1. “Holdback” allows dealers to pay up to 3% below invoice for vehicles. Here’s how it works: The dealer buys the car from the manufacturer at the invoice price. Then after the car is sold, the manufacturer reimburses the dealer for the cost of keeping it in inventory for 90 days. When a dealer sells the car faster than that, part of the holdback payment becomes pure profit, even if the car is sold at invoice price. “You’ll never get holdback money back from a dealer,” says Burke Leon, owner of BL Auto Enterprises, a Fullerton, Calif.-based dealership that sells nearly-new off-lease cars. But just knowing about it can help when a dealer whines that he can’t meet your price.
2. Some dealers will try to sell you an extended warranty, claiming that the lender requires it. Don’t be fooled. In its online “Facts for Consumers” report on auto-service contracts, the Federal Trade Commission tells car buyers to watch their backs: “If you’re told you must purchase an auto-service contract to qualify for financing, contact the lender yourself to find out if this is true.” The FTC also says that some people have had a hard time trying to get out of a service contract they signed up for thinking it was a standard requirement for their car loan—another good reason to ask questions before any papers have been signed.
3. Car buyers often think they’re showing up at the lot with tons of information they found online that they can use to negotiate – but often that information isn’t helpful, says Phil Reed, an editor at Edmunds.com. Knowing the invoice price of a car, he says, isn’t enough since it isn’t in lockstep with the car’s true market value. True market value pricing takes into account several factors, including a car’s current inventory levels – the higher they are, the more willing a dealer will be to negotiate – the local market sale conditions, hidden pricing details (i.e., all those extra fees that get added on before you sign the contract) and available rebates and incentives.
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