Nearly 20% of all auto-loans are subprime. That means you have poor credit (619 or lower) and are getting a much higher interest rate than what the rest of the market is. At the current market picture, I would classify subprime as anything over 5% and deep subprime as anything higher than 10%, though some folks rate it at 10% and 20%, respectively.
Anyhow, people are in the market to rip you off and I take responsibility in making sure that you are equipped with the knowledge to make good decisions when it comes to buying a vehicle. Before I jump into what you should look out for, I want you to know what I recommend you do prior to buying a vehicle.
I am not a fan of car payments and I tell all of my clients to avoid them unless 100% necessary. Necessary is subjective, but going and getting a lease for “safety” is vague and not apparently necessary. I can see if someone has good credit, a smaller emergency fund, and wants to get a $6,000 vehicle with a $150 car payment and then proceed to pay it off aggressively, but you need to have that plan established BEFORE you buy. Just saying “I’ll make it work” isn’t good enough.
You know you. Ask yourself: Why am I getting this vehicle? Do I need to spend this much? Do I need to go further into debt?
Auditing yourself can be valuable before you make any purchase. So as you can see, cash for a vehicle is a great thing, but there are some circumstances (very few) that going into debt would be the right option. As an aside, I will do anything I can within reason to help my clients avoid a car payment, that is how much I hate them.
All right, back to the shady dealers. Let’s look at 5 things you should do and be on the lookout for when you buy:
1. If they “work with any credit” they will more than likely rip you off
When I was a kid (19) I was in the market for a vehicle and didn’t want the price to be over $6,000 and the payment to be over $100. Even though I sucked with money back then, I did my best to make sure I wasn’t overly foolish (unfortunately, I wasn’t nearly that wise with student loan refunds). Anyhow, I went to two dealerships that were obviously taking advantage of me. The first was called RightWay Automotive (yes, I am exposing them) and they did their payments weekly and told me I could afford $75 per week (or $300 per month).
I guess if you tell people that their payments are weekly and the figures are smaller that it will convince them. Sadly, I suspect this tactic works on many. Anyhow, I became angry and left.
The second dealership wouldn’t tell me the price of the vehicle and just assured me the payment was going to be $140. Come to find out, the vehicle was nearly $9,000 and they were going to put the loan over 7 years. Again, I became frustrated and left.
All of that to say, avoid places that “will work with any credit”. Back then, I had decent credit, 680 or so, but the fact that I was young and inexperienced, caused them to think that they could work one over on me. They were wrong. And even today, when my wife I go to buy vehicles, they still act as though people are ignorant and naïve.
2. Ask for a breakdown of the fees and justification for each fee
This tip makes the salesperson sound shady in his own words because he has to tell you what an admin fee is and why it costs $1,000. Understanding every aspect of the loan is critical. No lengthy story in this tip, just something you should be on the lookout for.
3. Think it Over
“This baby won’t last long, you’ll have to act fast.” Calm down, Rick, the car will be there and if there isn’t I’m sure you’d be willing to cut me a deal on another one. The high pressure sales attempt is a joke. If you are unsure, then don’t pull the trigger. Sadly, people spend more time ordering at Applebee’s than they do thinking over a car purchase. It’s a several thousand dollar decision, remember that.
I pulled up Cars.com at a dealership one time and showed them everything within 50 miles that compared to their vehicles as we discussed price. It helps. Sometimes they don’t take too kindly to it, as they feel disrespected, but in a consumer marketplace, as a business, you need to be open to people doing things like that. If you complain, it’s because you’re insecure about the pricing. Don’t be afraid to negotiate.
5. Have Patience
This really is a summary of the previous four, but patience pays. Making an emotion decision on a car may leave you angry and tied to something that you didn’t want. Delaying gratification is a fantastic way to reach your level of success. Don’t make sudden decisions out of pressure and go on to regret it.
Lastly, as a piece of our service, anytime you have questions on a car and want to flip us an email to chat over the details, we will do that for freeeeee. I want people to have a resource they can turn to for advice so they don’t get ripped off by Slick Rick who offers 19% APR on a $3,000 car that he’s selling for $8,000.
Thanks for follow along.