6 Tricks of the Dealership Finance Office
Posted by: Dan on 2/03/2017
There are three basic steps to buying a new car. The first is deciding that you want a new car. The second is to do your research, and then locate the car you want. And the third? Arranging for the financing of your new dream vehicle.
With a total of $1,227,209,000 in car financing in 2015 across the nation, it's clear Australians are always ready to consider financing when buying their next car.
To many ambitious car owners, the idea of financing sounds fantastic. You can get the car you want today, even if you don’t yet have all the money on hand to buy it. But while financing can be a great way to get behind the wheel of your dream car, there are also many pitfalls you need to avoid once you get to the financing stage. Read on to learn some of the warning signs of a bad financing deal.
It's so easy to get a car if you finance. Really easy, in fact. At least, that’s what the dealership will tell you. They’ll use the word “easy” so much your ears will ring. And the more they use the word, the more suspicious you should be.
This is because, while signing up for financing may appear quick and seamless, the fine print of the agreement is usually front loaded. This means you may find it impossible to revisit, change, or end the agreement without facing huge penalties and costs.
Nobody likes being pressured into a sale or into doing their financing at the dealership. Good salespeople know that using this tactic is not only disingenuous but ineffective. Nonetheless, some salespeople try to give the impression of scarcity to make the sale, saying things like “Now is the time to buy – this car won’t be here long,” or “Let’s get this deal done for you today – the price may go up tomorrow.” If they do succeed in getting a buyer to agree to the purchase, the buyer will then likely be subject to more pressure to use the dealership’s financing, leaving little room for interest rate shopping or loan comparisons.
If you find yourself in such a situation, being polite – but direct – is essential. There’s no need to be rude, but neither should you worry about offending the salesperson. So, even if they try to guilt trip you into a sale or financing through the dealership, just say no, and indicate you’ll only consider financing when you feel you have all the information you need to make the best decision for yourself.
If you have the chance to drive away in your new car today for a payment of just $199 a month, that might sound like a great deal. If the fine print says you’ll be paying that for the next 15 years however...not such a great deal. This is why reading the fine print is so essential. Sure, the monthly payment amount may sound affordable, but you need to look at the total payments – and the interest rate – over the life of the loan to see the true cost.
Reading the contract in-depth (or getting a lawyer to do it for you) is your responsibility. Being upfront about explaining the details in the financing is the dealer’s responsibility. If you find that whenever you ask about something in the contract you just get a vague or evasive answer, that is a clear sign that the dealer is trying to pull something over on you. Don’t let them trick you. Ask your questions until you get the specific answers you need.
Deals are rarely done on the shop floor, so it's not an immediate problem if a salesperson invites you to sit down with them to discuss a potential deal. But if they immediately switch into a more aggressive sales pitch once you sit down – or ask the person you’ve come to the dealership with, such as a family member or friend, to wait outside – that’s a big warning sign. Bad dealers know it's easier to trick one person than a couple, so be aware.
Similar to the tactic of trying to isolate you, a bad car dealer will be wary of having other people involved. If you feel unsure about a deal, indicate you’re going to show the contract to your lawyer before signing, visit your bank to discuss other financing, or even bring back a friend for a second opinion. If the dealer is ok with all of this, odds are good their financing deal is ok too. If they resist and try to discourage you, it's a warning the deal is likely a bad one.
Any deal or contract signed in Australia is subject to a number of laws. This is non-negotiable and applies to both the buyer and seller of the product or service. So, while it’s always better not to sign a deal you are uncomfortable with, if you already have then you can still look to fix the problem by contacting Consumer Affairs, VCAT, or even your local police station to find out how you can take action under the law.
By following our tips here, you’ll avoid falling into the traps that surround car financing when you go to buy your next car. But it's also important to keep in mind that most car dealers are good and honest, and have been in the business of selling cars for a very long time.
Good dealers might put on a “typical salesperson” act, but in the end they’ll also be honest and transparent with you. Seek out a dealership with this style of salesperson, and buying your next car should be a drama-free experience.
What other tricks of the dealership finance office have you seen in action? Let us know in the comments below.