Auto Loans and Secrets

Everyone has secrets, and car dealerships are no exception. When it comes to auto loans there is one big secret that a car dealership does not want you to know: they make more money on the financing of your new car than they do on the purchase price. We have all learned to be wary of the slick-talking new or used car salesman, and we are more prepared than ever to negotiate with them on the sticker price of the vehicle. We are willing to walk away and when we get the price we want we feel victorious, and that’s when we let our guard down.

After agreeing to the purchase price at a car dealership we then come face to face with the Finance Manager. We have not learned to be wary of the finance manager, and often they pretend to be on our side in our battle with the sales personnel. This new person is just here to help us finance our new vehicle, they do the paperwork for our auto loans and this is where most consumers lose money, lots of money, on their vehicle purchase. You see the person setting up your financing at a car dealership gets paid on commission, and that commission is based on the interest rate you agree to, as well as the warranties and all the little extras they offer you in that “boiler plate” purchase agreement you sign.

After running your credit score you will be approved at an interest rate by a lender, and this interest rate is not usually the interest rate that the finance manager will quote you. Auto loans are based on down payment, interest rate, length of the loan, and any warranties that you agree to purchase. This is all factored together to give you a monthly payment that you agree to when you sign your auto loan contract. Another big secret is that all of these components are negotiable, and consumers often don’t realize that the dealership makes most of their profits by quoting a much larger interest rate on the auto loans they finance than the buyer actually qualifies for.

Negotiating an automobile purchase should never end at the price agreed upon, and consumers should know that extended warranties, undercoating, rust proofing and the like are all price quoted at the highest possible commission for the finance manager. Auto loans are big business for car dealerships and lenders, and the biggest secret of all is that as a consumer you can, and often should, get your financing separately from the dealership where you purchase your car.

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