Automotive consumer watchdog site CarInfo.com has just issued a public warning for car buyers. All consumers in the market for a new or used car are encouraged to read this warning to avoid making expensive mistakes on car or truck loans.
A recent survey of first-time car buyers found that 54% did not know that comparison shopping for car loans could be done online before visiting the dealer. In fact, only 18% of first-time car buyers actually used the Internet to shop for car loans before buying a car.
CarInfo.com warns that car dealers can take serious advantage of unprepared car buyers by charging higher interest rates on car and truck loans than consumers could get by shopping around. According to auto expert Mark Eskeldson, “In undercover investigations, car dealers were often caught telling shoppers that their credit wasn’t very good so they would have to pay higher loan rates. In fact, the undercover shoppers had excellent credit and qualified for the lowest possible loan rates.”
The incentive for car dealers to inflate a consumer’s loan rate is simple: higher profits. Car dealers receive kickbacks from lenders for sending in loan contracts with inflated interest rates and the higher the rate, the bigger the kickback.
An inflated interest rate on a loan can end up costing an unsuspecting car buyer a significant amount of money. For example, on a typical $30,000 loan for five years, an extra 2% added to the base rate by the dealer means an additional $1,700 in interest over the life of the loan. While some dealers might be satisfied with a smaller kickback from adding only 1% or 2% to a consumer’s loan rate, many have been caught adding 3% to 4% or more — causing overcharges of $2,000 to $3,000 per car.
It may be easier to let a dealer handle the financing for a new or used car, but surveys and undercover investigations have shown that consumers can save a lot of money by shopping around for loans. Fortunately, the Internet has taken most of the work out of shopping around for loans. Most car loan websites have posted rates, online applications and fast approvals including next-day delivery of checks or vouchers that consumers can use to purchase cars.
CarInfo.com recommends that car shoppers get a copy of their credit file (with their FICO score) at least 60 days before they intend to purchase a car, in case their credit file contains errors that can be fixed. Errors in credit files are actually quite common, and they usually cause consumers’ credit scores to be lower than they should be. Lower credit scores mean higher rates on loans, so it’s definitely worth the effort to “clean up” a credit file whenever possible.
To help consumers avoid car buyingscams, CarInfo.com offers free information on all aspects of the car buying process, from credit reports and car loans to free price quotes on new cars and trucks. Common dealer rip-offs are exposed, and successful negotiating strategies are provided to help car shoppers get the lowest prices. Extensive information is also provided on new car leasing, as this is commonly used to overcharge unsuspecting car shoppers.
Consumers are reminded that the secret to saving thousands of dollars when buying new or used cars is doing their homework on all of the pieces of the car buying process, including credit scores and car loans, insurance, extended warranties, getting free multiple price quotes on everything (including the car or truck), and learning successful negotiating strategies.
About CarInfo.com
CarInfo.com was created by Mark Eskeldson, author of What Car Dealers Don’t Want You to Know. His books have been featured in Smart Money, Kiplinger’s, Reader’s Digest, The Wall Street Journal, and on ABC, NBC and CBS TV. For more money-saving new car buyingtips, visit www.carinfo.com.
