How Dealers Take Advantage of People With Bad Credit
These folks are at the mercy of the dealer and make the huge mistake of entrusting them to arrange their financing.
There are some dealerships that specialize in sub-prime credit and they're usually the nastiest to do business with.
A good clue to recognizing these types of dealerships is through their advertising. If you see claims such as "We can help you get financed!", or "No Credit? No Problem", this is a good indication you're dealing with one of these vultures.
Most people with bad credit don't take the time to research their options and comparison shop for financing on their own. They just head to the dealership in hopes of getting financed and getting a car - any car!
This is why dealers absolutely love this type of customer. Not only will they fleece them, but they will make them feel as if they're doing them a favor.
Dealers use psychological tricks in preparing these customers to "own" the car they're looking at. They allow them to drive it as long as they want, tell them how great they look in it, and how everyone is going to be excited to see them in the car. By the time they're through, the customer will do practically anything to have the car.
In the meantime, the dealer will arrange financing and maximize every ounce of profit available. They will jack up the interest rate, stretch out the loan term as long as possible, and add-in as many extra products as they can (such as extended warranties) into the loan.
It's not unheard of for dealers to make upwards of $10,000 in profit on just one customer. It's pathetic!
To add insult to injury, many dealers will lead sub-prime customers to a certain car on the lot - one they're having a hard time getting rid of because nobody wants it due to its color combination or because it's a piece of junk.
They tell the customer it's the only car they qualify for considering their credit situation and a lot of people fall for it.
If you have sub-prime credit, the best thing you can do is to comparison shop your loan and try to line up financing on your own. (See: How to Get a Car Loan with Bad Credit)
It's simply not worth dealing with vultures like this. You're much better off waiting and saving enough money to buy a cheaper used car, and building your credit up in the meantime.
My Recommendation for Car ShoppersTrueCar No-Haggle, CarsDirect, and NADAGuides are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid