Using Dealer Financing to Buy a Used Car? Be Careful!

There's a reason why the phrase "used car salesman" conjures up certain images - and that reason doesn't completely revolve around engines and transmissions.

Car salesmen are masters at getting people financed to purchase - one way or another. The trouble is, the way might not be a benefit to you, even while they claim it is.

So, be prepared. Before you even consider visiting a car lot, get your credit report and check your scores. If they need some improvement, take the necessary steps, because the better your credit scores, the better interest rate you'll get on that car.

Don't wait for the dealer to check. For one thing, if the score tells you there's going to be a delay, that inquiry will harm it further. Secondly, not all dealers will tell you the truth about your score. Remember, the higher the interest you'll pay, the bigger their income.

OK, now you know your score and you've decided it's high enough for you to go forward. Write down these questions and make sure they're all answered to your satisfaction before you sign anything. Remember, if it isn't in writing, and signed, it doesn't mean a thing.

How much does this car cost - including taxes, license, dealer prep - everything? How much am I getting for a trade-in value? How much down payment must I have? How much will I be financing after trade in and down payment? Are there other fees, such as credit insurance? What Annual percentage rate will I be paying? How many payments will there be? What's the exact amount of those payments? What's the total cost of credit? Include interest, fees, etc.

And last but most definitely not least: Is this the final deal? When I drive off your lot, are we finished?

That last question seems odd, but it's an important one, because this is the spot where unethical dealers pull the "bait and switch."

They'll send you home with a car, give you 2 or 3 days to fall in love with it, and then call with the bad news: The lender refused the deal. But it's OK - don't panic. Your salesperson has made a heroic effort and found another lender who will approve the loan.

Of course, the interest will be slightly higher, and you'll have to pay a small fee, but hey! You've got your car!

Don't fall for this. Unless the dealer can show you who the lender is, and unless you can see documentation that they've approved the loan - tell them you'll be back after the financing is approved and the transaction is final. They can call you when it's ready.