Understanding How the Pay-Off for Your Trade-In Works!

It's very easy to get confused about how the pay-off is handled in a car deal. Almost everyone who trades a car into a car dealer on a new purchase has a pay-off on their trade.

The pay-off is how much you owe the lender for your trade. It in no way reflects how much your trade is worth, and most often the pay-off is higher than your trade's actual value.

When you buy a vehicle this is how the numbers break down:

Selling price of the new vehicle
+ Any Add-ons like extended warranty, protection package, etc.
+ Sales tax, title, documentation and registration fees
- Trade-in allowance
- Cash down and rebates
+ Pay-off on trade
_____________________
= Total Amount Due

Now adding the payoff back on to the "Amount Due" tends to throw a lot of people for a loop! They have a hard time understanding why the payoff has to be added back on once the dealer agrees to a trade figure.

You must remember, the loan on the trade is yours - not the dealers - and it must be paid off so the dealer can have a clear title to the trade. In essence, the dealer is buying the trade from you, and you can't sell it to him if there is an outstanding balance owed on it. So the pay-off gets added on to your "Amount Due" and then the dealer takes that money and pays off the loan. The lending institution in return sends the dealer a clear title and everyone is happy.

Remember, the pay-off is your responsibility not the dealer's. The dealer is actually doing you a service by simplifying the the way you pay off your vehicle. It also allows the dealer to control the process so they don't get stuck with a trade-in that has a lien and an outstanding loan on it.

Now having said that remember that most car dealers are honest and do business in a legitimate way, and they will pay off your outstanding loan promptly, or as soon as they get the funds on the car deal. It's to their benefit to pay it off right away so they can then sell the car. If they don't have a clear title for the vehicle they can't legally sell it.

However, there have been occasions when a car dealer waits to make the pay-off, or in rare cases doesn't pay it off at all. This is illegal and can get a dealer in a lot of trouble, but sometimes they are having cash flow problems or - again - in very rare cases you come up against a crook.

If the dealer doesn't pay-off you loan within a reasonable amount of time (one to three weeks) the lender is going to be looking for you to make a payment when it comes due. I have even seen cases where the customer didn't know for several months that the pay-off hadn't been made, and it was actually causing late payment entries on their credit report.

Remember...I said this was a rare occurrence, so don't panic if you have a trade with a pay-off. There are steps you can take to protect yourself. If you trade a car with a pay-off get a written statement from the dealership signed by either the Sales Manager or the Finance Manager stating that they will in fact pay off your trade and by what date. The statement should include the following information:

• The date of the document


• The amount of the pay-off


• By what date will the pay-off be made by


• How long the pay-off amount is good for (because the amount changes as interest accrues)


• The year, make, model, mileage and serial number of the car being paid off


• The name and mailing address of the lending institution


• The name of the person at the lending institution who verified the pay-off amount


• The signature of either the Sales Manager or the Finance Manager

Any reputable dealership should be happy to accommodate your request for this form. In fact, a professional dealership will have such a form as a routine part of their paperwork.

This way if anything goes awry you have something in writing to protect yourself, and to prove the dealer agreed to make the pay-off. As I said before, most dealers are honest, but it's always a good business practice to protect yourself.

If a dealer refuses to give you a written statement on the pay-off you should not complete the deal. To me this would be a big red flag! Go do business with another dealer who will accommodate your request. There are too many honest dealers out there for you to waste your time with a questionable one.

Until next time...

Tony Iorio
www.InsiderCarSecrets.com
My Contact Information

Ever Wonder What Goes on Behind Closed Doors When the Car Salesman Runs Back and Forth to the Manager's Office During a Car Deal?

In most car dealerships the salesperson has no authority to finalize a car deal without the explicit authorization of the Sales Manager. More importantly, the Sales Manager controls all aspects of the deal. The salesperson is, in essence, a pawn for the Sales Manager to to move as he sees fit.

When the sales person leaves the customer and goes to the manager's office it is to first tell the manager what is going on with the customer. The manager wants to know all of the following:

• What kind of vehicle is the customer is interested in?


• Has the customer test driven the vehicle yet, and if not why?


• Is there is a trade, and if so what it is?


• Does the customer owe any money on the trade, and if so how much is the pay-off?


• What is the customer expecting to get for the trade?


