Driving Into Debt

JOSH DREIBAND: Are dealers going to make money in finance? Absolutely. Are bankers going to make money when you finance with them? Absolutely.

PETER HOLLAND: Monthly payment shopping is big mistake number one.

JOSH DREIBAND: I think short term financing and short term leasing is the best way to buy a car just like your house, you can pay the least amount of the interest.

PETER HOLLAND: A car dealer can give you any monthly payment you want, if the loan is extended over a long enough period of time.

JOSH DREIBAND: Meanwhile they are not adjusting the price, but just extending the term.

PETER HOLLAND: You tell the dealer, "well I can afford $400 per month."

JOSH DREIBAND: But I would definitely take look at term, how far are we extending the term out?

PETER HOLLAND: Does not mean $400 per month over 3 years, over 4 years, over 5 years, or over 6 years?

JOSH DREIBAND: And somebody out there is going to extend the payments out long enough to make it attractive to the payment that fits perfectly within their budget.

PETER HOLLAND: The vast majority of Americans when they buy a car, they finance that car through the car dealership.

JOSH DREIBAND: There are dishonest finance managers and there are hundred dealers out there. They will try to take advantage of people. Anytime that they tell you that the price of a car depends on whether or not you finance at the dealership, you should get out that immediately.

PETER HOLLAND: Car dealerships will often bump the interest rate on the loan.

JOSH DREIBAND: You should try to get the rate that works best for you. Take it to your bank and see if they can offer a lower interest rate. Sometimes the dealers may be able to get it, sometimes the banks may be able to get it.

PETER HOLLAND: If you are approved at 6%, maybe they will bump it to 8 or 9%.

JOSH DREIBAND: It should be black and white. If not, there is no greater rate here, it is black and white. My rate is 5.9%. That is my rate.

PETER HOLLAND: Then, they will split part of that increase with the bank.

JOSH DREIBAND: Whether my banker gives it to me, whether the bank manager or car dealership gives it to me, that is the rate and any finance manager when you buy a car should be disclosing that to you on the contract making sure you are very aware what the rate is.