3 ways to save after buying a car | Smart Change: Personal Finance
Believe it or not, there are ways to improve your car’s bargain even after the ink on the sales contract has dried.
While you can’t lower the price of your car, you can usually opt out of add-ons that you might have felt pressured to purchase at the finance office. You can also shop for a lower interest rate and cheaper insurance.
As a result of the pandemic and related supply chain problems, dealers have fewer cars to sell. The demand for cars is high, so they load each sale with additional products.
“I saw up to $6,000 in crap added to the Honda Civic sale,” says Christopher T. Smith, a California attorney who handles auto complaints for Glassy Smith—and a former auto dealer. “Many people sign without reading the contract and only find out when they get home and read the contract.”
You may have read and signed the contract anyway, because many dealers make these extras a condition of the sale.
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Common additions are the extended warranty — sold for between $2,000 and $7,000 for luxury cars — and gap insurance, which costs up to $1,000 at the dealer but is available elsewhere for about $200, Smith says.
Smith says most insurance products — extended warranties, wheel and tire coverage, and “protection packages” — can be voided. Other add-ons are in the “gray area”, such as alarms and maintenance plans, and they will be difficult to revoke or remove from the vehicle.
1. Refund request
Most people finance their cars, so extras are built into the loan, says Matt Jones, TrueCar’s director of marketing. Therefore, if you are able to remove additional products, the refund will be deducted from the loan balance. Your monthly payment does not go down, but you pay off the loan more quickly.
If you cancel within 30-60 days, you will receive a full refund. If you wait longer, there may be a small processing fee and your refund will be split.
Before canceling the extended warranty, Jones says to “think carefully about it.” The escrow is transferable and will improve the deal when selling to a private party. But if the warranty hasn’t expired and you’re going to replace your car, then cancel it “so you don’t leave any money on the table.”
Not surprisingly, the selling agency might not make it easy to cancel these lucrative contracts. Smith says the CFO who sold you the extras “has a $200 incentive not to let you cancel.” This is because they will lose the commission they get for talking to you to buy it.
Here are the steps to take to cancel the extended warranty and any other insurance plans you may have purchased:
- Review your contract. If you have the contract, look for the section on Cancellation. In some cases, you will be required to submit a written form and the dealer will likely check the mileage of your vehicle.
- Check online. Most manufacturers will have their cancellation terms on their website. They can be hard to find but they are often found in the FAQ section. If a written form for cancellation is required, it may be available for download from the website.
- Expect opposition. Smith says if you call your CFO to cancel, they may try to slow down until their commission is locked in. Instead, go up the chain of command and contact your CFO or agency office manager.
- Trust everything. Keep notes and records of who you spoke to and what needs to be done. Make copies of all required forms.
- Set reminders. Don’t assume that an agent’s friendly confirmation means he or she will cancel the contract. Verify that your request is met. On your calendar, make a follow-up appointment.
2. Refinance at a lower rate
If you finance through the agency without first shopping for a loan, you may find that you charge a higher rate of interest than you would get yourself. The good news is that you can refinance your car loan at any time and possibly get a lower interest rate.
It’s easy to shop from car refinance lenders and see the different rates on offer. If your credit score improves, you can always try again later. Remember that the interest rate adds an additional cost to the loan over time. Lowering the rate by a percentage point would be a huge saving.
3. Re-evaluate your insurance company
When you buy a new car, this is a good time to review your insurance coverage and carrier. You may need (or be required to) higher coverage for your new vehicle. Competing insurers may charge less than your current company and even add a discount for a new customer to make the deal easier. Comparing car insurance rates and coverage may be worth your time.
And while looking for quotes, you can price the gap insurance and compare it to the coverage the merchant sold you. This also means that you will not have to pay interest on the insurance collected from you on the car loan.
Before committing to a new carrier, give your current insurance carrier the chance to beat your new rate, especially if you have a local agent.