It has now been 3-4 hours, you have negotiated and initialed the deal, you are mentally, physically and emotional drained… now all you have to do is sign a few papers and you are out of the dealership with your new vehicle. NOT!
Buyer Tip: The Finance Business Office is just the next step in selling process. A significant portion of a dealerships profit margin is made by the Finance Business Office. They make their profit selling items like financing, various types of insurance, extended warranties, rust proofing, paint protection, security systems and etching.
Dealership Trick: Dealerships have been known to tell buyers they won't accept checks from Internet financing sources. The dealerships say the Internet financing sources charge a $XXX fee for cashing the Internet financing source's check.Comment: Internet financing sources like E-Loan www.eloan.com do not charge any processing fee to the dealership. The dealership is trying to switch the buyer to one of their financing sources where they have a "business relationship". The dealership receives a fee for every customer the dealership signs up with their financing source. The dealership also shares in the interest rate if the dealership adds an additional interest surcharge to the buyers interest rate.
Buyer Question: Should I let the dealer try to beat my pre-approved loan’s terms and conditions?
Comment: Absolutely … remember you are under no obligation to use your bank, credit union or Internet site’s pre-approved loan. If the dealership offers a better deal, take it and save some additional money.
Buyer Tip: A better deal is not necessarily lower monthly payments. A better deal is a lower interest rate for the same loan term (length in months). Always compare the dealership’s interest rate and loan term against your best pre-approved loan’s interest rate and loan in your Buyer Information Folder.
Dealership Trick: Dealerships have been known to focus the buyer on a lower monthly payment by extending the term of the loan.
The following example is where the dealer has reduced the monthly payment by extending the length of the loan from 60 to 72 months. This has resulted in a lower monthly payment but a higher amount of interest being paid over the life of the loan.
Example: A $15,000 loan at 6%.
| Monthly Payments | Length of Loan (Months) | Interest Rate | Total Interest Paid |
| $290 | 60 | 6% | $2,400 |
| $250 | 72 | 6% | $2,899 |
Dealership Trick: Dealerships have also been known to focus the buyer on a lower monthly payment by extending the term of the loan and raising the interest rate.
The following example is where the dealer has reduced the monthly payment by extending the length of the loan from 60 to 72 months and raising the interest rate from 6% to 7%. This has resulted in a lower monthly payment but a substantially higher amount of interest, an additional $987, being paid over the life of the loan.
Example: A $15,000 loan
| Monthly Payments | Length of Loan (Months) | Interest Rate | Total Interest Paid |
| $290 | 60 | 6% | $2,400 |
| $256 | 72 | 7% | $3,413 |
Financing after the Purchase
Dealership Trick: Dealerships have been known to call buyers, after they have financed a loan thru the dealership, and advise them they have found another financing source which will lower their monthly payment by $xxx a month. All the buyer has to do is come down to the dealership and sign some papers. This could be a delayed version of one of the two examples above.
Buyer Tip: Always compare the interest rate and loan term (length in months) of the new loan against your current loan’s interest rate and loan term (length in months).
Buyer Tip: Obtain financing directly from a bank/credit union/Internet source and avoid the dealership tricks.
Dealership Trick: Dealerships have been known to call buyers, after they have financed a loan thru the dealership, and advise them they are having trouble getting the buyer financed. The buyer is ask to either put down a larger down payment and/or pay a higher interest rate. This could be legitimate but a requirement for a higher down payment could indicate the dealer is making to much profit and the bank won’t finance it. The requirement for a higher interest rate could indicate the dealer is trying to get more profit margin out of the transaction by charging an additional interest surcharge on the loan.
Buyer Tip: Obtain financing directly from a bank/credit union/Internet financing source and avoid the dealership tricks.
Classic Dealership One-Liners.
“We can get you the best interest rate from one of our 50 funding sources.”
Comment: Maybe! Check the dealership rates against your pre-approved rates from the Internet financing source, local bank or credit union.
“We can’t sell you the vehicle at the agreed price unless we finance it.”
Comment: Remember they are not the only place which sells this model of vehicle.
Financial Disclaimer
The purpose of website eAutoAdvantage.com is to provide the user with general information about the subject matter presented. Website eAutoAdvantage.com is not intended, nor should the user of website eAutoAdvantage.com consider it, to be financial advice applicable to the user’s specific situation. The user is solely responsible for the use of website eAutoAdvantage.com. If the user has any question about a specific financial situation, they should seek counsel from a financial planner or CPA registered to do business in their state. Also see our general disclaimer.
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