When buying new car, steer clear of pricey options offered by dealer

Spending Smart

Your Money

July 03, 2005|By Gregory Karp

New-car buyers waste the most money - and dealers make the most money - after the price has been negotiated.

That's when buyers are ushered into the F&I, or finance and insurance, room.

There, the dealer will push a host of options that consumers might not be prepared to reject.

"A lot of those things are high-profit and really a waste of money," said Philip Reed, Edmunds.com's consumer advice editor and co-author of the book Strategies for Smart Car Buyers.

"This is the prime place where the dealer is going to try to make a profit on you," he said.

Buyers need to be aware of which options are worthwhile and which they should steer away from, Reed said.

"People need to think it through beforehand and know what they want," he said. "Don't make a spur-of-the-moment decision in the F&I room, because you'll probably lose."

Here are a few traps:

VIN etching

Having the vehicle identification number etched into the windshield presumably helps identify your car if it's stolen.

But the VIN is printed on most of the car's major body panels.

More important, an etched VIN might actually lead to theft of your car.

Reed said there's a trend among thieves who note the etched VIN and call the manufacturer to get a key based on having that number.

In fact, some experts have recommended covering up the VIN so it can't be seen through the windshield.

Fabric protection

Protection for seats might cost about $180 yet provide almost no value. Instead, go to a store and buy a product such as Scotchgard for far less money.

A dealer will argue that he will guarantee the protection by fixing for free any stained seat. "Why not just keep your money and get your car seats cleaned if something is spilled on them?" Reed said.

Similarly, paint protection is relatively worthless. "Paint protection is essentially a wax job," Reed said.

Extended warranties

"You need to know what kind of warranty comes with the car and whether it needs to be extended," Reed said.

Many people don't know they can buy an extended warranty later. For example, if a manufacturer's warranty expires after three years, you can wait for more than two years before you decide to extend it. By that time, you can be a better judge of whether you need it. Even if you decide to extend the warranty then, it is likely to be the same price, and you'll have use of your money in the meantime.

The other types of issues are outside the F&I room, where consumers must decide on factory-installed options. Here are a few tips on keeping down the cost of those extras:

Weigh luxury options

Some factory-installed options can be expensive and shouldn't be tacked on as impulse purchases.

One strategy is to think of the option's cost alone. For example, an upgraded audio system for $500 doesn't seem like much money when buying a $25,000 vehicle, especially when it doesn't raise your monthly payment much. But it's smarter to ask yourself if you would spend $500 in cash at an electronics store for the same system.

Substitute for savings

Consider substitutions for luxury options. For example, your iPod can hook up to a simple car-audio system and provide access to every song you own. That could save you the cost of a CD changer. Or a portable DVD player costing $200 at an electronics store can be affixed inside your vehicle to substitute for a $1,500 factory-installed video entertainment system. An after-market navigation system that attaches to the dashboard is likely to be about half the price of a factory-installed system.

With all three examples, you can use the device outside your car or transfer it to a different car, something you can't do with a factory-installed device.

Worthwhile options

Some safety options, such as side airbags and traction control, are well worth the money, Reed said.

With other options, you should consider the effect on the vehicle's resale value if you anticipate selling it rather than driving it for its full life. The big three options that might help the marketability of the car are leather seats, CD player and sunroof, Reed said.

"It doesn't mean you'll recoup your money, but it means buyers will pick your car over other cars," Reed said.

Gregory Karp is a personal finance writer for The Morning Call, a Tribune newspaper in Allentown, Pa. E-mail him at yourmoney@tribune.com.

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