When you’re dealing with poor credit, you don’t want a dealer wasting your time on a deal they can’t get you, or one costing you more than you bargained for. Here are some common tactics to watch out for, and some methods to help you get the best deal you can when it comes to car buying – even with bad credit.
Watch Out for These Common Dealer Scams
Have you ever heard the saying “knowledge is power?” That phrase is certainly true when it comes to car buying. The more information you know about the situation you’re getting into, the better. Here are a few ways unscrupulous dealers look to take advantage of consumers who haven’t done their research:
- “This is the best deal I can get you with your credit”: Never let a salesman determine your credit for you. If you know your car buying ins and outs, you should be able to spot this one a mile away – especially if the “deal” or interest rate you’re offered is way out of line with the national average. There are two ways to combat this situation: always know your credit score and what’s on your credit reports before you head to the dealership, and research the kinds of interest rates people with similar credit scores get. You can also rate shop and apply with multiple lenders to see what each can offer you. If done within a period of 14 to 45 days, the multiple hard inquiries on your credit reports only affect your credit score as if they were one single hard inquiry.
- “Because of your credit, the lender requires this add-on in order to approve you”: Add-ons to car loans – such as window etching or service contracts – are never required. Know how to refuse unwanted items that a dealer tries to talk you into. It’s always a good idea to read all the fine print before signing on the dotted line. Make sure there are no additional, unwanted items listed on the contract that you didn’t agree to. Make sure you get a copy of the paperwork before you leave the dealership, too.
- Yo-yo Financing: This happens when a dealer lets you know that “everything’s great, you can even drive your car home today!” In reality, the financing hasn’t been approved, so in a few days you get a call saying the financing “fell through” and you have to bring the car back – or you’re asked to come back with more money because you’re approved at a higher rate or with a higher down payment. Once is bad enough, but be aware, it’s not uncommon for shady dealers to hope you fell so in love with the car that you won’t want to give it up – and pull this two or even three times. To keep this from happening to you, never sign a contract unless you know the lending is approved, and never sign anything that says you’re “borrowing” the car – it’s a sure bet you haven’t been approved yet.
If a dealer tries to force you into any of these situations, you should walk away. This dealer is trying to make a bigger profit, and if you don’t understand these scams, you may find yourself in trouble.
Knowing When and How to Haggle
Once you find a dealer that can work with your credit situation, you need to know what to refuse, and what you can be flexible on. Negotiation is more of an art than a science. When it comes to car buying, it can be especially difficult if you’re struggling with poor credit. The better your credit is, the better your opportunity to haggle over details such as make, model, and interest rates. But, even if you can’t haggle with a dealer over a particular car, you still need to know what can and can’t be negotiated.
One sure way to know when you have wiggle room is to do your research. No dealer can determine your credit for you if you already know where it stands. Learn the available options for the vehicles you’re looking into, prepare a budget that looks at both the monthly payment and overall cost, and research interest rates ahead of time.
When you’re troubled by bad credit, you also have to take into account the various requirements lenders need to approve you for a car loan. These items are non-negotiable, and you should be prepared to present them to the dealer right away, so there won’t be any question of whether or not a lender can approve you. The requirements vary by lender, so you should review them before you head to the dealership.
The Bottom Line
The more you know about the dealer you’re visiting, your situation, and the outcome you’re looking for, the better off you are. Make sure and do your homework before jumping into a bad credit car buying situation you’re not ready to handle.
At the same time, there are many more dealers out there who don’t try and scam their customers this way. If you’re having trouble finding a dealership or a lender because of your credit, using a service like Auto Credit Express can help. To be as prepared as possible, check out more advice, car buying tips, and bad credit auto loan information here.