• What is the customer's monthly payment expectation?


• What kind of credit rating does the customer have?


• How much money does the customer have to put down?


• Does the customer have the authority to make a buying decision, or does he or she need their spouse, parent etc. to do so?


• Is the customer prepared to make a deal right now?

The Sales Manager will then analyze this information and formulate a plan of action to turn that prospect into a "Today" buyer. He will instruct the sales person on what to say, what car to show the prospect and so forth. Ideally, the sales person is like a puppet on a string! The Sales Manager pulls on his or her strings and the sales person dances!

As the deal gets going the sales person may need to visit the Sales Manager's office many times for instruction and advice. Eventually, the sales person will go back and forth until he or she either closes the deal or the customer is ready to walk. If the customer is leaving, the manager may personally intervene in an attempt to close the deal, or he may send an assistant in to close the deal. Many dealerships have a "Closer" for this very purpose.

The purpose for all of this control is simply to maximize the number of sales and to maximize the profit per sale. The sales person does not have the authority, or in many cases, the know-how to get the most money out of every deal. That's the Sales Manager's job.

If a sales person lets a customer leave without notifying the sales manager first, he or she could get in big trouble and even get fired! I've gotten myself in trouble for this when I was a salesman, and I've seen numerous sales people fired for this infraction. This is why getting up and walking out is such a potent tool in the customer's arsenal. The sales person will do almost anything to keep the customer from leaving.

For additional information on this topic read: "How The Car Dealership's Selling System Manipulates You Into Buying a Car TODAY!"

Until Next Time...

Tony Iorio

Tips to Ensure You Don't Get Ripped-Off When Letting a Car Dealer Arrange Your Car Financing!

If you've read even a small part of my website at www.InsiderCarSecrets.com you know that I highly recommend that you arrange your own financing - preferably before you go car shopping - and that it is imperative that you keep the financing out of the price negotiation by not negotiating a payment.

Always negotiate the selling price of the car without financing and without a trade. This is the only way you can be sure what you are actually paying for the car.

The car dealership finance office or F & I office has so many ways to make money on you it's staggering. Very often the car dealership will make more profit from arranging the financing than they do on the vehicle itself. This is profit at your expense.

Once in a while a finance manager in a dealership will be able to get you a lower interest rate than you can get yourself, and it's perfectly OK to let them arrange your financing as long as you follow these simple steps to protect yourself:

• Always carefully read the loan contract before you sign it.


• Check the payment on the loan contract to make sure it's what you're expecting.


• Check the interest rate to make sure it's what they told you it would be.


• Check the "Amount Financed" on the loan contact to make sure it's what you're expecting.


• Make sure the "term" in months is what you are expecting.


• Make sure the loan contract has your "cash down" including any rebates listed in the appropriate place.


• Read the loan contract and the sales order carefully to make sure they are not adding things like credit life and or disability insurance, an extended warranty, GAP insurance (which is good to have, but that's for another discussion), or anything else such as window etching, appearance protection package, etc. unless you actually want any of these items.

Some other important things to watch out for are:

• Remember that if you have a trade-in with a payoff that the payoff will be added back into the new loan and it will raise the "Amount Financed" so be ready for the shock.


• If you do indeed have a trade with a payoff make sure you get a signed, written statement from the dealership stating that they will indeed pay off your trade loan and make sure there is a date on the statement as to when the payoff will be made.


• Last but certainly not least get a written and signed statement from the Finance Manager or the Sales Manager stating that your loan is already approved by the loan institution that is taking your loan. If the loan is not actually approved yet don't sign the paperwork and don't take the car until it is.
  
  If you do, and the loan is not actually approved then they can come back to you and say there was a problem with the financing and they have to charge you a higher rate or take the car back or whatever. At the very least you have to sign a whole new stack of papers, and the odds of them sticking it to you go up significantly.
  
  I repeat...don't sign or take the vehicle unless the loan is officially approved by the lending institution. Make the dealership give you written proof of that fact.

Listen, you may be dealing with a completely honest dealer as most of them are, but you must protect yourself. You can't just assume that they are looking out for your best interests. That's your responsibility.

Until next time...

Tony Iorio
www.InsiderCarSecrets.com
My Contact Information

The Real Truth About Your Car's Trade-in Value!

