Car-shoppers spend a lot of mental energy preparing for the salesperson. They plan their negotiation tactics as they ready themselves for a war of the wits. They should also prepare for another key player in the car-buying process-the finance manager.
"Buyer beware" is a good phrase to keep in mind when you're searching for a new car. Everyone has heard the stories about car salesmen who'll do and say anything to move their four-wheeled merchandise. But there's someone else who can also have a profound impact on your purchase-the finance manager. Here are a few questions to ask when the two of you talk dollars and cents:
1. What's the interest rate on the loan?
The most important factor in any financing deal is the interest rate. Ask the dealer for the APR (annual percentage rate), which is the best apples-to-apples measurement for comparing loans. Be sure to ask him how they compute their APR, because many lending institutions use different methodologies. You'll get a sense of exactly what a lender is including in the interest costs.
2. Can you detail all the penalties and fees?
A favorite tactic of any lender-auto, mortgage or personal loan-is to bury an assortment of fees and penalties in the fine print of your car loan. Make certain you're clear on all the fees that are included.
The dealer may also include penalties for paying off the loan early. Try to avoid them if at all possible; they can be problematic if you decide to refinance the loan down the road.
3. Can you get final approval on the financing package before you leave the lot?
Finance managers love to tell you that the deal is approved, but then call you the next morning to say the financing has fallen through. Naturally, they'll have another lender lined up for you, although the interest rate will be higher and there'll be more fees attached.
Don't fall for this one. Make sure that the deal is set in stone before you leave the lot. If it's not, tell the finance manager you won't come back.
4. What are the specifics behind the credit insurance?
Including some sort of credit disability or credit life insurance policy with the loan is another revenue-generator for auto dealers. If you feel that you need one of these policies, ask for all the details concerning the coverage. Compare the policy with others on the market, and also check with your financial advisor to see if it's the right deal for you.
"Buyer beware" is good advice when dealing with a finance manager; but the above questions will do more than help you get your guard up. Armed with them, you'll be "buyer prepared." You'll send a clear message to the finance manager that you're nobody's financial fool.