Even savvy consumers can find it tough to negotiate car sales

Most of us don't buy cars all that often. So when we do, we can come away with that nagging feeling of not knowing whether we got a fair deal or grossly overpaid.

"We don't negotiate much at all as Americans, so suddenly we find ourselves negotiating for not only a very expensive product, but a very complicated product," says Jack Gillis, author of "The Car Book." "We are matching wits with a seasoned professional who negotiates all the time and has actually been trained in negotiating. Right off the bat, you go into a showroom, and you are like a lamb being led to slaughter."

Now the Federal Trade Commission is looking into whether we lambs need more protection. The agency has been holding a series of meetings with consumer advocates and industry players to understand the customer's experience of buying and financing a car.

The agency received enhanced powers under the last year's Wall Street reform law to regulate auto dealers. The FTC says it is gathering information on whether more regulation, enforcement and consumer education are needed, or if current protections are sufficient.

So far, the FTC has looked into auto financing and how dealers treat the military, whose young members often are financially inexperienced and targeted by unscrupulous dealers. Next month, the FTC explores leasing.

The agency has heard a range of concerns about the car-buying experience. Some consumer advocates have told the FTC that there is a lack of transparency in financing arranged through dealers.

Others complained of so-called yo-yo financing, in which consumers leave the lot with a car only to be called back days or weeks later and told that their financing has fallen through. They then are given a new loan with more expensive terms or forced to give up the car. (Maryland regulators say state rules should prevent yo-yo financing, but cases still occur here.)

But Holly Petraeus, the service members' advocate at the new Consumer Financial Protection Bureau and the wife of the former U.S. commander in Afghanistan, recounted perhaps the most egregious sales tactic.

Petraeus says a dealership offered a young soldier from Fort Bragg in North Carolina a ride to the showroom so he could buy a car. It was only after he was on the road a while that the private discovered that the dealership was four hours away in Virginia. And once he arrived there, his ride disappeared, and the soldier had to buy a car to get back to base.

"I certainly won't say it's a general practice," Petraeus told the FTC recently. "But it still does exist out there, some really egregious examples of pretty much hijacking the customer and not letting them go until they've bought something from you to drive away in."

The National Automobile Dealers Association said in a statement earlier this year that the concerns raised by consumer advocates are not representative of the industry, so new FTC rules aren't necessary. Any problems can be addressed under current federal or state laws, it said.

Meanwhile, the association and other industry groups have formed a group called AWARE, which provides an online financing calculator and other information about buying a car. The group, for example, advises buyers to be aware of existing FTC regulations, including those governing used- car sales.

The FTC isn't tipping its hand on whether new regulations are needed. Although surely, if kidnapping consumers isn't against the law, it should be.

But what's clear from the FTC meetings is that consumers' experiences can differ widely. Those who have good credit and do their homework in advance are most likely to get a fair deal.

"For a dealer, the best customer in the world is someone who has to buy today and has done no work ahead of time," says Chris Kukla, a senior counsel with the Center for Responsible Lending. "You have just given up every negotiating leverage you had."

Consumers, though, aren't at a total disadvantage — thanks to the lackluster economy.

"The good news in this particular market: Car dealers need you more than you need them," Gillis says.

Here are some experts' tips for consumers before buying a car:

Fall in love later Too often, consumers have their heart set on a car before they've done any homework, says Jeremy Anwyl, chief executive of Edmunds.com, an online provider of vehicle information.

So, instead of focusing on what they can afford or the car that best suits their needs, Anwyl says, they focus on the wrong thing: the look of the vehicle.

To help consumers take some of the emotion out of buying a car, Edmunds launched a "vehicle recommender" tool that narrows a consumers' choice of cars based on their lifestyle. It can recommend cars that you otherwise might not have considered.

Edmunds also offers a "true cost to own" feature that estimates how much you will spend over five years for fuel, insurance, maintenance and repairs for different models. So even if the price tags of two vehicles are similar, such long-term expenses can make one car much cheaper than another.

Hunt for financing early Before you go to a dealership, check with your credit union or bank to find out what auto loan terms you would qualify for based on your credit history.

This way, you will know whether the financing offered by the dealer is competitive. And often, auto experts say, dealers will offer a better rate than a bank to get your financing business.

Some borrowers with tarnished credit might have no other option but to get financing through a dealership. But even then, experts say, shop around at more than one dealership. Don't accept the first offer.

Take your time Don't buy a car on the first day you visit a showroom. Test-drive cars at more than one dealer, and don't be pressured into buying on the spot.

"The most effective negotiating strategy is to walk out of the dealership," Kukla says.

Even after you negotiate a price and financing, don't rush it. Under federal truth-in-lending laws, you have the right to take finance papers home with you to consider whether to accept the deal or not, says John Van Alst, a staff attorney with the National Consumer Law Center. Although some dealers balk at letting customers mull over the figures, he says, it's your right and you should exercise it.

Buying used Spend a few dollars to get a report on a used vehicle's history based on the National Motor Vehicle Title Information System database, Van Alst says. The database is designed to provide information on a car's title and salvage history, while preventing the resale of stolen cars. To buy a report, go to vehiclehistory.gov. Gillis says the reports are similar to vehicle history reports from CARFAX, but are much cheaper.

If the report gives the car a clean bill of health, you should still take the vehicle to an independent mechanic and a body shop that can uncover problems before you buy, Van Alst says.

Hire a negotiator If you hate to haggle, Gillis recommends hiring a service to do the job for you. The 20-year-old nonprofit CarBargains.org charges $200 to get quotes from at least five dealers in your area bidding for your business on a new car. The process takes about two weeks, and quotes are good for 30 days.

Gillis says the dealers know they are competing against one another and quotes often come in lower than the so-called dealer cost. Though Gillis is an authority on cars, he used the service several years ago to buy a minivan for his family and was happy with the price he got.

"I'm a terrible negotiator," he says.


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