Car Financing Tips, and
the Real
Truth About What Goes On In
the Car Dealer's Finance Office!
A customer says to the car salesperson "I'm
paying cash, so I expect a bigger discount!" The car salesperson nonchalantly shrugs and says "It
doesn't matter if you pay cash or get an auto loan, we get
our money either way!"
The REAL TRUTH is, the car dealership WILL try to
talk you into letting them arrange car financing for you!
You see, the finance office in a car dealership is a Very Lucrative Profit Center! Very often a car dealer will make more profit from the car financing than they do from the car sale itself!
Each car dealership has a Finance Office. The larger dealerships may have several. The person in
charge of this office is called the Business
Manager, or the F & I Manager (F & I for Finance
and Insurance) or simply the Finance Manager.
This person will usually look and act more like a
conservative banker than a hard core salesperson...
but don't be fooled!
To sum it up succinctly, the Finance Manager's
sole purpose is to see to it that you walk out of
that dealership with the HIGHEST Monthly Payment
Possible!
This person will be presented to you as someone
who will arrange an auto loan for you at the lowest
rate possible...as if they are looking out for
your well-being. . . but don't believe them for a second!
Even if you are paying cash, or arranging your
own car financing, you still have to sit down with
the Finance Manager, because he or she also
does the paper work and title papers associated
with the deal! So there is no avoiding this person!
So Be Prepared!
And if you are paying cash, or have arranged your
own car financing, either through a bank, a credit
union or through the Low Cost Financing Alternatives right here on this website, any Finance Manager worth his or her salt will try to talk you out of it by telling you all the so-called advantages of letting them arrange the auto loan for you! They will have at their disposal computer programs and charts designed to convince you! Don't fall for any of it! It's All Crap!
The dealership, and consequently the Finance
Manager who by-the-way, works on a commission, make their
money in the Finance Office primarily in four ways:
 1. The Car Financing Itself. The banks will Kick-Back a certain percentage of the Amount Financed to the dealership! The higher the interest rate the F & I
person can talk you into, the higher the Kick-Back! The Kick-Back could be as high as 10% or MORE!
This means that on a $20,000 loan, the auto dealership
could be making as much as $2000 or More off of you just for arranging the auto loan! And guess who's paying that extra $2000?
Any ideas?
YOU ARE!!!
On a 66 month loan, $2000 could raise your payment
as much as $40 a month! That's a lot of YOUR MONEY lining the car dealer's pockets when it doesn't have to!
Now, just to be fair, the car dealership doesn't
always make that much. Then again, at times they
could make more! But even if they are Making
$500 or $1000 Off Of You it's still YOUR MONEY lining their pockets! Money that's raising your monthly payment; money you can easily save!
The only time the dealer doesn't make much money from
car financing is when you take advantage of the low
rates advertised by the manufacturer. Like the
0.0%, 1.9%, or the 2.9% or whatever. And in order to get these rates you usually have to give up the Rebate! In this case the dealership will be paid $50 or $100 by the car manufacturer. So this is a safe situation for you!
BE PREPARED!
Compare rates and grab the best auto loan deal right from the privacy of your own computer! Get Free auto loan quotes from the following lenders:
Specialize in helping individuals obtain bad credit car loans for the purchase of new or used vehicles. Apply to them and compare. You're under no obligation to accept any of their offers.
If you're not sure what your credit rating is get your Get all 3 Credit Reports plus 3 Free Scores Now!
2. The Second Main Area for Profit in the Car Finance Office is Selling Extended Warranties.
They are available for both new and used cars. There are many different warranty companies and many different levels of coverage available.
A few companies are good, most are not!
For a more in-depth discussion about what to look for in an extended warranty, and how to be sure you pick a good company, visit Extended Warranty Tips right here on this web site!
If you decide to purchase a warranty from a car dealer
understand this: The dealer is marking-up the price anywhere from
$400 on up to $2,000 and MORE every time they sell you a warranty!
An extended warranty is an excellent idea. You never know when a car is going to break down. One major repair could very easily cost more than the price of the warranty itself!
Buying a quality extended warranty from a company you can trust will give you great Peace-Of-Mind.
You can avoid the Big Dealer Markup on extended warranties by getting FREE PRICE QUOTES on New and Used vehicle warranties from the following extended warranty companies: CarWarrantyProvider.com
and Warranty Direct!
3. The Third Area That Will Cost You a Fortune in the Car Finance Office is Credit Insurance.
There are two kinds of Credit Insurance that the Finance Person will try to sell you. Credit Life Insurance is the first. This covers you in case you should die before your auto loan is paid off! If you have an auto loan in your name with Credit Life on the loan and you die before the auto loan is paid off, The insurance will pay off the balance of the loan.
