- In many cases, the dealer just never pays the loan off. "I can't tell you how many people have had their credit trashed over that," Ostroff says.
Best bet: Don't accept the offer at face value. Closely examine exactly how it will work. If it's to be paid off and not added to your new loan, specify in the agreement that the loan amount has to be paid within 10 days, Ostroff says. "Make them put it in writing," he says. Then call your original lender and verify that it's been done.
Push, pull or drag trade-in offersThe pitch: The dealer guarantees the same, preset trade-in amount for any car a buyer can push, pull or drag to the lot, regardless of its condition.
Why it might not work for you:
- If the car you're driving is worth less than the set amount the dealer is offering, that money has to come from somewhere. The dealer is going to make it up on some other part of the deal, says Sutton. You could be paying a higher interest rate, stretching payments over a longer period (adding up to a higher total cost) or shouldering additional fees, he says.
- There are three moving parts in most auto transactions: the price of the new car, the payoff for the trade-in and the financing, says Gerhard. "Somewhere in the middle they're going to make up the loss," he says.
- In addition, this offer may be limited to buyers who are purchasing certain, often less popular, models. So read the fine print.
Best bet: Negotiate each part of the transaction separately. Once you've agreed on a price for your new car (and the financing, if you're getting it through the dealer) then you can find out what the dealer is willing to give you for your old one. And shop around. Even when selling it to dealers in the same town, the price you can get on the same car can vary widely.
Bad credit, no creditThe pitch: The dealer says: If your credit is dinged, damaged or demolished, we can still put you in a car. Variation: No matter how bad your credit is, we take any application.
Why it might not work for you:
- With bad-credit or no-credit offers, often the dealership itself -- and not the lending arm of the manufacturer -- is financing the transaction, says Gerhard. "Typically, it will apply only to certain vehicles and at a high interest rate," he says.
- "'No credit application refused' doesn't mean that the person will qualify for a loan on the car
Best bet: Because of the rates, these deals are often only practical if you have no other options. So before you sign, find out if you can do better elsewhere. "Now, more than ever, it pays to slow things down and know what you're doing," says Gerhard.
Pull your three credit reports, which you can get for free once per year at AnnualCreditReport.com. You can estimate your FICO score using this information. Then shop banks and credit unions for car loans.
Make all your car loan applications within a two-week period and it will only count as one inquiry on your credit score.
Buy a car, get free stuffThe pitch: We'll give you a free gift (like a ham, turkey, box of steaks, flat-screen TV or MP3 player), if you buy from us rather than our competition, says the dealer.
Why it might not work for you: You're negotiating a five-figure purchase. Should you really be swayed by a giveaway that's often worth a couple of hundred dollars or less? Go to the place that gives you your best deal. If you score a turkey, consider it gravy.