Big car bargains: Deal or no deal?

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It’s a buyer’s market on car lots these days. As with almost everything, if you have the money, it’s a great time to shop.

“There’s never been a better time to get a car if you need one and if you’re going to be very cautious,” says Remar Sutton, author of “Don’t Get Taken Every Time” and co-founder of, a financial education Web site aimed at younger consumers.

Dealers are also rolling out some eye-catching offers. Some will dovetail perfectly with your own plans.

Others, however, could tempt you into a buy that’s not in your best interest.

Here’s a closer look at some of the offers you might see and some you may want to avoid.

Buy one, get one free

The pitch: You pay for one vehicle and get a second one free.

Why it might not work for you:

  • Many times you don’t get to choose the car you get free. It might be a specific model or even a specific car, new or used. Often, these deals will pair two very large vehicles, like heavy-duty trucks, or a very large truck or SUV with a very small car.
  • You likely won’t get as good a deal on the first car as you would have in a normal transaction, says Sutton. “In the real world, a free car is just not possible. It’s a distraction. It takes you away from what you should be doing: finding the one specific car that makes the most sense for you, at the best price.” Frequently with a “twofer,” you pay the manufacturer’s suggested retail price, or MSRP, which is often $3,000 to $4,000 more for a car and $4,000 to $8,000 more for a truck or sport utility vehicle, says Jeff Ostroff, president and CEO of, an online car buying guide.
  • You probably won’t get manufacturer or dealer incentives, or rebates. You can find the latest rebate and incentive information at and at the manufacturers’ own Web sites.
  • The primary vehicle could also include a host of dealer add-ons that will make it pricier, says Tim Jackson, president of the Colorado Automobile Dealers Association, or CADA.
  • If you use dealer financing, you’ll likely pay a higher interest rate or have payments spread over a longer period, Ostroff says.

Your best bet: Compare prices and buy the vehicle, or vehicles, you actually need. What if you’re looking for the exact two vehicles included in a two-for-one promotion? Consider the offer, but shop around. It’s likely you can do as well or better if you purchase them separately, says Jack Gillis, director of public affairs for the Consumer Federation of America and author of “The Car Book.”

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.
  • 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 offers

The 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 credit

The 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 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 stuff

The 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.

Written by
Dana Dratch
Personal Finance Writer
Dana Dratch is a personal finance and lifestyle writer who enjoys talking all things money and credit. With a degree in English and writing, she likes asking the questions everyone would ask if they could and sharing the answers — along with smart money management tips from the experts.