Financing your car buy before hitting the dealership can save thousands
Dealerships use same-day financing as a marketing tool to get you in the car and out the door on the same day.
ATLANTA, Ga. (Atlanta News First) - Dealership financing for new and used cars offers buyers convenience, but how do you know you are getting the best interest rate available? You don’t. We’re not implying it’s a bad idea, but it’s time to reverse your thinking. Do the financing first.
In the perfect dealership financing scenario, the dealership or used car lot lets you pick and compare three lenders to get the best rate, but that’s not how it works. Dealerships use same-day financing as a marketing tool to get you in the car and out the door on the same day.
But a rush purchase could cost you thousands of dollars in interest, mainly if the salesperson focuses on a low monthly payment. The monthly payment means nothing if the salesperson signs you into a seven-year loan with a 28 percent interest rate. The payment is enticing but should not be the determining factor in buying the car.
Consumer Reports provides an excellent financing guide to get you into the best car with the best rate.
Beware of preapproval
Some independent used car lots use financing preapproval as a tactic to get you in the car and out the door, but it’s risky, especially when you have poor credit.
The Better Call Harry team received several complaints from two viewers who purchased used cars, only to get a call weeks later that their preapproved financing had fallen through. The salesperson called the customers with two options, make a larger down payment or return the car.
Both customers returned the cars but did not anticipate charges for mileage and depreciation. Both customers lost around $1,500 each, but after a Better Call Harry investigation, the dealership returned the funds and was later sanctioned by the state attorney general’s office.
The takeaways
- Check your FICO credit score and get approved for financing before you go to the dealership.
- Get at least three quotes. Bankrate is an excellent resource for the latest rates.
- Get approved for an amount that fits your budget, and then go to the dealership. If the dealership can offer better terms, you win.
- If you are trading a car, don’t mention it until you agree on a price. In Georgia, the more you can negotiate for a trade-in, the more you will save on ad valorem taxes.
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