Financing Façade

Dealerships don't offer the best deals

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Consumers have become increasingly savvy about getting the best possible deal on car prices. But, there is one area in car buying where consumers need to do more research — financing.

“A consumer may get a great deal on the price of the car and then easily get taken on the financing of it,” offers Darryl Brooks, president of Consumer Consulting Services Inc., the publisher of How to Save Thousands on Your Next Car (Consumer Consulting Services Inc., $9.95), and host of

Jeff Ostroff, host of www.carbuying, a Website on beating car scams, concurs. “In the past, we had no choice, we had to finance at the dealer. But car dealer financing is just another product that the dealer sells you. You’ll almost always find lower interest rates and no scams from online car financing sites, your credit union, or your local bank. Have your new car financing lined up before you enter a dealer.”

You could save from one to two points, according to Brooks. “In some cases,” he adds, “you could do better if you use your pre-approved rates as a negotiating tool, giving the dealership the opportunity to beat your rate.”

It is imperative to review your credit report before you start shopping. “You just don’t want to rely on the dealer,” says Brooks. “He could come back with his own interpretation of the score and structure financing to his advantage.”

There are two practices consumers need to watch:

  • Spot Approving. Anxious to make a sale, the dealer may grant you a loan based on preliminary credit checks. Later, you’re told, your financing “fell through.” Says Ostroff, “Some dealers are telling [consumers] they made a mistake and [that they] need to come in and re-sign paperwork, of course, on a higher APR.” You avoid confusion by obtaining your loan before you shop.
  • Back End Profit Deals. These deals have nothing to do with financing. But when the financing officer presents the loan papers, he or she tries to sell you a number of products. For example, “they offer you credit line insurance, rust protection, window etching, and extended warranties,” says Brooks. “All of which, if you need them, can be bought off property.”