Know All the Costs Before Saying "Yes"

Why is this so powerful? In this climate of cut-throat competition, some dealers may try to hide profit in extra fees or products you don't need. This question flushes out hidden costs in a non-confrontational way. Here's how to use this question to make sure you don't get taken.

You are negotiating on a car when the salesman finally gives you a good price. The salesman might realize you've reached the "buy point" and press his advantage by saying, "So, do we have a deal?"

Wait! Don't shake his hand yet (even though you wouldn't be legally bound by such a gesture). Instead, say, "Your price sounds good, but first I need to know what my out-the-door cost is going to be." The salesman's congratulatory smile might become a little strained at this point. That's because he knows what you are really asking.

Translated, "What are my out-the-door costs?" means "Are there any hidden fees or extras in the contract?" It's much better to learn about these fees at this point, while the deal is still in flux, than when you are in the finance and insurance office about to sign the contract.

At some dealerships, the "out-the-door" costs are abbreviated as "TT&L" or tax, title and license. This means that, in addition to the price of the car, you typically have to pay the following costs:

• State and local sales tax
• Department of motor vehicles fees
• A "documentation fee"

The so-called "doc fee" is set in some states, such as California where it is $45. In other states, dealers can charge anything they think they can get for the doc fee. We've heard reports of customers being charged up to $900 for doc fees. In such a scenario, the dealer would quote an attractive price for the car, knowing they would make their profit by sliding the $900 doc fee past an unwary customer.

In most cases, when you ask for the out-the-door cost, the salesman knows exactly what you mean. The good salesman immediately replies with something to the effect of "besides the cost of the car, you will pay sales tax, DMV fees and a doc fee which is ¿" and then they name a figure that is hopefully less than $100. If you get a vague answer, or they tell you it is impossible to calculate this figure, you should be on guard.

Better yet, calculate your out-the-door cost using our calculators. Put in the amount you expect to pay for the car you are considering. To find this figure, use our True Market Value (TMV) price, which is the amount that other people in your area are paying for cars that are similarly equipped. You will see that the "Total Amount to be Financed" will be your out-the-door cost.

Some of you might be wondering how this strategy works when financing a car and paying for it in monthly payments. We certainly know that most people don't pay for the entire cost of the car in cash. However, don't get drawn into negotiating based on your monthly payment. The opening gambit from a salesman is usually, "What do you want your monthly payment to be?" Avoid this question by getting pre-approved financing. Then, you can proceed as a cash buyer by carrying a check from your lender into the dealership with you. Negotiating solely on the price of the car is much simpler.

Getting pre-approved financing and strategic use of the out-the-door cost question will help you control the numbers in what is otherwise a confusing process.