So, you’re buying a car. You’ve made it past the tedious comparison shopping, you’ve finished the detail-oriented research and you’ve even endured the haggling with the salesperson. Your tongue probably tastes like that terrible coffee they use in every car dealership in America, the kids are probably getting cranky and it’s pretty likely you’re thinking about everything else you could have done with your weekend. But, it’s almost over.
“I just gotta go in to see the finance manager, sign some papers, and we’re on our way home.” 
That feeling of relief washes over you, you let your guard down, and you don’t even realize until too late that you’re suddenly in a much higher monthly loan payment or longer term than you’d planned for. What, in the name of Lee Iacocca, just happened?
The stereotype of car dealerships usually involves a salesman with a pencil mustache and a polyester jacket who lies through his nicotine-yellowed teeth about undercoating or telling you how the used car you were looking at has only ever been driven to church on Sundays. That guy is easy to spot. If the salesperson lies to you, you have some legal protections. If you Google before you go, you’ll even know most of the tricks the salesperson might roll out. What you’re less protected against are the tricks that happen in the finance office. Below, we’ll talk about what to look for and how to avoid dealer finance scams so you don’t spend too much on your next car.
1.) Keep your wits about you. Never let your guard down at the dealership. Every person there wants to make money off of you and they’re very competitive. Even if he or she says that they don’t want or receive commission on your particular sale (“I just need to hit my quota” or “One more sale puts me at my bonus, I’ll take a loss on this one”), that person is almost certainly a very competitive person who’s going to be comparing notes with his or her coworkers this afternoon.
The finance office is designed to put you at ease, so you’ll lower your guard. The finance office is probably in a different part of the building, with different lighting and ambiance. The offices may be appreciably nicer, with actual walls instead of cubicles, some of which may have art hanging on them. Clearly, the person you’re talking to is important, having been in such a nice office for so long.
And that’s what should scare you. The people in the finance office are often not financial experts by trade; after all they don’t need to do your taxes or invest your money. They only have to understand one transaction. Therefore, many dealerships will send their best salespeople to finance classes so they can have a smooth closer at the end of each transaction. Don’t let the gray hair fool you; the person in front of you is just as competitive and sharp as the one on the sales floor. After all, to get this office, the finance officer had to be really fantastic at making sales.
2.) Know your credit score. There are a lot of reasons to know your credit score before you make a large purchase, including the fact that you should check your credit report for irregularities fairly often, whether or not you’re buying anything. When you buy a car, it’s especially important. Finance managers like to use customer ignorance against them, and if you don’t know your up-to-date credit history, then they’ll smell blood in the water.
While the most obvious example is to try to charge you more than you need to pay, you might not expect that another classic is to offer you a loan at a far lower rate than you deserve. The idea is to offer you a rate so low you can’t say no, then wait a few weeks before telling you that the financing unexpectedly fell through. Don’t worry, he or she will tell you, you can keep the car. There’s a clause in your contract that says “subject to financing,” so he or she found a different lender. The good news turns sour, however, because your new rate is through the roof and you’ve already signed the contract and taken delivery of the vehicle.
Don’t take a loan at a rate that’s too good to be true. If you’re tempted by an offer in the finance office, ask how long it’ll be valid. Then, take it home and show it to your lawyer, so someone you trust can tell you if it’s on the up-and-up. If you don’t want to pay your attorney’s rate, you can also bring it to us. We’ll take a look, let you know about any potential pitfalls, and we might even be able to beat that rate or provide a better term, saving you even more money. Remember, if they say that the deal expires today (particularly on the weekend) or that you can’t take your contract with you, it’s almost certainly because they don’t want you to take the time to think about what you’re doing.
It’s never a good idea to trust someone who doesn’t want you to think.
3.) Walk in with an offer. Then, walk out with an offer. The best way to get a fantastic rate on a loan for a new or used car is to finance through Stark Federal Credit Union. We aren’t looking to make a profit, we’re looking to support our members. We’re also trustworthy – it’s why you’re here in the first place, after all – so you know our great rates aren’t scams. So, come see us first and you can walk into the dealership with your loan financing already approved. You’ll know how much you can spend, taking the pain out of negotiating. You’ll also know what interest rate you’ll get and have a pretty good assurance that your monthly payment will be manageable. Plus, you’ll only need to run your credit score once, so you don’t have to worry about losing points from looking it up too often.
Don’t let the salesperson know that you’ve already gotten financing, though. The dealership knows how much it wants to make on the transaction, and it doesn’t care if that money comes out of the trade-in, the sale, or the financing. If you know how much your trade-in is worth and you have your financing taken care of, then the only place they can make money is on the sales price. If they know that, they’ll be less flexible on the sales price. Let them think that if they give in a little on the sales price, they’ll be able to make it up in financing.
But you also need to be able to walk away. Just like any other part of the sale, whomever can walk away controls the deal. If the terms of the loan the dealer offers you sound great, thank them and take them with you and let’s compare notes. We’re here for you and we promise to burn the midnight oil figuring out what we can do to make the best deal you can get.
This might all seem a little excessive. Maybe you’re good at negotiating, you’ve looked up all the dealer scams and dirty tricks, and you can get the loan really close to what you want. You’re only off by $50 or so, and if you just sign the papers you can take the car home tonight and be done with the whole process.
Remember, $50 may not sound like much, but over a 60-month loan, that’s $3,000 plus interest. Who would you rather see pocket that $3,000: the dealership or your family? To put it another way: if your child racked up $50 in extra data charges on your phone bill, how would you feel? What if he or she did it every month for five years? Let’s beat the finance office together.