Car Dealer Tricks: Things to know when buiyng a car from auto dealership

Sometimes you may hear this line: "With your credit score, you won't qualify for competitive financing rates." Of course, if you have not been paying your bills on time and missed a few payments on your mortgage, this may be correct. But be aware that some salespeople may imply your credit is worse than it really is so that you'll end up paying a higher interest rate on your loan.

SOLUTION:

What to do to avoid this trick?

Review your credit history and know your credit score BEFORE you get to the dealership. The first thing you should do is to determine what credit score you have. Even though experts recommend that everyone should review their credit report at least once a year to make sure there are no errors, not many people do this on a regular basis. This is especially important if you are applying for a bad credit car loan.

You can find out your credit score in any credit reporting agency, such as Experian, Equifax or Trans Union. They will be able to provide you with a numerical indicator of how much your credit rating rates and how much credit risk you are.

If the indicator says that you have a high score, this means that you have a good credit score, if you have a lower score, it indicates a bad credit score, which means it will be difficult for you to get approved of for loans.

If you are like most people, buying a car means for you one transaction. However, it not. Depending on your situation, it may be up to three transactions: buying a car, getting financing, and trading in your old vehicle.

The dealer sees each of the as a way to make money.

SOLUTION:

Treat each of these as separate transactions, and negotiate each one separately. If you get a new car for a low price of $300 over invoice, but only receive $2,000 for a trade-in car that's worth $4,500, you are not getting the best deal.

Also, be aware of other options you have with financing and selling your old vehicle. When I was buying my new Volvo C70, I wanted to trade in my old Toyota 4Runner, but the dealer was only offering $3,000 for it. I told my daughter, if you sell it for anything above $3,000, you are getting the difference - and she did! She sold it online for $4,500.

Don't think of finance department at the auto dealership as their loan agent. The dealer is not required to find you the best rate, and might add to the number by serving as the middleman.

When recently searching for a car for my daughter, I found some surprisingly good deals online, some of them being in the too-good-to-be-true category. Well, if something sounds too good to be true, it probably is. After reading the fine print on the dealer's website, I learned that the price factors in a significant down payment and car loan for pre-determined term.

SOLUTION:

Educate yourself by visiting the cars.com, edmunds.com, carsdirect.com or any other website that provides information on the actual selling prices of cars, as well as rebates and incentives.

Also, remember other expenses that you will have, such as car insurance. Stick to practicality to ensure that you can get the most you can with what you can afford.

The vehicle price that you see listed on the window is the MSRP, or manufacturer suggested retail price. However, what you need to know is the vehicle's invoice price, or the amount the dealership paid for it.

SOLUTION:

If you can find out what the invoice price is then working from the invoice will be significantly easier for you than than trying to cut $$ from the MSRP.

Also, do your research online and know what are the prices that the cars you want are actually selling for, taking into account any consumer and dealer incentives. Go to the cars.com, edmunds.com, carsdirect.com or any other website that provides information on the actual selling prices of cars, as well as rebates and incentives. Also, keep in mind that some popular cars actually go for the sticker price.

The payment negotiation may be tricky. The salesperson may tell you things like, "We can get you into this car for only $349 a month." And it's probably not a lie. But keep in mind that it probably includes a large down payment, or may have a longer loan period, as long as 5 or 6 years, which means you'll be paying for that car for a long, long time.

SOLUTION:

Find out exactly how much credit you can afford and can be approved for and then pick a car that fits your budget. You can also use any car loan calculator available online to help you crunch the numbers for your bad credit car loan.

Focus on the total price of the vehicle rather than the amount that you will pay monthly. Do not answer the question, "How much can you pay each month," Know how much you'll be able to pay for the car and stick to saying, 'I can afford to pay X-dollars for the car.'"