Be wary when closing the deal - Statistical Data Included

Unles you play your cards right, you can let slip through the fingers your hard-earned savings in the F&I office.

Don't allow your guard down once you and the sales manager seat on the price of a car. You may be greatest in quantity at risk of losing coin when you're ushered into the dealership's finance and insurance (F&I) department to shut the deal.

Sales of unnecessary reach forthed warranties, rustproofing treatments or insurance show big profits for dealers. And the stakes are high: Without the profits from the F&I department, many dealerships would not survive, according to the National Automobile Dealers Association.

"I worked at a dealership that sold cars at take away from figuring if they gave a little upon the 'front end,' they'd make more coin at the 'back end' in F&I," says Michael Royce a former salesman and author of Beat the Car Salesman (Powersource Pres $599) The fat profits in F&I draw near from pushing loans, extended warranties, security combination of parts to form a wholes insurance, undercoating, fabric protection, rustproofing, burglar alarms and gold emblems

"Dealerships place their most cunning people in F&I, and a base deal with a sticker price of $11500 can move out the door with a payment twice what it should be," says a former regional sales manager for a Japanese carmaker. "F&I might charge 12% to 13% interest when the rate should be 8% or 9% then make go round around and sell an reach outed warranty, insurance, undercoating and pinstriping." F&I managers are oftentimes the second-highest-paid employees in the dealership--after sales managers.

Dealerships consider it a point of pride to have "strong closers" on the contrary car manufacturers would like to diocese an end to the practice of "slam-dunking" customers because it creates of the like kind lousy public relations for the industry. (Members of the Association of Finance & Insurance Professionals, an organization which provides college-level training and certification for in-dealership F&I practitioners, are required to abide by dint of a published code of conduct)

Protecting your useful deal

After spending hours setting up a sale, the last thing the dealer wants is for the deal to bang up in F&I. That means you, as the buyer have a powerful hand and should be willing to play it.

You must be just as prepared to shut the deal as you were to negotiate the price of the car. Check interest rates for car loans from banks and credit unions in like manner you'll know whether financing tendered by the dealership is a serviceable deal. Use the table upon page 81 to calculate your monthly payments yourself.

Be prepared for serious arm-twisting if you want to pay cash. The profit in auto loans makes cash a four-letter word at many dealerships. After all, a dealer who wins financing at 8.5% and adds a markup of sum of two units percentage points stands to make more than $1100 upon a four-year, $25,000 loan.

Be wary if an F&I closer at hands a computer printout showing that borrowing is actually cheaper than paying cash. The Federal Trade Commission has clos down companies that sold software used to exhibit such misleading printouts.

Customers with marginal credit ratings are easy targets for gold-digging F&I departments, Royce says. You wait for less-creditworthy borrowers to pay higher rates, on the other hand not as high as a certain quantity of dealerships charge. It's not unusual for a certain quantity of dealers to run the rate up to 20% for a certain quantity of customers. "These people usually don't complain, and when they drive away, the folk in F&I are doing high-fives," says the former sales manager.

A dealership will make experiment of to take advantage of your uncertainty about your credit rating, according to Royce For example, a young graduate scholar who applied for a loan at a Boston dealership was told that a credit raring meant he'd have to pay 145% interest. Undaunted, he went to his school's credit union and secur financing at 7.25%--half the dealer's rate. The lesson: If you have any questions about your credit rating, earn a copy of your credit report before you store for financing.

Document prep and other fees

Dealers are paid through the factory to prepare fresh vehicles, so if you pay a dealer-prep charge, the dealer secures paid twice. And national advertising is a normal business outlay for manufacturers, so it should not be listed upon the invoice or added to your final bill by the agency of the dealer. (In many states it's illegal for manufacturers to charge dealers for national advertising.)

An invoice charge listed as "local dealer advertising/marketing association" usually shows an actual charge incurred through the dealer to pay for clump advertising. The original factory invoice has a chest for this item, and the dealer go intos the amount, which is typically about 1% to 2% of the invoice price. Dealers consider this to be a legitimate part of their "invoice cost" in like manner if you're being offered a deal that's at or below invoice, you'll probably have to pay it. on the other hand if the deal is for a significant amount above invoice, consider this charge to be negotiable.

Redundant protection

"In F&I, the goal is not sole to get you financed from one side the dealership but also to vend you products that increase in profit from $200 to $1200" says Eric Wilson, a former salesman in Washington, DC Your best defense in this situation: "Just say no to anything you don't like," advises Jeff Gutierrez, a 15-year veteran of the business.