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CONSUMER REPORTS AUTO-BUYING EXPERTS HELP SHOPPERS GET
THE BEST DEAL WITH 2 KEY CHECKLISTS:
10 COMMON TRAPS TO AVOID AND 12 SMART-SHOPPING TRICKS
HOW CONSUMER REPORTS (CR)
TESTS CARS:
• CR maintains its IMPARTIALITY by
buying all the cars it tests from dealers,
just as consumers do, accepting no
ads, and barring the commercial use of
its reports.
• CR automotive EXPERTS test all cars
at our track and on public roads, for
performance,
convenience,
and
comfort, with safety in mind.
• CR surveys its subscribers to provide
RELEVANT information on auto
reliability, dealer satisfaction, and
more.
• CR is published by Consumers Union,
an INDEPENDENT, NON-PROFIT
champion for consumers.
You want a great car at a great price. The dealer wants to make as
much profit as he can. Consumer Reports’ annual April auto issue helps you
resist the dealer ploys that squeeze you for more cash than you should pay.
Here are 10 common traps to avoid.
(1)
The False Credit Score The dealer checks your credit report but lies
about your score, telling you it is lower than it really is and saying
you don’t qualify for the low-interest car loan that drew you to the
dealership in the first place. You’ll have to pay a higher rate. This
practice is illegal. Consumer Reports recommends you know your
credit score before you shop for a car loan. If the dealer says your
credit score is lower than you know it is, buy your car elsewhere and
report the dealer to your state attorney general.
(2)
0 Down, 0 Interest, 0 Payments for One Year But when the year is up, you owe all the monthly
payments you’ve delayed—sometimes plus retroactive interest. You end up owing much more than
the sticker price on a vehicle that is now a used car. In some cases, the contract states that the buyer
owes the dealer X number of monthly payments at a high interest rate, then must refinance the
balance of the loan. Don’t fall for this gimmick. A “0-0-0” deal costs more in the long run than a
conventional loan. Also, remember to check the contract fully.
(3)
“We’ll Pay Off Your Loan!” Ads suggest that the dealer will assume your old-car debt or lease to
get your business. But whatever you owe on your old vehicle is rolled into your new loan.
Consumer Reports’ advice? Stick with your current lease to avoid early-termination fees, and don’t
trade in a car if you still owe more than the car is worth.
(4)
“Pay More or We’ll Say You Stole the Car.” The salesperson says you can drive home today in
your new dream car. And you also qualify for a better rate than you expected—if you finance your
purchase with the dealership. You sign the papers and away you go, but a week later the
salesperson calls and says you didn’t qualify for a low rate after all; you now have to pay more for
the loan, or the salesperson may threaten to report the car as stolen. If you want to cancel the deal,
he may say you can’t; the dealership has already sold your trade-in, and you signed a contract. CR
says accept the dealer’s financing offer only if it beats the best rate you find elsewhere. Before
taking possession of the car, be sure to have in hand an approved financing agreement.
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(5)
The Mandatory Credit Check If you’re paying cash, have other financing, or are just taking a test
drive, car dealers may obtain a credit report only with your written consent. An excessive number
of credit inquiries can lower your credit score and thus blemish your credit. If you have already
arranged financing elsewhere or plan to pay cash, tell salespeople you do not authorize them to run
credit checks on you. Do not give them your Social Security number or your driver’s license, and
before you sign any papers, insist that the credit-check authorization clause be stricken from the
document.
(6)
The Mandatory Extended Warranty The finance manager says you must buy an extended
warranty. The bank requires it, he says. In some states such a pitch is illegal, but it’s hard to prove.
Lenders typically don’t require an extended warranty, and Consumer Reports does not recommend
buying one unless the car is particularly trouble-prone.
(7)
“We Don’t Take Checks from Online Banks or Credit Unions.” Dealers have the right to refuse
a check from a source if it is stated in a written policy, but this often amounts to another ploy to try
to get you to finance through the dealership. Point out to the finance manager that online banks and
credit unions have been around for years, and they are in the business of writing loans. And most
U.S. online banks are FDIC-insured; they don’t bounce checks. If the dealership won’t back down
and accept the check, or won’t offer you a better rate for financing, leave.
