Thrifty Mommy

Beware of Loan Mark Ups

by Karen on November 27th, 2006

When buying a car at a dealership, the dealer can significantly mark up the loan rate.  The dealer may get the rate of 5%, but then jack it up to 14% when charging you.  Since car makers don’t make much in the actual sale of a car, they try to make their money in the “finance and interest” (F&I) department.

Do your homework before buying a car.  Get rates from credit unions and banks before buying.  This way you’ll have the necessary information to negotiate.  Just don’t take the interest rate they give you without shopping around.  Some car dealerships will even have a lower cash price.

This is the time of year when car dealerships are marking down their 2006 models.  You definitely have negotiating power. 

Another tip:  Buy a car at the end of the month when dealers are interested in making their monthly sales quota.  Begin shopping around the 25th of the month.  Start haggling around the 28th-29th.  On the 30th and 31st they will be calling you on the phone.  You really have negotiating power then.  Just shop a few days before the last day of the month so that you have time to research your options, think things through clearly, and allow for bargaining power.

Source:  Clark Howard

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POSTED IN: financial matters, money saving idea, odds and ends, shopping