How to Navigate the Car Dealership Finance Office

What You Need to Know About Financing

Dealership finance paper signing
Photo Copyright: Billion Photos/Shutterstock
Many of the questions I get on the air have to do auto financing. This is an area people who have bought cars before worry about. By the time it is time to sign on the dotted line, you may have been at a dealership for a long time, you are tired, and you are just ready to go home with your new vehicle.

Here are some things to keep in mind:

Finance Departments

Beware: Like 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. Bear in mind, most finance managers are paid on commission, based on what they sell.


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. They would negotiate for five hours on a car, then when the most important part cameÖgoing 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.

Optional Policies

It is no secret that a dealer makes money on almost every product it sells in the finance department. Remember that all additional products are 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. 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 its captive finance arm, like Ford Credit, Hyundai Financial, and the others.

Interest Rates

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 what interest rate you can get, donít leave it to chance. Know how many miles you drive per year to know which extended service policy to buy.

Get online and calculate 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. Once you know what interest rate you can get on your own, give your dealer a chance to get you a better interest rate. They often can. If the dealer can save you a quarter to half a percent on interest, let them have the business and pocket the savings.

One good rule of thumb is to look at every line on the finance contract that has a dollar amount next to it. You will see normal charges for tax, title, and license, but if there are any added items, they must be broken out on the contract itself, so they are easy to spot.

Should You Get Pre-Approved Before Car Shopping?

This is difficult to do actually. You can find out from your bank or credit union the best possible interest rate, but until the loan officer can see the actual numbers on the car you picked out, most lenders will not do that. The lender wants to know how much you want to borrow versus the collateral, the car. In other words, they donít want to loan $50,000 on a vehicle with a $40,000 MSRP.

Cash vs Financing

You can often get a better price by financing the car with the dealership from which you are purchasing. I realize this sounds counter-intuitive, but let me explain. Thinking back to my years in the retail auto industry, I ran across a lot of people who wanted to throw around the fact that they were paying cash. They were determined that they should get some sort of special deal because of that. The truth was, as a car dealer, I didnít really care how we got our money. Whether cash, credit union, bank or one of our finance sources, we got our money quickly, often the same day, so waving a blank check in front of me did not carry any weight when it came to pricing my vehicle.

Rebate Offers

Today, many of the captive finance sources (Ford Credit, GM Financial, Toyota Financial Services, etc.) offer extra rebates for financing with them. Iíve seen those amounts as large as $1500. Diehard cash buyers are often put off by this and get angry with their car dealer, but the truth is, the dealer cannot control this. There is an easy way to get around it, however.

The finance companies offering the rebates are enticing you to finance with them, of course, to make a return through interest rates. They are hoping that you will decide to keep the loan so they can make money. In these cases, the savvy cash buyer will proceed with financing the car, get benefit of the financing rebate, and simply pay the car off in full before the first payment is due. You get full benefit of the extra rebate and get to write a smaller check. The finance companies know a lot of people are going to do this and they are fine with it. However, others will not go through the process.

One important note: dealers like to tell you to make the first three payments before you pay the car off. Dealers are paid a flat fee in many cases, itís normally a couple of hundred dollars. That flat fee is charged back to them if the consumer pays off his or her car before three payments are made, but by law, you can pay it off at any time.

Bottom Line

If you keep anything from this article, remember to read what you are signing, and make sure the numbers match what you agreed to. Donít rush the auto financing process whether you purchase, lease, or pay cash.

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In the modern automobile purchasing environment, the most dangerous office is the F&I aka Finance . You are already worn down in the purchasing process and your guard is down when you are escorted into Finance.

They will attempt to load up your contract with additional warranties, additional Destination charges etc. Read everything. the ONLY mandatory fees are tax, title and license.

Do not fall in love with a car and do not be afraid to walk out the door. If you do, be sure to tell your salesperson why you are walking.

Just because you have initialed a proposal, you have not made a legal offer.

