I've always considered myself a car enthusiast. And enthusiasts — well, we think we know it all.
But when my boyfriend and I recently visited a local high-end European car dealership, I was reminded that I don't actually know it all. If we had fallen for the dealers' high-pressure sell, our new car might have cost us a few thousand dollars more than it eventually did.
So now — out of guilt, perhaps — I feel a duty to warn other consumers who don't spend their idle time figuring out how to tell one car door slam from another. Here's our story.
After we settled on the model we wanted to purchase, my boyfriend scoured the internet to determine a fair price for the car. (The exact car we chose doesn't matter — you'll confront the same issue anytime you buy a new car.)
We decided that my boyfriend would secure financing from the credit union he'd used on an earlier vehicle purchase. That way, he'd have the money already and could focus on getting a fair deal for the car. If the dealership offered a finance package better than the credit union after the deal was made, great. If not, we'd just drive the car home and the credit union would mail the check.
At the dealership, the beginning of the actual car purchase was as straightforward as it could be. Then the finance guy invited us into his office.
He presented us with a number of packages and options to protect our "investment." First there was gap insurance, or guaranteed auto protection. For the unfamiliar, it works like this: The amount of money you owe on your car is sometimes greater than what the car is actually worth, largely because of interest and depreciation. If, God forbid, one of us had totaled the car on the way home from the dealership, there would be a discrepancy between what the insurance would cover (the car's value) and what the loan on the car actually was. The owner is still responsible to pay the entire loan balance, regardless of whether the car is reduced to scrap or has been stolen and is on its way, via container ship, to Uruguay. Gap insurance covers that discrepancy. It can be a great thing.
My problem with the gap insurance the dealership was offering was the fact we didn't actually need it. And the finance guy knew it. We had enough money to cover the gap, and he had access to our financials. He was trying to trick us.
Plus, since the car had outside financing, the credit union would make us get gap insurance anyway (and maybe even get it for us) to protect its investment. Still, the dealership gave us a doomsday scenario, which could potentially scare people into needlessly buying yet another gap insurance policy.
I'd been the silent partner through the sale, but I spoke up when the finance guy insisted that my boyfriend buy gap insurance. I told him that the credit union would provide it as part of the overall financing agreement. The finance guy glared at me.
"It's different," the finance guy insisted.
"No, it's not," I replied.
"And how do you know this?"
"We're not going to buy gap insurance."
"Are you sure?"
He spent a few more minutes making sure we didn't want it before moving on. He was offering it for $775, and he could oh-so-conveniently add it onto the purchase price. The credit union offered the same coverage for $225.
Compared to the purchase price of the car, $550 isn't that much. It's still quite a lot to literally flush down the toilet.
Then came scam No. 2. Depending on how aggressively you drive, tires are one of those things that are inevitably going to wear out. The dealership offered a type of insurance for wheels and tires. It worked like this: If we bought the coverage (which was around $1,200) and anything happened to our tires, the dealership would replace them after we paid a $50 deductible.
There are, of course, stipulations as to what is covered and what type of damage will warrant replacement, but this insurance covers a wide range of potential hazards, including potholes and nails.
In a twist I thought quite odd, the finance guy went on about how crappy the type of tires were on the brand-new car he was selling, and highly suggested we invest in this valuable coverage.
Because, you know, our tires are crap and so are the roads, so yeah, give me your money, please. A quick search on Tirerack.com found the exact same tires that came from the factory running $1,224 for four, plus they'd throw in road hazard coverage for $106 for all of them. (Which is to say, you could replace all four tires for the cost of the insurance package. Why get the insurance?)
In essence, you're just giving the dealership free money that would be better served sitting safely inside your bank. Play the odds and replace the tires on an as-needed basis.
I don't fault the guy for offering these things. It's like when you go to Walgreens and after you're done shopping, the cashier asks if you want to buy candy or at Best Buy (remember them?) when they try to sell you the extended warranty.
They are all ultimately businesses whose primary objective is to extract money from their patrons. I get it.
It can be hard to think straight when you're sitting in an office and the only thing you want to do is drive off in your new car. But really, think. A lot of these "extras" are wholly unnecessary, and a total waste of money. Be careful. Be skeptical. That way, you'll have more money you can use to splurge on that candy at Walgreens.