Car dealers have a bad habit of telling you they're giving you more for your trade than they actually are. They do this by artificially inflating the price of the car you're purchasing and then artificially inflating the trade in allowance.

In reality, all they are going to give you is wholesale value. Why should they buy a car from a customer for more money than they can buy a similar car for at a dealer auction? A car dealer is no different than any other merchant in that they have to buy inventory to resell. Just like the grocery store owner, they have to buy at wholesale and sell at retail in order to make a profit.

The problem is that I've never met a customer who is satisfied with wholesale for their trade. They always think their car is worth retail. It doesn't help when Blue Book and some others list unrealistic values for most cars. The only way to get more than wholesale is to sell the vehicle privately.

Dealers even have terms to differentiate between the real amount they are putting in a trade (ACV) and the fake number that they list on your sales order (Over Allowance). ACV stands for "Actual Cash Value." They have these two terms so that when they are discussing the deal between management and salesman, and when they are calculating their profit after a deal is complete they can differentiate between the real number for the trade and the false, inflated one.

So what happens when you trade a car to a car dealer is that they will inflate the selling price of the vehicle you're buying and then artificially inflate the trade allowance so you think you're getting a high trade allowance. It's all "Smoke and Mirrors!"

This is why I recommend on www.InsiderCarSecrets.com to always negotiate the selling price without the trade. Spring the trade on them after you have agreed to a price on the vehicle you're buying. This is the only way you can know for sure how much they are actually giving you for your trade. The car sales person won't like it, but so what. No one says you have to do a car deal their way. Their way will usually cost you more money!

If you tell them up front that you have a trade they will always hold back some money in the selling price so they can show you - on paper - an inflated trade allowance. The "price difference" will be the same in both scenarios, but the latter always looks better on paper to the customer even though it's all BS!

Doing car deals in this convoluted way is not all the car dealer's fault. As I mentioned earlier, most customers have an inflated opinion of what their trade is worth, so in order not to make the customer mad the dealer will show them on paper what they want to see...a high trade-in allowance, even though there is absolutely no way a dealer could or would pay that amount for the trade.

What a crazy system!

Until next time...

Tony Iorio
www.InsiderCarSecrets.com
My Contact Information

An Email I Received From a Car Salesman

I received the following email from a car salesman recently. It should give you some insight into what you're up against when you go into a car dealership.

Now please understand that not all car sales people and car dealers are like this guy, but I do get quite a few nasty emails from car sales people.

This guy's name is Tom. Tom is angry because on my website at www.InsiderCarSecrets.com. I teach people how play the car buying game and come out on top. Tom and others like him don't want you to know this information.

They would rather have you come into their car dealerships like unsuspecting lambs going to their slaughter. Well guess what Tom? The more I hear from guys like you the more motivated I become to help people neutralize your pathetic and unprofessional sales tactics. Get used to dealing with customers who are on to your deceptions.

Here's the email Tom sent:

"Hello there.

"Buyers are more often liars than not. Get over yourselves and stop whining about cars being too expensive. No one deserves to buy a car for a dealers cost and no one deserves a damn dime off a sticker price. Do you whine at Walmart??? Bet you don't. Don't like it?? Bite Me!"

Sad isn't it? They're out there folks, so be careful. Read the information on my website and use it to stop car sales people like Tom from sticking it to you.

If you're in the market for a new car save yourself a lot of trouble and get free new car price quotes at my website before you visit a car dealer. You can get them here Free Car Quotes.

Until next time...

Tony Iorio
http://www.insidercarsecrets.com
My Contact Information

The "Spot Delivery" - a Disaster Waiting to Happen!

The "Spot Delivery" in a car dealership is a tactic many car dealers use to get the customer down the road in their new car as soon as the deal is agreed upon so the customer doesn't have a chance to change their minds. If given enough time many customers will have second thoughts about a car deal.

The "Spot Delivery" is a bad practice that causes lots of grief for car buyers and dealers alike. Most often it's done before the financing is approved and this is where the trouble starts.

The Finance Manager in the car dealership has to be able to make an educated guess based on a person's credit report and their credit application as to where they can get them financed and at what rate. They may not be able to actually get the deal approved by the bank for one to three days.

