Some Not So Hidden Other Costs
Insurance
Many car companies and lending institutions will offer you insurance on Your loan loan. On the face of it this seems very inexpensive. However, before agreeing to the extra few dollars a month, consider the following: Loan insurance covers only the amount of money you owe the lending institution. In other words, let's say you finance $15,000 and ~ purchase insurance for $10 per month over a three-year life of the tn. If you die the first month, the $10 will pay off the entire $15,000.  however, if you die in the last month of the loan the insurance will pay what's owned, i.e., the last month's payment. Consider if instead of buying loan insurance you purchased level rm for the same $10 per month. At rates quoted in 1995 for a _ person 40 years of age, $10 will buy you $15,000 of level term. With v'.,is insurance, whether you die in the first month or after the last _aonth of payments, you get all $15,000. Now, while we recommend -11at for peace of mind you cover your loan with insurance, why not rut your money where it will return the most cash in the event of an mtimely death?

Accident and Health Insurance
If you're in poor health and feel that you can't qualify for other programs because of your age or current; health status, the A&H may be of some value. However, if you're in good health and have enough existing insurance, take a long look at this type of policy. Generally the only ones who benefit are the sellers.While a lending institution can require you to cover your loan with insurance, they cannot, in most, states, require that you buy the insurance from them. What you can do is assign the lending institution a current insurance policy purchased elsewhere to cover the loan. You probably should consult your insurance agent for details and for requirements as they apply in your state.

Conveyance and advertising fees
Some dealers will try to get you to pay a conveyance fee for preparing the paperwork and another for their local advertising. We suggest that you remind them that both of these are a cost of doing business and refuse to pay. If they insist, take your business elsewhere.

What's a fair Profit for the Dealer?
Like beauty, fair profit is all in the eye of the beholder. If a dealer has a really hot car in large demand, the fair profit is going to be a whole lot higher than on a car that's been sitting on the lot for three months with 20 other cars of the same make and model.

Dealers always complain that they aren't getting enough profit on their cars. When you look at a car that has an invoice price of $15,500, a 3 percent profit or $465 would seem to be very small indeed. But remember, most dealers floor-plan their cars, which means that the cars are owned by a financing institution. It's almost as though the cars were given to the dealer on consignment with the understanding that they will pay monthly interest on the cost of the car. Usually that interest is prime plus a point or two. For purposes of illustration, assume that a particular vehicle costs the dealer $120 a month in finance charges for the opportunity to sell the car.

Now, let's say you decide that a 3 percent profit is what you're willing to pay. What you probably didn't; know is that most manufacturers include a two to three percent hold-back in their invoices. Which is to say the invoice price-the price the dealer pays the manufacturer-is actually 2 to 3 percent higher than the real cost. Once the car is sold, the manufacturer sends the dealer the additional 2 to 3 percent. Using the illustration we showed you several pages back, if you were to agree to a 3 percent profit over invoice, and add that to the manufacturer's hold-back, the dealer would have over $900 in profit. In addi¬tion, if he can get you to pay for stripes and some other miscellaneous charges, it's not unlikely that his total profit on the deal will be about $1,250. Subtract one month of interest-$120-and a commission of $100 to the salesperson, and his profit before overhead and expenses will be just over $1,000. Not a bad return on a $120 investment.

Where  does their profit come from?
Now in fairness" even with this amount of return on their investment, there no way that a dealership could survive by just selling new cars. even most customers were to pay list price, the dealership would sources of income. You'll find that most successful dealer valiae the bulk of their income and profits- from their used-car operations, service departments, parts sales, and from convincing you - makes sense to buy their financing, their life insurance, their and accident insurance, their striping, their rustproofing, their 1ed warranties, and whatever else they can sell you.We offer this bit of insight so that when the manager appears and about "fair," you will have a slightly different perspective of what really fair.

Deciding on Your Offer
If you are determined to make a good deal, decide how much profit : you want to offer the dealer and then stick to it. If you want to make an v_s1 offer and then come up a bit to help the salesperson save face his or her manager, that's your call. Remember, when your money s out their door, so does theirs. You represent profit that will help lor the interest, the sales commission, and contribute to overhead.  your money walks out, so do all the dollars you'll spend in the service department.The other thing that walks out if they don't, make a deal is the pos of your recommending a friend to the dealership. Don't be ayed by sob stories, fairness pleas, and other pressure tactics. As people will tell ,you, the toughest customer in the world is ove %%n comes in, knowing what he or she wants, who has all the figs neatly written down, and who makes it clear that they will P the dealership one, and only one, opportunity to sell them a a %at their price. If the dealership won't deal, thank them nicely and ~ e elsewhere. There are an awful lot of dealerships out there just waiting for a chance to get at your money.On the next page there's a financial work sheet that we think you'll find helpful.