Dealers like that are high pressure, blue suede shoes dealers that will bury you in a new car. And you'll never get out from under it until it's paid in full.
I've worked at places like that. And I can tell you from my own experience, a come-on like that means only one thing ... you'll get shafted! Here's how it works:
A dealer has it's own in-house credit, or works with a sub-prime lender that will buy any deal from him. He doesn't use a prime lender or a captive lender, such as Ford Motor Credit or Chrysler Credit because they will only go 10% over the MSRP of the car. So the dealer lines up a friendly lender that will take any deal from him. And that means a much higher APR for you.
You'll end up paying anywhere from 15.9% to 29.9% interest. The dealer will briefly go over this as fast as he can so it doesn't have time to sink into your head. He tells you he had to work very hard to get the deal bought since you were so far upsdie down, but he was finally able to. He goes over all the figures qucikly then has you start signing the contract.
If you balk or hesitate, he reminds you that he got you out of your car and into a new one. Not only was it very difficult to do but now you'll have a new car with a full warranty. It'll be carefree driving. This takes your mind off the bottom line. You sign the contract, go home and a few days later you'll want to kick yourself in the *** when you see how much you'll really be paying for it.
You not only pay a much higher APR and for the purchase price of the car, you're also paying for the balance you owed the bank who financed the car you traded in. For instance, the trade in value was $10,000. Your payoff was $16000. The dealer paid off you loan. And the $6000 negative equity you owed was tacked onto the price of the new car you just bought.
The car sold at $24000. Plus $6000 negative equity. It now is sold at $30000 plus interest. Add on the APR paid out over the term of the loan and you could easily spend a total of $43,000! You've just gone from being $16,000 in debt to being $43,000 in debt! And once it's paid off, it may be worth $4000. You just threw $39,000 down the toliet. There's a lot you could've have done with $39,000 that would have made you money. Instead, you wasted it and got nothing back for it in return.
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