A stranger in a strange land always does better when they have an understanding of the language they’ll encounter. This is why so many people feel a bit out of place negotiating with a car salesperson.
After all, they do so every day, while we do it once, what, every five years or so?
This is why understanding these terms you’ll hear at a car dealership will enable you to communicate more knowledgeably and effectively.
The term refers to the total price of the car, including financing, taxes, fees and the like. This is the number upon which you want your negotiations to be based. After all, once you get agreement on a price of $25,000, those other costs could push the final number to $28,000 or more.
Knowing this up front, you can ask for the “out the door price” throughout the negotiation process to ensure you’ll know exactly what you’re paying. Otherwise, you’ll learn the actual cost to you will be $28,000 on that $25,000 deal when you’re ushered into the F&I office to close the deal.
The finance and insurance office is where you’ll typically go to sign the papers to cement the transaction. At this point, you’ll be tempted to relax; thinking all of the heavy lifting is done. Stay up though; you’ll still have a ways to go to complete the transaction.
You’ll be hit with offers for things like extended warranties, protection plans, Gap insurance, upholstery armoring, anti-theft products and rustproofing. Basically, anything under the sun the dealership can use to amplify the value of the deal will be paraded past you.
However, everything the F&I person offers can usually be had at better prices elsewhere. This includes both standard financing and no credit history car loans. Online lenders like RoadLoans routinely have better rates, which is why you should get pre-approved for a car loan before visiting a dealership.
Your insurance company will declare a total loss if your car experiences a catastrophic event from which it cannot be repaired at a reasonable cost. Having done so, the company will then pay you the fair market value of the car.
Sounds good — right?
It could be.
However, if the balance of your loan exceeds the market value of your car, you’ll be required to pay the difference out of your pocket, unless you have GAP insurance. Better auto insurance policies generally include it, but you should always ask to be certain yours does.
And again, you’ll get it at a lower cost if you acquire it on your own, rather than buying it from a car dealer. Why? Because the dealer will pad the price the insurance company gives them to improve their profit on your deal.
At face value, this looks like the amount the dealer paid to acquire the car for resale — the wholesale price. Thus, it sounds really good when the dealer says, “You’ll only pay $1500 over invoice.” Or, “We’re already selling the car below invoice.”
Thing is though, the invoice price isn’t always a reflection of what they paid to get the car. Further, manufacturers often offer dealers additional cash to increase the profit margin. Knowing this gives you the ability to negotiate from an informed position.
And, when you get right down to it, this is true for all of these terms you’ll hear at a car dealership. You’ll understand the true implications of what you’re hearing. When you’re a stranger in a strange land it’s always better to relate to people based upon what you really know, than what you only think you know.