The Finance Dept. in the dealership, otherwise known as the "Business Office" or the "F&I Dept." has only ONE JOB;
To make sure you walk out with the HIGHEST PAYMENT POSSIBLE!
When you negotiate a car deal based on your monthly payment the dealer is going to quote you a "loaded payment." This means any payment quoted to you is going to contain a plethora of profit builders for them. At your expense, of course!
What the car dealers don't want you to know is that the dealers makes as much, and often more money from arranging the car loan then they do on the car deal itself! This is because when they arrange the loan it will include a higher Interest Rate (that is higher than you can get on your own) Credit Life & Disability Insurance and an Extended Warranty.
Here's how it works:
When you let the dealership arrange your financing they will receive a Kick-Back from the bank equal to a certain percentage of the Amount Financed!
The higher the interest rate the F & I
person can talk you into - and often you won't even know what rate they're using - the higher the Kick-Back is going to be. The Kick-Back could be as high as 10% or MORE of the total amount financed.
For example, if you were financing $20,000 the bank or finance institution that the dealer is associated with will be kicking back as much as $2,000 or more to the dealer.
That $2,000 is packed into Your payment! In other words you're paying it!
You can avoid this rip off by arranging your own car loan at CapitolOneAutoFinance.com.
They will give you a Blank Check® to go shopping with, and this way you can avoid getting caught up in the car dealer's trap!
If you do allow the dealer to arrange your loan there's an excellent chance the dealer will add Credit Life & Disability Insurance to the loan - very often without your knowledge - and this will increase your payment significantly. It's your choice to get this coverage or not, but you have to know about it first. In most cases they will just try to sneak it in on you.
The car dealer usually earns 50% of the price of this coverage which can amount to thousands of dollars in the dealer's pocket. That money is buried in your car payment! So you're paying for their commission!
Now an extended warranty is a good thing to have as long as you don't get grossly over charged for it. You can learn more about warranties on my other web site at: www.Used-Car-Warranty.com. But when you allow the dealer to include a warranty in your payment - and again, they may pack it into your payment without you even knowing - they are going to mark it up substantially. I have personally seen dealers mark-up warranties as much as $2,500 & more!
If that's not bad enough, you are at there mercy as to the quality of the warranty itself. There are a few good warranty companies out there, but most of them aren't worth the paper they are written on.
So now you see all the different ways the car dealer can make money in the Finance Office. There are other products they might try to pack into your payment such as Gap Insurance (good to have, but don't get it through the dealer), rustproofing, window etching, stereo upgrades, alarms, paint sealant and on and on it goes!
Do yourself a big favor and arrange your own financing before you go car shopping. You'll save thousands of dollars and a lot of aggravation.
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