In a Nutshell: CarBuyingTips, a leading source on the web for information on automobile buying, leasing, and financing, helps buyers with subpar credit avoid car dealership scams. Jeff Ostroff, CarBuyingTips’s well-known President and CEO, offers expert advice and provides strong tools, such as free offer spreadsheets and payment calculators, that allow consumers to confidently arrive at dealerships prepared to get the best deal. By encouraging consumers to research prices, know their financing options, and understand the way dealers play the game, CarBuyingTips eases the pain of the car buying process.
Buying a new car is challenging. There’s all of the haggling to look forward to, and once a price is negotiated, you have to face the financing monster. This is especially daunting for people with less than ideal credit standings.
Jeff Ostroff, President and CEO of CarBuyingTips, tells us that there is hope for those who wish to purchase vehicles with subprime credit. However, buyers need to be aware of some of the methods dealers employ that might not necessarily be on the up-and-up.
“From time to time, we’ll hear of dealers trying to force extended warranties on people with bad credit,” Jeff said. “They’ll lie to you and say, ‘Because of your bad credit, the bank requires that you take this extended warranty to get the loan.’ You’re sitting at the dealership, low on self esteem. You’re down and out, and thinking, ‘I have to get this car. I’m not going to get the loan.’ So you sign.”
Jeff noted that the lie in such a scenario is easy to expose if you just evaluate the logic behind what the dealer says is a stipulation for financing. Why would a bank questioning your ability to pay a loan in the first place want to add additional costs on top of the loan? It just doesn’t make sense.
Unfortunately, Jeff sees a lot of these types of cases. But consumers are in luck. Jeff created CarBuyingTips to help buyers of all credit rankings avoid dealer scams. The site is one of the leading sources on the web for information related to buying, leasing, and financing.
CarBuyingTips gives consumers the ammunition they need to confidently walk into a dealership and get the best deal. By doing a bit of research, knowing their financing options, and understanding the way dealers play the game, consumers can ease the pain of the car buying process.
Step 1: Do Some Simple Background Preparation
Before even stepping foot onto a dealer’s lot, there is some basic preparation that consumers must perform if they are going to get a good deal on a car. Dealers readily and efficiently take advantage of uninformed buyers who are sometimes unaware that they’re being taken for a ride. Using the tools on CarBuyingTips, knowing your credit score, and compiling a folder of information related to pricing and financing will ensure success at the dealership.
a) Know Your Credit Score
The first step in the buying process is making sure you know exactly what your credit score is. Reputable credit agencies like Equifax or Experian can provide an accurate report you can take to the dealership in case discrepancies arise in the dealer’s reporting.
“It’s a big problem when the dealers know more about your credit score than you do,” Jeff said. “It should really be the other way around. If something slightly goes wrong with your car or air conditioner, you know it. But, credit is so complex and strange that it’s almost an afterthought when it should be a forethought.”
Dealers can take advantage of buyers’ ignorance of their credit scores. If you have a true score of 650, but a dealer tells you they have to take precautions and add higher financing rates to your loan because they’ve scored you at 580, the credit reports that you’ve prepared are very useful.
Knowing your credit score is also important when making the initial decision of whether you should buy. Jeff notes that there are courses of action consumers can take to raise credit scores if they are outside of the range where financing approval is possible or if scores result in prohibitively high APRs.
“Certainly, many people have a mistake or two in their credit file that they may want to resolve before seeking financing,” Jeff said. “I received an email from a woman who had numerous charge-offs from a retailer. She called them up and just asked them if they were willing to remove them, and they did.”
“If you have enough of these and call all of your different creditors, you’ll be surprised how many of them are willing to remove them. Removing them will bump up your score, so it really is worth the effort to go through it and remove as many bad marks as you can.”
b) Download Free CarBuyingTips Spreadsheets
Some of the most useful tools on CarBuyingTips are the free, downloadable spreadsheets available to consumers. The different spreadsheets available help buyers determine a budget, documentation necessary for a sale, steps to take in a given loan scenario, and the legitimacy of dealer offers.
Jeff strongly recommends that buyers fill out the Buyer’s Offer Spreadsheet for New Cars before beginning negotiations with the dealer. In fact, the core strategy of CarBuyingTips comes down to this offer spreadsheet, as it works to determine the dealer’s true cost and offers a fair profit of 3% – 5% above that.
