Car Buying Tips: Five Things You Need To Know To Avoid Hidden Fees And Additional Costs

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

profit.

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

* GAP

* 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

signed.

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

* Carfax

* 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

implied.

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

includes:

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

dealership.

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.