When you’re about to buy a new car one of the keys to negotiating a great deal is the extras and benefits included in the deal… isn’t it?
Actually no, it isn’t. The reality is that accessories and add-on services are often just new car sales tactics to rack up the total purchase price of your car or lock you into the dealer for servicing forever and ever.
When you’re purchasing your next car, here’s the list of new car sales tactics used by many Car Dealerships that you need to be prepared for…
FIXED-PRICE (CAPPED) SERVICING
Most dealers now offer fixed price servicing. At face value, the transparency means you can better budget for your car servicing costs over the fixed-price period. However, the Australian Automobile Association (AAA) issued a warning for consumers to read the fine print – and for good reason! ‘Fixed price’ does not mean ‘discounted price’ and it doesn’t mean they won’t up-sell extras along the way. Many fixed-price services are still hugely overpriced, often run out prior to any major service intervals and become void if you take your car to a different mechanic.
FREE SERVICING
Free has to be good, right? Wrong. Dealerships make most of their profit from servicing and they aren’t going to just give that up. They’ll either add to the purchase price or load on up-sells and unnecessary repairs throughout the life of your car. To know whether you’re actually getting value for money, calculate the cost of servicing prior to buying your new car. Ask the dealer their rates and then determine what a typical independent mechanic would charge.
Tip: Read the fine print! Most dealers will void their free servicing if you’ve taken your car to another mechanic, which forces you to go to the dealer for things that aren’t included, like new tyres.
0% FINANCING (OR LOW INTEREST)
Occasionally seemingly amazing 0% finance offers come up. In this case the dealer pays the interest to the financier, not you. This reduces the dealer’s margin, along with your ability to negotiate and there are often loads of of restrictions on the finance.In many cases, it works out cheaper to just pay the interest yourself, negotiate a lower sale price and enjoy more flexible loan terms.
Tip: Run some numbers yourself using a car loan or leasing calculator. The trick is to understand the lifetime costs of financing your car and ensure that the lifetime rate with the dealer is lower.
DEMONSTRATOR VS. NEW
A demonstrator vehicle is a new vehicle that has been used as the “test drive” vehicle for potential drivers or as a company car by the salespeople. Eventually a dealer will sell these vehicles at a reduced price. Buying a demonstrator is a great way to save on a new car if you’re happy to compromise on a few extra kilometres. Be careful though. There are currently no regulations that define what km’s constitute a new, demonstrator or used car. Therefore all cars will have kilometres on the odometer when you buy them. New cars should have no more than 10km’s (the logistics of getting them from the factory to the dealer). If you find a new car that has racked up more than this, it could be because the dealer had to source your car from another location and drove it rather than putting it on a truck (cheeky!) or it could have been damaged during delivery and driven to a repairer. If you have asked for after-factory extras such as window tinting or special paint coating, this may also be done off site, adding to the cost.
Tip: If you see more than 10kms, ask the dealer to clarify why.
EXTENDED WARRANTIES
A dealer may try to sell you an extended warranty, or indeed throw it in. This could take your new car warranty from three to five years. On the surface it sounds like extra peace of mind, but there’s always a catch. It’s at the four-to-five-year mark (when extended warranties kick in) that new cars can start to experience mechanical problems. Why would they want to give this prime source of revenue away?A recent study has revealed that many extended warranties effectively offer little or no value. This is because the terms of the warranties state that the warranty company has absolute discretion over the claims paid. So the reality is on many occasions the warranty companies either don’t pay, or only pay a percentage. Ouch.
Tip: Even if the dealer is throwing this in for ‘free’, ensure it’s not adding to the purchase price.
MOST IMPORTANT: DON’T GET LOCKED IN
Absolutely most importantly – never ever, ever sign anything that locks you into servicing your car at the dealership. Anything you think you’ve saved on the purchase price will be made up in the higher prices you’re likely to pay over the life of your car through services, repairs and unnecessary up-sells.
Ultimately it can be hard to decipher a genuine good deal versus new car sales tactics in the guise of perceived value that are solely being used to drive up the purchase price of a vehicle.
Your Checklist When You Visit Car Dealerships
Know the true value of the car your buying.
Work out your expected servicing costs using a car cost calculator
Understand up-sell tactics
Run the numbers on your finance using a car loan or leasing calculator
The Carousel thanks Blue Toro for this article. For more tips on buying a car head to the Blue Toro Blog.
