Car negotiating to get the lowest sale price on a new car is just the first step in getting a great deal on your new ride.

You've spent time on the Internet and on sites like AutoTrader.com to find the exact car you want. You've researched the best transaction price in your area on websites like Kelley Blue Book (kbb.com). You went to your local dealership and test drove the vehicle. You danced with your salesperson and his managers to negotiate the best price. And now it's just a matter of signing the paperwork and getting the keys for your new car, right?

Here's the bad news: It's only half time. You may have gone into the locker room feeling good, but there's still a lot of ball game left. If you don't have a sharp second-half strategy, your first-half advantage can turn into a deficit quicker than you can say, "Sure, Scotchgard my seats."

Because next you will find yourself in the Finance and Insurance (F&I) office, seated across the desk from the shrewdest salesperson in the building: the F&I manager. Worn down and weary from the excitement of getting a new car and hours-long price negotiations in the showroom, you now must pull yourself together to defend the good deal you worked so hard for.

Although the F&I manager (business manager is another common title) might look like a buttoned-down banker, he's really just another salesperson with the bulk of his paycheck coming from commissions and bonuses. Those commissions and bonuses are based on the extra profit he brings into the dealership by selling you additional products and services.

The F&I office has become a key money maker for dealers who have seen their average profits on new cars drop as better-educated consumers research transaction prices on the Internet. According to a 2010 survey of dealerships by F&I and Showroom magazine, nearly 28 percent of a dealership's average gross profit flowed from add-ons sold in its F&I office.

It's big business that can add hundreds or thousands of dollars to the total amount financed for a new car.

Here are the more common F&I office money makers, and what you need to know about them:

Padding the Interest Rate

Car dealerships work with assorted lenders to arrange financing for customers. Each lender sets a minimum interest rate it charges the dealership, but that's just an interest-rate floor. Let's say the lender sets 3 percent as the interest rate it charges a dealership for a borrower with a credit score of 700 or higher. The dealership, of course, must charge the borrower a higher rate to cover the costs of putting together the deal. Yet there is no limit to how much the rate to the borrower can be inflated. Sticking the borrower with a rate of 4 or 5 percent translates into a lot of dealer profit, and there is nothing illegal about it.

To avoid getting dinged with a higher interest rate than you deserve, do your homework before heading to the dealership. Bankrate.com is an excellent resource for determining the average auto-loan rates in your area. Smart borrowers, however, will go to their bank or credit union and at least find out exactly what rate they qualify for. Really savvy borrowers will get pre-approved financing from their bank, eliminating the need to discuss financing in the F&I office at all. Even if a customer wants to take advantage of some special interest rate offered by the manufacturer that's only available through the dealership, he should have a backup plan. Only borrowers with squeaky-clean credit usually qualify for those juicy 0 percent to 2 percent manufacturer interest rates.

Likewise, know your credit score. Experts agree that often people have better credit than they think. If you don't know your credit score, you have to trust someone else for that information. You can check out your credit score at www.freecreditscore.com and other websites.

Package (Menu) Pricing

Dealers realize that customers grow bored and are more likely to say "no" as F&I mangers drone on about the many add-ons and services available. To streamline the process, many F&I managers use a package (or menu) approach. This is similar to trim levels or factory-installed option packages on new cars, in which the more a package costs, the more add-ons and services are included. This allows the F&I manager to frame the pitch as an either/or choice, sometimes without telling the customer he doesn't have to choose anything.

Even if a package only adds $20 a month to the payment, that's $1,200 over the life of a 60-month loan.

Extended Warranties

Every new vehicle comes with a limited factory warranty to repair or replace parts that break during a specific period from the date of purchase. Most cars are covered for at least three years or 36,000 miles, whichever comes first. The parts that actually propel the car, such as the engine, transmission and so forth, are covered for a longer period -- sometimes as much as an extra year or two.

Roughly 25 percent of the profits generated in the F&I office are from the sale of extended warranties that pick up when the factory warranty expires.

Before considering an extended warranty, understand the time/mileage limits of the factory warranty. If you plan on trading this car before the warranty end date, and you won't exceed the mileage limit, an extended warranty makes no sense. However, if you are going to drive a car until the wheels fall off, an extended warranty might be useful.

Extended warranties come in two flavors: those backed by the manufacturer that built the car, and those from third-party vendors. Extended warranties are far too complicated to make a smart decision sitting in the F&I office. You must consider the reliability of the issuing vendor, know exactly which parts are covered, understand how the deductible works and be sure whether the vendor pays the service shop directly or reimburses you.

Even if you decide you want an extended warranty, you don't have to buy it when you buy the car, so don't. Take your time and do the necessary research.

Gap, Credit Life and Accident/Health Insurance

Rule of thumb: Don't buy any insurance in the F&I office -- not ever. Your insurance agent will have much cheaper alternatives. Gap insurance, for example, makes a lot of sense for most borrowers, but most mainstream auto insurance companies offer it at a fraction of the cost you will pay at the dealership.

Paint Sealant, Upholstery Protection, Anti-Theft Alarms and So Forth

Again, just about everything offered in the F&I office can be purchased in the aftermarket at a much lower price. Rather than spend $200 or $300 on fabric protection for your seats, why not buy a couple of cans of Scotchgard and do it yourself?

VIN etching is another add-on you might hear about. It essentially burns your vehicle's unique ID number onto the car's windows. It can be a theft deterrent for sure. The service should cost about $25, or you can do it yourself by purchasing a kit.

Remember, car negotiating doesn't end once you've agreed to a purchase price. Letting down your guard in the F&I office could cost you hundreds, if not thousands, of dollars.

author photo

Russ Heaps began covering the automotive industry in 1986, first overseeing the automotive pages of the Boca Raton News and then the Palm Beach Post in Florida. In 2001 he became managing editor of AMI Auto Week and NOPI Street Performance Compact magazines. Since leaving AMI he has freelanced his auto reviews and industry analysis to the Washington Times, Hispanic magazine, Journal-Register Newspapers, Bankrate.com, MyCarData.com, Interest.com, and others. He resides in Greenville, SC.

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