Many new car dealers advertise unusually low
interest rates and other special promotions. Ads promising high trade-in allowances and
free or low-cost options may help you shop, but finding the best deal requires careful
Many factors determine whether a special offer provides genuine savings.
The interest rate, for example, is only part of the car dealers financing package.
Terms like the size of the downpayment also affect the total financing cost.
Questions About Low Interest Loans
A call or visit to a dealer should help clarify details about low
interest loans. Consider asking these questions:
Will you be charged a higher price for the car to qualify for the
low-rate financing? Would the price be lower if you paid cash, or supplied your own
financing from your bank or credit union?
Does the financing require a larger-than-usual downpayment? Perhaps 25 or
Are there limits on the length of the loan? Are you required to repay the
loan in a condensed period of time, say 24 or 36 months?
Is there a significant balloon payment possibly several thousand
dollars due at the end of the loan?
Do you have to buy special or extra merchandise or services such as
rustproofing, an extended warranty, or a service contract to qualify for a low-interest
Is the financing available for a limited time only? Some merchants limit
special deals to a few days or require that you take delivery by a certain date.
Does the low rate apply to all cars in stock or only to certain models?
Are you required to give the dealer the manufacturers rebate to
qualify for financing?
Questions About Other Promotions
Other special promotions include high trade-in allowances and free
or low-cost options. Some dealers promise to sell the car for a stated amount over the
dealers invoice. Asking questions like these can help you determine whether special
promotions offer genuine value.
Does the advertised trade-in allowance apply to all cars, regardless of
their condition? Are there any deductions for high mileage, dents, or rust?
Does the larger trade-in allowance make the cost of the new car higher
than it would be without the trade-in? You might be giving back the big trade-in allowance
by paying more for the new car.
Is the dealer who offers a high trade-in allowance and free or low-cost
options giving you a better price on the car than another dealer who doesnt offer
Does the "dealers invoice" reflect the actual amount that
the dealer pays the manufacturer? You can consult consumer or automotive publications for
information about what the dealer pays.
Does the "dealers invoice" include the cost of options,
such as rustproofing or waterproofing, 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 that have no expensive options? If
not, will the dealer order one for you?
Are the special offers available if you order a car instead of buying one
off the lot?
Can you take advantage of all special offers simultaneously?
Youre not limited to the financing options offered by a particular
dealer. Before you commit to a deal, check to see what type of loan you can arrange with
your bank or credit union.
Once you decide which dealer offers the car and financing you want, read
the invoice and the installment contract carefully. Check to see that all the terms of the
contract reflect the agreement you made with the dealer. If they dont, get a written
explanation before you sign. Careful shopping will help you decide what car, options, and
financing are best for you.
For More Information
You can file a complaint with the FTC by contacting the
Consumer Response Center by phone: 202-FTC-HELP (382-4357); TDD: 202-326-2502; by mail:
Consumer Response Center, Federal Trade Commission, Washington, DC 20580; or through the
Internet, using the online complaint form.
Although the Commission cannot resolve individual problems for consumers, it can act
against a company if it sees a pattern of possible law violations.
This article is a useful review of 10 key areas you should look at when you're reviewing your advertising to determine whether it's in compliance with the numerous laws, rules, regulations and guidelines that may affect your ads.
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