Congratulations! You and the salesperson have finally come to terms on a fair price for your new dream car. You even managed to get a reasonable trade-in value for that old heap you've been driving. You passed a credit check and the nice salesperson quoted you a very competitive figure on a dealer-arranged loan or lease. It's taken an eternity, but you can almost feel those keys dropping into the palm of your hand. Time to breathe a sigh of relief, right?

Not quite. There's just one item left on the dealer's agenda: a visit to the finance and insurance office to sign the final papers. Here, many buyers expect to encounter some sort of clerk, and thus they let their guard down. In fact, F&I people are masters at salesmanship and are often more accomplished at sales tactics than the sales folk on the showroom floor. With a few strokes of a pen, an F&I person can turn a sweet deal for the customer into a bonanza for the dealer.

It's logical to think that dealers make their money - lots of it - on the sales of new cars. Look at a dealership and what do you see? Showrooms filled with marble and chrome. Sales people running around in nice suits and expensive shoes. And of course, the cars on the showroom floor, each worth tens of thousands of dollars.

If the department store marks up those suits or shoes that the salespeople wear by 20 or 30 percent, then most people assume the car dealer - also a retailer - probably pockets $4,000 or $6,000 on a $20,000 new car. Not even close. Take a look at IntelliChoice's target prices and you'll see that the difference between a dealer's cost and a target price is considerably less - perhaps a few hundred dollars on a $20,000 vehicle (and sometimes nothing at all). Over the past decade, dealer gross margins have hovered in the 6 to 7 percent range. From that amount the dealer has to pay for rent, inventory financing, income taxes, sales commissions, advertising and other overhead costs. In reality, dealers make most of their money on used cars and service operations. But don't grab your hanky and weep for the dealers just yet. They have other ways to pay their bills. What they don't bag on the sale of the car itself they can more than make up for in the F&I office.

Take loans, for example. Dealers don't lend buyers their own money; they arrange loans through banks and then tack on a couple of percentage points of interest for themselves. A dealer who marks up an 8% loan by two more percentage points stands to make $684 on a four-year, $15,000 loan.

In addition to arranging for a loan or lease with a profit margin for themselves, F&I people often push a laundry list of unnecessary or exorbitantly priced add-ons to boost their bottom line.

• Extended warranties. Often sold with a 200 to 300 percent markup. New cars have lengthy manufacturer warranties these days, so an extended warranty is overlapping or even unnecessary protection for buyers who trade in cars every three or four years. In any case, a car buyer doesn't have to purchase one at the time of the car sale, or even from the dealer. Mechanical breakdown insurance, sold only through insurance companies, can be a cheaper alternative and can usually be purchased any time before the car's factory warranty runs out.
• Security systems. Many new cars already come equipped with factory-installed anti-theft systems, ranging from alarms to ignition-defeating devices. Aftermarket retailers can also install security systems. Window-etching plans offered by dealers often carry a huge markup - because they cost very little to perform and hardly ever get used to recover stolen vehicles. Some dealers make a point to install LoJack on all of their new vehicles, tagging on $695 to the price, half of which the dealer keeps as profit - unless you negotiate them down.
• Rust-proofing. Completely unnecessary on today's cars with galvanized and plastic panels and comprehensive factory corrosion warranties. Rust-proofing jobs can even void the factory new-car warranty.
• Paint sealant and fabric protection. Car buyers can save $200 to $300 by waxing their cars from time to time or by buying a $5 can of Scotchgard or the equivalent and applying it themselves.
• Gap Insurance. Coverage for the difference between the actual car value and the amount remaining on your loan or lease can be a good idea, depending on your financial situation. But as you might expect, the dealer usually charges much more for these policies than if they are purchased independently.
• Credit life insurance. Better to buy insurance through an insurance agent than a car dealer. Standard term life insurance or disability insurance policies are likely to be far cheaper ways to protect a buyer after a disabling illness or a buyer's family after the buyer's death.

As a general rule, there is nothing that an F&I person will sell you that can’t be found elsewhere for much less after you purchase your car. They also know that after most buyers have waited several hours to get to this point in the process they are more apt to say “yes” to something just to get it over with. Our advice is to be skeptical, stand your ground, or just issue a flat “no” to the F&I manager when they start going down their list of suggested add-ons.