NEW YORK (CNN/Money) - After weeks of shopping and hours of sweat-inducing negotiation, you finally got a good price on a new car. You breathe a sigh of relief as you shake hands with the smiling business manager and plop yourself into a comfortable seat in his quiet little office.
This, however, is the critical stage, for all that money you saved is now at stake. It is in that little office that the business manager will try to sell you financing, insurance, extended warranties, service contracts and other items that can add thousands to the cost of a car.
Usually, they add little value in return.
When you step into an auto dealership business manager's office, you are about as vulnerable as any consumer is ever likely to be.
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For one thing, you're tired. Car buying is a long and tense process. By the time you walk into the business office, you've just finished negotiating a transaction involving tens of thousands of dollars. And you've done it amid the bustle and confusion of a showroom floor.
The business office, meanwhile, is quiet and relaxing. There is usually a large window so you can see that shiny new car being readied for you to drive home. As the papers are prepared, the additional costs seem paltry compared with the price of an entire car.
The business manager seems like a pleasant pencil-pusher. That's no accident. "They want the consumer to feel like the selling is done," said Bob Kurilko, vice president for industry communications with the autos Web site Edmunds.com.
But make no mistake: He's there to sell you. Internally, the business manager is known as the 'F and I' manager, for finance and insurance. These extras mean big money for dealerships. Finance, insurance, extended warranties and service contracts contributed 24 percent of gross profits for new and used vehicles sales departments in 2001, according to data from the National Automobile Dealers Association.
In a technique known as "loading the payment," you might be told, "OK. So, your monthly payment is... and that includes..." followed by a list of extra insurance products, services and even dealer-installed equipment you never asked for, said Kurilko.
Or you might hear a firm-sounding quid-pro-quo. You might be told, for example, that the dealership can only give a "special low interest rate" to customers who also buy an extended warranty. Don't fall for it. If you qualify for that rate, other products you buy should have nothing to do with it.
In fact, no one ever said you had to get financing through the dealership at all. Sometimes, a dealership is able to offer you the best rate you could possibly get. Sometimes, it's even zero percent.
But even when a zero-percent finance incentive is being offered, shop around for other credit before going to the dealer. A rebate combined with a low interest rate will often be a better deal.
Shop for credit first
Check your credit rating before you start shopping for a car. Also, check the average auto loan rates in your area. Better yet, get pre-approved for a loan from a bank or credit union.
"More power to you as the consumer if we can help you negotiate a lower rate," said Brian Reed, director of Internet operations for Capital One Auto Finance, a provider of on-line pre-approved "blank check" auto loans.
When you meet the business manager, tell her up front that you've already got a pre-approved loan and what the rate is. (Keep your pre-approved loan a secret until then. You'll find it harder to negotiate a low price for the car if the sales manager knows there will be no chance to make money back on a financing deal.) If the dealership can give you a better deal, take it. You're under no obligation to use the pre-approved loan.
Head it off
Before the topic of any additional services comes up, Philip Reed, consumer advice editor for Edmunds.com, recommends taking the idea of buying additional services or products off the table right away. As you walk into business manager's office, start off by saying you want the car and just the car.
"There's really nothing you want to consider in the F-and-I room," he said.
When pressed, Reed allowed that there might be certain types of insurance that, in certain unusual situations, might make sense. Still, he said, the safest route is to decline any additional-cost offers made in the business office.
Read the contract
The advice to read any contract before you sign it certainly applies when you're about to buy a car. But is it realistic to think you'll be able to analyze every word of a long contract while you're sitting at a desk in someone else's office?
Instead, know where to look. Anything that's written or typed into the document should be checked carefully. Check all the numbers and make sure everything agrees with oral promises made during the negotiation. If you wanted to buy the car, be sure the contract you're signing indicates that it's for a purchase, not a lease.
Check the term of the loan. It's easy to keep monthly car payments low if you make enough of them. Make sure the duration of the loan is as you had discussed with the salesperson. Dealers sometimes tack a high mark-up onto an interest rate, then keep payments low by stretching out the term of the loan, said Maeda Scanlon, manager of automotive financial services for AAA South.
When you leave, make sure you have a copy of the contract with you, said Reed of Edmunds.com. Don't take the dealer's word for it that, for instance, it's inside the envelope in your glove compartment. Open the glove compartment, open the envelope, look for yourself.