Know Their Game Plan
Your credit score is a snapshot of your past, but an indicator of how future business dealings with you may go. Auto lenders are only concerned with the risks versus the benefits. Now, I have avoided using the terms ""car dealer"" and ""auto dealership"" on purpose. I wanted you to start separating the concept of lender and dealer. Your neighborhood automobile dealerships do not lend money, nor do they have any to lend you! (I am certain they would if they could) Car dealerships are merely middlemen; they hold car inventory and have all the local resources required to sell vehicles and negotiate the terms and conditions of the loan between the lender and you. Here are some helpful tips to keep in mind so that you are not easily taken advantage of by the bad credit auto dealers in your region. Check into them:
You should never be forced to purchase an extended service or warranty agreement. This is a favorite tactic of dealers because it puts profit directly in their pockets. This is where my rants about the distinctions between dealers and lenders become relevant. Dealers profit from the difference between what they owe the automaker and what they sold the vehicle to you for. (They are also compensated for meeting monthly, quarterly, and annual volume targets) This shady strategy is designed solely to capitalize on your desperation and extract additional profit from you in times of need. You are here to increase your knowledge, which will hopefully bring you one step closer to obtaining a loan for a new or used automobile.
Know Your Score - Nothing could be simpler. This is a step that should never be skipped. Before entering a dealership, it is imperative that you know your credit score. Loans for people with poor credit typically carry high interest rates and may require larger down payments. This fixed interest rate originates directly from the bank, preventing dealers from adjusting or manipulating it. However, they consistently misrepresent the amount of the down payment required to secure your new loan. The lender may request a $2500 down payment, but the dealership will require $5,000. Again, they intend to retain the additional $2500 as profit. Typically, they can extort this additional cash from you by lying about your credit score and scaring you into believing that $5,000 was required by the bank to complete the loan. As I previously stated, ""Know Your Score"" Already said.
The Total Cost Is KING - If you have poor or damaged credit, it's likely for this straightforward reason: At some point, you owed more money than you could pay out, and the situation deteriorated. Typically, this type of past is accompanied by a lack of funds or inadequate monthly income sources. Consequently, you begin to manage and consider all financial decisions in terms of a monthly payment. This is not inherently a bad practice, but keep in mind that your auto loan will carry a fairly high annual interest rate. This can blind you as you evaluate your needs for a new automobile. Monthly payment... Monthly payment...this is your typical refrain as you approach a car dealership. However, this is also the salesperson's catchphrase. This is problematic, and here's why: You should be interested in negotiating the total price because that is the only way to save money in a meaningful way. The dealer is interested in negotiating the monthly payment because it distracts you from the fact that they are not offering a discount on the car's price. It also distracts you from the fact that the majority of your monthly payment will be interest and only a small portion of the principal balance. If you are even slightly interested in saving money, which I am certain you are, then you should focus on the only area where you can actually do so: the total price of the vehicle, not the monthly payment."""