As dealers try to maximize their profits on every car they sell—because current demand far exceeds supply—many of them fill contracts with additional fees and products without telling the buyer. This means that it is more important than ever to review the sales contract carefully before signing it.
“We’re seeing a record level of fees across the board,” says Jesse Toprak, chief analyst at Autonomy, an electric car subscription service. In fact, while buying a car for his wife, Toprak, a former auto finance manager, discovered that the dealer had added a $1,995 “dealer setup fee” to his contract.
Spotting such hidden extras – and even honest mistakes – before you sign the sales contract is key because once you sign it, you’re legally bound by the terms. There are no easy fixes after the facts if you see that the purchase price, interest rate, swap value, and extras are not what you assumed.
Pay attention to the details
“For the average person, a car contract is very confusing,” says Oren Weintraub, chief concierge at the Automobile Authority in Tarzana, California. When he reviews contracts for his clients, he finds problems and errors about 30% of the time.
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Weintraub says some errors are unintended. For example, a vehicle’s vehicle identification number, or VIN, consists of 17 digits. The dealer can accidentally switch VINs because there are two cars of the same color on the lot.
innocent mistake? Can. But if you get the only car that doesn’t have all the bells and whistles listed as per the PIN, you lose.
Watch out for other common mistakes, such as writing your name incorrectly, inserting the wrong address, or including the incorrect number of miles allotted to your lease. While these errors can be corrected, they can also cause unnecessary stress.
Then there are what Weintraub calls “sleight of hand” errors, which – not surprisingly – are usually in the trader’s favour. These errors can range from listing the wrong residual value on a rental car to dramatically inflating the documentation fee, which is simply the cost of filling out paperwork. This fee can be as high as $900 in states like Florida, which is pure profit for the agency.
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Learn about legal fees
To prevent such “mistakes” when buying a car, it is better to find out the legitimate fees and all other costs ahead of time. As Toprak points out, “You don’t want any unpleasant surprises at the agency.”
Usually, when you buy a car, you pay for four basic things:
Agreed upon car sale price.
Sales tax in your state.
Registration cost charged by the state.
But if you fund through the agency, and you barter, the deal gets more complicated. And instead of dozens of forms in a simple purchase, you can sign nearly 20 different documents, Toprak says.
The sales contract contains many different boxes with items that can be added. This is where things get confusing. The merchant can add additional fees and give them an official name such as “agent setup” or “market modification”.
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Do your research
Toprak says that in today’s tight auto market, consumers have very little leverage. So you probably won’t be able to remove these additional fees. Instead, find the dealer with the least amount of these inflated fees.
To do this, email the quote requests for the vehicle you want to the various local dealerships. Once you have a quote, ask the merchant to send you an external quote detailing all fees. (You can request a copy of the contract itself, but few dealers are willing to do so, Toprak says.)
If there are obscene fees or extras in this rating, ask that they be removed. In all likelihood, the merchant will refuse. So you can either pay the fee or shop for a better deal at another auto yard.
Here are some additional tips to help you make the best deal possible:
Don’t let yourself be pressured. If you are dealing with a salesperson who is intimidating you, ask the manager to work with someone else or go to a different agency.
take your time. Finalizing the deal can take several hours, especially on weekends. Instead, try signing the papers in the middle of the week or early in the day.
Compare numbers. Make sure to print out the costs details sent to the email. Check that the numbers in the contract match what you were told earlier.
Just say no. The CFO will likely try to sell you extras like an extended warranty. A simple way to decline is to just say that you don’t plan to keep the car beyond the bumper-to-bumper warranty period.
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Philip Reed writes for NerdWallet. Email: [email protected] Twitter: AutoReed.