Archive for December, 2010

Is 0% Dealer Financing Really a Good Deal?

Car-buying CAN be a pleasant experience if you do your homework and get pre-approved

Automobile sales are on the rise as the economy improves.  With fuel prices also going up, many people are switching to more efficient vehicles.  

Are you among those Americans in the market for a new vehicle?  Are you being lured to the dealer by 0% financing ads on TV?  Before you hit the showroom floor, you’ll want to consider whether dealer financing is as good in the long run as a loan from your Credit Union.  There are certainly many fine dealerships in existence, but they are well-versed in ways to manipulate a deal, and you should be, too.

One of the biggest complaints consumers have about dealer financing is it puts the dealer in control of the transaction.  When you already have an approved loan from your credit union, it’s the same to the dealer as cash in your hand, which you can take away if you don’t like the way negotiations are going.  You’re in control of negotiating, and can often negotiate a lower price and/or extra options.

If you’re dependent upon dealer financing, the dealer can choose to stand firm on the car’s sticker price rather than negotiate, withhold cash back offers, ignore trade-in credits or add on extras you don’t want, like credit insurance.

And, if your credit history is less than perfect, you won’t qualify for those 0% finance deals.  Additionally, most 0% offers only apply to some makes and models, and are only good for 24 months … after that ‘teaser’ period, the rate increases to far more that you would pay at the credit union, and often come with a penalty if you attempt to refinance elsewhere.

When you finance a car short-term, the payment is often unmanageable. While you may optimistically agree to these terms thinking you can “find a way to make it work,” oftentimes you’ll end up damaging your credit rating with late payments, or suffer an inability to meet other financial obligations.

An old trick in the dealer book is to take your driver’s license from you while you’re testing driving the car. This isn’t for liability reasons, as the salesman will claim; rather, it’s so the credit department can run your credit. If you’re already pre-approved from your credit union, simply show the salesman you have a valid driver’s license … if he insists upon confiscating it for the duration of the test drive, walk away.  (Chances are, he won’t let you walk away and will agree to your terms!)

If you have less than perfect credit, you can be assured your experience will be positive and confidential.  Our loan officers aren’t predatory like car salesmen, and they won’t discuss your credit history out in an open showroom in front of strangers.

PFCU’s current auto loan rates are still historically low.  At those rates, you’re better off taking the cash rebate, or negotiating yourself a better sticker price.  

For more information on PFCU’s auto loans and pre-approval process, visit the Credit Union or call (626)799-0882.  You can also just click the APPLY NOW button on our website at www.pfcu.org