Car dealership ads are everywhere. They're on the radio, TV, print, billboards, and just about anywhere else you can think of. These ads are designed to entice you onto their lot to buy a new or used car. Some of the deals sound great, but are they too good to be true? Maybe or maybe not, it depends on the dealer. Dealers bank on impulse buyers, but with some education and a little planning you can turn the tables on them.
Your best option is a cash purchase, but in the event that is not an option, you will have to obtain financing. The key item your financing will be based on is your credit score. You should always check this prior to any big purchase where financing is involved.
Lenders have been hit hard by this economy and have been tightening credit offers to everyone. If your credit score is below 700 you will likely have a hard time getting a low interest rate. Dealerships advertise low rates knowing that only a small portion of the population can actually qualified for them. But most people always think their credit is better than what it actually is and dealers bank on this to get people on the lot to look at cars.
When a would be customer arrives at the dealership the salesman negotiates based on the special offers available. Take 0% financing for instance, in order to qualify for this rate the dealer retains all rebates and incentives from the manufacturer. So if a car cost $25,000 with 0% financing you might could actually buy the car for $17-18,000 but the salesman can't tell you that and still offer the rate discount. The problem arises when buyers are told they don't qualify for the rate and think they have to purchase at that price and don't haggle on price any further.
Employee Discount Programs are also popular incentive programs which have gone by many different names over the years. This is generally where a dealer slashes the price of the car or truck by offering you all the discounts and incentives. The catch is you have to pay the full interest rate in financing which in most cases are high even for shoppers with over 700 credit scores.
In addition, the finance department at your dealership will typically charge you a $295 doc fee and try to sell you additional items like credit life insurance, warranty programs, etc that they earn commissions on.
Prepare yourself before ever talking with the dealership. Shop car prices online and then talk to your bank or credit union about payment terms and interest rates. Use an auto loan payment calculator to find a payment that fits your budget and not their bottom line. Take your pre-approval letter to the dealer and negotiate a cash price with them.