Getting Auto Financing: Secrets of the Dealer

After you sit down with the salesman and figure out what price you’re going to pay for the car, it’s time to figure out where the money is coming from.  The next stop is the business office, or as it is also known, the finance and insurance office.  Here you will discuss your financing options with the dealership’s money man.  This is the step to consummate the car purchase and involves the auto loan rate, term and monthly payment as well any extras sold by the dealership.

You’ll sit down at a desk to sign papers (lots of them), and sit still while you revel in the wisdom of your choice of automobile.  The business manager or F and I guy will explain to you how your car loan will work, when the payments are due, the car loan interest rates, et cetera.  Hopefully, you have done your research on auto loans and rates that available without the dealership attachment.  But, what their real job for the dealership is to up sell you on things you don’t really need. 

Rustproofing, undercoating, window tinting, and lots of forms of insurance are high on the list of things to add to your auto loan that cost you ‘pocket change more’ on each one of your payments.  So you choose a few options, confident that it’s money well spent, when really you’re just given someone else quite a hefty little bonus. 

And here’s the secret of the dealership.  The person you just talked to is working on commission.  They get paid according to how much stuff they can sell you before the car is taken off the lot.  And you can negotiate the price of everything they offer. 

Most car buyers don’t realize that dealerships use these up selling techniques to add to the cost of the vehicle, and if you believe the dealership is going to divulge that information, you’ve got another thing coming.  Dealers often make the majority of their profit selling the extras that go along with buying a car.  Of course, they make money when you buy a car as well, but they can get a higher profit margin by selling little things. 

Here is a short list of things you should keep in mind when you go in to buy a car.

The business manager gets a commission for every sale, and gets even more when the interest rate on the car loan is higher.  If you set up financing before you go in, you stand a better chance of short-circuiting this process by having the money in hand or at least the option of getting the car loan from somewhere else after hearing the dealership pitch on their car loan interest rates. 

The sale of a car isn’t final until you drive away.  Period.  As long as that car sits on the lot and you sit in that chair, the dealership will try to extract as much money from you as is humanly possible.  Remember that they are nice because they want to make money, not because they want to see you in a nice car.

Take a lesson from grade school and do your homework.  You may have researched the car until you were blue in the face, but unless you educate yourself about the ins and outs of auto finance and auto loans, you’re likely to find yourself paying far too much for services that you don’t really need.

When the business manager tries to sell you extras, take a long hard look at whether you really need them or not.  You can get paint protection at any auto parts store for much less than the dealer will charge.  It’s the same thing with fabric protection.  Most new car auto warranties have a clause in them covering rust perforation, so don’t worry too much about rustproofing.  Besides, they usually put that on at the factory anyway.  Upgraded stereo systems cost more at the dealer than they do at an electronics store, and window tinting can be found in rolls and applied yourself. 

When you’re dealing with dealer financing, they set all the rules and all the terms.  If the interest rate on the auto loan that the dealer is offering seems a bit too high, negotiate with the business manager.  They want to make that sale, so it is likely they will drop at least a couple tenths of a point, which can save you thousands of dollars by the end of the loan.  If you need to walk away, walk away.  Do more auto loan searching on your computer to find better rates and terms and buy the car on your terms.  Return to same dealership if you want with your new auto loan ready to go.

If you haven’t figured it out by now, the dealership is trying to make the sale no matter what.  They will tell you what you want to hear, not necessarily what you need to hear.  If you have questions about auto financing, ask someone who knows and is not in a position to make money off your ignorance.  This website, www.selectautorates.com is a good source of information regarding car loans of any type, and if you’re not applying for a loan, the information will help explain all the car loan rates and features without turning it into a sales pitch.

Not all car salesmen are low life weasel scum that will overcharge you for pin striping.  Some are downright nice people.  That doesn’t make them any less motivated for your dollar.  Understand the costs and the options including direct auto loans from banks and finance companies before haggling.  Do your homework, negotiate everything, and know what you want before you walk in; you’ll get the best deal possible on your new car.

This entry was posted on Tuesday, February 24th, 2009 at 8:06 am and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.