There's one question you can ask when buying a car that could keep you from paying thousands more than you should: "What's my out-the-door cost?"
In this climate of thin profit margins and tough 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 nonconfrontational way. Here's how to use this question to make sure you get a fair deal.
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 presses his advantage by saying, "So, do we have a deal?"
Wait! Don't shake his hand yet. 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.
"What are my out-the-door costs?" means "Are there any hidden fees or extras in the contract?" It's better to learn about these fees at this point, before the deal is final, 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 by law in some states, and in others, it's not. We've heard reports of customers being charged up to $900 for doc fees. In such a scenario, the dealership could quote an attractive price for the car, knowing it would make a profit once it applies the $900 doc fee.
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 he'll name a figure that is, we hope, less than $100. If you get a vague answer about the out-the-door cost or a salesman tells you it is impossible to calculate this figure, you should be on guard.
Better yet, calculate your out-the-door cost using our car monthly payment calculator. Choose the vehicle you're considering or put in the figure the dealer is quoting you (in the line that says "True Market Value"). The approximate out-the-door price will be listed under "4. Calculate Monthly Payment." Our calculator does not factor in doc fees, so you'll have to add that later.
Some of you might be wondering how this strategy works when you're focused on 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, the trick here is not to be drawn into negotiating based on your monthly payment. The opening question from a salesman is usually, "What do you want your monthly payment to be?" Avoid this question by getting pre-approved car 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, and it's also easier to ask the question that will reveal what you're actually going to pay for the car: the out-the-door cost.
To find a dealership that knows how to treat shoppers right, please visit Edmunds.com's Dealer Ratings and Reviews.