Life is weird sometimes. A few days ago, I never would have foreseen myself buying a car this week — yet, here we are. Rather than bore you by sharing the full story, I’ll just fast forward to say, yes, my wife and I bought a used car after years of having just one vehicle. This all came about pretty quickly and culminated in us walking into a local dealership cold and leaving having signed paperwork (we would have been able to drive away with the car as well except the trade-in was so new that it still needed detailing). I bring this up because I learned something interesting in the process: dealerships want you to think in monthly payments, not other costs.
I realize upfront that there’s a solid reason for them putting you in this mindset. After all, if you are financing a car, it’s a lot easier to swallow an affordable monthly expense than it is to consider how much you’ll ultimately be paying. Thus, I imagine that asking potential buyers what their payment budget is rather than asking how much they’re hoping to spend on a car is a key tactic in making the sale.
With all of that in mind, though, I was a little surprised by something that happened when the salesman came back with our approved financing. While the sheet did indeed show the cost of the car (after the added fees, of course), the total amount we’d be financing after our down payment, and the monthly payments, it was missing a key piece of information: the APR. When I asked about this, he said that the business manager would go over all of that with me — but they were asking me to agree to the deal before that. To their credit, when I then said, “Can I know what the APR is before I sign?” he went and asked for me and returned with an answer.
In other words, it’s not as though dealerships are necessarily deadset on you not knowing this information — it’s just that they apparently don’t feel the need to make it a prominent point of their pitch. That’s fine for them, but buyers should absolutely be aware of what their auto loan APR will be. Moreover, before financing through a dealership, you should have a rough idea of what you expect your rate to be. That way, when you’re eventually presented with an interest rate offer, you can determine whether or not it’s a good deal.
Luckily for us, I was happy enough with the APR and the financing overall. Truth be told, we also plan on paying off the car far sooner than the terms of the loan state — which is why we also made sure that there’s no prepayment penalty. Still, I couldn’t help but wonder how many buyers fail to ask about this crucial piece of information and inadvertently end up spending more for a car than they realize or intend to.
The moral of the story is that, if you’re financing a car, make sure you have all of the loan info before signing on the dotted line. Alternatively, you may be able to search for outside financing first so that you don’t have to worry about this step at the dealership. And of course, if you can pay cash instead, that’s even better still!