Closing the New Car Deal

Last Modified: July 20, 2019 by Jeff Ostroff  | Originally Published February 26, 2000
signing car contract

After you negotiate your deal with the salesman, your buying experience moves on to the most dangerous place for your goal of getting a great deal. You will be brought to the business office, also known as the Finance & Insurance (F&I) Office to finalize all of the paperwork. We'll expose what goes on in the business office and look at several common practices that a business manager can use to mislead you.

When you move to the business office to finalize your new car deal the really high pressure sales tactic begin. Don't be fooled by the title "Finance Manager" (F&I), it's just another name for salesperson. Their job is to sell you high profit extras. This is the most profitable department in a dealership. Since the salesperson dropped you off and moved on to the next customer, you think you're safe. But you're far from safe.

1. Excessive Fees Added to the Deal

Ask if the dealer charges advertising fees, dealer prep or other fees. Make sure it agrees with what you found on the car pricing sites. Knowing the fees is important when you are comparing similar deals. Fees can add up to over $1,000 and throw off all your budget calculations. You must know all the fees your dealer plans to charge so you can factor them into your budget and formulate your offer accurately. Click here for our glossary of dealer fees.

2. Avoid Needless Extras

If you fall asleep at the wheel now, you may lose thousands. Sometimes you'll drive home not knowing you bought these extras because they sneaked them into your contract or buried them in your monthly payments. If you are a payment buyer, you won't notice them. On a 48 month loan, the extras below will cost an additional $95 plus interest per month. Here are some extras they will try to push you to buy:

Typical "Extras" at Closing
DescriptionYour PriceDealer's Cost
Rust Proofing$800$40
Extended Warranty$3,000$800
Fabric Protector$300$5
Paint Sealant$300$10
Credit Life Insurance$200$30
Total of Extras:$4,600$885
Total added to your monthly payment on a 48 month loan$95 + interest

3. Overpriced Extended Warranties

Myth: "I'll get it at the dealer, it's cheaper and more convenient"

A lot of times you will be given a "menu" of extended coverages to choose from. You will notice that "none" isn't listed, but that is the option you should take. Do not buy these plans at the dealership. The dealer is just the middle man and they are marking the price up sky high and making a huge profit. You should buy direct from the source. If you buy from the dealer, they usually do not show you the contract in advance, so you have little or no idea what you are buying. You just have their verbal promise or marketing sheets that leave out details that bite you in the butt later.

You must read the contract before you buy any warranty. Don't let them give you a false sense of security that you will be protected from everything. Car dealer contracts have so many weasel clauses you're lucky if half the claims are paid. I've done a lot of research in this area and created a check list of caveats to avoid. Before you buy you want to see in writing "What is Not Covered." You should read our complete article on extended warranties where I go over everything in detail. You'll learn that you can get better coverage for a lower price at sites like CARCHEX. They show you the contract before you buy.

Are They Finance Managers or "Lienance" Managers?

Finance people can lie to you about interest rates or money factors and pad your monthly payments. In fact, the epidemic is so bad, I call the folks who do this "lienance" people. Most finance managers are good people, but we all know there are many who will try every trick in the book. Read the contract carefully. Many people take their word for the APR or money factor then find out later it's higher, but they already signed and it's too late.

Arguments Dealers Use To Coax More Cash From Your Wallet:

4. Never Buy These Extras!

Rust Proofing
This is pure profit for them. They charge $800 and up for it, and how do you know if it's even on the car? Most cars have 6 year/100,000 mile rust warranties, so you don't need this. Tell them you don't want it and if they say it's already on the car, tell them you're not paying for it.

Fabric Protection
Can you say ScotchGuard™? It's cheap and easy to do it yourself so don't let them rip you off.

Paint Protection
Don't waste your money on this junk. My friend who worked at a Chevy dealer said it comes in a $5 bottle. It's just wax and they make promises about it lasting for years. No car wax lasts for years.

Credit Life or Disability Insurance
If you have bad credit, they may tell you that you must take this insurance. This lie is against the law. You can buy it cheaper from your insurance agent. Credit Disability Insurance is a joke. It's supposed to make your payments if you are injured. But it does not kick in until after 15 days. They sock you with pre-existing conditions. Many dealers conveniently finance these policies into the loan, so now you pay interest on that too.

5. Signing The Papers

Always check their numbers carefully. Don't sign until you are sure. Check the payments against the final cost of the car to make sure they didn't sneak anything in. Just because they do everything on the computer does not mean it's correct. If their monthly payment calculations differ more than a dollar from yours, question them. They may say "It's only $9 per month, you must have made a mistake." But, on a 4 year loan this translates into 48*9 = $432. Once you sign the contract, you effectively agree that you "read and understand all the numbers." The total of all your monthly payments that you calculate should match theirs to within a few dollars.

Verify Everything is Correct

Check the Sales Tax

Many visitors catch their dealer "miscalculating" sales tax in favor of the dealer. These aren't mistakes. Everything is done by computer and they know what they are doing. They were just squeaking more cash from unsuspecting buyers. Who ever questions tax? You should always verify it. Some states charge sales tax based on the selling price before the rebate, some do it based on net cost after trade-in. Find out how your state figures it.

ES, LS, LX, EX, SC, GS, They All Look the Same

When they are filling out the paperwork, make sure your car model color, doors, etc. is itemized, not just the model, but extensions too, like LS, EX, LX, etc. I saw a woman's lease and under Year/Make/Model it said "13 Honda Civic." She had negotiated a Civic "EX" down from MSRP, and the dealer did not list the "EX" on the form. He just put "EJ667"under the "Body/Style" heading. I did research and found the EJ667 imbedded in the model number of an LX, which is cheaper. The dealer lied, telling her she was getting an EX at a reduced price, but then slipped the cheaper LX at full MSRP onto the contract.

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