“The spreadsheets are what the savviest users of our site use to go in and save the most money,” Jeff said. “We’ve been developing the offer spreadsheet since 1998. The spreadsheet helps you come up with an offer to the dealer, calculating their true cost. It’s not invoice price like many other consumer advocate sites give. It’s a true, accurate picture of cost to get you the best deal.”
c) Have “The Folder” Ready
All of the information consumers have researched and compiled about credit scores, credit reports, and spreadsheets should be placed in what Jeff calls “The Folder.” The information contained within puts buyers on the offensive, a position in which dealers never like to see them.
“The dealers aren’t expecting you to have that folder,” Jeff said. “Once the dealers see that folder and see you pulling out your credit score, you have a lot more control than if you didn’t have that information.”
Along with your credit reports that include scores from two reliable agencies, “The Folder” should also include:
- Price quotes and invoice pricing data from CarBuyingTips recommended sites
- Rebates and incentives from FightingChance.com
- Car loan pre-approval from your credit union
- Laptop, tablet, or smartphone with CarBuyingTips’s spreadsheets
- Insurance quotes for the vehicles you are considering
- If trading in a car – trade-in and market value
- Extended warranty quotes for the cars you’re considering
“I hear from a lot of people who are now very self-empowered who went out and scored big,” Jeff said. “They tell me that the dealer’s jaw dropped when he saw the research. In one case, the dealer was so impressed he offered the buyer a job after seeing ‘The Folder.’”
Step 2: Know Your Financing Options
Jeff recommends doing everything you can to raise your credit standing before seeking to finance a new vehicle. But, for those who need immediate transportation, there are financing options out there for those with subpar credit.
“Credit unions tend to be a little nicer to you, especially if it’s an employer credit union,” Jeff said. “I worked for Motorola some years back and got my first car loan through them. I also did a home equity loan with them. Because they know you’re an employee, they can directly look to see how much they’re paying you and pretty much tell you yes or no right on the phone.”
People can also be approved for loans through auto financing companies that have access to dealers that work with those who have bad credit. Auto Credit Express specializes in this, and buyers can quickly find out if they pre-qualify.
- Network of dealer partners has closed $1 billion in bad credit auto loans
- Specializes in bad credit, no credit, bankruptcy and repossession
- In business since 1999
- Easy, 30-second pre-qualification form
- Bad credit applicants must have $1500/month income to qualify
- Click here for application, terms, and details.
|Interest Rate||In Business Since||Application Length||Reputation Score|
|3.99% - 29.99%||1999||3 minutes||9.5/10|
The main thing to keep in mind when applying for financing is that there is a reason banks are denying a loan. “It’s because lenders know that there’s a high probability that you’re not going to have the ability to pay it,” Jeff says. “When all the lenders are telling you no, you shouldn’t try to force a yes.”
Step 3: Know Common Scams and Tricks Dealers Use
While the majority of car dealers are honest, buyers have to be wary of the dealers that employ a host of tricks to get a signature on the line. Unfortunately, the dealer taking advantage of a buyer’s poor credit score by adding an extended warranty to a contract is just one example of the unethical practices that take place throughout this industry.
Consumers at any credit level are vulnerable to scams if they haven’t done proper research. “A buyer told me that his credit score was 720, and the dealership’s finance manager came back in the room with four other guys, all shaking their heads no,” Jeff said.
“They placed a piece of paper on the desk with 580 written on it, circled in red. The buyer already knew his score was 720 and that these guys were trying to pull the wool over his eyes. But, once he pulled out his real score, they all scrambled. The buyer eventually went to another dealer and got the deal he was supposed to get.”
Many times, dealers reach an agreement with a buyer only to call back a few days later to tell the buyer the financing fell through and will have to be renegotiated at a higher interest rate. By this time, the buyer has invested so much time in the process and really wants the car, and that’s what dealers are counting on. This can be avoided by going outside of the dealership for financing.
“We’ve seen where they try to make people buy credit lines,” Jeff says. “Or, because of your credit, the dealer says that the bank’s worried about the car getting stolen, so a VIN etching must be put on the window to qualify for the loan. They’ll list these very high-profit, big-ticket items that bring in a lot of money for them.”
The best way to avoid getting taken advantage of at the dealership is to be prepared. If you have bad credit, try to improve your score before you buy so you can qualify for a lower APR. If you need the car immediately, go to CarBuyingTips and learn how to put a folder together that will keep the dealers honest and get you the car you want at the right price.
“When people read our information, they go in much more confident,” Jeff said. “I’ve had people tell me, ‘The dealer tried every trick that you described, but I was ready for it.’”