Posted Thursday, Sep 30, 2021
The only thing between you and your new car is the dreaded paper works. You are tired, exhausted and excited at the same time! Now you are headed to the finance office, the best salesman in all of the dealership. Honestly, there is nothing to be concerned about if you understand what will happen once you get into the finance office. Knowledge is power, and below I will tell you what you can expect, and to prepare you and potentially protect you from bad dealership practices.
Caveat: Like every profession, there are good dealers and bad dealers, just as there are good finance managers and bad finance managers. Many people are taken advantaged of in the finance department of dealerships. Over the years, I have seen it all, and have firsthand knowledge because I played the role of an F&I Manager. High-pressure tactics to purchase extended warranties, credit life, and disability insurance, GAP insurance, etc. Sad to say sometimes downright fraud. Bear in mind, most finance managers are paid on a commission basis on the ancillary products they sell.
READ WHAT YOU SIGN, not just your monthly payments. While it is true that it is a CONTRACT OF ADHESION; take-it-or-leave –it contact, you’d still want to know what you are signing is what you have agreed upon with the sales department. Also, THERE IS NO COOLING OFF PERIOD, you can’t change your mind and return the car tomorrow, unless you purchase a used car below $50,000 at which you have to be offered a Contract Cancellation Agreement, at least in the state of CA. People never ceased to amaze me, they would haggle for five hours on a car, then when the most important part came…going over the final numbers and signing papers, they would almost always want to rush through this part. They would sign everything you put in front of them without asking any questions.
The finance department is the most profitable department in the dealership! It is no secret that a dealer makes money on almost every product it sells in the finance department. The loan they arranged for you is not an exception. Remember all additional products are optional, don’t let the finance manager tell you otherwise. You should research products the dealership will offer you like extended warranty, GAP insurance, maintenance packages etc. It is not my place to tell you to buy or not a product, but please research it. I don’t have enough information to go by to give you advice. Know how many miles you drive per year to know if an extended service policy should be considered. If you have a $ 7000.00 negative equity added on your loan with zero down payment on a car that you purchased for MSRP please buy a GAP insurance, might as well right? But often the situation is not as obvious so if I may suggest that you get some information on it, as part of your research that will also relieve a lot of pressure when the finance manager pitches it to you. Also remember they are NEGOTIABLE, and if the finance manager is not willing to part with his profit it is also available from third party providers.
Doing your homework is always a good idea. As far as interest rates go, know what you can get before you go to a dealership. Talk to your banker or credit union to know for sure what interest rate you can get, don’t leave it to chance. Get online and calculate what your payment should be. We have one for you @ 15852864-2.websites.dealercenter.net. Buying a car and committing to five or six years’ worth of payments should rank right up there with buying a home, and taken as seriously. Once you know what interest rate you can get on your own, give your dealer a chance to get you a better interest rate. They often can. If the dealer can save you a quarter to half a percent on interest, let them have the business and pocket the savings.
Should You Get Pre-Approved Before Car Shopping?
By all means, please do so. Just understand a pre-approval is not an approval. You can find out from your bank or credit union your best possible interest rate, but the credit analyst or loan officer still need to determine the loan-to-value ratio, debt-to-income ratio and whatever guidelines they might have before they fund the loan. Lenders will change the APR based on LTV and sometimes rescind approval. In other words, they don’t want to loan you $50,000 on a vehicle with a $30,000 MSRP.
One of those things you never tell to your salesperson. I am paying CASH! You can often get a better PRICE by financing the car with the dealership. I realize this sounds counter-intuitive, but let me explain. During my time working for the dealership I ran across a lot of people who wanted to throw around the fact that they were paying cash. Thinking they should get some sort of special deal because of that; guess what, they don’t! Dealerships make money by originating the loan just like your mortgage officer makes money when he originates a loan. Knowing that allows the sales manager to discount the car even more. Cash buyers deprive the dealership of that revenue and they don’t get a better price because of it, so waving a blank check do not carry any weight when it comes negotiating a better price. Notice I said PRICE? Paying cash could still give you a better overall deal because you don’t have to pay for finance charges. So pay cash if you must just don’t use it to haggle for you a better price.
If you keep anything from this article, remember to read what you are signing, and make sure the numbers match what you agreed to. Ancillary products: extended warranty, GAP, maintenance plan are negotiable. If you are paying cash keep in to yourself until it’s time to write the check. Don’t rush the auto financing process whether you purchase, lease, or pay cash.