Be Cautious Of These Car Credit traps

In: Personal Finance

12 Jul 2009

Looking for a new car? Luckily for you, it’s a buyer’s market out there. Thanks to bankrupt automakers looking to get rid of extra inventory as soon as possible, now has never been a better time to go shopping for that dream car, especially if you’ll be using car credit to purchase it.

Like with most deals, some of them are truly too good to be true! Here are the most regular offers that dealers are using to entice customers in, and why you should run away from them:

Buy One Car, Get The Second Free. Sounds like a great deal, right? You can purchase one vehicle, and the dealer will throw in another car for absolutely free! This might appear to be a great deal at first – especially if you have a large family that will benefit from the second car – but don’t sign that contract just yet. Dealers won’t let you choose your second car; as a result, they’ll often give you a car that doesn’t sell well, like an SUV or gas-guzzling truck. Additionally, that second car isn’t necessarily free; dealers will attach hidden fees to your loan application to ensure that they get some financial return. If you’re paying for the first car with the dealer’s car credit, you’ll be hit with a high-interest rate loan to cover the costs of your “free” second vehicle.

Low Interest Car Credit Loans. It’s no secret that dealers are starting to get desperate – and many of them are offering car credit loans at next-to-nothing rates. Does this sound great to you? Before you put on your shoes to head to that dealership, you need to possess perfect credit in order to take advantage of these rates. Besides, many of these loans are only available for certain car models, which means that your ideal car might not be covered by these low-interest car credit loans. To get the best deal on your car credit, be sure to get competitive loans from a third-party lender before approaching the dealership for financing. This way, you can ensure that you’re getting the best deal on your car credit!

Drive Off The Lot. Many dealers are promising potential customers that they’ll be approved for car credit on the spot, meaning they can drive off of the lot that day. Yet if you peruse through the fine print, you’ll see that the terms of the loan can change – and you might see your interest rates go up only a few weeks later.

Don’t fall for this trick; instead, be sure to get a competitive loan offer from another bank or lender before you approach the dealer for financing. Another important note: never let the dealer know that you intend to drive the car off of the lot that day. You want to have the power in negotiations – and this will only put your dealer in a superior negotiating position!

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