You were absolutely jerked around. This is the first I’d heard of the car dealers having their very own credit score, but dealer-instigated financing is well known to be a scam.
Here’s a link to the credit score scam:
Another link that mentions that, and also the one I’d heard of where they try to jack up the rate above what their bank will give. Say you qualify for a 5% loan, they try to convince you you can’t get any better than 7%. That 2% goes directly to the dealership:
Now, 3.15% isn’t a bad rate all in all, but make very sure they didn’t sneak any other fees into the contract.
I bought my current car in 2014 and shopped around a lot for non-dealer financing, and the best rate I was offered was 3.3% from Chase. I think my FICO score was 690 at the time (I don’t have much of a credit history).
That’s my question also. Where did the OP come up with the arbitrary “credit score over 800 = 3.0%” ?
My basic rule for new car financing is to see what rate banks or credit unions will give me. At the dealer I tell them I am handling the financing myself. After the final vehicle price has been settled with the dealer I offer them the opportunity to beat what my bank is giving me. If so I finance with them. If not I finance with my bank.
And this
[Quote=The Former Finance Guy]
After the loan was arranged, I tried to sell the customer extra products and services. This was a grueling process but it was where a lot of my commissions came from. The biggest item for me to sell was the extended warranty.
Usually, I’d begin by asking, “How long do you folks plan on keeping your new car?” The answer I wanted was: “I’m going to keep it until the wheels fall off.” If I heard this I could easily sell them an extended warranty.
[/quote]
Consumer Reports recommends to never buy an extended warranty.
Please note that in many states, mine included, a car dealer can tell you anything - lie through their teeth - throughout the entire deal and it means absolutely nothing. If it is not in writing, you probably have no recourse:
If a used car dealer tells you that he car has never been in an accident but does not put that in the sales paperwork and later you find it to be a lie, you’re likely stuck with the car. And, oh yeah, there is no ‘cooling off’ period either. Once both parties sign the contract, you own the car - period. In general, car buying is one of the most financially dangerous things a consumer can do as they have very few legal protections on the back end. It makes being thorough on the front end absolutely critical.
My experience has been identical to what Hampshire is describing. It is incredibly useful to have prearranged financing in hand when you’re at the dealership. However, you’re certainly not obligated to finance with your bank if the dealer can do better.
I’m kinda in agreement with the ‘you got yanked around’ consensus. Any time a dealer says they’re gonna get you a ‘great deal’ or a ‘friend discount’, they’re talking out their ass. I highly doubt he was even talking to anyone when he made that call for you. I just don’t understand why you didn’t go to your bank to get the loan. I have horrible credit but even I was able to get a loan through my credit union. I was able to go car shopping without the stress of haggling finance rates. And actually I even used a little trick I saw online that (as far as I know) worked out well for me.
I wasn’t sure what car I wanted but I knew my budget. When I got on the lot, I saw my baby. Fell in love with it instantly but I just kinda asked a few questions, googled some and saw they were charging like 3k over the blue book. Which, for a 6k car is a hefty markup. So when I sat down to haggle, I didn’t mention already having secured financing. The advice I read said that if they think they can make up their ‘loss’ in financing you, they’ll be more willing to go down on the price. And yeah, I was able to get him to 6k out the door, taxes and all. Once we agreed to that and he asked for my SSN to run my credit, I let him know I was already financed, which didn’t make him too happy but whatever. But my point is, as been’s mentioned over and over, you research this stuff before buying the car lol Sounds like you’re happy with the purchase though and that’s what really matters in the end!
One of my car buying experiences:
We knew what car we wanted, spotted an ad for a “one car only” dealer discount of 2,000, decided to get it without additional haggling, calculated full deal including monthly payment, then headed to dealer.
At dealer we told him we wanted the car in the “one car only” discount ad, did the normal dance, and after a while he walked back to the desk with paper work for the deal filled out. His paperwork was correct everywhere including VIN except for the monthly payment was about $40 too high.
I told him I had pre-calculated the whole deal and his monthly payment was wrong. He argued with me for 10 minutes about how it’s the computer and must be correct, until we started to walk out and he went back to “double check” the computer. He came back with correct paperwork and explained that the computer had the wrong VIN in the “discount calculator” portion, and so it didn’t have the extra dealer discount.
I guarantee you they use that “one car only discount” many times per month for anyone not paying attention.
When someone does a credit check on me, I can ask for a copy of the results. Perhaps this is only in MN, but if I ask, they have to comply.
I think you were scammed down to the somewhere around the correct interest rate. This makes the dealership and salesperson seem like they are great guys to a naive audience.
This is Mom lecturing here. Always, always check the loan rates with your credit union or bank before you are ready to lay your money down. They can sometimes do better than dealers and credit unions are often members of buyer groups so if you know what you want and are willing to pay, they can find the truck that fits your specifications through their online network.
I can’t comment on the extended warranty as I’ve never bought one.
The correct answer is one year less than the length of the car’s initial warranty period.
