Consumer Law

Test Drive the Car Financing

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

Car dealers sell you two separate things whenever you buy a car or truck, unless you pay cash for the full purchase price. They sell you (1) the vehicle itself and (2) the means to pay for it. You probably test drove the car. But did you ?test drive? the financing? If you merely looked at the monthly payment, it is as though you kicked the tires, but failed to look under the hood.

It is important to remember that you pay one amount for the ?wheels and steel? and you pay another amount for the lease or loan. Unless you pay cash, each of these items is a separate profit center for the seller. Many consumers who come to see us are surprised to learn that, just as the cash price of the vehicle is negotiable, so are terms of the financing.

It?s a good idea to take a calculator and scribble pad to make your own notes. That way you have your own record of what was said. If you were responding to an ad, keep a copy of that ad. Once you decide on a car, have the terms of the window sticker right at hand. Decide before you go whether you want to lease or buy, and the total you want to pay over a set period of time. When you are in the midst of deciding between black or tan interior, you may not notice a bait and switch.

You might deal with the salesman on the lot and the ?F&I guy? (finance & insurance) in the office. The F&I guy loves to speak in terms of ?win-win? situations. That?s when things can start to get slippery. Here?s a checklist to help you ?test drive? the financing:

1) Is your credit application accurate? Never sign it in blank.

2) Is the contract labeled Lease or Retail Installment Sales Contract (loan)?

3) What is the cash price of the vehicle?
How is that different from the total amount you will pay?

4) What was the highest and lowest interest spread the bank is willing to offer?

5) If there is a rebate, where is that stated on the contract?

6) Does the contract list the add-ons and accessories you are paying for?

Are these all things you wanted, at the price you negotiated to pay?
In a lease, these should be in a box labeled ?Itemization of Gross Capitalized Cost?

7) If you have a trade-in, are you being given a credit or being charged a negative?

And how much? Is that what you negotiated?

8) Cross out any mandatory arbitration clause in the contract.

If it is a ?take-it-or- leave-it? requirement, note that in writing or walk away.

9) Calculate not just the monthly payments, but the number of months.

Look at the total figure you are agreeing to pay.
Do you know enough about your job, family and future finances
to know you can still pay that monthly amount at the end of the term?

10) Is the VIN on the contract the same as the VIN on the car you actually test drove?

Full post as published by Lemon Law Blog on April 10, 2007 (boomark / email).