When shopping at the dealership for your next vehicle, be vigilant. Sales tactics aimed at enhancing profits may pose challenges to the buyer who is unaware – as the showroom can be a stage where strategies such as deceptive pricing and credit maneuvers can lead to financial setbacks.
Avoid These 7 Tricks When Shopping at the Dealership
1) 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 to know is the invoice price – the amount the dealer paid for the vehicle. How to avoid: Shop online with NIHFCU’s online buying service. If you do shop at the dealer, find out what cars are actually 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.
2) The credit deception. A dealer may say, “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: To mitigate this, get pre-approved with NIHFCU financing. However, 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.
3) 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 to avoid being lured by 0% or other low-ball financing at the dealer. Consult with NIHFCU to determine what deal is best.
4) 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.
5) 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.”
6) 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.
7) 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.
Before you’re ready to head out to the dealership, research new and used vehicles with NIHFCU’s Car Buying Service powered by TrueCar. You’ll save time and will get great deals! Check out our Winter Online Car Buying Special.* Auto loans start as low as 5.24% APR when you finance your online car buying purchase with us. *For details, click here. But hurry, this offer expires January 14.
Resource: Bankrate.com
