- total loss protection (aka gap insurance), which covers the cost if your car is totaled or stolen, but youstill owe more on your loan or lease than your auto insurance will pay.
- credit life insurance, which pays off your auto loan if you die prematurely.
- accident and health insurance, which covers your car payments if you're injured or sick.
Ever heard how most restaurants just break even on entrées, making their biggest profits on drinks and desserts? It's a similar system at most car dealerships, say auto industry experts. "Consumers focus too much on the cost of the vehicle itself," says Phil Reed, senior consumer advice editor at Edmunds.com. "Buying a car is really a series of transactions, with lots of ways for the dealer to make money." And, surprisingly, of all the things that are huge profit centers for car dealers, the actual vehicle isn't one of them. According to various industry sources, dealers often make less than $1,000 on a $30,000 vehicle — a paper-thin margin. So just because you held your ground to pay well below sticker price, don't think your work is done. It's everything else that can truly make or break the deal for you and the dealer. So it's well worth your time to study up on every aspect of car buying before visiting the showroom. Here are six areas where traditional car dealerships pull in the most profit. And, according to Howard Krueger, manager of internet auto sales at USAA, "Everything's negotiable."The Trade-inMany new-car buyers complicate their transactions by trading in their old vehicles. "Mistake No. 1," says Reed."Some dealers want you to think they're doing you a favor by taking the old car off your hands," he says. They'll offer a low-ball price and then sell it on their used lot for a tidy profit. If you're asked about trading in your current car, consider saying you haven't decided yet, and later negotiate a trade separate from your new-car purchase.You can often fetch the highest price from an individual who really needs your used car. And if you're willing to sacrifice some money for convenience, consider selling to a different used-car dealer, such as CarMax. Before you do, research the estimated market value of your car through a service such as Kelley Blue Book or NADA Guides. A CarFax report may also add value to your trade-in if you can show that your vehicle has not been in a wreck or had any structural damage. By selling your old car outright, you can approach the dealership with a down payment in hand and one less thing to haggle over.The LuxuriesSay you love the car with the "emerald sea" exterior and "desert mystery" interior. Trouble is, the only one on the lot comes loaded to the hilt with premium sound, navigation system, heated seats and a dozen other extras you could live without. The dealer hopes you'll simply accept these unwanted upgrades, so you can take your baby home today. Don't make it so easy on them. If you can wait a few months for a new car, you might be able to custom-order a vehicle to your exact specifications (though it may limit your influence when negotiating on price). You can also search dealer inventories online to find your more practical dream car at another location. It might cost you a transfer fee, but dealers are often willing to swap vehicles if it suits them both. Or, if it saves more money, take a road trip and do business with the other dealership directly.The FinancingThings can get really tangled when you enter the dealer's finance and insurance office, known as F&I in the industry. An attractive price on a vehicle can be offset if you accept an inflated interest rate or a confusing balloon payment. The "keep it simple" mantra applies here too, so it pays to check out financing options ahead of time."Shop around and get preapproved for an auto loan from your bank first," says Krueger. This strategy takes financing out of the equation when you're negotiating the sale price. Then, if dealer financing is still the best offer, go for it. In some cases, you may be required to use dealer financing to cash in on a big manufacturer rebate. If that's the case, consider refinancing the loan to a lower interest rate once you have purchased the vehicle.The InsuranceThe other half of the F&I manager's job is to sell insurance (yes, he works on commission, just like the car salesman). And when you sit at his desk, you're sure to receive pitches for several types of coverage.These include:
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