Always watch the dealership scenes from Fargo before you go to a dealer so you have a fresh reminder of how they work. Those scenes are funny but they never stray from reality. When I bought a new car this year and the salesman started his spiel about some sort of undercoating I started reciting the “True Coat” scene. He gave up pretty quickly.
I’ve heard and read for a long time that the Credit Karma score really is an estimate, so I don’t know if that was a lie, but it does seem odd that there wouldn’t be such a big gap between the two legit scores you had in hand and what he was claiming. So maybe that was a lie.
As for the ever popular “phone call to corporate/my finance dept head guy/whoever” in order to get you a “family and friends discount” or some other phrasing, that is very common. I’ve never experienced it when buying a car, as I’ve paid cash for used cars or obtained financing on my own and got a commitment to the price before ever stepping onto a car lot (learned that lesson years ago). Friends of mine have experienced it with car dealerships though.
However, I did experience it when purchasing of all things a piano. Completely different product, but same exact scenario. “Tell you what, I really want your family to have this beautiful instrument. Let me call my finance dept head and see about getting you the associates discount.” He gets on the phone, says something like, “I have someone here who is exactly the customer we want. What can we do for them on price?” Complete with pause while supposedly the person on the other end was saying no way, forget it. He “fights” for the discount saying what a great family we are, everyone plays the instrument, it should be in a home where people appreciate it, etc. for a couple minutes. Really laid it on thick. Hangs up, says great news, finance guy is allowing him to knock $500 off the price. I could tell he expected me to jump for joy or kiss him in gratitude, but I said I’d sleep on it and left because the phone call thing seemed so fake to me. Wound up buying a piano from a different place for about the same price as the “discounted” price at the first place.
There’s also an awesome episode of This American Life where they spend time with car salesmen. I looked it up - it’s episode #513. A Jeep dealership on Long Island tries to meet their monthly sales goal of selling 129 cars, because if they do they’ll get a huge bonus of like $85,000 from the manufacturer. It’s a very revealing and fascinating episode. Highly recommended!
2nding the This American Life podcast which I actually listened to last night. It’s 60 minutes long but well worth it to learn the sales tactics. And, I guess, to buy at the end of the month, especially if it’s on Halloween.
Thanks for all the great feedback and the Fargo “Trucoat” scene.
I have all but confirmed and resigned that I was likelygiven a seller rate that was perhaps as much as a quarter percent higher than I could have qualified for. I talked to my banker and the best rate they offer on used cars @ 72 is 2.99 so while likely scammed a bit at 3.15, I probably got off easy.
Typically, when you get a car loan at the dealer, who is actually providing the loan? Isn’t the “finance manager” at the dealer acting as a loan originator for a third party financing company?
Coincidentally, during our Thanksgiving dinner, my niece started talking about some of the experiences she had when working for the finance department of a local car dealer. The finance manager had a huge house, a vacation house, and many other trappings of wealth. He also (and I’m sure this was not unrelated to his wealth) did such things as falsify pay stubs in order to get a buyer to qualify for a loan. I’m sure that loan was for a high interest rate, and I’m sure he was receiving a commission for every loan he originated.
I waited and got my Escape December 26th of its model year; knowing they’d be scored by Ford on how many of the previous model year they had on their lot on January 1st gave me that much more confidence.
A hint. Always go into buying a new car with the idea that you get the price then decide on financing. Also, always know what a good price is and watch for ad ons.
My last two new car buying stories.
Dad wanted to buy a car. Wanted me along to ‘talk to’ so that the sales guy would go away so he could think.
Dad and sales guy agree on price. Dad says ‘This is the total, out the door price?’ Sales guy says ‘Yep’. Dad says ‘Ok’.
Sales guy comes back and with the paper work and says ‘Here is the car price, the total is X’ with X being something like $750 above the agreed upon price. Dad points this out and sales guy says "Well, that is dealer fees and blah blah blah. It isn’t the car price’. Dad says ‘We agreed on X out the door, this is higher than X’. Sales guy says ‘But X is the car price, it doesn’t include the other fees’. Dad says ‘See ya’.
We leave.
The next day the sales guy called back and dropped the price to the agreed upon number. The ‘dealer fees’ were extra pure profit that the dealers try and scam people on.
#2. Went to buy myself a car. Brought Dad along for same reason as #1.
Picked a car and started talking price. Sales guy said 'How are you financing? I said ‘I don’t know, but lets get the price first’. He said ok. We talk about the price, I get him down to a good figure, maybe a hundred or so too high.
I say, deal. Sales guy says ‘Ok, now for our financing.’. I say ‘I am writing a check.’ Sales guy says ‘This price is for dealer financing’. I say ‘I don’t need it’. Sales guy says ‘I can’t do that’. I say ‘Ok’ and start walking to the door. Sales guy lets me get to the door then starts chasing us. He stops us and says ‘Let me talk to the manager’. I say ok.
10 minutes later I got the car for my price without the financing.
The dealer wanted to charge you more for a cash sale?
It’s usually the other way around. Cash gets you a discount on big ticket items.
Cash saves the dealer the finance costs and there’s zero risk of defaulting on a loan.