So they make their best guess, print out all the corresponding paperwork and get the customer to sign everything just like the loan is approved. In fact, the customer is led to believe that the loan is indeed approved and their deal is done. This is done so the customer thinks in his or her mind that they have bought and financed a car. Thinking this they will not consider backing out of the deal when they come to their senses!

Now if the bank approves the deal as the Finance Manager structured it everything is fine. The dealership processes the paperwork and the deal is done. What happens however, if the bank won't approve the deal? And this happens very often.

Remember, the customer is under the impression that their loan has been approved. If the bank won't approve the loan the best case scenario is that the Finance Manager gets the deal approved somewhere else and has to call the customer back in to sign a whole new batch of paperwork. Probably the interest rate and the payment will be higher, maybe even the down payment goes up.

If the Finance Manager is slick enough he or she can get the customer to go along with the new terms and everybody is happy.

The worst case scenario is that the customer is told the dealership can't get them financed and they have to bring the car back! If the customer refuses the dealership will go and get the car. If the customer traded a vehicle it may or may not have been sold by the dealership, so that opens up a whole new can of worms.

I get emails all the time from people who go through this stuff. I usually tell them to file a complaint with their state's Attorney General's office and to get a lawyer.

If you ever find yourself buying a car in a dealership and they are trying to hustle you down the road in the car ask for written proof that the loan has been officially approved. If they can't or won't provide you with this proof then don't take the car until it is proven to you that the financing is approved.

If you don't, and sucumb to the temptation of taking the vehicle before it's a done deal it could be your driveway that the tow truck backs into to take your car back.

To avoid this whole mess you should arrange your own financing before you go to buy a car. One excellent source to get a pre-approved car loan is Capitol One Auto Finance. They will give you a Blank Check to go car shopping with thereby avoiding the "Spot Delivery" trap.

New Round of New Car Buying Incentives

A few days ago GM announced a new incentive program called their "Red Tag" sale. GM dealers will be posting the selling prices on new cars in the form of a red tag hanging in the window. These incentives are on 2005 and 2006 models with few exceptions.

It appears that these sale prices are about $100 more than the selling prices in the previous "Employee Discount" sale that recently expired. Chrysler has already announced it will be coming out with something in a few days to compete with GM. No doubt Ford will be right behind them.

Car dealers are not happy that the manufactures are forcing these pricing restrictions on them. This kind of program, like the previous "Employee Discount" program, limits the dealers ability to make profit on new vehicle sales.

Car sales people don't like these sales either because in most cases they are limited to a $50 commission on new vehicles. Imagine the frustration a salesman feels when he or she takes 3 or 4 hours to sell a $25,000 - $35,000 vehicle and only makes a $50 commission.

I'm all for the consumer getting the best possible deal, but the sales people who are on the front lines should be compensated fairly at the same time. Most of them work on a straight commission basis with no salary at all.

Some of my contacts in car dealerships have told me that since the factory has tied their hands on pricing they are now trying to take trades below their normal value in order to make up some of the lost potential profit. I've been told by one friend who sells cars in a GM dealership that they are undervaluing trades by at least $1,000 whenever possible to make up some of the profit lost on the new vehicle sale.

They are also trying to make bigger gross profits on used car sales. Normally car dealers will average $1,500 to $1.800 profit on used vehicles, but with the profits down on the new side they are holding out for averages in the $2,500 to $3,000 range. So beware!

Remember, if you are in the market for a new or used vehicle read some of the tips and articles on my website at www.InsiderCarSecrets.com . The information there will help you successfully navigate the mine fields of the car buying process without getting blown out of the water! Pardon the pun!

Until next time...

Tony Iorio
email: tony@insidercarsecrets.com
www.InsiderCarSecrets.com

Welcome

Welcome to the Insider Car Secrets blog. You will find car buying secrets, tips and information here that will save you money time and aggravation when you buy or sell your next car.

I get emails on my website at http://www.insidercarsecrets.com all the time from people who have been ripped-off by some unscrupulous car dealer. Not all car dealers are looking to rip you off, but even one is too many. Unfortunately, there are many more than one looking to take you.

There are also many good and honest car dealers out there. All you have to do is find them. I have spent 37 years working in car dealerships and I know what goes on there. Believe me it isn't pretty!

It is my hope to help you to avoid the ugly part of the car buying process and to make your car buying experience as pleasant and trouble free as possible.

Stay tuned...

Tony Iorio