(8)
“What Can You Afford to Pay Per Month?” The dealer stands to make more money this way
because he can arrange the various elements of the deal so that you can get a relatively low monthly
payment but end up paying more in the long run. CR recommends that you negotiate the vehicle
price first as if you were paying cash using resources such as the Consumer Reports Wholesale
Price. Calculate the monthly payments only after you agree on the sale price.
(9)
Dubious Fees You think the deal is complete, but the bill of sale includes “protection package”
fees and “dealer prep” charges that no one discussed with you. These additional charges usually
include protection you don’t need, including etching your Vehicle Identification Number (VIN) on
windows to deter thieves, rustproofing, and fabric protection. CR’s advice is refuse to pay them; put
a line through the items on the bill of sale. Vehicle bodies are already coated to protect against rust.
Upholstery is typically treated at the factory. Some states require dealers to offer VIN etching, but
you can do it yourself with kits you can buy online for $25.
(10) The Arbitration Clause An increasing number of dealerships say you must agree to arbitrate any
future problem you have with them that warrants legal action. Don’t buy from a dealer who requires
that you sign a mandatory arbitration clause. You would effectively be giving away your right of
redress should a serious problem arise.
12 SMART-SHOPPING TRICKS
In our recent survey of new-car buyers, 38 percent of respondents said they did not negotiate,
which is up from 30 percent 2 years ago. Many felt—or were told--that the dealer wouldn’t haggle
because of special pricing or financing on the vehicle. CR says don’t hesitate to negotiate—even if there
are special deals. For more information, visit ConsumerReports.org.
(1)
Get price information. The Consumer Reports New Car Price Service provides the CR
Wholesale Price, which takes into account holdbacks and incentives dealers receive from
manufacturers as well as up-to-date information on rebate and financing deals.
(2)
Don't show a salesperson that you are attached to one vehicle. There are usually several
comparable competitors, say, the Honda Civic and the Toyota Corolla. To see which models
compete within the same category, use our Vehicle Ratings and Finder in the April issue.
(3)
Decide what options you must have and which you can live without. A car in the dealer's
inventory may lack some of the bells and whistles you had in mind; but you could come pretty
close to what you want and save hundreds of dollars in the process. Be wary of option packages
that make you pay for equipment you don't really need.
(4)
Solicit quotes from dealers and Internet car-buying services. The more you know, the greater
the likelihood you'll get a good deal.
(5)
Never bargain down from the sticker price. Always bargain up from the Consumer Reports
Wholesale Price. Or use the invoice price, making sure to subtract current holdbacks, dealer
incentives, and rebates.
(6)
Don't respond if the salesperson asks what constitutes a "legitimate" profit. You wouldn't
ask a salesperson to set your salary. Dealers sell cars every day. It's their job to determine a
reasonable profit.
(7)
Be willing to walk. If you don't like the deal or if any of the details make you queasy, tell the
salesperson you're taking your business elsewhere. If the dealer beseeches you to stay, explain
frankly why you're unhappy with his or her offer. You may end up with a lower quote.
(8)
If you are too reticent to bargain, feel sorry for the car dealer, or are otherwise worried about
your resolve, recruit a tough-minded friend or family member who can do the job for you.
(9)
If you've negotiated a good price and the dealer won't waive a modest "paperwork" or
advertising surcharge, ask for free servicing or complimentary floor mats to offset the fee.
(10) Don't wait for your old clunker to die before shopping for a replacement. If you need a car
fast, you could end up overpaying.
(11) Don't leave a deposit to lock in a price unless you're certain of the car you want. Doing
otherwise can pressure you to act prematurely.
(12) Insist that the sales contract stipulate that you can void the agreement if something goes
wrong, for example, if the vehicle isn't delivered by a specific date. And make sure the manager
or general manager of the dealership signs the contract. The salesperson's signature alone may not
be legally binding.
The 50th Anniversary April Auto Issue is on sale March 11 through June 11. The Auto Issue is
generally available where magazines are sold and may also be ordered online at
www.ConsumerReports.org.
— 30 —
APRIL 2003
The material above is intended for legitimate news entities only; it may not be used for commercial or promotional purposes.
Consumer Reports® is published by Consumers Union, an independent, nonprofit testing and information-gathering
organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services,
personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the
public, and protect consumers.