There you are sitting at the sales persons desk negotiating your new car deal. The sales person is busy promoting the idea of putting more money down in order to lower your payment, prevent less negative equity, pay less in finance charges, have a shorter term, etc. All of this is true, but their real motivation is to make more money.
The additional gross profit a dealership makes by getting more down payment from you all comes down to how lenders lend. Using this example, let's say a car dealership has a vehicle for sale for $15,000 and that vehicle has a wholesale value of $10,000. I will leave taxes and other fees out of this to simplify this example. A typical automotive lender, for average credit, is going to have a 125% Loan to Value. So in this example the lender would be willing to loan $12,500 against the value of the vehicle. If you had $0 as a down payment, the only way the dealership could get the loan approved would be to lower the sale price to $12,500. I think we all know that the dealership doesn't want to do that, because it's an instant loss of $2500 in gross profit. That's why sales people are so aggressive when it comes to your down payment.
That being said, there are situations where down payment is necessary. If, for instance, you have a lot of negative equity, you'll need to pony up some money to get the "deal inline" with the lenders guidelines. You'd also need down payment if you have major credit problems. The lender will typically want to see a commitment, from you, of 10% down, or in some cases a flat $1500.
So the next time your sitting with your sales person and they're explaining the benefits of additional down payment, it's probably only benefitting them and the dealership. I'd suggest getting off the down payment issue with the sales person, and work on the dealership to lower the sales price by $2500.
All this being said, I do believe putting money down is a good idea. I'd recommend using a down payment that's at least equivalent to your tax, title and license fees. This is to avoid paying any additional finance charges on those fees. Negotitate with the zero down approach out the gate, and focus on the the dealership lowering the sale price of the vehicle. Once the sales price is acceptable to you, then you can talk down payment.
There are lots of tips and tricks to save money when buying a vehicle, this one is by far the least talked about, but one of the easiest for customers, that don't like to negotiate, to use to realize immediate savings.
Take care and beware, J the Car Guy
Car Dealer In Pennsylvania
You hear them on the radio and TV everyday. Some have outrageous ads and sales gimmicks. "Push, pull or drag your trade in for $4000 minimum trade", "Best price in the world!" "Best bumper to bumper warranty ever - we cover everything." "Repo'd car sale today." Bet you didn't know that these ads can be and usually are very misleading and can be illegal.
According to Leslie Anderson, AAA, Misleading advertisements and deceptive marketing from car dealers has been on the rise in recent years. Car dealers, due to a struggling economy are resorting to grey market sales tactics and ads. Many of these ads are either borderline or even illegal in nature. With all the publicity in recent years of scams and illegal business activities by businesses from every state you would think most states would have toughened up their laws and started to crack down on bad car dealers. Only one state, New York, has really done anything.
There are laws already on the books that make many of these advertisements and such illegal, but few states will even look into these activities. In New York, if you run a Push, Pull or Drag sale the odds are you will get fined. The thinking behind New Yorks laws is that if you promise someone a set figure for their vehicle it should not be factored into the discount or markup of the newer, replacement vehicle. This is deceptive advertising. Yet I hear these same ads, with even higher amounts promised on the radio and TV in North Carolina and South Carolina all the time. Then there's the matter of expressed and implied warranties.
Expressed and implied warranties are actually covered under federal laws. Every car dealer must have a federally approved warranty disclosure placed in the window. This is to show if a warranty exists and what is actually covered. This was done as there was too much discrepency in the past with car salesman blurring the line of what is really covered and what isn't. On a recent drive from North Carolina to South Carolina I saw 11 used car dealerships that did not have these in the windows - at one we found they were in the glove compartment. When we asked the salesperson why it wasn't in the window he said it wasn't necessary. In New York, every car dealer you drive by or visit will have these prominently displayed.
Then you have the usual lies - car dealers advertising a repossession sale, cream puffs, etc... They will lie about the origination of cars just like in a recent Carfax ad. Oh that was just a little fender scratch (complete repaint from a 50mph accident) or new upholstery (due to a flood and complete submersion). These repossession sales, like Repo Joe, do a media Blitz and claim they have all repossessed vehicles for a great buy. When in fact they probably don't even have one repossessed car that is for sale. Most car dealers get their cars from either trades or local auctions.
Regardless of what they claim they most likely do not know the vehicles history. You can't even rely on Carfax 100% as many vehicles are repaired without full salvage disclosure or even any repair history. A carfax report is only as good as the information that is actually entered into the system. Before you rely on that Carfax or what the dealer says is the cars history listen to this - Tennessee attorneys Frank Watson and David McLaughlin charge that Carfax's ads promise more than it can deliver. "Carfax fails to disclose the limitations of their database," says Watson. "People think they have a little insurance policy on their Carfax report, and it's just not accurate," says McLaughlin. Carfax is an online company that searches databases for a vehicle's history, claiming to be "your best protection against buying a used car with costly, hidden problems." But, critics say when it comes to many accidents, online reporting companies fall short. A class-action lawsuit against Carfax claims the company doesn't have access to police accident data in 23 states.
This article should be a wake up call to car buyers to be more on the alert to car dealer scams, lies and untruths. It should also be an alert to states from Oregon to Florida that more needs to be done to curb bad car sales tactics. Most car dealers aren't small mom and pop organizations. They are large million or billion dollar companies that will do anything to make a dollar. Even crossing the line or blurring what is legal and what isn't. And according to one big dealer in Charlotte, North Carolina whom didn't want his name or dealership mentioned for obvious reasons - "its all about that bottem line and if we get caught, thats what our lawyers are for. Per another car dealer, "it's a buyer beware market: Buyers must beware and be detectives too."
Both Justin Reynolds & David Maillie are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Justin Reynolds has sinced written about articles on various topics from Cars. Justin is currently employed with a new and used car Arizona Car Dealership, as a Finance Manager. He also offers a free car buying consultant service, for consumers looking to educate themselves prior to purchasing. Justin has held most every position. Justin Reynolds's top article generates over 1300 views. to your Favourites.
David Maillie has sinced written about articles on various topics from Skin Care, Hair Styles and Wrinkles. David Maillie holds numerous patents including his recently awarded patent for headlight repair, cleaner and restorer. He is always striving to create new products that save the consumer money:. David Maillie's top article generates over 74000 views. to your Favourites.
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