by
Brian S. Tozer

While most of us are concerned about the price negotiations at our local car dealership, it would be a serious error to overlook some of the events that can happen in the Business or Finance & Insurance (F & I) Office.

These car buying tips may seem unusual and possibly new to you, but they will protect you from getting the bad end of a deal.

Seven of the Most Overlooked Car Buying Tips

1. Run your own credit check. Do not let the car dealer do it. Take the time to review your credit report and to contact the appropriate people if you find errors. If you let the dealership run your report, you will not have this luxury. Also, by knowing your credit score, you can research and even obtain financing on your own. This way, if the dealer offers you a financing arrangement, you will know how it compares to other options.

Credit inquiries never help your credit score. By running your own report, you can restrict the number of inquiries into your credit history. You can say to the dealership, "based on this score in this report, what rates can you get me?" The dealership could draft a contract contingent upon the accuracy of the report you provided. If the dealership needs to run its own report (to verify the accuracy of the one your provided) that would be fair and reasonable.

As a caveat to this advice, it is illegal for car dealers to run your credit report without your permission, but many of them still will. If the dealership can get your social security number or in some cases, your driver's license number, it can run a credit check. Beware of the following tactics that dealers use to get this information from you:

• Do not provide your Social Security Number to the dealership unless you are filling out a credit application. As soon as the dealership has your SSN, there is a strong chance that someone is running your credit report, even if you have not granted the dealership permission to run your credit. Knowing your credit score helps the dealer to come up with a strategy for negotiating with you. It is generally worth the risk to run your credit report as soon as possible since most customers will never check to find out that an unauthorized credit report was run.
  
• Do not provide your driver's license number to the dealership. In most cases the dealership will want to see and make a copy of your driver's license before you go on a test drive. Provide the dealership a photocopy of your license so that your driver's license number and social security number (if it appears on your license) are blackened out.
• Do not panic when you hear the words "Patriot Act." Many car dealerships are misusing this Federal legislation as an excuse to get your Social Security Number. Section 326(a)(2)(A) of the Patriot Act, requires “financial institutions to implement, and customers to comply with, reasonable procedures for verifying the identity of any person seeking to open an account to the extent reasonable and practical.” This rule is supposed to help prevent money laundering and other methods of funding terrorist activities. Basically, the purpose of the Patriot Act is “to deter and punish terrorist acts in the United States and around the world, to enhance law enforcement investigatory tools, and for other purposes." If you are not applying for a loan through the car dealership, then the Patriot Act does not apply to you. Once you start filling out the loan application, then you must provide your Social Security Number. Until then, the dealership should not have it.

2. Avoid all Mandatory Binding Arbitration agreements (MBAA's). Chances are that you probably will never have to take the car dealership or the manufacturer to court, but if you do, the mandatory binding arbitration agreement is going to kill almost any chance you have of taking any meaningful legal actions. Usually hidden within the small print of the many pages of contracts that you must sign, the mandatory binding arbitration agreement basically says that you are waiving your right to take the dealership (and sometimes the manufacturer) to court over any grievances that you have. Instead, you are agreeing to allow an arbitrator to hear the case. This would be a disaster for you for the following reasons:

• The arbitrator's decision is final. The consumer has no recourse for making an appeal;
• In a court of law, rules are governed by existing law. With arbitration, the rules of governance are not as clearly defined;
• The arbitration company is chosen by the dealer, so the arbitrator might be biased. In fact, bias may be likely because the arbitrator could lose the dealer's business if it favors against the dealer;
• The fees you must pay for taking the dealership to the arbitrator are usually significantly higher than they would be for taking the dealership to court;
• In some cases, consumers must travel to distant cities for their case to be heard by an arbitrator.
  

In many cases, the contracts will require you to submit to the mandatory arbitration agreement, while they allow the dealer may take you to court. It's one-sided and to your disadvantage.

If any paperwork mentions a mandatory binding arbitration agreement, do not sign it. Tell the dealership that you will only sign contracts without an MBAA. If the dealership is adamant about subjecting you to this unfair arrangement, carefully consider if you really want to do business with it.

3. Avoid the spot delivery. In other words, do not take your car home until the financing has been approved in writing. Usually in the paperwork, one can find wording that says, "Subject to loan approval," or "Subject to financing." This is extremely important for those with poor credit. In what is often called the "spot delivery scam," the unsuspecting buyer receives a call from the dealership saying that the credit was not approved at the negotiated rate. This could be days after the sale was completed. Sometimes the person's trade-in is already sold by now. The finance officer will usually then say that the loan was approved at a higher rate. Usually, most buyers accept the higher rate since their options are so limited. One can avoid this altogether by waiting for the original negotiated rate to be approved before taking delivery of the car.

4. Read everything carefully before you sign any paperwork. Literally, read every word. Read all the fine print. This may take hours, so ask to take the paperwork (or a copy of the paperwork) home with you and arrange to come back to complete the sale. You need to look out for wording such as "mandatory binding arbitration" and "subject to approval." Highlight any wording that may be objectionable. Aside from being careful, this will also give you some "cooling off" time if you are about to make an emotional purchase.

5. Do not leave any blanks in any paperwork. Everything you sign while buying a car is a legal document. Your signature holds you accountable for everything that is on the page that you signed. Dealerships have been caught adding things to documents after the customer has signed.

Fill in every blank line with "N/A" or "Not applicable" before you sign. Get the finance officer to initial each of these lines. Sign your name only after all the blanks are filled in.

6. Get a photocopy of all paperwork pertaining to your car purchase. Request a photocopy of all the paperwork pertaining to your car purchase. Be thorough. Make sure you get a copy of the backside of any two-sided forms.

7. Find out how much the exact document preparation or paperwork fees are in your particular sales' transaction. These fees usually refer to the paperwork for registering the vehicle's title and license plates. According to an article dated October 11, 2006 in the CUNA's (Credit Union National Association) website, fees vary by state and dealership and can be as high as $900. Analysis by this author reveals that the online car loan calculators used by some of the major lenders assume a $300 paperwork fee.

The CUNA's website suggests negotiating for a lower fee or for additional features on the car in exchange for paying the fees. If the dealership will not budge to reduce exorbitant fees, then start shopping elsewhere.

Brian S. Tozer is the author of The Car Buying Bible. A former car salesman, college math instructor and insurance analyst, Mr. Tozer offers car buying tips with a strong emphasis in the financial aspects of buying a car. His website offers free online car loan calculators that he personally developed.