FTC FACTSfor Consumers

AUTOMOBILES

1-877-FTC-HELP

FEDERAL TRADE COMMISSION FOR THE CONSUMER

www.ftc.gov

CAR ADS

READING BETWEEN

THE LINES

any new car dealers advertise unusually low interest rates and

other special promotions. Ads promising high trade-in allowances

and free or low-cost options may help you shop, but finding the

best deal requires careful comparisons.

Many factors determine whether a special offer provides genuine savings. The

interest rate, for example, is only part of the car dealer’s financing package.

Terms like the size of the downpayment also affect the total financing cost.

Questions About Low Interest Loans

A call or visit to a dealer should help clarify details about low interest loans.

Consider asking these questions:

■ Will you be charged a higher price for the car to qualify for the low-rate

financing? Would the price be lower if you paid cash, or supplied your own

financing from your bank or credit union?

■ Does the financing require a larger-than-usual downpayment? Perhaps 25 or

30 percent?

■ Are there limits on the length of the loan? Are you required to repay the

loan in a condensed period of time, say 24 or 36 months?

■ Is there a significant balloon payment — possibly several thousand dollars —

due at the end of the loan?

■ Do you have to buy special or extra merchandise or services such as

rustproofing, an extended warranty, or a service contract to qualify for a

low-interest loan?

M
Federal Trade Commission

Bureau of Consumer Protection

Office of Consumer and Business Education

March 1997

F C EDERAL RADE OMMISSION T FTC OR HE ONSUMER

1-877-FTC-HELP www.ftc.gov

Facts for Consumers

■ Is the financing available for a limited time

only? Some merchants limit special deals to

a few days or require that you take delivery

by a certain date.

■ Does the low rate apply to all cars in stock

or only to certain models?

■ Are you required to give the dealer the

manufacturer’s rebate to qualify for financing?

Questions About Other Promotions

Other special promotions include high trade-in

allowances and free or low-cost options. Some

dealers promise to sell the car for a stated

amount over the dealer’s invoice. Asking

questions like these can help you determine

whether special promotions offer genuine

value.

■ Does the advertised trade-in allowance

apply to all cars, regardless of their condition? Are there any deductions for high

mileage, dents, or rust?

■ Does the larger trade-in allowance make the

cost of the new car higher than it would be

without the trade-in? You might be giving

back the big trade-in allowance by paying

more for the new car.

■ Is the dealer who offers a high trade-in

allowance and free or low-cost options

giving you a better price on the car than

another dealer who doesn’t offer promotions?

■ Does the “dealer’s invoice” reflect the

actual amount that the dealer pays the

manufacturer? You can consult consumer or

automotive publications for information

about what the dealer pays.

■ Does the “dealer’s invoice” include the cost

of options, such as rustproofing or waterproofing, that already have been added to

the car? Is one dealer charging more for

these options than others?

■ Does the dealer have cars in stock that have

no expensive options? If not, will the dealer

order one for you?

■ Are the special offers available if you order

a car instead of buying one off the lot?

■ Can you take advantage of all special offers

simultaneously?

You’re not limited to the financing options

offered by a particular dealer. Before you

commit to a deal, check to see what type of

loan you can arrange with your bank or credit

union.

Once you decide which dealer offers the car

and financing you want, read the invoice and

the installment contract carefully. Check to see

that all the terms of the contract reflect the

agreement you made with the dealer. If they

don’t, get a written explanation before you

sign. Careful shopping will help you decide

what car, options, and financing are best for

you.

For More Information

The FTC works for the consumer to prevent

fraudulent, deceptive and unfair business

practices in the marketplace and to provide

information to help consumers spot, stop and

avoid them. To file a complaint or to get free

information on consumer issues, call toll-free,

1-877-FTC-HELP, or use the complaint form

at www.ftc.gov. The FTC enters Internet,

telemarketing, identity theft and other fraudrelated complaints into Consumer Sentinel, a

secure, online database available to hundreds of

civil and criminal law enforcement agencies in

the U.S. and abroad.