Very low trade in value, balloon or residual payments and lack of paperwork are among the car dealer finance tricks you should know to save thousands and hopefully, before taking your new beauty home.
Buying a car isn’t an everyday experience for most people, leaving us vulnerable to the sales techniques of the dealership. Car finance can be particularly tricky, with multiple, unfamiliar variables in play. You will own this car for years so give yourself time to prepare and negotiate. These tips on understanding car dealer finance tricks will help you avoid common pitfalls and potentially save thousands.
1. You are offered instant finance approval without any paperwork
Dealerships providing finance sometimes close the deal before the finance process is complete. You may even have taken your new beauty home, only to hear that finance has fallen through. The dealership can come to the rescue at a higher rate. The advice here is simple. Finance first. Don’t rush. Research finance terms and rates, then get the paperwork done before driving away.
2. One price for cash… One for finance
Low or no interest loans are very motivating for many buyers. Beware, dealerships have to make up the cost of the low interest rates elsewhere in the deal. This may be in a non-negotiable price, limited terms or balloon payments. Before you sign up for the finance deal, ask for a separate, itemised purchase invoice and a loan offer contract. Compare these with the cash price. You can often get a much better deal shopping around and securing personal or car finance with a brokerage or bank.
3. Your ‘rapidly sliding’ credit rating
A dealership may have promised you finance at a competitive rate, but just before you close the deal, they “discover” your bad credit rating – and you are up for a higher rate. This is a ruse. No one can access your credit rating without your consent. Secure a free online credit report first. Within 10 days, rating services such as Veda can provide a report, or your financier can organise an instant report.
4. What you don’t know will hurt you
The sticker price and the actual value may be very different. The solution? Research, research, research. You need to have a clear idea of the variations in year, models, inclusions and individual cars. Before you walk into the dealership, check car valuation sites like Drive.com.au’s value checker or Redbook’s car value assessment tool.
5. The contract and the verbal agreement don’t match
Dealers may promise things that don’t end up in the contract. Before you sign, always ask for a written, fully itemised sales invoice with all inclusions or costs. Be vigilant when you check the contract. “Mistakes” invariably favour the dealership. Review each item separately – the car you are buying, the trade-in and finance. Don’t waiver your right to a cooling off period.
6. What year is your car?
The dealer tells you the car is 2016. You check the compliance date and he’s right. Be sure to look for a manufacturing year and check the VIN number to have guarantee that it’s not classified as a 2015 model.
7. Combining the trade and sale transactions – ‘Changeover’
A common trick is to offer a very low trade-in value when you have secured a great deal on the new car. Alternatively, you may be lured into a higher purchase price by a very generous trade-in offer. If you have to trade-in, ask for prices on both and split the transaction.
8. Bamboozling balloons
A dealer may focus your attention on a low monthly repayment, but beware the “balloon” or residual payment at the end of the loan. Can you afford the lump sum proposed? Total the cost of the initial, monthly and residual repayments. Ensure the deal provides genuine value.
Gus Gilkeson, Managing Director, Grow Capital