If there are two names on the car loan like a husband and wife for example you can get Joint Credit Life to cover both people.
The second kind of Credit Insurance is called Disability or Accident and Health. This coverage is very expensive, and it covers you in the event that you become disabled through sickness or injury and are unable to work.
This coverage will make your payments for you until you get back to work. You usually have to be disabled for at least 15 to 30 days before you become eligible. Also, there is much fine print for pre-existing conditions.
So Be Warned!
The dealer will usually earn about 50% of the
insurance premium on these two coverages. And believe me, this can add up to $1000s. . . AND IT'S YOUR MONEY!
Another product the F & I person may try to sell you is Gap Insurance. Gap insurance covers the difference between the value of the car and what you owe on it in case the car is stolen or declared a "total loss" from a wreck.
Most people who finance or lease a vehicle owe more on it than the vehicle's actual book value. So if the car is totalled from an accident or from being stolen your insurance company will only pay the book value to pay off the claim. If you owe more on the vehicle than they give you there's a "gap" that you must pay off.
Gap insurance covers this "gap" or difference so you don't get stuck owing money on a car that you don't have anymore. It's a good thing to have, but you do not want to buy it from the car dealer! They will mark the price up $300 to $500 and more over the actual cost of the coverage! I've said it before "That's Your Money!"
A much less expensive alternative is to purchase Gap Insurance online where you don't have to worry about being ripped off by your car dealer. To find out if it's right for you and to get a Free price quote visit Gap Insurance.
4. The Finance Manager Will Try to Sell You a Variety of Other "Afretmarket" Products.
Everything from Rustproofing and Paint Sealant to Window Etching and Alarm Systems. Needless to say, all of these items will carry a huge markup, thereby lining the car dealer's pockets even further with Your Money!
All of these things we've been talking about make your payment go higher and higher! And don't forget, in addition to the individual commissions the dealer earns on each product, he is also earning a percentage of the Amount Financed! So the more stuff you put on the loan, the higher the Amount Financed and the more of Your Hard Earned Money goes from Your Pockets Into the Dealer's Pockets!
It's like the car dealer gets a double commission when you add this stuff to your auto loan! DON'T DO IT!
If you're going to finance a car, here are a few
pointers to keep you from paying too high of a payment:
1. Get all 3 Credit Reports plus 3 Free Scores
2. Get Free Online Auto Loan Quotes From the Following Lenders:
By getting Loan Quotes from the above lenders you'll know what kind of car financing is available to you, then you can decide if you want to go with one of them or if you want to use the quotes as a negotiating tool with your local bank or credit union! By the way, the car dealers hate it when you arrange pre-approved financing, but it's the smart way to go.
3. NEVER negotiate a car deal based on payment!
If the salesperson asks you what payment you'd like to have tell him or her not to worry about the payment. You want to negotiate a price on the car. Not a payment!
Beware of the "Packed Payment!" If you let the car dealer arrange the car financing on your purchase, and you negotiate the deal based on a payment then very likely the payment that you agree to will be much higher then is needed to cover the cost of the vehicle.
You see, the higher payment creates a "pack," or room in the payment to add in things like credit insurance, an extended warranty and other items like window etching, security systems, rustproofing, paint sealant and other high profit items that they can squeeze in....of course without you knowing you're actually paying more for the extra stuff! They'll just tell you it's all included in the price!
Bottom line? Don't negotiate on payment. Only on the price of the car! Do it any other way and you will be spending too much!
****Sidenote****
When negotiating a car deal don't let on to the salesperson that you have your own car financing in place.
If you tell your salesperson up front that you have already arranged an auto loan, and he or she relays this information to the Sales Manager, the manager might make the decision to hold out for more profit on the car deal (the Front End) thinking that they're not going to make as much on the Back End (Finance Dept. profit)!
****Sidenote****
Some years ago I was a salesman in a Ford dealership when I had a young couple who wanted to buy a Ranger 4X4 pickup. I asked them if they would buy the truck
for $450 a month! They said "Yes!" They didn't care about the interest rate or the length of the loan!
For $450 a month for 66 months, (a "packed" payment) we made a Very Big Profit on the truck, plus the Finance Manager included a high interest rate, an over priced extended warranty and credit life and disability insurance!
He made a killing too!
If this couple had come in prepared and educated, they could have gotten the same truck for about $250 a month!!!
Can I say this enough? BE PREPARED!
So PLEASE, use the information on this website to educate yourself before you step one foot on a car lot! Afterall, It's Only Your Money!
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