In Focus – SCCCU Blog

For many people, buying a new car is right up there with getting a root canal. It can be a painful process fraught with shady practices and dealer add-ons you never asked for. And while there are certainly honest auto dealers out there, not everyone is on the up-and-up. If you are in the market for a new car or want to make sure you get the best deal possible, consider these warning signs to avoid getting ripped off by the dealer.

• They Want To Know Your Target Monthly Payment. This seems like such a harmless request. It might be if you were anywhere else but a place where you are being asked to put down a huge sum of money for something that will begin to lose value the moment you leave the lot. “Never answer that question,” says Ira Rheingold, executive director of the National Association of Consumer Advocates. “If you do, at that point, they've got you. Only negotiate the cost of the car. Period.”
• “That Car Is Sold, Here’s A Higher-Priced Model…” If you see a vehicle offered online at a dealership, call first to verify that the car will be there when you come for a test drive. Variations of this bait-and-switch scam have been around for years. A seller gets one or two cars without bells and whistles and advertises them at rock-bottom prices. Those models sell fast. When customers come in looking for that specific car, they are sometimes told “Oh, it just sold,” and then shown more expensive models.
• They Pressure You To Get An Extended Warranty. When it comes to extended warranties on new cars, not everyone thinks they are a smart investment. A Consumer Reports study found that most people didn’t get the value they paid for in the extended warranty. If you are getting a car known for reliability, it seems counterintuitive to get the extended warranty. Plus, you’re not obligated to buy the extended warranty when you purchase the car. When you do that, you could end up paying interest on it if it’s rolled into the payments. Experts suggest saving up money to buy the extended warranty later, right before the regular warranty expires.
• They Want to Mix Financing and the Car's Price. The most important thing people need to recognize is that financing a car and negotiating its sales price are two separate transactions, Rheingold says. It’s just like when you buy a house. First, you get approved for a mortgage, and then you make an offer on a house. Because most people need financing for a new vehicle, you should secure that from a financial institution before you go to a dealership. Rheingold cautions consumers to only identify the total price they are willing to pay — the “out the door” price and “never, ever, ever mix the financing and the price of the car.”

The best way to quietly tilt the odds back in your favor is to start with your financing — and start it somewhere that’s working for you, not the dealership. Credit unions, in particular, are often the unsung heroes of auto loans, consistently offering lower interest rates, fewer fees, and more flexible terms than traditional banks or dealer-arranged financing. Because they are member-owned, not profit-driven, their goal is to help you borrow smarter — not to squeeze extra margin out of your loan on the back end. Walking into the dealership with a pre-approval from a credit union doesn’t just save you money over time; it gives you leverage in the moment, turning you into a buyer with options rather than one at the mercy of whatever financing package is slid across the desk.

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How to Buy a Car Like a Pro

To avoid being scammed, take these steps before purchasing a new vehicle:

• Do your homework and research the car's price online using a service such as Kelley Blue Book at KBB.com.
• Get your financing lined up by being pre-approved for a loan at your credit union. Start your application here.
•  Negotiate only the car price with the seller, not the financing.
• If you’re trading in a vehicle, know its value going in by using an online resource.
• Never buy an extended warranty; wait until your new car’s regular warranty is about to expire before considering one.
• If a dealer wants you to pay more than the sticker price, walk away.