Financial disasters in 2008 changed loans dramatically for the auto industry, the mortgage industry, and the credit card industry to mention a few. Prior to 2008, just about anybody could get a car loan no matter what your credit score. Anyone who filed bankruptcy was inundated with offers to get a car loan, but that changed and credit tightened up. Most of the lenders that were making high interest, high-risk loans went out of business.
Today, credit is loosening up but will probably never be as easily accessible as it was four years ago. More people are using dealerships to finance these days due to aggressive incentives and very low interest rates. Dealerships can often save you money on a loan, but the finance department seems to be a source of irritation for many buyers.
As in every profession there are good dealers and bad dealers. Many people are taken advantage of in the finance department of dealerships. Over the years, I have seen it all, high-pressure tactics to purchase extended warranties, credit life and disability insurance, GAP insurance, etc. I have also witnessed downright fraud.
The finance experience does not have to be a trying experience. This seems basic and simple, but it is critical that you understand you are signing a contract-a legal and binding document that obligates you to make monthly payments on a timely basis. READ WHAT YOU SIGN.
People never ceased to amaze me when I was in the car business. People would negotiate 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.
It is no secret that a dealer makes money on most every product they sell in the finance department, but remember it is all optional, nothing has to be purchased in the way of optional policies or products. There are worthwhile products offered, like extended warranties and GAP insurance just to name a couple, but they are totally up to you. Nobody will hold a gun to your head and force you to buy anything. If a finance person tells you something is “required” to purchase, leave immediately.
Dealers first and foremost provide financing as a convenience to their customers, to help complete the sale under one roof. In many cases, the auto manufacturer offers extra rebates if you finance with their captive finance arm, like Ford Credit, Hyundai Financial, and the others.
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, don’t leave it to chance. Know how many miles you drive per year to know which extended service policy to buy. Get online and calculate about what your payment should be. 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, especially when it comes to reading and signing paperwork.
By the time you get to the finance department of a dealership, you are ready to get out of there. Some dealers prey on that, and too often consumers sign everything someone puts in front of them. Take a deep breath, consider the products you are offered, and remember that these are optional purchases. Some of them will be right for you, others may not. Make a good financial decision for yourself and your family.