Sales/Finance Tactics when buying a new vehicle...

With all the "How much should I pay" threads we see I just wanted to post a "PSA" of sorts while it was fresh on my mind. Comments, similar experiences? Post away...

I wanted to try to explain some current tactics that finance guys use as I am a caraholic and have bought way to many vehicles the last few years.

When you get into finance the tactic that has been used recently on the last 3 vehicles I have purchased is as follows:
-They will make up a fictitious interest rate that you were qualified for; something relatively high...lets say 6.99% for 60 months and your payment is xxx.xx
-They will then say, "Great news, by going with our preferred credit union I got you a warranty, a maintenance contract, and gap insurance and your payment is the same!"
*In reality you may have been approved for and received a much better interest rate, lets say a 3.49% interest rate and they just sold you $3K+ worth of stuff you may or may not want
-Finance guys are good at their jobs or they wouldn't be in their chair, they do this very nonchalantly and will try to fool you into signing while your not really understanding.
*My last 2 experiences were eerily similar, the guy said a few times something along the lines of "I got you the better rate, and with that you GET a warranty and GAP with this bank, they require it" I'm pretty sure banks wouldn't create such stipulations, unless perhaps some high-risk/low-credit banks.

Some things to know (I am speaking for Colorado so please check locally if you have any questions):
-Dealers can't mark-up interest rates of Credit Unions, they can mark up rates on banks (They do get spiffs back from credit unions but that cost is not passed onto the customer)
*My suggestion if financing through the dealer is to ask they run credit through their Credit Union partners and not banks. They can shotgun you to 5 banks for example and that's 5 separate inquiries on your credit. Credit Unions (atleast here) are 1 huge network so they can shoot you to several and it's just 1 inquiry.
-ASK to see the screen showing your approval. It should show the rate, term and max amount your approved for based on credit, the vehicle and many other factors
-If you purposely or accidentally get roped into buying any add-on contracts you don't want, you MAY be able to cancel them and get a pro-rated refund. Please contact the contracting company and ask.
-You can negotiate the cost of warranties, gap and other service contracts.
-Are/were any of your parents in the Military? If so, and you don't have a USAA account your missing out. They offer SUPER competitive loans(to A or A+ credit) at or below credit union rates. They wire the cash to your bank account or overnight you a check...they rock!

And last but not least, I'm not bagging on the industry and I know these guys are just trying to make a living. I am basically just putting info out there with my experiences and asking people to keep their eyes open...that's all.

 

I just went to my local credit union... Got pre-approved. When I found the vehicle, the CU took care of everything and made it super easy.

When I went to the dealership, they asked about financing, I told them I have it through my credit union. They asked the rate, I told them and the dealership said they couldn't beat that.

I left with the truck and only spent about 20 minutes at the dealership.

 

- My advice to avoid the situation you described.
- Pay cash unless you can get 0% interest rate.
- To save up for your next vehicle keep your current one till its payed off. Then pay yourself a car payment for 3-4 years.
- If you want an extended warranty, shop around before going to the dealer. Ask them what is the lowest cost for the plan you want. Be specific on years and miles. Then counter their offer by stating you are only willing to pay $X.

 

Pre-approved, cash or 0% promo. That's it, fini, final, no mas!

 

Why would the guy put you down for a higher interest rate when you got approved for a lower rate?

 

Because that's how dealerships make money. They get an actual buy rate then mark it up. It's the same thing as a distributor of any product buying something at a cost then re-selling it at a mark-up. It's always cheaper to go to your financial institution first and get pre-approved. Much like it's cheaper to buy factory direct than to go through a distributor.

 

@NunyaBizness Any input from the sales guy side?

 

Make sure you carefully go over your sale contact. My deal was talked over for a few days with them, and then I went in to sign the papers. When I signed the contract, the sale price was off by $300 but I didn’t notice it until a month later. When I asked the salesman he said they had to charge me 300 for their alarm. There’s only a stock alarm. Obviously this was a lie, so I took all that to the finance guy and he instantly wrote me a check. Although I got the 300 back, in the end it’s a lot less because of the interest and sale tax I had paid on it.

 

Common items they'll try to slip by you:
-Glass Insurance
-"Etch" (Antiquated anti-theft method)
-Alarm system
-Paint protectant
-Underbody coating
-Tint that's not installed

 

When it comes to F&I they are upselling the interests rates as a middle man. Unless you are qualified for a promotional interest rate from the manufacturer you ALWAYS want to get your own financing. Dont pay a middle man.

Same goes for all extra upsales in F&I. If you want an extended warranty purchase it from the source, dont pay a middle man.

 

I personally would prefer to get the financing elsewhere than the dealer. Here in MA, the dealers can mark it up. I financed through a local credit union and told the finance guy I was not interested in anything he sold. Signed the paperwork, shook hands and that was it.

 

So great. I can't even recall all the times a dealer has tried to screw me:

- Financing length at 39 months instead of 36
- Interest rates at 3.90% instead of 3.09%
- Tax rate higher than than it actually was (I think this is illegal now)
Just goes on and on.

 

Are people really this foolish with money? I’m not one of Donalds kids, so I live in the fiscal real world.

When you get out of school you buy a piece of shit used car and hope it lasts four years. All the time saving for an investment such as stocks or real estate. And you work your ass off to get ahead in your job.

Then your shit box dies so you buy another one, hopefully you get five years out of that. At that point you hopefully have saved for real estate (house) so you can grow equity.

As you are now cash poor again, you buy your third shitbox. In five more years your 401k is in need of some help and you can afford to refinance your investment (the house) for a shorter term/better rate. Time for, you guessed it, shitbox number four.

Now start saving for your first new car, and after you pay off your house, have your 401k maxed and are building your kids college savings accounts you also have the life smarts to go tell dealers like this to fuck themselves.

 

I found a dealer with two Cement TRD ORs with similar MSRPs. I looked at the Truecar and Costco prices and I went in with cash and offered them $750 below these prices. Dealer accepted my offer. I declined the extended warranty, filled out some paperwork, wrote a check and drove off. Whole process took a little over an hour.

 

Or you could have alittle fun with the bank by endorsing your paycheck with the following...”Deposit for credit on account or exchanged for non-negotiable federal reserve notes of face value”. Now the bank can no longer fractionally lend on your deposit say goodbye to the middle man!