Common Tricks To Avoid At The Dealers
Here is a list of some common tactics used by dealers to maximize their profits…at your expense.
The credit deception
A dealer may say something like, “With your credit score, you won’t qualify for competitive financing rates.” This may be true. However, some dealers will imply your credit is worse than it is, so you think you’ll have to pay a higher interest rate.
How to avoid: Get pre-approved for NIHFCU financing to help mitigate this. As the dealer may still try to talk you into their financing, come armed with your live check and your credit score so they can’t pull a fast one on you.
The single-transaction strategy
Many people view buying a car as one transaction. It’s not, and dealers know this. It’s really three transactions: the new-car price, the trade-in value, and the financing. The dealer sees all three as ways to make money.
How to avoid: Treat each transaction the same way the dealer does, as a separate transaction. That means you should negotiate each one. If you get a new car for $200 over invoice but receive only $1,000 for a trade-in car that’s worth $2,500, you haven’t done as well as you could. And of course, you should be confident in taking your NIHFCU financing with member-friendly terms.
The payment ploy
A dealer might say, “We can get you into this car for only $389 a month.” Probably true, but how? In some cases, the dealer may have factored in a large down payment or stretched the term of the auto loan to cover more months.
How to avoid: Focus on the price of the car rather than the monthly payment. Never answer the question, “How much can you pay each month?” Stick to saying, “I can afford to pay X dollars for the car.”
The sticker shenanigan
The price listed on the window is what’s known as the manufacturer’s suggested retail price, or MSRP. What you really want know is the invoice price – the amount the dealer paid for the vehicle. Working from the invoice up is much easier than trying to cut from the MSRP.
How to avoid: Shop online with NIHFCU’s online buying service. However, if you wish to shop at the dealer, find out what cars actually are selling for after taking into account any consumer and dealer incentives. Some really hot cars go for sticker price and even above. Be patient and wait: The prices will fall as demand slackens.
The holdback hustle
Manufacturers often give cash incentives — sometimes called holdbacks — to their dealers to encourage them to move slow-selling models. This typically isn’t mentioned in advertisements.
How to avoid: Search for holdbacks or other factory-to-dealer incentives available for the car you’re considering. While it’s not a given that the dealer will apply any of these funds to the car you like, it doesn’t hurt to ask.
The financing four-flush
Some dealers have been known to call customers after they signed a purchase agreement to tell them that the financing fell through. It’s a crock. The dealer can know if you qualify for financing almost instantly. The goal of the later call? To sign you up for a loan with a higher interest rate because, according to them, they just found out you didn’t qualify for the lower rate.
How to avoid: By getting pre-approved for and taking NIHFCU financing you’ve done a good job in mitigating this. But if they convince you to take dealer financing, never leave the showroom without signed contracts that spell out every detail and with every blank filled in. If you’ve got that, they can’t retreat on the financing.
The insurance illusion
Some dealers may try to get you to purchase protection policies when buying your car. One type, GAP, covers the difference between what the car is worth and the amount you still owe on it. Another one is credit life insurance which will pay the balance of your loan if you die before you’ve been able to repay it.
These could be, and often are, very important coverages for certain buyers. You’ll want to understand what you’re purchasing and have the opportunity to decline it and shop around for better prices. The mark-up on these policies at the dealership can be enormous, in part because the insurance companies that sell the policies to the dealerships offer them huge incentives — everything from cash to first-class trips — to push the policies.
How to avoid: Check out NIHFCU protection options with rates commonly way less expense than those at the dealership. You can also check with your insurer to see if GAP is already included in your regular comprehensive automobile coverage.
The rate razzle-dazzle
It certainly sounds tempting — 0% interest to finance a car. However, this deal may not be the best one for your wallet. For starters, most financing incentives are for shorter terms, and you need a stellar credit record. With very short-term loans, such as 24 or 36 months, payments on even a moderately priced car can be sky-high.
How to avoid: Getting pre-approved by NIHFCU is a great move and don’t be lured by 0% or other low-ball financing at the dealer. Consult with NIHFCU to determine what deal is best. You can also use our rate calculator to compute various scenarios and figure out what deal suits you best.
The rollover ruse
Often, it’s tempting to trade up to a more expensive car even before you’ve finished paying off the car you’re currently driving. One way that some car buyers do this is by rolling over the remaining payments on their current car into a new car loan or lease. While this isn’t illegal, it is risky. Why? You’ll end up owing more on the second car than it’s worth. This is known as being “upside down” on the vehicle. If it’s totaled in an accident or if you decide down the road to trade it in, you’ll end up writing out a big check to cover the remaining amount of the loan.
How to avoid: A good rule of thumb to keep in mind is that you don’t want to roll over an old car loan into a new one.
The long-term trick
There’s nothing illegal or even deceptive about dealers offering loan periods extending out six or seven years. After all, many cars last longer than they used to, and longer loan terms mean your monthly payments are lower. Still, it may not be optimal for everyone. You’re likely to continually owe more on your car than it’s worth because your car is depreciating faster than you’re paying it off.
How to avoid: If you’re considering a long loan period, you probably should scale back to a less expensive car that’s better suited to your budget.
The balloon bamboozle
Similarly, some dealers will encourage you to purchase a car for unrealistically low monthly payments now but with a much larger balloon payment at the end of the loan period. In a few cases, this can be a legitimate way to finance a car. For instance, you may have just graduated and can realistically assume that your income will rise by the time the balloon payment comes due.
How to avoid: Be wary of these offers and know that your financial situation may change by the time the balloon payment comes due, and you may struggle to pay it. You are likely better off sticking with the upfront and honest financing from the NIHFCU!
Bait and switch
The bait and switch happens when you go in looking for one car and the dealer manages to get you behind the wheel of a different one. Dealers may use deceptive strategies to get you on the lot, only to tell you the car you want isn’t available and then try to sell you on something else, often at a higher price.
How to avoid: Stick to what you want. If you did your research and know what you’re looking for, then there’s no need to second-guess yourself. Wait it out or try another dealer that does have the car you want.
Contract cons
Contract cons are clauses tucked into the fine print that you might miss and likely wouldn’t even be looking for. They might come in the form of changes to the loan term, add-ons that you never agreed to or other services that can lead to significant costs.
How to avoid: Read over the contract carefully. Make sure there are no blanks. Ask about all charges and make sure the terms are clear to both you and the dealer. Make sure you keep a copy of the contract. And, of course, stick with your great financing package from the NIHFCU!
source: www.bankrate.com/loans/auto-loans/dealer-tricks-to-avoid/