AVOID THE CAR DEALER HYPE
Mory Brenner, Esq.
& Keith Hassenpflug
Well, it’s that time again. Your car just doesn’t meet your needs anymore. So you pick up the paper and check out the automobile classified ads. What you see could have you believing in Santa Claus again. What an auto advertisement says is one thing, what it means can be something else entirely. Below find some typical auto ads that usually represent a lot more hype than substance for those who want to buy a car.
1. We’ll payoff the auto loan on your trade, no matter what you owe on the car!
What a load that would be off your mind if they did that? Right? In this case the auto dealer would like you to believe that they will pay your car loan off in full. Actually what they are saying is that if you add the balance of your trade into your new car loan, in addition to the money needed to purchase the new car, then they will be able to pay off your current lender. In this case they’ve done absolutely nothing for you accept maybe some of the leg-work you would have done on your own. Even worse, they have created a loan on your new vehicle that will be more than the car is worth on the day you drive it away from the auto dealer and for many years to come. Your reward for falling for this trick-You proudly own an upside down car loan. Is that what you understood when you saw the headline?
2.Guarenteed $2500 for your old car trade whether you have to push, pull or tow it here.
Wow, what a lucky break! Your car just broke down and you need a new one. You thought you’d only get 500 bucks for that old clunker from a dealer. What you must understand with this kind of marketing is that they probably already have a $2500 mark-up in the car over and above what they want to make for a profit. In this case, if your car is really worth $500, then you should ask for $3000 for it. With this kind of ad you should expect $2500 for your kids skateboard. If you do not have an old car to trade at all just take $2500 right off the price of everything the car dealer has included in that promotion before you even start to negotiate the price for a new vehicle.
3. Every car loan application accepted regardless of credit.
Whew! You were turned down for a car loan the last time you tried. It looks like you’ll shop there because they’re going to accept you. Well, it may be that this dealership has a good sub-prime lender relationship. If that is the case then maybe you’ll get the loan you need. What is more likely with this type of ad is that you will be disappointed yet again. Read carefully what the ad actually says. It says ‘every application accepted”, not loan approved. All they are promising is that they’ll send your application to an auto lender. There is no guarantee your auto loan request will be approved. Why do they do this then? Well they need a lot of people to come through their doors. The more that come the better chance at least some of them will really be approved, and that means more car sales. They also realize that the more desperate people are to get a car loan, the more willing they are to accept whatever terms are thrown out at them. This could mean over paying for both the car and the auto loan interest. To connect with dealers in your area that have special relationships with lenders specializing in very bad credit loans try this online service.
4. Cars sold “below dealer invoice”
Woe. Before you go speeding down there to take advantage of that “sacrifice” of a new car deal, do your homework. There are plenty of publications and web sites for you to find out what the true cost is on a new car and what a true book value is on a used car. What you will usually discover is that what they are calling “invoice” includes a few things you may not expect or consider a part of new car cost. Things like advertising, hold back, dealer mark-up and even cleaning are included. I don’t mean to say that these aren’t legitimate costs, necessarily. For example, when you pay for a quart of milk, the farm has had to figure the cost of advertising in the price they charge. But you should research the vehicles you are interested in so that you will know about what to expect, including the advertising cost, believe it or not. Don’t rely on them to tell you. At least when you compare what you’ve learned about the true new car invoice with what they advertise, you’ll get an idea of their integrity. That could in turn save you a lot of money.
5. Buy a new car with no money down!
Look for the fine print in this ad. It should disclose somewhere that you’ll only qualify to buy that car for no money down if you have the good credit to warrant it. If you don’t, expect to have to pay a sizable down payment in order to be approved for the auto loan. Alternatively, you could really get that no money down car loan with an unusually high interest rate to reflect the fact that you took put no money down and created more risk for the auto lender. And you better believe the auto dealer knows this before you arrive on their sales lot. The very language of the ad itself will attract shoppers that either have no money to put down, which is probably the case, or auto buyers who want to use the cash for some other purpose. As mentioned before, the more desperate, the more control the auto dealer feels they have over the potential car buyer on the terms.
6. $5,000,000 available credit for this sale!
