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Many new car dealers have been advertising unusually low interest
rates and other special promotions such as high trade-in allowances
and free or low-cost options. While these advertisements may help you
shop, finding the best deal requires careful comparison.
There are many factors that determine whether a special offer
provides genuine savings. The interest rate, for example, is only
part of the car dealer's financing package. Other terms, such as the
size of the downpayment, also affect the total financing cost. Be
sure to consider all aspects of a financing plan before you sign a
When considering an advertised special, read the ad carefully and
call or visit the dealer to find out about all the terms and
conditions of the offer. Then compare the specials advertised by
Questions About Low Interest Loans
Listed below are some financing questions you should consider when
talking to dealers.
* 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 30 percent?
* Are there limits on the length of the loan? In other words, are
you required to repay the loan in a shorter period of time, such as
24 or 36 months?
* 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 loan?
* 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 specified date.
* Does the low rate apply to all cars in stock or only to certain
* Are you required to give the dealer the manufacturer's rebate (if
one is offered) to qualify for financing?
Questions About Other Promotions
Other special promotions include high trade-in allowances and free or
low-cost options. Some dealers also promise to sell you a car for a
stated amount over the dealer's invoice. The following questions can
help you determine if such 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 your new car.
* Is the dealer who offers high trade-in allowance and free or low-
cost options actually giving you a better price on the car than
another dealer who does not offer such promotions?
* Does the "dealer's 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 "dealer's invoice" include the cost of options, such as
rustproofing or waterproofing, that already have been added to your
car? Is the dealer charging more for these options than other
* Does the dealer have cars in stock without expensive added
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?
Remember, you are not limited to financing offered by the dealer. You
may wish to see what type of loan you can arrange with your bank or
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 differ, get a written explanation before you
sign. Careful shopping will help you decide what financing, car, and
options are best for you.
Facts for Consumers from the FTC
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