JOSH DREIBAND: There are dishonest finance managers and dishonest dealers out there that will try to take advantage of people.

PETER HOLLAND: I have seen everything from a used car sold as new. I have seen used cars, it was not disclosed that they were in a major accident.

JOSH DREIBAND: People are standing against the scratch on the car while they show you the car, so you do not see it.

PETER HOLLAND: I have seen used cars in which it was not disclosed that they were a lemon law buyback.

JOSH DREIBAND: The first thing I would recommend is you look over the car thoroughly. Make sure you do it in the light. If it is nighttime, ask him to pull car in the shop. Look it over.

PETER HOLLAND: They could sell it "as is" and they say you cannot answer any questions. But if it comes with any kind of warranty, they need to tell you a little bit about the car and, more importantly, you should ask questions. Ask them to give you a CARFAX report, which shows the history of the vehicle, who it was titled to, when it was titled, how many miles, if it was in a major accident, it should hopefully be in that CARFAX.

JOSH DREIBAND: A red flag for me is when some of them are lying to me. I've got a problem with that.

PETER HOLLAND: I have seen a whole host of financing fraud.

JOSH DREIBAND: Anytime, that they tell you that the price of the car depends on whether or not you finance here or not, at the dealership. You should get out of there immediately.

PETER HOLLAND: I have seen forged signatures on credit applications.

JOSH DREIBAND: Anytime, the dealer tells you have to buy a warranty because the bank is requiring it in order for you to get the loan, they are committing fraud.

PETER HOLLAND: I have seen money charged for products that were never installed or delivered. I have seen income statements that the dealer increased the income. If a dealer suggests that you just fudge a number and sign it ...

JOSH DREIBAND: You should get out of there immediately!

PETER HOLLAND: ... or change something that you know is not true that is a red flag to get up and walk away from that dealer.

JOSH DREIBAND: So I am not suggesting that you sue 'em. I am suggesting you to get out of there and go to the next place where you find somebody you can trust.

Reading Between the Ads: If It Looks Too Good to Be True...

Many new car dealers advertise unusually low interest rates and other special promotions. Ads promising high trade-in allowances and free or low-cost options may help you shop, but finding the best deal requires careful comparisons.

Many factors determine whether a special offer provides genuine savings. The interest rate, for example, is only part of the car dealer's financing package. Terms like the size of the down payment also affect the total financing cost.

Low, Low, Low Interest Loans

A call or visit to a dealer should help clarify details about low interest loans. Consider asking these questions:

• Will you be charged a higher price for the car to qualify for the low-rate financing? Would the price be lower if you paid cash, or supplied your own financing from your bank or credit union?
• Does the financing require a larger-than-usual downpayment? Perhaps 25 or 30 percent?
• Are there limits on the length of the loan? Are you required to repay the loan in a condensed period of time, say 24 or 36 months?
• Is there a significant balloon payment - possibly several thousand dollars - due at the end of the loan?
• Do you have to buy special or extra merchandise or services such as rustproofing, an extended warranty, or a service contract to qualify for a low-interest loan?
• Is the financing available for a limited time only? Some merchants limit special deals to a few days or require that you take delivery by a certain date.
• Does the low rate apply to all cars in stock or only to certain models?
• Are you required to give the dealer the manufacturer's rebate to qualify for financing?

Question Questionable Promotions

Other special promotions include high trade-in allowances and free or low-cost options. Some dealers promise to sell the car for a stated amount over the dealer's invoice. Asking questions like these can help you determine whether special promotions offer genuine value.

• Does the advertised trade-in allowance apply to all cars, regardless of their condition? Are there any deductions for high mileage, dents, or rust?
• Does the larger trade-in allowance make the cost of the new car higher than it would be without the trade-in? You might be giving back the big trade-in allowance by paying more for the new car.
• Is the dealer who offers a high trade-in allowance and free or low-cost options giving you a better price on the car than another dealer who doesn't offer promotions?
• Does the "dealer's invoice" reflect the actual amount that the dealer pays the manufacturer? You can consult consumer or automotive publications for information about what the dealer pays.
• Does the "dealer's invoice" include the cost of options, such as rustproofing or waterproofing, that already have been added to the car? Is one dealer charging more for these options than others?
• Does the dealer have cars in stock that have no expensive options? If not, will the dealer order one for you?
• Are the special offers available if you order a car instead of buying one off the lot?
• Can you take advantage of all special offers at the same time?

You are not limited to the financing options offered by a particular dealer. Before you commit to a deal, check to see what type of loan you can arrange with your bank or credit union.

Once you decide which dealer offers the car and financing you want, read the invoice and the installment contract carefully. Check to see that all the terms of the contract reflect the agreement you made with the dealer. If they don't, get a written explanation before you sign. Careful shopping will help you decide what car, options, and financing are best for you.