2009 Spring Car Guide
Big car bargains: Deal or no deal?

Low-interest loans

The pitch: If you buy the car, the dealer or manufacturer will give you a low-interest loan.

Why it might not work for you:

  • It could be a great deal if you can lock in zero percent to 2.9 percent for the model you want. "But the highly publicized low interest rates are available to very few of us," says Gillis. Credit scores often need to be in the 750 range, and frequently only select models are included in the offer, he says.
  • Sometimes these low-interest offers require a minimum down payment or a shorter loan term, says Bill Gerhard, director of bank products for AAA Financial Services.

Your best bet: Get financing from a bank or credit union before you hit the showroom. If the dealer can best that offer with a lower rate, take it. Hammer out the best possible deal on the car before you start talking financing. Until you have your price locked in, consider yourself a cash buyer. Another caution: Don't apply for dealer financing accidentally. There have been reports that some dealers ask buyers to complete credit applications even if they don't want dealer financing -- under the pretense that the information is required by the Patriot Act, says Ostroff. It's not, he says. Unless you are actually applying for credit at a car dealership, do not supply your Social Security number and other personal or financial information.

Sign and drive -- today

The pitch: Your loan is approved on the spot and you drive home in a brand new car, truck or SUV.

Why it might not be a good deal for you: If you read the fine print, you'll frequently find that on-the-spot financing terms can change, pending final approval of the loan. That means you might get a call two weeks later notifying you that you didn't qualify for that low rate. Not only could your payment go up, you might also have to cough up extra cash for the down payment.

Best bet: If you want to drive away the same day, go in with your own financing. Otherwise, leave the car on the lot until you see the final terms of your loan. That way, you're in the driver's seat.

We'll pay off your old loan -- no matter how much it is

The pitch: You buy a car, and we'll pay off your old loan.

Why it might not be a good deal for you: This isn't very unusual but often is offered in conjunction with other special promotions, says Jackson. Usually, "there will be some imitations," he says. Always read the fine print so that you know exactly how the deal will work.

  • The dealer may be paying off the balance but it's with your money. The amount of the payoff is then added to the amount of your new loan and the new payments are based on the total. "You're really paying off 1½ cars," says Ostroff. To keep the payment amount low, the dealer will often stretch the new payments over 72 months or 84 months, he says, but that means you're paying interest of up to seven years on the car you no longer own.



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