Welcome to the Auto Buyer’s Weekly Edge for October 3rd, 2014. I’m Phil Kelton, and I’m author of Power Shift.
The Weekly Edge is news and information you need to maximize your new-car savings. If you follow this videocast regularly, I promise that you’ll become a more successful car buyer.
First the headlines for this week:
Car sales and Car prices are up in September. Cars.com reports an average transaction price of over $30,000, and WardsAuto indicates sales are up 5.4 % through the first 9 months of 2014. Many speculate that both are being driven by low interest rates and easier credit.
A story at AutoBlog.com highlights the real problem with long-term loans. The tendency to over spend, not the additional interest cost.
And perfectly on cue, Ford Credit announced this week they will begin 75-month auto loans. Just following the money.
It’s now more important than ever to have preapproved financing before you visit a dealership. The Federal Government is bearing down on the practice of dealers adding profit to wholesale financing rates, and NADA, the National Automobile Dealers Association, has recommended that dealers stick to a profit ceiling unless there is a good reason to reduce rates … like competition.
In the middle of all this, Warren Buffet confirms the profitability of auto dealerships by buying a 75-dealership group.
Just remember, where there is profit, there is also opportunity for you, the consumer!
The story in focus this week is an article titled Is it Wise to Keep Putting the Car Before the Cash? Published by Automotive News. It’s a story on spot deliveries, written for the auto industry, but a good reminder for you and me.
A spot delivery takes place when a dealer lets you take a car home before the financing is completed. The danger is that if the financing is not approved, the contract will have to be rewritten at a higher rate and higher monthly payments.
If this outcome is premeditated to cost you more, it’s a scam called yoyo financing. The dealer hooks you on a lower rate, then calls you later with the higher costs, hoping you will pay rather than part with your new car.
The story indicated that NADA says the scam isn’t prevalent, and cited an industry consultant that said his company saw occurences in less than 2% of deals they’ve reviewed. But, if it happens to you, it’s 100% right?
The most telling quote was by a dealership auto finance director who said: “The main component is to ‘control the customer.’ We spot because it secures the deal and now we have control.”
You succeed as a car buyer when YOU stay in control of the transaction—My advice, don’t take your car home until it’s ready, and the deal is final—including financing. When everything is done, your financing scam risk goes straight to zero … And that’s a good thing!
Thanks for watching this week. I’d love to get your feedback and questions—just leave them in the comments below.
I tweet news articles as I find them so you can stay up to date daily by connecting with me @phil_kelton.
See you here next week! In the meantime, happy shopping!
