Deciphering auto dealers' promises

Deciphering auto dealers' promises

Ever wonder how your local car dealers can afford to make promises like these?

“Zero-percent financing! Drive it away for just $189 a month! We’ll give you $4000 for your old car, even if you have to tow it in! And (my personal favorite) below-invoice prices!”

Can dealers really afford to make such extravagant promises? Of course not. None of those come-ons are quite what they pretend to be. “Below-invoice” prices, for example, are “not necessarily what the dealer paid for it. He may be getting a rebate, and he is definitely getting a dealer holdback fee from the manufacturer,” explains Bank Rate Monitor.

Zero-percent financing? Check the fine print for something like ‘With approved credit,” meaning a FICO credit score of 700 or above.

We’ll pay off your old car no matter how much you owe: “Let’s say you owe $8,000 on your present car and it’s worth only $3,000. When the dealer boasts it will pay off your old car, it doesn’t mean you’re going to get $8,000 deducted for your trade: it means the dealer is just going to add the $8,000 to the cost of your new car. It gets even worse: Because the new lender is fully aware that the amount being financed exceeds the value of the new car, your loan will be treated as an unsecured loan and will carry a significantly higher interest rate.” Ouch!

For a fascinating “translation” of what those hype-filled promises really mean, check out the Bankrate article here.

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