Buyer Beware: Dealer Financed Auto Loans Can Be Costly - Page 2
Solution: When buying a new car, understand that the car value will decrease by 20-25% within the first year of ownership. You should be able to make a down payment of approximately 20% when you buy the new car, that way you won’t be “upside down” on the loan within months of owning the car.
You shouldn’t buy a new car until you’ve paid off the loan on the old car but if you are shopping for a new car and want to do a trade-in, first go online to get real car values at Edmunds.com and TrueCar.com. If you decide to go with dealer financing, read over every line of the financing and dealer agreement before signing. You don’t want to be paying off two car loans.
5. Scam: The dealer is offering a cash incentive to be used as a down payment on a new car purchase but the dealer rolls the incentive amount into the loan without you knowing it. The dealer may also inflate the amount of the loan by telling the lender the car has more extras than you’re really getting.
Solution: Again, be an informed consumer. Read all of the dealer and lender documents to know what you’re buying, what it should cost and what your loan amount and payments should be before you sign any document.
Buying a car is a big financial commitment whether you’re paying for it outright or taking out a loan. It is very important to do your homework and not be pressured by the car dealer salesperson.
If you decide to get dealer-financing, focus on the price of the car and the loan amounts, not on the monthly payments, (although you must be able to handle the loan payments within your budget.) Don't forget that a car loan is a secured loan. Once you sign the contracts you are the car owner, but if you don’t make the loan payments on time, the dealer has the right to take back the car.
Contact the Federal Trade Commission and the Better Business Bureau if you have complaints regarding any fraudulent financing practices of a car dealer.
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