PreOwned (& New) Car Ads: Reading Between the Lines
Lots of dealers promise uncommonly low interest rates and other special promotions. Ads hyping high trade-in values or low-cost options might pull you in, but finding a truly great deal calls for careful comparisons.
There are a number of things to consider when assessing whether or not an offer is really special, or just a smoke screen for hidden charges. For example, interest rates are just one part of the car dealer’s financing package. Factors such as down payment size strongly affect your total cost.
Questions About Low Interest Loans
When you call or visit your dealer, consider asking these questions about low interest loans:
Will you pay more for your car to qualify for the low-rates? Would save if you paid cash, or provided your own financing from your credit union or bank?
Does the financing call for a bigger-than-usual down payment?
Are there limits on the duration of the loan? Are you required to repay the loan in a reduced time frame, say two or three years?
Be sure to ask if you’re required to make a balloon payment at the end of the loan.
Do you have to buy add-ons like rust proofing, an extended warranty, or a service contract to get the advertised low-interest rate?
Is the financing available for a limited time only? Some dealers restrict special promotions to just several days or require you to take delivery by a specified date.
Does the low rate apply to all cars in stock or only to certain models?
Must you kick back to the dealer the manufacturer’s rebate to qualify for financing?
Questions About Other Promotions
There are other so-called special promotions such as high trade-in allowances and free or cheap options. Some dealers claim they’ll sell the car for a set amount over the dealer’s invoice. Asking questions like the following can help you ascertain how “special” promotions really are.
Does the advertised trade-in allowance apply to any car, or just those in good condition? Are there any deductions for high mileage, dents, or rust?
Does the larger trade-in allowance inflate the cost of the new car beyond what it would be without the trade-in? You might be giving back your big trade-in money by overpaying for the newer car.
How does this dealer’s trade-in allowance and free or low-cost options compare to what another dealer who doesn’t offer promotions can offer?
Does the "dealer’s invoice" reflect the true dealer cost from the manufacturer? Be sure to verify what the dealer pays via consumer or automotive publications.
Does the "dealer’s invoice" include the cost of options, such as rust proofing or water proofing, that already have been added to the car? Is one dealer charging more for these options than others?
Does the dealer have cars in stock without expensive options? If not, will the dealer order one for you while retaining the same terms?
Can you take advantage of more than one special offer at the same time?
You’re not limited to the financing choices a particular dealer offers. Before you clinch a deal, shop for loans via your bank or credit union.
When you do choose a dealer, remember to read the invoice and the installment contract carefully. Double check that all the terms of the contract reflect the agreement you made. If they don’t, get a written explanation before you sign. Preowned car shoppers should always remember: buy in haste, regret at leisure.
For More 411
The FTC works to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide consumer information. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at ftc.gov/video to learn more.