Many people who shop for a new or preowned vehicle are only interested in the “selling price.” Many times they consider the sales consultant a bother and do not take the time to become an informed customer. I cannot tell you how many customers tell the sales consultant, “I only have 15 minutes to look,” or “Just give me the bottom line.” At the same time, I understand that car dealerships have not earned the best reputation as a place to just shop in a leisurely and comfortable manner.
Most people finance the purchase of a vehicle. Many people in today’s market have had their credit score negatively affected by the economic downturn, job change, medical issues, divorce, education loans, etc. So whether you have good or poor credit, your question really should be, “What will be my monthly payment given my credit, my trade-in value, terms and my down payment?” The happiest customers are the ones who understand that three parties need to come to an agreement: the customer who wants to get the best vehicle for their money; the dealership that wants to sell you a vehicle; and the bank or financing institution that wants to earn interest from the loan. Customers shopping for a vehicle armed with only the selling price really limit their own opportunity to make the best deal.
Now that we recognize that financing is important in getting a good car deal, we need to understand that a dealership’s relationship with their financing institutions, whether it is a credit union, bank, or manufacturer’s financing arm (example: Ford Credit) is critical for a customer to optimize their car deal. Remember that the dealership is presenting you, the customer, with the terms of the offer, i.e., your credit score and your credit application. The financing institution relies on the dealership to properly structure the customer’s car deal to the benefit of all three parties. The dealership becomes the eyes and ears for the financing institution, and there has to be a lot of trust between the two. Financing institutions do not want to be in the “repo” business. Therefore, a trusting relationship between the dealership and the financing institution can greatly affect the terms the customer receives on their car deal. This is where the dealership’s integrity and honesty can greatly benefit the customer. The dealership’s reputation, ability and relationship with many financing sources will allow the dealership to shop for the terms that may best suit the customer. Ultimately, all these factors come into play in determining what the customer’s final monthly payment will be. Even if the customer has already arranged financing with his or her own source, the customer may find that the dealership can offer better terms and save the customer money.
Just because a customer gets approved on a car loan does not mean it is a good deal for the customer. Sometimes the monthly payment fits the customer’s budget, but the terms on of the loan get stretched out so far that the customer is ultimately penalized in the future when he or she finds out that the car is worth significantly less than what is owed on the loan (i.e., negative equity or upside down). So when the customer purchases the next vehicle, he or she is faced with a larger down payment to stay in a vehicle comparable to the trade in, or perhaps downsizing to a vehicle the customer does not want. This is where doing business with a dealership that has true finance professionals is crucial. It is about finding a vehicle that provides value yet protects your current and future personal financial interests.
An informed buyer will take the time to know the monthly payment and exact terms of the car deal after taking into consideration down payment, rebates, interest rates, term, selling price and trade in value, if applicable. Knowing the exact payment, customers can compare against other vehicles on their shopping list. For example, a customer can now evaluate and understand that a vehicle costing even $1,500 more today but is more comfortable, safer, more efficient, with a better future trade-in value and a better overall fit, may only increase the monthly payment by an equivalent of $10 per month.
In summary, a customer should take the additional time to become an informed buyer. Focus on the “payment difference” in order to compare apples to apples. A dealership’s complete understanding of finance and its relationship with their financing sources is crucial to a customer receiving the best deal. Spend the time and work with dealership finance professionals who are transparent in their dealings and willing to not only sell you a car but to help you understand the financing process. FBN
By Alan Chan, Jim Babbitt Ford in Downtown Flagstaff