Car Loans

Watch out for car dealer tricks

1. Credit cozen

You might be told by a dealer that you aren’t eligible for competitive rates. While this might be true in certain cases, it may not always be true. The salesperson might suggest that your credit is less than it really is. So you will have to pay more interest.

Avoid being tripped by dealers: Bring your credit score with you to the dealership before you go. Preapproval for an auto loan is a better option than relying on dealer financing.

2. The single-transaction strategy

Many people see buying a car as one transaction. Dealers know that it isn’t. The financing, trade-in value, and new car price are all part of the same transaction. The dealer can make money from all three of these transactions, which means that you can save at each of them.

Avoid this: Treat every transaction as if it were a dealer’s. To get the best deal, you can trade-in your car at multiple dealers. You can also bring in the common sale price for the car that you are interested in to keep the salesperson honest.

3. The payment ploy

A sales representative or finance manager might offer a fantastic monthly payment that you could reasonably qualify for. There’s usually a catch. Sometimes, dealers may have added a large downpayment or extended the term of the auto loan up to 72 or even 84 months.

Avoid this: Pay attention to the car’s price and not the monthly payment. Do not answer the question “How much do you have to pay each month?” Instead, say, “I can afford to buy the car at X dollars per month.” Also, ensure that the price you negotiate is the total cost of the vehicle before any trade-in or down payment.

4. Sticker shenanigans

The manufacturer’s suggested retail prices, also known as MSRP, are the vehicle prices listed on the windows. However, this is not the most important. It is important to know the invoice price, the amount that the dealer paid. It is easier to work from the invoice than from the MSRP.

What to avoid: Determine the selling price of cars after taking into account any dealer and consumer incentives. Some cars are priced at sticker price or higher. Wait and be patient: Prices will drop as the demand decreases.

5. The holdback hustle

Dealers are often offered cash incentives, sometimes called holdbacks, by manufacturers to encourage them to sell slow-selling models. This is not usually mentioned in advertisements.

Avoid these traps: Look for factory-to dealer incentives and holdbacks for the car that you are interested in. Although it is not guaranteed that the dealer will use these funds for the car you want, it is worth asking.

6. Spot delivery financing

Customers have received calls from dealers advising them that financing was not available after signing a purchase agreement. It is a fraud. Spot delivery is also known as spot financing and it’s designed to convince you to sign a loan agreement at a higher rate of interest.

The dealer will quickly determine if you are eligible for financing. This call is intended to convince you to accept a loan with a higher rate of interest because they have just discovered that you aren’t eligible for the lower rate.

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Avoid this: Never leave the showroom unsigned contracts. These contracts should include every detail and every fillable field. Verify that you have been approved by your dealer for financing. They can’t withdraw financing if you have this.

7. The insurance illusion

Dealers may try to convince you to buy insurance when you purchase your car. Gap insurance covers the difference between the car’s value and what you owe. Gap insurance is usually an additional expense but it’s cheaper if you choose to purchase from your regular car insurer.

Credit life insurance is another favorite. It will pay off the loan balance if you are unable to repay it.

8. The rate of razzle-dazzle

This sounds very appealing — 0 percent interest to finance your new car. This deal might not be the best for your wallet. First, financing incentives tend to be for shorter terms and require you to have excellent credit scores. Even a moderately priced car could have high payments due to short-term loans of 24 or 36 month.

You may also be better off financing yourself and taking advantage of the rebates offered by dealers. Let’s say you are looking at a $20,000 vehicle and want $4,000 for your trade in. You have the option of financing at 0 percent or 3.49 percent, with a $2,000 rebate. The loan term is 36 months. If you get the rebate and the 3.49 Percent financing, you will be able to make a profit of more than $1,200 over the term.

9. Rollover ruse

Sometimes it can be tempting to trade your car for a better car than you own. Some car buyers opt to roll over any remaining payments from their car and get a new loan or lease.

This is a risky decision. This is a risky move. You’ll end up owing more money on the second vehicle than it’s worth. You’ll end up owing more on the second car than it is worth. You will need to write a large check to cover any remaining loan amount if the vehicle is damaged in an accident, or if it is sold.