Consumer Reports Auto-Buying Experts Help Shoppers Cash in on This Year's Discount Mania; 5 Steps Consumers Should Follow

3/8/2004

From: Alberto G. Rojas, 914-378-2434; e-mail: arojas@consumer.org; Lauren Hackett, 914-378-2561; e-mail: lhackett@consumer.org, both of Consumer Reports

YONKERS, NY, March 8 -- Although the economy is improving, many auto industry analysts predict that customer expectations and heavy competition will compel automakers to keep putting as much horsepower into their promotions as they do into their cars. The Annual April Auto Issue of Consumer Reports guides buyers through the maze of dealer rebates and low- interest-rate financing, and offers advice on how to save thousands of dollars on the price of a vehicle.

For example, if you bought a Ford Explorer in February, you could have chosen a rebate of up to $3,000 or zero percent financing for 60 months. You may also qualify for an additional $1,000 cash bonus if you financed through Ford Motor Credit. In the high-pressure atmosphere of a car dealership, you probably couldn't easily tell which is better. And because manufacturers offset their incentives by hiking car prices, you may be getting a deal that's just ho-hum. Worse, sales incentives may discourage haggling. In a Consumer Reports 2002 survey of 1,500 car buyers and leasors, many felt or were told that the dealer wouldn't bargain because of special financing on the vehicle. But haggle consumers must. Rebates and financing offers come directly from the maker and don't affect the dealer's profit. For the best offer, you should aim at the lowest price on the cars and the incentives.

o The Incentive Game

Supply and demand play roles determining which cars come with incentives and which don't. As a rule, consumers won't find incentives on vehicles in short supply, some high-end models, and new or redesigned models in high demand. A study of last year's incentives by the Consumer Reports Auto Price Service, a for-pay online service that provides new-and-used car prices, found that in 2003, the number of incentives nearly tripled. Even buyers of the Mercedes-Benz C-Class were able to collect a $1,500 incentive, though the average amount for one was $2,000. Here's what you can expect to be confronted with at the dealership:

-- Cash Rebates, reducing the price of a vehicle at the time of purchase.

-- Low-interest financing rates, ranging from 0 to 3.9 percent instead of the 5 percent banks now charge on a 36-month car loan. But without a stellar credit report, you may not qualify.

-- Combination deals that let you choose a mix of rebate and low-rate financing at levels that might seem less, or sometimes more, attractive than if you took either by itself. Do the calculations carefully and compare.

-- Special lease deals offered by automakers and finance companies that have low monthly payments or forgo the down payment and other up-front charges. But mileage could be limited, leaving the leasor to rack up a big penalty for extra miles.

-- Dealer incentives given by manufacturers to dealers in the form of cash when they sell certain vehicles. A savvy buyer can negotiate for a piece of the incentive, which can run up to $5,000.

o What Should Consumers Do?

Assume that dealers will dicker on the price of a vehicle that comes with incentives. Several told Consumer Reports that they were willing to negotiate. Here is how to do the deal properly:

-- Consider vehicle first, specials later, with your needs and budget in mind.

-- Get pricing information. You can get this information from several online sources, including the Consumer Reports Auto Price Service at ConsumerReports.org.

-- Find out what other car buyers have negotiated. Ask friends and co-workers, and visit online bulletin boards.

-- Know your credit score. Ask the dealer what qualifies you as a buyer for favorable financing. If you don't know your score, the dealer could falsely claim that you don't qualify.

-- Find out what other lenders charge. Interest rates for car loans are posted on Bankrate.com.

-- Evaluate the incentives. Figure out the monthly payments under each scenario and multiply by the number of months you'll be financing the car. The lowest price is the best deal.

-- Keep track of the dollar amounts. Make sure all the deal's specifics are included in the contract before you sign it.

This report will be available free of charge for a month on ConsumerReports.org.

o Buying A New Car? 5 Steps to Getting the Best Price

In the 2004 Annual April Auto Issue, Consumer Reports' Auto Price Service advises that consumers keep their interests front and center by following these tips:

1. Do your homework. To avoid predatory dealers, thoroughly research your choices, read a variety of reviews, check reliability, fuel economy, and pricing of all models you are considering.

2. Don't assume the sticker price is the purchase price. Go in with a starting price that is not based on the sticker price, but on how much the dealer paid for the vehicle. The dealer invoice price is commonly available on Web sites and pricing guides, or in Consumer Reports' New Car Price Reports or New Car Buying Kit. These Consumer Reports Web-based services include the Consumer Reports Wholesale Price, which factors in the dealer invoice, holdback, and any incentives or rebates to give you a close approximation of the dealer's real cost.

3. Negotiate one thing at one time. Salespeople like to mix financing, leasing, and trade-in negotiations together, often asking to negotiate around the monthly payment. Remember, you're in charge and can leave at any time.

4. Arrange financing in advance. Compare interest rates at banks, credit unions, and loan organizations before checking the dealer's rates.

5. Don't pay for extras you don't need. Don't accept unnecessary services and fees, such as rustproofing, fabric protection, and paint protectant, or etching your VIN on windows to deter thieves. If these items are on the bill of sale, put a line through them. Vehicle bodies are already protected against rust, and the rest you can do yourself inexpensively.

CR's Annual April Auto Issue is on sale from March 9 through June 9. The Auto Issue is available wherever magazines are sold and may also be ordered online at ConsumerReports.org.

To subscribe to Consumer Reports, call 1-800-234-1645. Information and articles from Consumer Reports can be accessed online at ConsumerReports.org. Consumer Reports is one of the most trusted sources for information and advice on consumer products and services. CR has the most comprehensive auto-test program and reliability survey data of any U.S. publication; its auto experts have decades of experience in driving, testing, and reporting on cars.

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