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Is Car Financing a Scam?

Oftentimes many people don’t take the time they need in order to research financing before visiting the dealership. In terms of car financing, dealerships can easily take advantage of eager buyers. This is due to hidden fees or unrealistic loan terms.

How Dealers Scam Buyers

First of all, most people don’t realize that dealers don’t finance the loans most of the time. They arrange financing with financing companies or banks. Since they’re the middle man, you will pay more. They do a finance markup and take the difference as profit.

One Payment

This packed payment is focusing on one’s monthly payment instead of the actual price of the car. Things such as extended warranties and others things can dramatically affect one’s monthly payment. Focus on your budget. Determine what you can offer. Many experts suggest not having a car payment that is over 10% of your take-home income monthly. Take that into consideration before committing to any Car loan at a dealership.

Bad Credit Score

A lot of people don’t even know their credit score, allowing the dealer to lie to them about it. After they do a credit check, they will tell you that you don’t qualify for low interest rate offered in their deals. Most people at this point are desperate and take anything offered to them. What a mistake!

Fees

It’s important for you to realize that the dealership is not obligated to give you the lowest rate available. Look at what they’re offering you and look at what the markup is associated with each loan. The lowest interest rate loan may not be the best choice. Look at the details.

Loan Packages

This often occurs with someone with bad credit. The dealer will package two or more loans together to secure a loan for this individual. While this seems great to someone who normally doesn’t qualify for car loans, you often pay extremely high interest rates, making the cost of the vehicle astronomical.

Don’t Agree to Add-Ons

For instance, if they offer you an extended warranty, pass. Most auto brands offer warranties anyways and you’re just paying for extra coverage. Do your homework ahead of time to know if this is true for this brand and the vehicle you’re interested in.

Ultimately, it’s simple, take time to look into financing before you visit a dealership. This research time could save you thousands and give you the upper hand, not only during negotiation, but in general, when visiting a dealership wanting to purchase a new vehicle.

Author Bio: InstaAuto is an Australian company whose mission is to simplifying the car buying process with the use of technology. Funded out of California, our proprietary finance application technology allows customers to quickly compare various financing options on both new and used vehicles with ease.