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Shopping for a car, whether it’s new or used can be stressful, intimidating and overwhelming. Being as prepared as possible is always the best option but even then some things just might not go the way you planned. Second guessing yourself about the deal you struck or the bargain the dealer gave you can unfortunately be a side effect of signing on the dotted line.

To make sure you’re prepared the next time you head to the car dealership and able to save as much money as possible, here are the top 6 things that car dealers don’t want you to know.

Find out if in-house financing is right for you.

Don’t be Confused by the Invoice Price.

Most people know not to pay the MSRP (Manufacturer’s Suggested Retail Price) of a car, but did you know that you shouldn’t offer to pay the invoice price either? A dealership will typically get even more discounts off the price they actually paid to purchase the car from the manufacturer. This includes dealer holdbacks and other dealer rebates and incentives. Dealers will never tell you that once they sell a car they will get a percentage back from the manufacturer because they don’t want you to use that information to negotiate a lower price. Don’t promise to pay any amount right away until you’ve spoken to your dealer and gotten the best possible price.

Auto Financing 101

Always Review a Car’s History.

If you’re looking to purchase a used car then you need to ask about the car’s history because your dealer probably won’t offer up the information. If you don’t ask about past issues like accidents and you find out later that there is a problem because of the accident you’ll have no proof. Unfortunately, when it comes to accidents most used car dealerships have unofficial don’t ask, don’t tell policy. In this case, you might be able to use an accident or other past issue as a bargaining tool, even if that doesn’t work it’s still important that you know before you make any decisions.

Always inspect your car before buying. If you don’t you may end up with a lemon car.

If you’re uncomfortable asking or think your dealer in lying to you then you can check the car’s history through a car history report provider. These reports aren’t always completely accurate and can be missing some information, but they are a good starting point and can provide some needed information.

Here are questions you should ask your dealer before buying a car.

Low Monthly Payments Aren’t that Great.

It’s important you look at the larger picture when negotiating the price of a car, new or used. Focusing too much on small monthly payments that draw your loan out too long will in the end hurt you financially. Dealers want you to ask for smaller monthly payments because in the end, you’ll pay more for the car. When dealers adjust the monthly payment price for you all they do is make the term of the loan longer which in return makes the monthly payment smaller. The longer the term of your car loan the more likely you’ll develop negative equity.

If you plan on using the car to drive long distances on a regular basis then having a long-term loan is even more risky. When you put a lot of distance on your car it depreciates the value quicker. It won’t take long for you to be making payments on a car that’s not worth its original price anymore. Just remember a shorter term is always the best option for you as a consumer and if you plan on driving it more than the average amount an even shorter-term is better.

How You End Up Paying More in Interest With Long Term Loans

As mentioned above, a long-term car loan not only leads to negative equity but an increase in interest paid. For example, if you have a $25,000 car loan with an interest rate of 4.5%, how much interest will you pay? In the table below, you’ll notice that while the monthly payments for the 84-month car loan is $222.59 lower, you’re paying $1,826.16 more in interest. 

48-month loan84-month loan
Loan Amount$25,000$25,000
Interest Rate4.5%4.5%
Monthly Payment$570.09$347.50
Total Paid$27,364.32$29,190
Total Interest Paid$2,364.18$4,190.34

Keep Your Down Payment to Yourself.

If your dealer asks you right away what your down payment is don’t tell them until you know what the final price of the car is. Obviously, your dealer will want and need to know what your down payment is but they might try and use the amount against you, especially if you have a large down payment. If you have a large down payment then you’ll technically have to make fewer payments which means you’ll pay for your car quicker. Dealers want you to make many payments so that they can make more money from the interest you’re paying. Try to keep your down payment to yourself until the final price has been decided.

Check out if your monthly car loan payment is too expensive.

They Calculate Your Credit Score Differently.

Before you decide to purchase a new or used car you should check your credit score so that you have an idea of what you’re working with. Dealerships will also check your credit score, but the one they see might be slightly different than the one you saw. The credit score that dealerships see will have more emphasis placed on past car loan payment history. Dealerships want to see if you’ve had difficulty making payments on a car loan in the past or if you’ve never had a car loan before.

The Process Doesn’t Have to be Difficult.

No one likes the process of buying a car and guess what? Dealers don’t want it to be that difficult either. To make it as painless as possible do your research beforehand and know what other dealerships are charging for the car you want to buy. If you want to know what a great price is, you’ll have to know what a bad price is. Knowing that there might be some competition for your business could possibly make your dealer offer a more competitive price.

Check out how dealerships are screwing Canadians overs.

If you’re really aren’t into haggling then you can always look for a dealership that works to be transparent with its customers. Some dealerships find that if they are up front and honest with potential buyers then they are more likely to make a sale. Not all dealerships work this way so it’s up to you to find a dealership that best suits your situation.

Watch out for these dealership hidden fees.

Finally, Don’t Back Down

After all this is said and done, dealers want your sale and they want your money so they should be willing to work with you at least a little bit on the price. Don’t back down if you know you’re being charged too much and don’t be afraid to walk away if you know they aren’t being truthful with you. Finally, don’t settle for a price you know you can’t afford, you’re the one making payments so make sure you put yourself first.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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