5 Ways Not To Get Screwed When Financing A Car

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Pimpmobile (Photo credit: GeoClark)

The following is a guest post. To learn more about guest posting on iHeartBudgets, please contact me.

The other day, I was reading Jake’s article, Things I Couldn’t Do If I Had A Car Payment, and as soon as I read it, I thought about my little sister. She can’t stand her ‘99 Buick. Unfortunately, she’s dubbed it the pimp-mobile and has promised to trade it in. I’ve told her to sell it on Craigslist but, she refuses. So, I’ve given her a list of rules to follow when she finances her next car.

5 Ways Not to Get Screwed When Financing a Car

#1 Know what you want before you get there. Most people are like sitting ducks during hunting season when financing a car. They don’t know what they want or how much they’re willing to pay for it. As soon as you arrive most car dealers will ask you, “What’s your price range; and, do you have a specific car in mind?” You should already know the answer before you arrive.

Luckily, we have the internet today. So, you can choose your car from home. Once you’ve decided, print off the entire ad. Then, head to the dealership. This way, you won’t have to worry about price manipulation or being limited to vehicles you don’t want.

#2 Get Outside Financing. When you shop for a car, you don’t want to negotiate with the dealer. Unfortunately, all the cards are stacked against you because, they have the money and the product.  Gain some leverage by showing up with the ad you printed off, and your pre-approval letter.

Another reason you want to get pre-approved is to avoid any inflated finance charges and hidden fees. Plus, car dealerships tend to submit your application until a finance company approves the loan. This results in multiple inquires on your credit report, thus reducing your score.

#3 Don’t go it alone. Purchasing a car is a big expense for most families. It’s usually only second to buying a house. You’re required to get your home inspected before closing the deal. You should do the same when buying a car. So, be prepared and show up with a professional. If you don’t know a good mechanic, ask your family and friends who they trust. This is an easy way to avoid buying a lemon.

#4 Read it, don’t believe it. Never believe a salesman. I don’t care how nice they appear. If it’s not on paper, it doesn’t exist. Reading the fine print is crucial. Most car dealers don’t want to piss off a potential customer, for obvious reasons. So, they’ll agree to anything in order to make a sale. More than likely, you won’t find out what you’ve gotten yourself into, until you’re driving off the lot. Then, you’ll spot the high APR, ridiculous finance charges, and hidden fees.

#5 Sell it, don’t trade it in. One of the biggest mistakes car buyers make is trading in their old vehicle. Every good salesmen knows, the more he gives you for your car, the less he’ll make when he sales it. It’s just good business. Make sure to sell your old car before buying a new one. Most people avoid this step but, it will save you a lot of money in the end.

If you don’t want to do the leg work, at least trade it in the right way. At some point, the car dealer is going to ask, “Are you going to trade-in your old car?” Don’t make the mistake of saying yes. Say anything but, yes. Personally, I would say something like, “No. I don’t plan to.” Wait until the price is set and everything has been confirmed with financing before mentioning your trade in. This is how you prevent them from raising the asking price to diminish your car’s trade in value.

iHB thoughts: Jackie, these are some great points on how to deal with a dealership if you are purchasing a car there. Heck, I say avoid the dealership altogether and, if at all possible, don’t buy a new car. It sounds like you really love your sister and want the best for her, you’ve got a big heart. Let us know if she ends up selling the “pimp mobile”, trading it in, or keeps it.

About The Author: Jackie is the sole author at Debt Free Bread, so give her some love and go check out her site (clean design, too, I should really take some notes!). Thank you Jackie for the guest post, and let’s hope your sister can heed your advice and save thousands!

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Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

22 thoughts on “5 Ways Not To Get Screwed When Financing A Car”

  1. Good points. I totally agree with #1. Doing your homework beforehand is a huge way to set yourself up for success. I personally never give the number I am looking for as I don’t want to be sold to that. I decide what car or two I am looking for beforehand and just go from there.

  2. #5 has some truth to it, but not disclosing you have a trade in establishes a lack of trust with the salesman. If you drove up in a car that isn’t newish, he is just going to assume you have a trade in anyways and now you look like a liar to him. Now he doesn’t have any extra incentive to help you get a better deal. I have several friends who sell or have sold cars as a job and they all have told me that this “trick” doesn’t really work anymore. There is only so much profit that can be made from a sale and if you bring up your trade in later they are going to low ball you on it so they can make more profit to make up for what they are losing now. You can always pass on their offer but now you have to sell your car on your own, while not hard, can be annoying and not worth it to some people. The real trick is to know what you are will to pay for the car you are purchasing and how much you are willing to take for your trade in and negoiate until you hit that point or just walk away. There is nothing a salesman hates more than spending a couple hours with someone and they walk away.

    • #5 can come off as dishonest which I always try to avoid except when it comes to car dealers. I don’t trust them. It’s all about money when buying a car.

  3. All great tips. You lose so much of the cars value when you trade it in. The dealerships have to get their profit out of it. We sold our 2004 Acura a few months ago on Craigslist and the first person who came to see it bought it for the Kelly Blue Book price.

  4. Cars can easily become one of the biggest mistakes people make in regards to their finances and I see it most commonly done in younger adults/teenagers. That age lends itself to wanting to conform to societal pressures and there is nothing better than having a pimp ride to look cool in. Great tips in trying to avoid a bad deal! We try our best to pay cash for used cars and avoid loans/debt at all costs!

  5. The best tactic we found was to find two cars that were almost identical (same make, model, year and mileage), but different colors and $2.5K difference in price. The cheaper one was at a sleazy lot where they wouldn’t let us get it inspected prior to purchase… but the more expensive lot didn’t know that. They were great, let us take it home (about 100 miles away) for a week to get inspected by whoever we wanted before purchase, and because we had the printout of the ad with the exact same car, they matched the price.

  6. I was so paranoid about being ripped off (or the dealer at least trying) when I went to purchase my car that I brought my boyfriend along with me even knowing which car I was buying. So many dealers try to pull the wool over people’s eyes that they see as vulnerable (I’m young, I’m dressed in office clothes, they probably thought I was naive too). My favorite piece of advice in this post is to not go alone!

  7. Another reason you want outside finacing is to avoid the car payment sell. The moment you are open to financing, the saleman tries to sell you a car payment instead of haggling on the overall price. Before you know it, the overall price hasn’t moved, you’ve traded in your car for less than it’s worth and you have a ten year loan with a high interest.

    Keep it simple. Haggle on price and go elsewhere for a loan.

  8. Good article.

    I usually buy cars from individuals, rather that from a dealer. At least if you buy from a private party, you know they are not professional liars.

    If you have to buy a car from a dealer, I like your suggestion of using the buddy system. It’s harder to trick two people than it is one.

  9. Great article Jackie!

    Back in the 90’s I was looking to buy a Pontiac Sunbird. I went to a number of dealerships in our city to talk about all of the details including the price. Back then each of them let me leave with a print out of what the deal would look like. All of that helped me determine the exact price I was going to pay and all of the options that I wanted included. I then took that info and went to a dealership in a small town outside of our city. The sales guy found the vehicle I wanted for several thousand less than everyone in town and I was satisfied with my purchase.

  10. Great post and lots of good info…the only thing is when it comes to inquiries on your credit. Similar inquiries grouped together in a short period of time (such as for car loans or mortgage rate shopping) typically are seen as one inquiry. The credit reporting agencies give a little space for people to shop around for the best possible rates.

  11. Getting outside financing ahead of time is an excellent tip that I bet most people forget about. My sister is looking for a new (or gently used) car right now, so I will be sure to share this with her!


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