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2014 Kia Optima, Snow White Pearl, 16 mi., $23,110
Knowing these few simple facts can put you in a great position to negotiate the financing on your next car (Getty Images).
Next you´re ushered into the dealership´s "Business Office" - also known as the "F&I Office" for "Finance and Insurance". You´re introduced to the Business Manager, a pleasant well-groomed woman (or man) who congratulates you on your purchase. She reassures you that you made a wise decision and that the tough part is over so now you can relax. You sit and breathe a welcome sigh of relief.
As you go through the formalities of signing the various forms and agreements, she casually explains to you your financing terms, your interest rate and other details. Along the way, she offers you several "extras" that will add "mere pennies a day" to your monthly payments. Among these items might be an Extended Service Warranty, Paint and Fabric Protection, Rustproofing, Undercoating, Alarm System, Window Tinting, and maybe even Life, Health, or Disability Insurance.
You´re relaxed. The negotiating is over. And these "extras" sound really worthwhile. Besides, you like this Business Manager. She´s so darn nice and sincere. So you agree to the interest rate and financing terms. You purchase the Extended Service Warranty. You even purchase the Paint and Fabric Protection.
BAM! You just put a small fortune in her purse. Why? Because the biggest secret that the dealership doesn´t want you to know is this:
The "Business Manager" is, in reality, a salesperson working on commission.
Read More From Michael Royce
How Do I ...
- Buy A Car Online?
- Avoid Negotiating?
- Get the Best Financing?
Most of what the Business Manager offers you is negotiable.
Of course, you probably didn´t know that. Most car-buyers don´t. And certainly no one at the dealership is going to tell you.
The plain fact is: Car dealerships often make more profit from the financing of the vehicle and the sale of "extras" sold in the Business Office than from the actual sale of the vehicle itself.
So what to do? No worries, my friend. Here are some car negotiation tips for dealing effectively with the dealership´s "Business Manager":
1. Don´t let your guard down. Just because the Business Manager may seem friendlier and nicer than the car salesman, it doesn´t mean the deal is over once you enter the Business Office. It isn´t. The deal doesn´t conclude until you drive the vehicle off the dealership´s lot. So despite how friendly the Business Manager may seem, remember that she´s there to make as much money as possible for herself and the dealership.
2. Arrange your financing before you go to the dealership. Since the Business Manager works on commission, she may try to trap you in a higher-than-necessary interest rate so she can maximize her commission. Avoid the dealership games by arranging your financing before you set foot in the dealership to buy. Apply for an auto loan at your bank or credit union. You can also apply for an auto loan online. Then compare all of the loan offers you´ve received and choose the best one. Once at the dealership, compare your best offer with the dealership´s offer and decide which is the best deal for you.
You can obtain financing quotes from your local bank or credit union or for free online by using sites such as car.com
3. Try to negotiate the interest rate. If you were unable to qualify for financing from any bank, credit union or online financier, then you´ll probably be stuck with dealership financing. And your auto loan will probably have a relatively high interest rate since you are considered a "credit risk." Nonetheless, if you feel that the interest rate that the Business Manager offers you is unreasonably high, tell her so and ask her to lower it.
4. Think twice about the "extras." Each "extra" you purchase means another commission to the Business Manager. But do you really need these "extras"? Probably not. For example, you´ll certainly be offered an Extended Service Warranty. All new cars and trucks come with comprehensive warranties so you don´t need to buy another one. As for Paint Protection, you can apply it yourself by buying any inexpensive "over-the-counter" polymer sealant car wax. You can apply Fabric Protection yourself by buying a can of Scotchguard. You may be able to purchase Window Tinting, Alarm Systems, Pinstriping and other after-market items cheaper on your own. Rustproofing is usually applied automatically in the factory so you certainly don´t need to pay twice for it. (Check your vehicle´s Factory Warranty to see if it includes a Rust Perforation Warranty. Most do.) And by all means, decline any health or life insurance that you may be offered by the dealership.
5. Go to the experts for answers. Don´t count on the dealership to give you straight answers about financing. Remember, they may say anything to get you to finance your vehicle with them on their terms. So for the real facts about monthly payments, interest rates and other important financing details, ask your bank or credit union for the truth. They´ll be happy to take the time to explain it all to you in an easy-to-understand no-pressure atmosphere.
6. Take the time to learn. Be sure to do all of your research and get the necessary facts before you go to the dealership to buy. Remember that they want you to be hurried and confused. So don´t fall for that trap. Take the time to do your research. It´ll pay off big time in the long run.
Michael Royce is a consumer advocate and former car salesman. For more car-buying tips and advice, visit his Beat The Car Salesman website.