You’ve seen this kind of car ad many times. The implication here is that with all that money available for auto loans, getting one yourself will be all more likely. Once again this auto ad is designed to get you to believe that you must shop there if you want the best chance of driving away with a car. The truth is, that huge sum of money is available to anyone who applies for a loan at any dealership that uses the same lender for a source. The money figure by the way was probably pulled out of thin air. If the figure actually came from the auto loan allocation available from a national lender it could be a figure available to dealers all over the country. It just sounds good and is used to drive their point home, but it rarely means that particular auto dealer has something you cannot find at the dealer down the street.
7. Bank representatives on hand!
This may or may not be what it sounds like. I have seen special weekend sales where certain lenders did send representatives to help process applications. If that is the case, then there really may be a better chance to get a loan, even if you have less than perfect credit. These lenders want to prove to the dealer that they indeed help them move more cars. Showing up and then turning everyone down could damage the dealer lender relationship. This they will try to avoid if at all possible. Sometimes a dealer will just use the ad for hype and will only have their own finance manager working. Technically they aren’t lying because a dealer must sign an agreement with every lender they use. In it there is language that requires the dealer to abide by the lenders requirements just as their own employees do. The difference here is that if actual lender representatives aren’t on hand, then it’s probably just business as usual at the car dealership. In either case, most banks will not offer auto loans to those with very bad credit. These loans generally come from sources other than a local bank.
8. Every car must go by noon on Friday!
Really? They have hundreds of cars on their lot. That must means they will sell them really cheap. You’ll get a great deal on your car then, right? The claim of that ad is almost too much to fathom. Why would they all have to be sold by Friday? The answer is, while they would be thrilled to do so, they really don’t expect to. They will be happy to just increase their business over what they usually do for a similar time period. So, the more people that they get in, the better chance they have to reach that goal. That does not mean you will reach yours by getting a better price, however. You will still need to do your research. Chances are you will get the same deal whether they sell all their cars by Friday or not.
9. Do to our enormous success we took in too many trades!
This actually can be a good one. If a dealer has indeed received a lot of trade in vehicles, it can temporarily put them in cash flow predicament, especially if the majority of them are late or expensive models. For example, if they sell a car invoiced at $25000 and pay out $15000 for the trade in, then they really have $10,000 of real money in the house. If they have financed their inventory, they are $15000 short to pay it off. They do not realize the entire sum until the trade in is sold. If they wind up too heavy with that kind of used car inventory then they may indeed want to move them out at reduced prices. Make sure you get the book price, though to be certain it’s not just more hype.
10.No dealers allowed!
Here you’re expected to believe that the prices are even lower than what actual car dealers can get them for. So they are telling them they will not be allowed to participate in this sale. I’m tempted here to tell anyone that falls for that one deserves all they get. Seriously though, car manufactures treat all their franchisers the same way. They all get the same invoice to pay for each car. In that way, they all are on equal ground when a car deal is made. If one sells lower than another it is simply because they choose to. There is a way that some dealers can achieve a price advantage over others. Sometimes an auto manufacturer can award a dealer cash back for reaching certain sales volumes. They can keep it or pass it on to you, the consumer. Don’t confuse this with a customer rebate though. That is yours to get no matter what dealership you go to, providing they sell the same brand and model.
14. Top dollar for your used car trade!
What dealer hasn’t promised that? Again, do your research and make them prove it to you. Finding the proper value for your used car trade can be discovered easily online.
15. Buy a new car for only $99 a month!
You actually can fill in just about any model car for this kind of ad. Any time you see bold monthy payment, price, or trade in numbers you’ll have to look for the fine print, and there always will be. Well there always should be, legally that is. With out the fine print disclosures, the bold monthly auto payment numbers in the ad really mean nothing. There is a good chance whatever “bottom line” they are featuring will require something extra out of you either in the form of a considerable down payment, a trade in with a certain value or cash equal to a trade in value they were assuming. Often these ads feature lease programs, not car ownership programs where you never gain any equity in the vehicle.
So the next time you look through your paper for car ads, remember the main purpose of them. They are designed to get you through the auto dealer’s doors. That’s fine. Sooner or later you’ll have to if you need a car. You just need to be aware of what the ad really says between the lines and adjust your car buying strategy accordingly.