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THE INFLATED INTEREST RATE ON THE NEW CAR FINANCING

During final bargaining with the salesperson, you will be asked how you plan on financing the new car purchase.  If you indicate that you are going to take out a loan, the salesperson will try and persuade you to take your loan out with them instead of your bank or credit union.  What the dealer isn't telling you is, by financing through the dealer, you must pay the interest rate PLUS a dealer "mark-up".  This is great for the dealer since he borrows at, say 11%, then turns right around and charges you 13% (or more).  The dealer might offer you a "lower" interest rate, say 9%, but fail initially to mention that it is for 60-months instead of the usual 36-months.  When you compute this out, the EXTRA amount you are paying can often be over a THOUSAND dollars more.  Always BE SURE TO ASK about the TIME INTERVAL over which the loan is to be paid back.

 SOME THINGS TO REMEMBER:

 There are three types of new car buyers out there: 

TYPE 1 BUYER  -  Cares mostly about how much the monthly                  payment will be (called the "Payment Buyer") 

TYPE 2 BUYER  -  Cares mostly about what "allowance" is being given for the trade-in (called the "Allowance Buyer") 

TYPE 3 BUYER  -  Cares mostly about what the "difference" will be in price when the trade-in is subtracted from the final price (called the        "Difference Buyer")

 The dealers LOVE Type 1 buyers (payment buyers) because that type of buyer usually ONLY CARES ABOUT THE MONTHLY PAYMENTS and does NOT FULLY understand what it means to pay $209/mo. for *** 60 months *** versus paying $299/mo. for *** 36 months ***.  This type of buyer can and does get soaked by the dealer.

  The smartest of the three types of buyers is the Type 3 (Difference Buyer) because the "Difference Buyer" is conscious of the actual allowance being given for a trade-in and is usually NOT fooled by the low monthly payment tricks.  

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