How to Spot a Bad Deal

You found the car of your dreams and now you are sitting in the office of the dealership’s loan officer. After giving him a detailed account of your personal information, he has checked your credit score and has presented you with a loan offer. How do you know if it’s a good deal or a raw deal?

Shopping around

The best way to spot a bad deal is to shop around. Shopping around means going to your bank and consulting at least once other dealership and one or two outside lenders, such as an online car loan service. If you get the same proposal everywhere you go, you know that you are getting the best deal you can. If the dealer’s offer is far better than the ones you have already looked at, you might want to finance elsewhere.

Too good to be true

In the process of shopping around, what do you do if one offer is much lower than the others? Does this mean that it’s the best deal? It could be, but it could also turn out to be the worst deal. There is no way to know until you do a bit of investigating. What are the details of the loan? How is it different and why? Don’t be afraid to ask. You may also want to consult with someone you trust who can help you sort out the differences.

The pressure deal

A classic sign that a deal may be a bad deal is that you are pressured to take it or leave it. Considering that you are making a purchase of tens of thousands of dollars, is there really a good reason that you can’t take time to examine the details of the deal and ask questions? With a loan officer tapping his fingers on the table and everyone waiting for you to sign, the pressure can see overwhelming. But, this is your money.

The unexpected

Another sign that the deal may not be a good one is when there are a lot of costs added to the deal at the very end that you were not expecting – such as fees that you did not know about up front. Dealers and other lenders can pad the bill by adding charges that are not necessary but certainly add to the costs of the loan.

Once again, the best way to guard against these practices is to comparison shop for both your car and your loan.