There is a reason why most of today's dealers finance office is the most profitable section of the dealership.

Spencer T.
I am not sure where to ask this question so I will ask it here. I purchased a new Kia Soul in 2015. When I purchased the car the salesman told me that California taxes the rebate. I was also told by the salesman and the finance office that the sales prices of the car is based on the MSRP and not the price of the rebate. if the price of the car is based on the MSRP then what is the purpose of od having any incentives?
The Car Pro
California charges sales tax BEFORE any rebates are applied, but not based on the MSRP of the car. Tax is applied on the sale price, before rebates without regard to the MSRP.

Jerry Reynolds, President
Car Pro Radio Network
Craig B.
Our 2005 Lexus has 115000. At 100,000 miles I had the timing belt, water pump replaced and had new struts installed. The tires are one year old. I wanted to know if I should have anything else replaced, since I plan on keeping the car for a while.


Jerry Reynolds
I think you have it covered for now, you should be fine!

Jerry Reynolds, President
Car Pro Radio Network
kelly b.
We bought a 2018 Grand Cherokee from a non CP certified because the other dealer said they could be the price. When my wife went to make the dela they offered two incentives. One for $2500 and one for $3000 in house. We agreed to pay cash for TTL and a extended warranty. When got the paper work back to sign the total had changed by $3000 and my cash TTL was shown and as a down payment. The financing showed a inflated number for the beginning price that was not in line with what we agreed.
We still have not paid the cash for the extended warranty because i want to question the deal. No the finance guy is calling me hurry and give him the $1500 so he can collect from the bank.
My question is can we walk the deal even though we had the car for a week?
Jerry Reynolds
Kelly, if you signed all the papers and took delivery, you can?t walk away even though you have not given them the $1500. You do have some leverage to make sure the numbers are correct on the contract, and they can be changed since the contract has not gone in yet due to the $1500 that is outstanding. I would get the GM involved if you need to. If they give you the option of letting you out of the deal, take and I?ll hook you up with the Owner at Bayshore.

Jerry Reynolds, President
Car Pro Radio Network
Phillip H.
My Brother bought a new CR-V and had negotiated the contract with the salesman; however, when he got to the finance office, he noticed the contract was $1500 more. When he called it to the attention of the Finance Manager, he basically said "Whoops! My bad" and corrected it. My brother felt certain that this was done intentionally, hoping he wouldn't notice. Second issue, several months later he had his CR-V in for some kind of issue at a different Honda dealer; When the service department entered the VIN number into the HondaCare system, it returned "No Record". Turns out instead of selling my brother the Factory "Honda Care' Extended Warranty, he was sold some third party warranty. I have since learned that this is becoming a common practice at almost all dealers. You assume you are getting a factory warranty but are getting something else.
Joe .
Of course, there is another option. Locate the vehicle you want on the Internet at other dealers, negotiate the price and financing via email and finally a phone call, and pick up the vehicle. I pay cash unless the dealership wants to give me a better price at an extremely low rate, and come with a certified check in hand.
bob .
my wife bought a honda CERV, everything was done over the internet. got to the dealership, went thru the numbers and the interest rate was 12.5%. my wife's credit score is almost 850. we raised hell, credit manager came out and tore up the contract up and gave us 2,5%. by the time we finally got the final papers done, the finance officer gave us .99%.
PAY ATTENTION as this article explains, they will take you if you let them, and yes this was one of if not the biggest honda dealers in houston. remember "it's just business"
Jerry Reynolds
Good point Bob! Thank you for the affirmation!

Jerry Reynolds
Car Pro Radio Network
Dale a.
We are looking for information on the new Explorers and Tahoes.

Also for a Car Pro dealer in our area.

Thank You!
Jerry .
I don?t have any way of knowing where you are located, but just click CERTIFIED DEALERS at my website to start the process, I have great dealers all over. THANKS for listening.

Jerry Reynolds, President
Car Pro Radio Network