If you’re ever purchased a car at a dealership, the time spent in the finance and insurance (F&I) office may be among your most painful memories. This final step in buying a new car can be stressful, frustrating, and downright costly. However, with some planning and a little follow-through, you can vastly improve your next visit.
The F&I manager is responsible for properly documenting the sale, but he’s also responsible arranging financing and selling add-on products. Here-in lies the potential for a problem. You’ll often be asked to purchase items of unknown value—an extended warranty or prepaid maintenance, for example—at a price for which you have no context. The pressure to buy may be quite intense since the sale of these items are a major source of dealership profit. It’s a recipe for a painful experience.
The good news is that you can take action—both before and during your visit—that will transform your next F&I office experience.
Before You Visit the Dealership
Arrange a Preapproved Auto Loan
If you plan to finance your purchase, arrange a preapproved loan before you arrive at the dealership. Your bank or credit union is likely to be an excellent, reliable source of direct financing. Avoid using indirect financing sources, such as online brokers, that connect you to finance companies of unknown credibility.
You gain two things when you obtain a preapproved loan: the benefits of competition (dealer vs. preapproved offer), and a point of reference for the dealers financing offer. Competition will save you money, and a point-of-reference will give you confidence in your decision.
Confirm Your Auto Insurance Coverage
You’ll likely be required to show proof of insurance prior to taking possession of your new car. If you have an active policy, give your insurance company a call, let them know about your imminent purchase, and make sure you’re covered. If you’re a first-time buyer, select an insurance company and make the necessary arrangements.
If you arrive at the dealership without the necessary insurance, you’ll likely be able purchase coverage from the finance manager. But, you can be sure that it will be more costly than arranging it on your own.
Obtain a Quote for Your Trade-in
If you plan to cash in your current vehicle, the best way to maximize the value is to sell it at a different place and time. However, if you decide to combine your trade-in and purchase into one transaction, you’ll fare best if you have a good understanding of your trade-in value. Otherwise, you may unknowingly accept a poor trade-in offer and essentially nullify your great price quote.
Publicly available valuation tools, like those from Edmunds.com or Kelly Blue Book, can be useful, but they tend to make conservative assumptions for dealer profit (their primary customer). A better approach is to obtain a written quote from an actual buyer. CarMax is a great source for a quick, guaranteed quote, if you have one close by.
Make an Add-on Decision
The best time to make a decision about purchasing an add-on is before you arrive at the dealership. With your mind made up before you enter the finance office, you’ll have eliminated the stress of needing to make a snap decision.
Review the benefits of add-on products in terms of your financial objects. For example, a service contract (extended warranty) is absolutely unnecessary if you maintain sufficient savings to cover repairs. Find out more about the nine most popular add-ons by downloading my free Power Shift Add-on Guide. It covers their value, typical cost, and lower priced alternatives.
Keep in mind that add-ons can also be purchased after you take your car home. For example, many franchise dealers compete online to sell service contracts (extended warranties). You won’t be able to include the cost in your loan payment, but you also won’t have to pay the additional cost of interest.
During Your F&I Office Visit
Consider the Dealership Financing Offer
If you have arranged preapproved financing, you can complete the sale without any dependence on the dealer’s financing offer. However, it’s entirely possible that the finance manager may be able to beat your preapproved offer—particularly if you’re a prime credit customer.
Keep an open mind about dealer financing. Listen to the offer and compare the terms to your preapproved loan. If necessary, seek the advice of your preapproved finance agent. Select the offer you feel most comfortable living with for the life of the loan.
Stick with Your Add-on Decision
You’ll often get an add-on sales pitch along with your financing offer. It might go something like this: “Your payment will be $325 a month, or $368.50 with our premium package,” followed by a quick transition to a presentation of a range of add-on packages.
If you’ve decided to purchase an add-on, simply ask for the one(s) you want. You don’t have to purchase a package. The finance manager won’t give up easily—her paycheck is likely based on the amount of the sale. Simply repeat your decision until you’ve made your point.
Finalize the Sale Prior to Taking the Car Home
It’s quite common for dealers to offer a spot delivery—the release of your vehicle prior to approval of financing. You’ll be asked to sign a conditional sales contract that is contingent on final approval. The idea is to keep you sold on the car even if the sale can’t be finalized, particularly after hours when approval may not readily available.
In most cases, a spot delivery is simply a convenience. However, if you accept it, you’ve put yourself at risk for a bait-and-switch financing scam (often called yo-yo financing). If you happen to be doing business with an unscrupulous dealer, at minimum you’ll have to endure the inconvenience of returning the vehicle. Worse yet, you may have to fight thousands of dollars in additional financing costs.
It’s quite simply to avoid the scam. Finalize the sale first, then take possession of your new car.
Review the Sales Contract Prior to Signing
Before you sign the sale contract, take time to review it thoroughly. Make sure the itemized costs and fees, and bottom line price match your price quote.
You may be tempted (or pressured) to rush through your review. However, if there are errors (either intentional or unintentional) in the contract, your great price quote can easily turn into a mediocre sales price.
Share Your Experience!
What’s your strategy for success in the finance office? How did it go last time? Comment below and let us know!