After years of diligently saving and putting up with your old junker, the day has finally come: you are ready for a new car. And then, right before you sign on the dotted line, you notice thousands of dollars in extra costs that have nothing to do with the vehicle you’re buying. Unfortunately, this is the typical experience of the modern buyer.
Whether you are shopping for a car, a new home, or a loan to purchase either of these, you must remain mindful of the tactics businesses use to wriggle a few extra dollars out of your wallet. One of the primary differences between a financial ninja and financial zombie is the willingness to uncover these hidden fees, the courage to call businesses out on them, and the dedication to shop around for a better deal.
The Many Names of Junk Fees
The term “advertising costs” is just one example of the many names car dealerships use to charge more without consumers noticing. As a financial ninja, you must train yourself to spot these for what they are — junk fees. “Battery disposal fees,” “activation fees,” “delivery fees,” “preparation fees,” “loan origination fees,” “floor plan fees,” and “administrative fees” are other items to watch out for on your final quote. Some dealerships have even started hiding junk fees behind legal terminology to make them look like supplemental taxes.
In other cases, dealerships will try to upcharge consumers on legitimate fees. “Documentation fees,” for example, must be paid to establish your title and registration. However, some states do not have a cap on these fees, allowing dealerships to charge consumers much more than a reasonable amount.
Remember, if it’s not a sales tax or licensing fee, then you can safely assume it’s a junk fee. Most of these fees can be negotiated, and some can be eliminated completely with a little persuasion. Below are a few tips to get you started in the negotiation process.
1. Know Your Budget, and Stick to It
To maximize your leverage over the seller, it helps to start with a clear baseline of what you will spend. If you express interest in a car that you really like, but are willing to walk away empty-handed, it’s the salesman’s responsibility to make staying worth your while. Their first strategy for retaining potential buyers is usually slashing these fees, so see how many you can eliminate before making a serious decision to buy.
2. Always Shop Around
Especially when it comes to junk fees, if there’s a dealership unwilling to budge, chances are another dealership will. Even if you think you are getting a good deal within your budget, take the time to shop around to see what other sellers will offer you. Ask for a final written quote and price breakdown from each of the dealers you visit. Not only will this give other dealers a clear goal to reach for, it will also prevent you from having to cut through the other dealer’s hidden fees. If a dealer is willing to work with you, that’s fantastic, but if they can’t match the price, you will be able to move on without wasting a couple hours on fruitless negotiations.
And when you’re ready to close the deal, don’t be fooled into believing you must finance your vehicle through the dealership. Talk to your local bank or credit union and see what they can offer you. Even if their interest rate is just a few decimal points lower than what the dealership offers, you can still save hundreds of dollars long term.
3. Time Your Purchase
In many ways, car dealerships are not much different than furniture stores in that their prices can vary drastically depending on the time of year. Car dealers make a significant portion of their income on commission and company incentives, and if you can time your shopping with one of their seasonal deadlines, you will find them much more financially flexible.
Holidays are also traditionally an ideal time to purchase a vehicle. If you are willing to wait, Memorial Day, Christmas, and New Year’s Day have long been associated with good car deals. For a more detailed look at the best times to purchase a vehicle, you can view TrueCar.com’s detailed infographic here.
The Trap of No-Haggle Pricing
In response to the negative stigma often associated with salesmen, many dealerships have recently opted for a more transparent, upfront, “haggle-free” pricing model. This means that there is zero room for negotiation on the price of the vehicle; what you see on the window sticker is what you pay. On the surface, this sounds problematic because it limits the consumer’s ability to negotiate, but there are some benefits. For individuals that struggle with the art of negotiation, for example, this model can take a lot of stress out the car-buying process.
No-haggle pricing, however, does not necessarily mean the price on the vehicle is the best price on the market. Even if you are unable to negotiate with that specific seller, it still falls on you to shop around with other dealers, traditional and no-haggle alike, to see if the price is fair. It may be the best price around, but you will never know if you are unwilling to step outside your comfort zone and see what’s out there.
It’s the Final Price that Matters
As hard as you try, it is unlikely you will eliminate all the unnecessary fees associated with the purchase of your vehicle. Remember, if you have found the lowest possible price on your dream ride, junk fees and all, you shouldn’t hesitate to pull the trigger. If you have shopped around and done your part to find a deal, you can drive away knowing you did all you could to ensure a healthy financial future.
