It needed to be simple, stripped down, without upholstery or carpets or electronic dodads. I’m perfectly capable of rolling the windows down and adjusting the rear view mirror myself, thank you. Something I could hose out after the kids dripped ice cream all over.
When I started looking at new trucks they were awash in gizmos and luxury add on’s I didn’t want. I asked car dealers if they would order me such a truck as I actually wanted. Any number of dealerships refused outright. No.
After many phone calls and a lot of looking around, I finally found a dealership – in another state – that would factory order me such a simplified truck. I had to put down a big deposit and wait SIX MONTHS for delivery.
But I did ultimately get what I wanted and was willing to pay for.
Hi Marissa – My guess is that you saved a lot of money waiting for the stripped down version. I’m also guessing that the lack of dealer response had everything to do with the lower profit margin, probably much lower, on the stripped down truck.
One benefit though is that fewer options means fewer components to break down. On the financial side, it’s a complete win-win, lower price for the truck, and lower costs for repairs and maintenance. Some of those gizmos may cost just $50 or $100 to add to the package, but when they break you’ll have to pay several hundred to get them either fixed or replaced.