One of the keys to negotiating a great deal for your new car is the extras and benefits included in the deal… isn’t it?
Unfortunately, accessories and add-on services are often just new car sales tactics to rack up the total purchase price of your car or, worse still, lock you into the dealer for servicing!
Here is the list of new car sales tactics you need to be wary of. Before I dive in though, 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 upsells.
1 – 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 upsell 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 for miscellaneous repairs.
The moral of the story; shop around, ensure it’s the best option for you, read the fine print and beware of upsells at every service (check our article on 6 Upsells To Look Out For)
2 – FREE SERVICING
Free has to be good, right? But, as the saying goes ‘nothing’s ever for free’. 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 upsells 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.
Don’t forget to 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.
3 – 0% FINANCING (OR LOW INTEREST)
Occasionally seemingly amazing 0% finance offers on new vehicles come up. This means the dealer is paying the interest to the financier, not you. This reduces the dealer’s margin, along with your ability to negotiate. You may also find that there are loads of restrictions on the finance.
Therefore, in many cases, it can actually work out cheaper to pay the interest yourself and negotiate a lower sale price. You’ll also have loads more flexibility with the loan terms.
You can 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.
4 – 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 the demonstrator vehicles at a reduced price before they get too old or rack up too many km’s. 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. As a result, all cars will have kilometres on the odometer when you buy them. New cars, however, should have no more than 10km’s (simply 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 either 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 k’s. Ultimately, if you see more than 10kms, ask the dealer to clarify why.
5 – 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.
Even if the dealer is throwing this in for ‘free’, ensure it’s not adding to the purchase price.
Ultimately it can be hard to decipher a genuine good deal versus new car sales tactics in the guise of perceived value that’s solely being used to drive up the purchase price of a vehicle.
Your final checklist to remember is: