Walk into any dealership today, and you’ll likely leave having negotiated what feels like a fair price on the car itself. Then you get walked into the finance and insurance office, and a second, quieter negotiation begins. When you buy or lease a car, most finance managers or sales consultants will try to sell you several add-ons, and knowing which ones are worth it can save you thousands of dollars.
The primary reason dealers add unordered options to cars on their lots is to boost their profit on the sale. Dealer-installed options are typically heavily marked up, sometimes by 100% or more, and are often more expensive than you would pay elsewhere for the same item or service. The eleven items below are the ones experts consistently flag as poor value, pushed hard precisely because the margins on them are so wide.
1. Extended Warranty (Service Contract)
Extended warranties provide coverage for the failure of different parts of your car after your manufacturer’s warranty runs out and might also include maintenance and repairs performed at no charge. Unfortunately, these warranties are often overpriced and include many exclusions that limit coverage as well as where you can get your vehicle repaired.
The truth is, much of the cost goes to the salesperson’s commission, most people never wind up using them, and they cost more than the price of the average repair. There’s no reason to purchase an extended warranty at the time of your car purchase. Shopping around for an extended warranty before your manufacturer warranty expires will likely cost less and offer the protection you need.
2. GAP Insurance Sold by the Dealer
GAP coverage is designed to pay the difference between what you owe and what your vehicle is worth in the event of a total loss. It can be a genuinely useful product in the right circumstances, particularly if you financed most of the purchase price. The problem isn’t the product itself – it’s where you buy it.
Selling gap insurance is a huge profit center for car dealerships. However, customers don’t have to buy it from them, even if your lease requires you to have it. Gap insurance from a dealership is likely to be overpriced. If you need gap insurance, talk to your independent auto insurer to see if you can get adequate coverage at a cheaper cost.
3. Paint and Fabric Protection Packages
These are “protective” coatings sold as a way to maintain paint luster and prevent underbody rust, while interior sprays are meant to improve stain resistance. They can cost around $600 for paint protection and $800 for rustproofing, though pricing may vary widely among dealers.
The frame, exterior paint, and interior fabrics in today’s new cars are designed to last a decade or longer, so extra protection isn’t necessary. Periodic cleaning is all the car needs to look good for years. The product sold through the finance and insurance office is often an inferior formulation applied by someone with five minutes of training. A reputable independent detailer will do a far better job for less money if you genuinely want paint protection.
4. VIN Etching
VIN etching involves engraving the car’s vehicle identification number into the windows to deter vehicle theft and assist in vehicle recovery if stolen. Dealers frame it as a genuine security measure. It costs between $200 and $300, and some dealers will sell the car pre-etched and attempt to later upsell this unnecessary service.
It’s unnecessary. All new cars have VINs stamped in multiple places, including under the hood and inside the doorjambs. Dealers charge $200 to $400 for VIN etching, while a DIY kit at any auto parts store costs $20 and takes about 20 minutes. The math makes it one of the clearest mismatches between cost and value in the dealership lineup.
5. Nitrogen-Filled Tires
One of the more common add-ons is filling your tires with nitrogen instead of regular air. Nitrogen is said to maintain tire pressure better than standard air, which could lead to improved fuel efficiency and tire life. Dealers present this as a straightforward upgrade worth paying for at the point of sale.
The benefit is marginal for the average driver, and the service is often overpriced at the dealership. Regular air, which is already 78% nitrogen, usually works just fine for most vehicles. While tire pressure is critical for race cars, having the tire pressure vary by a couple of pounds won’t have a significant effect on mileage, drivability, tire wear, or safety.
6. Rustproofing and Undercoating
Cars today are manufactured with corrosion protection, which makes this added treatment unnecessary, though it is profitable for car dealerships. Consumer Reports recommends that car buyers skip the undercoating and several other pricey add-ons. Dealers in cold-weather states lean on the fear of road salt to make this upsell feel urgent and necessary.
