If the words of carnival king P.T. Barnum are to be believed, indeed "There is a sucker born every minute. And while you thought that car dealership is all about honesty and integrity, salesmen out there are out to get you wrong.
Some of them you would find are really genuine salesman who will go by the product and its features. Most others though are the aggressive breed of salesmen who will possibly call a spade, an axe. Before buying a car, you better be sure who you are dealing with.
To be an educated, assertive consumer you need to do some research and serious number crunching. Spend a couple of hours with all the information resources available and you should be ready to buy a new car. Some misrepresentations that you would have to keep an eye on are as follows.
The credit cozen
You would often find a lot of dealers proclaiming that your credit history is indeed bad. And because of your credit history being bad, you might just have to pay a bit more for your loans - seems the retort of most salesmen. If you are damn sure your ratings are not jacked up, you are safe.
But if you have any doubt at all, you should check with the major credit bureaus before you even think of heading to the showroom. Remember, knowing your credit rating before you purchase a car is essential.
The transaction trick
Buying a car includes multiple transactions and they are - new car price, the trade-in value, and the financing. All these transactions are possible money-making opportunities for dealers, and as it happens in most cases, this is where a lot of dealers make merry.
One mistake people make is roll up all of them into one and negotiate on the price. This surely is a losing deal for you. Rather, treat them individually and negotiate on each transaction in entirety. This way you would surely get the best price for your car.
Enough research on the entire process is important if you wish to get the best deal possible. One thing though - Buyers need not think of the finance department of their dealers as their loan agents. It is not the dealers responsibility to get you the best rates.
The payment ploy
Assume that the car's value of $15,000. If a dealer tells you could get the car in less than $400 a month, rather than getting all excited, you should watch the science behind this statement. Possibly, the dealer has counted in a huge down payment. Or, you may just have to pay the loan in more installments. Whatever be the case, you should know these terms and conditions in advance.
Rather than thinking on the lines of how much you need to pay for the car, you should be thinking how much you could pay for the car. There is a difference between both, a difference not many people understand.
The sticker shenanigan
The vehicle price listed on the window is known as the MSRP, or manufacturer's suggested retail price. Who cares? Do you really have to know all this? Not really! Just know the invoice price and work the MSRP from the bottom.
Visit some websites to get updated about the actual selling prices of cars. This is important because if you know the actual selling price of the car, you could eliminate any possibility of the dealer cheating on you.
Sticker price is the metric in the sales of some popular cars. One of the popular cars, the Honda Minivan is sold at the sticker price.
The holdback hustle
Sometimes you would find manufacturers giving cash incentives to dealers. These are called "holdback". This allows the dealers to expedite the process of pushing up the sales for models that normally don't sell all that well.
Find out if any holdbacks are included in the car deal. While it may not really impact your car deal anyways, but there is no wrong in asking either.
The financing four-flush
Some unscrupulous dealers have the practice of informing customers about the failure of the financing deal, days and sometimes weeks after they signed the purchase agreement. Senior executives of financing institutions say this is an absolute misrepresentation of the fact because all it takes for the dealers to check the financing is 15 minutes.
The objective of the dealers is simple - By telling you did not qualify for Car A costing $25,000, they wish to trap you into Car B that costs $50,000. Okay! Stay away from these guys then. Think about it - If you could not qualify for a lower priced car, how in the world would you get financing for a higher priced one?
The insurance illusion
Insurance is definitely a subject matter of solicitation but some dealers just do not seem to follow this. They would force you on buying an insurance for the vehicle. Gap Insurance is one of the most favored type of insurance policies. Assume that your car is worth $25,000 and you owe $30,000 on the car. If your car is considered to be a loss, the insurance policy will pay $5000. Credit Life Insurance policies on the other hand will pay the remaining amount if you die before repaying the car.
As of now these policies may not make sense. The reason why this is being told to you is because you may watch out for these prices when you buy the car. You would possibly be in a position where you could decline or accept a proposal.
The rate razzle-dazzle
How about a 0% interest on financing a new car? Sounds tempting! Be sure you check the nuts and bolts of such a deal. Chances are that you would find the monthly installments for such a deal run very high. These in essence are short term, ones that last for 24-36 months. Loans of such short tenure are known to have high installments anyways.
Be sure to get your own financing before proceeding to get a dealer rebate. This works out because of two inherent reasons - 1) You have arranged for your finance so you do not have to rely on the dealer charging you some interest rate, and 2) If the dealer anyways is giving you a rebate, it should be taken from your finance that you have arranged.
The rollover ruse
A lot of people make a decent move of trading up to a more expensive car. Sounds decent enough thus far! But the mistake they do is this - They trade up even when they are paying for the current car. This is a perfectly legal practice, but is risky. Here's why!
When a person trades up a car, he would roll over the payments of the existing car to the new car. Of course, the payments for the new car would still hold true. In essence, the person ends up paying more than the car's worth. God forbid if in the future, the person wishes to sell off the car or if it meets in an accident, the cover-up charges would be huge for the person.
The balloon bamboozle
Some dealers offer car loans with an exorbitantly high loan tenures. There have been some cases where people have been offered loans of about six to seven years. This could work in the scenario where you think you might have to pay lower. True, but there is a downside to it!
Remember, with time passing by the value of your car would go down. If you still end up paying for 6-7 years, chances are that you would have paid more than the actual worth of the car. Isn't that a loss for you?
On the other hand, you would find some dealers offering you cars at outrageously inexpensive rates for the moment. As you move down the road, you would find that the rates have gone up considerably higher. This scenario is still affordable especially when you have just started working and do not have a lot of money to pay for your car. Assuming your salary would increase with time, you surely would have some more money in a year or two to payoff your loans.
Experts from the financing industry say that understanding what you have to pay is critical. You may have bought a car worth $20,000 and yet be paying only $300 per month. Remember though, you would still need to payoff the principal at some stage of your life.
It is important for you to be extremely cautious about these things. More than being cautious, you should be knowledgeable about dealer financing just so to ensure your dealer does not dupe you off.
