Are Car Ads Taking You for a Ride?
Whether you’re buying or leasing, shopping for a car can be fun and exciting. But wading through ads and promotions offered by car dealers also can be stressful. Some advertise unusually low prices, low or no up-front payments, low- or no-interest loans, or low monthly payments. Others promise high trade-in allowances, free or low-cost options, or rebates. And if you’re looking to lease a vehicle, ads for very low — or no payment — at signing may be especially enticing.
But the Federal Trade Commission, the nation’s consumer protection agency, says beware: Not all dealers play by the rules. Details about special offers and promotions may be buried in the fine print, clicks away from online claims, may not be disclosed at all, or may not be disclosed until you get to the showroom or the finance office. But the law requires that if a dealer advertises discounts, prices, or special low payments, the ads must clearly explain the important details of the offers and how a buyer may qualify for them.
To find your best deal, shop around and compare offers from different dealers and financing sources like banks or credit unions. Ask the right questions, and make sure all promises and terms are in writing before you sign on any dotted lines.
Here are some claims that may be deceptive — and why:
Vehicles are available at a specific low price or for a specific discount
What may be missing: The low price is after a downpayment, often thousands of dollars, plus other fees, like taxes, licensing and document fees, on approved credit. Other pitches: The discount is only for a pricey, fully-loaded model; or the reduced price or discount offered might depend on qualifications like the buyer being a recent college graduate or having an account at a particular bank.
What may be missing: The advertised payments are temporary “teaser” payments. Payments for the rest of the loan term are much higher. A variation on this pitch: You will owe a balloon payment — usually thousands of dollars — at the end of the term.
Zero or Low Rate Loans
What may be missing: The low advertised annual percentage rate (APR) may apply only to loans up to a certain amount — which may be a lot less than the purchase price. You will pay a higher APR for loans financing higher amounts. A variation on this pitch: rates may not be stated as “APR,” meaning the advertised rate may not reflect the true “annual” cost of financing, and may exclude certain costs required to be included in the APR.
“$0 Due at Lease Signing”
What may be missing: The fine print indicates that additional fees — sometimes several thousand dollars — are due at lease signing.
What may be missing: The prize. This is just a tactic to get you into the showroom.
To find your best deal, ask the right questions. The answers should help you determine whether the special promotions offer genuine value — or are simply smoke and mirrors.
- Do you have to pay sizeable amounts — say, a downpayment or taxes –— that aren’t included in the advertised low price?
- Does the advertised discount apply only to certain models of the vehicle? Is it available if you order a car instead of buying one off the lot?
- Do you need to have certain qualifications to get the advertised discount, low price, or credit terms?
- To get the advertised low rate financing:
- Do you have to repay the loan in a short time period, say 36 months
- Does the loan need to be for a certain amount? If so, what are the financing terms for loans with higher amounts?
- Do you have to buy special merchandise, like an extended warranty, a service contract or rustproofing?
- Will you be charged a higher vehicle price? The price may be lower if you paid cash or supplied your own financing from a bank or credit union.
- Do the advertised low monthly payments apply for the entire term of the loan? Do they instead increase after only a few months? Is a balloon payment — possibly thousands of dollars — due at the end of the loan?
- If the ad offers $0 due at lease signing, do you still have to pay something before you drive off the lot — say, fees, taxes, a security deposit, or the first month’s payment?
- Does the dealer’s prize promotion mean you’ve won something substantial? What is it?
Once you decide which dealer offers the car you want, be sure all the terms, including the price — and the financing if you get credit through the dealer — are what you agreed to. If you lease from the dealer, check that the terms are what you negotiated, too. Read the documents you get very carefully, especially the credit or lease contract. Be sure you understand the terms before you sign. If the deal isn’t what you negotiated, ask questions. Don’t sign, and don’t leave the dealership with a new vehicle until the terms you and the dealer negotiated are on the contract, and you are clear about your obligation, including all your payments.
To learn more, check out Buying & Owning a Car.