NASHVILLE, TN ­–Buying a new vehicle or a good used one is a big deal because cars are one of the most expensive things people buy. Consumers can lose thousands if they’re not careful. And whether you buy or lease, it’s a complicated transaction.

“Think of car buying as if it was a research project that starts well before you set foot on a dealership lot. Dealers will test once you get there and just like in school, you will perform better if you study for the test,” said Daniel Dwyer, an attorney with the Division of Financial Practices at the Federal Trade Commission. 

Dwyer compared buying a car to cooking a good meal. “If you wait until it’s dinnertime to start planning, you’ll have to go with whatever is easiest, like fast food, which could be more expensive and not as good, but if you plan ahead, you get to choose the recipe,” Dwyer said. 

Dwyer said before you go to a car lot decide what kind of car you need and how much you can afford to pay for it. Decide what kind of options you need or want and search around to get a sense of options and prices at different dealerships. 

“Once you find something that you like, call the dealer. We recommend that people ask the dealer to confirm that the vehicle is actually on the lot and to send you the “out the door price” in writing before you even go to the dealership,” Dwyer said.

That’s the total price that includes all charges and fees you would pay if you had a wad of cash in your hand and gave it to the dealer.  “You want to do this because some dealers will advertise a price but then once you arrive they’ll say the vehicle is unavailable and try and sell you a different vehicle usually at a higher price.”

Dwyer said to study the advertisements closely. Is the price available to you or just recent college graduates?  “An ad might advertise a low monthly payment that goes up after a few months or say ‘no money down’ but still require you to pay to drive the car off the lot,” he said. Dwyer called these ‘red flags”. If you see them his advice is: don’t be afraid to walk away.

Financing

Try and get preapproved for a loan before you work with the dealer’s financing office. If you are buying a used car, signs that say “Buy Here, Pay Here” may be convenient but not necessarily the best deal. Banks, credit unions, and big box outlets like COSTCO offer car loans. They will approve you for free even if you are not a member or are shopping for a used car.

“Otherwise you’ll be relying on the dealer to arrange options and without pre- approval it’s harder to avoid a situation like in our Bronx Honda case where we alleged  the dealer tacked on extra fees and interest for African American and Hispanic buyers,” he said.

Dwyer said to check your consumer credit score before you negotiate a car loan. Lenders check to see if you are a good risk and to determine how expensive your loan will be, so it’s good to know your score beforehand and check to see if it’s accurate.  Go to: www.annualcreditreport.com. It’s free. 

Things to know before you buy

1. Many things that seem required are actually optional. Price is negotiable.

2. Focus on the “out the door” price not the monthly loan payments. They may be a bit cheaper but last a lot longer.

3. The interest rate is something you can negotiate. Better find your own loan before you go to the car lot.

4. Add on products and services are optional. Tell the dealer “No” if you don’t want road service, for example, and make sure it’s not included in the paperwork.

“Vehicle safety and history probably won’t come up so you need to know to ask about them,” Dwyer said. 

Are there any open safety recalls? If so, have the repairs been made on the car you want to buy? If you’re buying a used car, you need to see the vehicle history report, aka the “CARFAX” report. You can go to www.ftc.gov/usedcars or www.vehiclehistory.gov. Those reports will give you ownership history, whether the car was in any accidents, its repair records, and whether it was ever declared a salvage.

If you’re buying a used car, has it been inspected? If not, can you have your mechanic inspect it before you buy? Is the car being sold with a warranty?  

“Don’t let anyone rush you through documents. You should never sign something without having read it. The dealership rushed Navajo consumers through the process of reviewing an signing their income verification forms which kept them from discovering that they had been falsified,” he said. 

Dan Dwyer is an Attorney in the Division of Financial Practices at the Federal Trade Commission. He works on a variety of consumer credit and financial services issues, including debt collection, mortgage advertising, and automobile sales and financing.

The bottom line is buyer beware. You should understand and agree to everything you’re being charged for. 

“We’ve seen things pop up in contracts even when people tell the dealership ‘I don’t want that’ or we’ve seen prices change even when they seem to have been agreed on earlier,” he said.

Dwyer’s last bit of advice: If you finance a vehicle make sure you ask the dealer if your financing has been finally approved. If it has been, make sure that it is written into your contract.  If not, that means the terms could change. That’s called yo-yo financing.

Here’s how it works: a few days after you drive the car off the lot, the dealer calls to say your loan application was rejected. He might offer you another loan with a higher interest rate. Maybe you can’t afford that. Unless you have it in writing beforehand that the dealer won’t sell your trade-in before the financing is approved, you are up the proverbial creek without a paddle.