The Good and Bad of New Car Ads
Even car buyers with credit problems need to be aware of some of the more creative advertising practices of some new car dealers
Buying new cars with bad credit
With the price of used cars approaching that of their new car counterparts as well as the possibility that they may qualify for one, credit-challenged car buyers need to be aware of the types of new car ads that can mislead shoppers.
Most of these new car dealer tactics haven’t changed much during the past two decades. We know here at Auto Credit Express because that’s how long we’ve been helping people with low credit scores find dealers that can offer them their best chance at approved auto loans.
New car advertising
We’ve all seen these ads. Many of them tie in with the auto manufacturers programs. Special interest rates, lease programs (to qualified buyers), and rebates are all legitimate programs that are backed by the auto companies. But a few new car dealers take things a step further and promise even more: lower interest rates, higher trade-in values and free options such as upgraded sound systems and sunroofs.
The fact is that manufacturers charge all dealers get charged the same amount for a given car. While there may be incentives based on volume, this is not always the case and even when it is, the smaller dealers have lower sales targets, while the high volume dealers have to sell more cars to reach their incentive targets. So if every dealer essentially pays the same for their vehicles how can one dealer and not another offer you more for a trade-in or throw in a sunroof for free?
Special deals
If you’ve ever been to a carnival and watched the shell game in action, you know that it involves moving 3 shells around with one of them hiding a pea.
No matter how the shells are moved, the pea is always somewhere. The same holds true for the price of a new car. No matter how many things you get for “free”, the price of the car has to change to account for the additional options. Somehow, somewhere, you’re going to pay for that sunroof or leather interior.
I remember an actual incident a number of years ago. I’d spent a great deal of time with a customer regarding the price of the vehicle and the value of his trade in. I even emphasized the “difference” price during the discussion, but he was sure he could get more for his trade. Two weeks later, he came by with his new car – which he hadn’t purchased from me. The reason he bought the car at the other dealer? They gave him $500 more for his trade – and he proudly showed me the actual paperwork to prove it.
The bottom line: they did give him $500 more for his trade, but they also charged him $700 more for the new car- something he either chose to ignore or didn’t bother to check – meaning he actually paid $200 more for the car at the other dealer. This guy thought he was smart, but he really wasn’t.
According to the FTC, these are the things that you need to know about before signing on the dotted line:
• 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 doesn’t offer 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 rust proofing 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?
• 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 doesn’t offer 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 rust proofing 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?
As we see it
Like you should do concerning any important financial transaction, read the buyers order and the bank contract to verify that it corresponds to the terms that you agreed to with the dealer. Any discrepancies should be in writing before you sign any paperwork. Finally, take a look at the entire transaction to determine the real, bottom line price and base your decision on that.
And one more thing: Auto Credit Express matches car buyers that are experiencing auto credit problems with dealers that can offer them their best chance at obtaining approved for auto loans.
So if you’re ready to reestablish your car credit, you can start now by filling out our online car loans application.
