Why many car dealerships may not be doing you a financing favor.
New cars are exciting! Even buying used cars is getting something new to you. It’s normal to want to take the keys, jump behind the wheel and drive home, right from the lot.
Be careful. The car dealerships know you are excited. Often, that is when you are most vulnerable, and can end up spending more money than you should. If you have a lower credit score the cost can go even higher.
Don’t be lured or rushed into an expensive decision. Know what you are getting yourself into before they dangle those keys out like a carrot on a stick.
Here’s what you should expect when you enter the finance office at the dealership:
Higher-Interest Rates:
Dealerships are not banks. They are the middle man between you and the bank. It’s a convenience you’ll pay for, since both the bank and the dealership need to cover their costs and make their profit. And…if you have a lower credit score, some dealerships will raise the rate even more and tell you they’re doing you a favor. Shop around for the lowest interest rates first.
Extended Loan Terms:
Car dealerships like to steer the question to monthly payments Longer-term loans mean more affordable payments but often stretch out for six or seven years. You’ll end up paying a lot more in interest, and you may end up with negative equity, making it tough to sell or trade your vehicle later.
Add-Ons and Extras:
There is nothing wrong with extended warranties, gap insurance, or service packages. But some dealerships mark these up for big profit. You don’t know what price is fair, and so you may pay more than you should. You’ll likely pay less here at the Ashland Community Credit Union.
Prepayment Penalties:
Sometimes you can refinance a loan at better terms later due to changing economic conditions. For instance, if your current loan is at a rate higher than ___%, you may want to consider refinancing to save money. So, keep your options open, and check the fine print before you sign.
The bottom line is that auto dealership financing is convenient and tempting. It can also be very expensive. Visit a lender like the Ashland Community Credit Union for lower rates and the best terms before you go car shopping.