Dealerships love to bundle undercoating into expensive “environmental protection” packages. These offerings are often overpriced and not always applied carefully. A dealership might charge close to a thousand dollars for something a dedicated rustproofing shop can do for a fraction of the cost. Modern vehicles come with far better corrosion protection than older ones. Automakers use galvanized steel, factory primers, wheel-well liners, and various sealers on body seams. Many new trucks and SUVs even get factory-applied underbody coatings that do essentially the same job as aftermarket ones.
7. Key Fob Protection Plans
Modern car keys are like mini-computers that your car can’t work without. Car dealerships even include a price tag on the keys of some newer vehicles to show their replacement costs. While it might seem like a good idea to pay a couple of hundred dollars to protect your $500 key, adding that cost to your car loan means you’ll be paying interest on that cost.
This add-on can go beyond $500 when you extend the length of coverage. For example, some Lexus dealerships list key replacement plans for $595 for five years, advertising payments as low as $11 a month to make it seem more affordable. If your key fails from a mechanical or electrical issue, it will likely be covered under your car’s bumper-to-bumper warranty anyway, making the extra plan even harder to justify.
8. Tire and Wheel Protection
Tire and wheel protection offers specific coverage for wheel and tire damage due to driving over curbs, potholes, and other road hazards. Pricing varies, with costs often being several hundred dollars for the coverage. Most cars don’t have the expensive, low-profile tires that are more damage-prone.
Dealers charge $500 to $1,200 for a multi-year plan, while independent providers offer comparable plans for $150 to $350. If you drive a standard sedan or crossover with conventional tires, the odds of needing this coverage are low. The value case really only holds for drivers with premium, low-profile wheels on sports cars or high-end SUVs.
9. Credit Life and Disability Insurance
Your dealer might try to talk you into credit insurance, which comes in the forms of credit life insurance, credit disability insurance, involuntary unemployment insurance, and credit property insurance. They all serve the same purpose: to continue making your car payments if you lose your job, become disabled, or die. There are few reasons to get credit insurance and many reasons not to.
Credit life and disability insurance pays your loan if you die or become disabled. Dealers charge $500 to $2,000, financed into your loan. A term life insurance policy provides far more coverage for less money and isn’t tied to a single debt. It’s also illegal for dealers to tell you they can’t sell you a car or approve a loan unless you buy this optional coverage.
10. Appearance Packages and Pinstriping
Among the most common and costly dealer add-ons are so-called “appearance packages,” which often take the form of pinstriping or some other graphic design. While it appears to come from the manufacturer, dealers can add them on themselves, try to pass them off as standard, and outrageously upcharge for them.
Dealerships can’t force you to pay for unwanted add-ons like pinstriping; you can negotiate or find another dealer if they insist. A recent study found that the average markup on certain dealer add-ons was 170%, meaning the average car dealer will charge you $1,700 for something you could buy for $1,000 elsewhere. Appearance work, in particular, can be done by any competent detailing or graphics shop for a fraction of what the F&I office quotes.
11. Dealer-Installed Security Systems and Tracking Add-Ons
Some dealers even install security systems on every vehicle in the lot. While security systems have advantages and may even result in discounts on your auto insurance, a dealer-installed system may be significantly overpriced. It’s worth shopping around at car electronics retailers to get a firm understanding of the cost of an alarm system.
If you don’t want an alarm or tracking system as a dealer add-on, make sure the dealership removes the system in its entirety or provides a significant discount that compares to your researched price. Most modern vehicles already include factory theft deterrent systems and, increasingly, built-in connected car services that render a standalone dealer-installed tracker redundant. Some of the add-ons you’ll be offered are of questionable value, have massive markups, or can be found from other sources for a fraction of the price.
The finance office is where dealerships make a significant portion of their profits, and knowing that going in is genuinely useful. Anything not on the OEM window sticker is optional. Taking a moment to read every line on the addendum sticker before signing is the simplest way to avoid paying for things you didn’t ask for and don’t need.
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