Before purchasing your next car, you're going to want to check for
hidden costs, add-on fees, and other charges. You could end up spending
hundreds, even thousands, of dollars over the lifetime of your loan.
Once you've found the car you want, it's time to sit down with your
sales rep to negotiate the terms of your contract. After a little back
and forth on price, figuring out your interest rate, and calculating
your monthly payment, you're ready to sign on the dotted line, right?
Not so fast.
When you read the fine print you may find that additional fees and
charges have found their way into your contract – including add-ons you
didn't necessarily ask for.
Most car buyers are so focused on getting the best interest rate
and negotiating the most affordable monthly payment that they're
unconcerned with the fine print of the contract. By the time they get
to the step where they review and sign the paperwork, if the sales rep
is throwing industry terms at them that they don't fully understand,
they're becoming exhausted from the entire process and just want to get
it over with.
Here are a few insider tips to make sure you don't regret signing those papers.
1.) Read the Fine Print
While this seems pretty obvious and self-explanatory, it's amazing
how trusting the consumer can be. Honestly, the last time you bought a
car, did you read and fully understand the contract before you signed
it? Probably not. Most people don't.
Some unscrupulous car dealerships are betting on that. Because most
people don't read the fine print, some sales reps can slide in
additional, undisclosed charges or extras with huge mark-ups to their
Also, make sure there are no blank spaces on your finance contract
that can be filled in later – wherever there are blank spaces, write in
$0 or N/A.
2.) Typical Extras
Most of us are familiar with learning about the standard features
of an automobile and then figuring out which additional features we are
willing to pay extra for, but here are some extras to look out for when
reviewing your contract:
* Rust proofing
* Extended warranty
* Fabric protector
* Car alarm (including Lojack, a device police use to find your car if you report it stolen)
* Paint sealant
* Credit life insurance
* Window etching
The value of such extras depends on individual customer needs and
situations. If the sales rep attempts to tell you that some or all of
these extras are standard for every vehicle on the lot, ask to order
your car from the factory, or suggest the dealership trade with another
dealer that hasn't pre-packaged their vehicles.
Extra products can add thousands to the negotiated price of the
vehicle. Most products fill a customer need that when priced and
disclosed correctly and can add real value to the whole transaction.
The problems with extras occur in two areas. First, when the sales
rep doesn't spend the time necessary to determine which products fit
the specific needs of the customer. Rather than suggest specific extras
individually priced, the sales rep lumps all the products together and
pushes you to buy them as a package.
Second, unscrupulous sales reps can add thousands of dollars to the
amount financed for these products, but not disclose the price increase
until the last possible moment, when the financing contracts are being
3.) Documentation and Administration Fees
Federal, state, and local governments are pushing more and more of
their regulatory cost onto the local dealerships. In an effort to
offset some of these fees and services dealers are required to perform,
most add, a documentation or administration fee to the total cost of
the transaction. Depending on state and local regulations, fee adding
$100 to $150 seem reasonable and cover most of these additional items.
These services include:
* Duplicate Title Fees
* Notice of Security Interest (to perfect lien)
* 30-day Permits
* Federal terrorist matching data bases
* Federal information privacy requirements
* State vehicle id verification
* Highway Patrol Inspections for out-of-state titles
* Registering leases at customer's county of residence
* FedEx charges/Shipping charges
* Additional title addendums
* Truth in lending record retention
Some dealers have taken up the practice of marking up documentation
and administrative fees and are now charging as high as $300 to $500
per sale. A few are even higher. The charge for most of these fees
seems to be more based on getting a customer to pay extra after the
customer has finished negotiating, not the average amount it cost to
get most deals through various state and federal regulations, as
4.) Ask for a Menu System Disclosure
The best disclosure method I've seen in years involved using a menu
system. On a separate sheet of paper the rep produces a document that
1.) The negotiated price of the vehicle or trade difference
2.) The additional price of suggested extras (these can be shown as
various option packages that may save money when bought in combination
and as individually priced options)
3.) New totals initialed by both parties
This procedure makes sure that any suggested extras are properly
explained and disclosed. It also allows the customer time to consider
each item separate from the longer and potentially confusing finance
documents. The final numbers from the menu should get carried over
directly to the finance document.
5.) Other Costs
When buying a car, remember that there are other hidden costs
(or, costs that aren't usually considered), that go beyond the
During the lifetime of your vehicle, you're going to have to pay
for registration and tags, taxes, insurance, oil changes and fuel every
year, and periodically pay for maintenance and repairs. Older models
(cars more than 3-5 years old) may cost less up front, but you will
likely need to factor more maintenance and repair costs into your
budget than if you bought a newer model. While new models need fewer
repairs and maintenance work, you will have to pay more up front.
Your wallet does not have to go through the ringer the next time
you decide to visit a new or used car dealer. You can protect yourself
from blindly signing into an unfavorable car deal by doing your
homework, going to a car dealership with a good reputation, being
prepared, asking questions, and double checking behind your sales rep.
Scott Conklin is the president of Conklin
Cars, a leading provider of Kansas Ford, Kansas Toyota, and Wichita
Cars. With locations in Kansas (Hutchinson, Salina, and Newton), and
Kansas City, they can be found online at: http://www.conklincars.com .